What are the differences between certificate of origin and GSP Certificate of Origin Form A?

What are the differences between certificate of origin and GSP Certificate of Origin Form A?

Certificate of origin is a generic name of an international shipping document, which is used to identify the origin of goods that is subject to foreign trade business. 

There are various types of certificates of origin in circulation. The most frequently used one is known as ordinary certificate of origin or simply "certificate of origin".

GSP Certificate of Origin Form A is a special type of certificate of origin, that can be grouped under "preferential certificates of origin".

Today on this article I would like to mention the differences between ordinary certificates of origin and GSP certificate of origin Form A.

Certificates of Origin: Ordinary certificates of origin could be used in any kind of international trade transaction. It simply states the origin of the goods, but does not give any benefits to the importers in terms of import custom duties.

Once an ordinary certificate of origin presented to the customs, importers will pay tariff rates as applicable to Normal Trade Relations (NTR) or Most Favoured Nation (MFN).

Ordinary certificates of origin should be completed by the exporter and certified by one of the local chambers of commerce.

In some cases certificates of origins should be legalized by the importing country's embassy/consulate in accordance with the letter of credit terms and conditions or import requirements.

GSP Certificate of Origin Form A: Form A is a special type of certificate of origin. It does not only states the origin of goods, but also allows importers to be benefited from reduced tariff rates during importation.

Once a Form A certificate of origin presented to the customs, importers will pay preferential tariff rates as applicable to under the Generalized System of Preferences.

As Form A is a special type of certificate of origin, it should be issued in limited situations, where Generalized System of Preferences applies. 

Form A certificates of origin should be completed by the exporter and certified by one of the local chambers of commerce or another authorized institution.

In very rare situations Form A certificates of origins should be legalized by the importing country's embassy/consulate in accordance with the letter of credit terms and conditions or import requirements.

What are risks of making air shipments when using documents against payment method?

What are risks of making air shipments when using documents against payment method?

Documents Against Payment (D/P) is apayment method used in international trade transactions.

This payment method has couple of alternative names such as documentary collections, cash against documents, CAD and documents against acceptance.

There are various advantages of using this payment method in export and import operations.

Some of the advantages of documentary collection payment method can be mentioned as follows:

·      Documentary collection payment method is easy. 

·      Documentary collection is relatively a cheap payment option comparing to letters of credit. 

·       Documentary collection is a fast international payment type comparing to letters of credit.

Despite all of these advantages stated above, documentary collection payment has couple of disadvantages, which have to be burdened by the exporters.

Documentary collection payment method inherits greater risks comparing to letters of credit, bank payment obligation and bank guarantees. 

Banks have very limited obligations against exporters.

What are risks of documentary collections for exporters when the shipment effected via air transportation?

The main risk of the documentary collection for the exporters is that under the air shipments the goods could be delivered to the final buyer without the need of the original documents.

If the importer is a fraudulent company, then they would never apply to presenting bank in order to collect the original documents. Instead importer could apply to the transport company and gets the goods by simply proving his identity.

Alternatively fraudulent importers leave goods at the import customs. During this period they do not reply to exporter's calls. They simply cut all their communications with the exporting companies. 

They act in a such way because untouched goods, which have been waiting at the import customs, will be sold out in auctions after a reasonable time. The waiting period will vary from one country to another but it would be logical to expect a 3-6 month period.

Example : Real life situation

We are a small exporting company located in Morocco. We have made a shipment to a new customer in France against a mixed payment. According to sales contract conditions payment should have been made 50% in advance and 50% documents against payment.

We have received the advance payment and make the shipment via air. Although we have sent all the shipping documents via bank under documents against payment, we have never received the remaining 50% payment.

We have waited 15days after we have presented documents. Then we asked to our customer the remaining balance payment. They claimed that the payment has been made. But our bank confirmed us that no further payment has been received. 

One week later once again we asked our customer state of the payment. Additionally our bank sent a swift message to the importer's bank in France. Both of them have not responded our questions.

At the same time we have confirmed through our freight forwarder that the importer has released the good, even if the air waybill has been consigned to the importer's bank. 

Now we are searching possible ways to get our money by legal means.

Conclusion :

Documentary collection payment method is a risky option for the exporters, especially if the shipment will be effected via air. 

Even if you consigned the air waybill to the name of the importer's bank, it is possible that the importer company could receive the goods without having the original shipping documents.

Receiving some amount of the order total may not be changing the situation.

As a result exporters should be very careful when working with documentary collection payment, if shipment will not be sea freight but air or road transportation.

What are the differences between bills of lading vs. non-negotiable bills of lading?

What are the differences between the bills of lading vs. non-negotiable bills of lading?

Bill of lading is a transport document that is used in international port to port sea shipments. 

This transport document has a long history as it can be accepted as a first transport document used in international shipments.

The traditional bill of lading was developed before the industrial revolution had been taken place. 

At those times vessels were slow and information options were very limited comparing our current technology. 

Bill of lading has been evolved over the years in order to respond to the changing business environment. Non-negotiable bill of lading is one of the end results of this evolution.

The traditional bill of lading is a document of the title so you can transfer the ownership of the goods to another party by means of endorsement or delivery. 

For this reason, buyers have to present at least one original bill of lading to the carrier at the port of discharge. Non-negotiable bill of lading is not a document of title. 

As result buyers do not have to present at least one original bill of lading to the carriers at the port of discharge. 

Also, you cannot transfer the ownership of the goods to another party by means of endorsement or delivery under a non-negotiable bill of lading. 

That is why the non-negotiable bill of lading is called non-negotiable sea waybill. It is not a bill of lading in a traditional sense.

Main Differences :

·   Consignee: Bill of lading can be issued in a negotiable form. Non-negotiable sea waybill cannot be issued in a negotiable form. You should indicate your buyer's name on the non-negotiable sea waybill. 

·   Endorsement: The only bill of lading can be endorsed. Non-negotiable sea waybill cannot be endorsed. 

·   Delivery of Goods: Under the traditional bill of lading, buyers have to present at least one original B/L to the carrier’s agent at the port of discharge. Otherwise, they cannot get the goods unless a letter of indemnity is issued. Under non-negotiable sea waybill, buyers can claim the goods by confirming their identity.

Costing for Export

There are many costs incurred in an export transaction, which are not applicable to domestic sales. 

It is recommended that a costing sheet is prepared to ensure that all cost items relevant to the export transaction are itemized and included. This will ensure that a correct quotation can be prepared accurately and quickly.

Generally, export costing should include the manufacturing cost and any additions or modifications to products, special packaging, ingredients, formula or specification modification, quality control, export administration, freight, distribution and marketing.

Also there are special costs applicable to particular industries, which should not be overlooked. In addition, costs of premiums for credit risk insurance, foreign exchange risk, loss of interest when providing credit terms, bank charges, agents commissions, training customers’ or agents’ personnel, bid and performance bonds and other bank guarantees may have to be taken into consideration when preparing a quotation.

Export costing should not be confused with pricing. The following definitions indicate the differences:

• Costs: are the total of all expenses associated with producing and selling a product overseas.

• Price: is the amount for which the exporter sells the product and is determined by the exporter’s marketing strategy.

• Margin: is the difference between the total cost per unit and the export selling price; and is determined by the exporter’s corporate objectives.

COSTS ASSOCIATED SPECIFICALLY WITH EXPORT DOCUMENTATION, TRANSPORT AND INSURANCE INCLUDES THE FOLLOWING:

• Customs clearance (EDN): obtaining the Export Declaration Number issued by the Australian Customs Service and any other export permit or license from regulatory authorities.

• Certification/ Legalization: certification/legalization of documents and preparation costs (eg.State Chamber of Commerce, embassies, company staff costs; courier satchels, etc.)

• Inspection costs: of arranging and supervising inspection of goods if required. Note: Whether the exporter or importer is responsible for the payment of inspection fees should be established when preparing the quote.

 • Cartage: to wharf or airport—delivery by road to the container depot or airport, eg. cost of road haulage by a contractor or cost of exporter’s own transport.

• Packing/labor costs: it is the exporter’s responsibility to include export packaging as part of the export price. However, on some occasions special packing requirements are prescribed by the importer. In this case, the additional costs incurred may be added to the pricing structure.

• THC (Terminal Handling Charge) / Port Service Charge (PSC): these charges are made by port authorities for use of their facilities. They are normally included in the freight rate charged by the shipping company and paid on the shippers’ behalf to the port authorities. Occasionally, for charter vessels, etc. the charges will have to be paid direct to the port authority by the shipper.

• Sea or air freight: cost obtained from shipping company, airline or consolidator. Also an allowance for contingencies is recommended. This is to allow for possible rate increases, adjustments to the Bunker Adjustment Factor (BAF)/Currency Adjustment Factor (CAF) percentages or other unforeseen circumstances.

• Marine insurance premium: cost obtained from insurance company or broker.

• Credit risk insurance premium.