International Business Law

Incoterms 2000 (International Rules for the Interpretation of Trade Terms) supports business groups including manufacturing, shipping and banking industries worldwide. Inconterms include thirteen trade terms classified into four groups (E,F,C and D) plus their variations. The terms are grouped in Exibit 5.5 which arranges the terms with the minimum responsibility of the seller and maximum of the buyer appearing at the top and oppose to that minimum responsibility of the buyer and maximum of the seller appear at the bottom. E Terms place the lowest amount of responsibility on the seller. The seller needs to make goods available at its factory and present the buyer with an invoice for payment. The buyer must arrange all transportation and bear all risks and expenses of the journey for payment and also have to clear the goods for export by obtaining export licenses from the U.S. government. F Terms are shipment contracts, under these terms seller is required to deliver the goods to the designated point of departure ‘‘free’’ of expenses or risk to the buyer. The risk of loss passes from seller to buyer, buyer arranges the transportation and pays all freight costs. F terms are also used when the buyer has contracted for a complete shipload of materials or commodities and thus had reason to assume the responsibility for arranging carriage. These terms can also be used because the buyer feels that it can obtain better freight rates than the seller, and some terms are for ocean shipment only while other can be used for all modes of transport. C terms are also shipment contracts, the letter C indicates that the seller is responsible for certain costs after goods have been delivered to the carrier. Risk of loss passes to the buyer when the goods cross the ship’s rail at the point of shipment. D terms. Contracts with D terms of sale are destination contracts. The seller must deliver the goods at the port of destination and bear the risk of loss throughout the journey.

EXW (Ex Works)
FCA (Free Carrier)
FAS(Free Alongside Ship)
DES (Delivered Ex Ship)

Carrier’s Liability:

In order to prove the carrier’s liability under COGSA, the plaintiff must prove that the goods were loaded in a good condition and unloaded in a damaged condition or lost. The carrier must use due diligence at the the beginning of the voyage.

Ocean carriers are exempted from liability under following circumstances: errors in navigation or management, Fire unless the fault is shippers, Perils of the Sea, Act of God, Act of war, Act of public enemies, Legal seizure, Quarantine, Labor strikes, Riots, Saving life or property at sea, Insufficient packing, Inherent defect in goods, Inadequate marking of goods, Latent (hidden) defects in ship.

7. Shipper must be given a fair opportunity to declare the nature and value of the goods. Ocean carriers are not liable for more than $500.00 per package unless the shipper has declared and paid for higher value.

The type of loss covered by a marine insurance when cargo is damaged, destroyed, or sacrificed in the process of saving the vessel or the cargo of others is known as General Average and FPA Loss. A general average is a loss that results when extraordinary expenses or losses are incurred in saving the vessel or its cargo from danger at sea.

Letter of credit is an obligation of a bank issued on behalf of their costumer and promising to pay an amount of money to a beneficiary upon the happening of a certain event or events agreed upon. Letters of credit can be International or domestic, they can be used in transactions for the sale of goods or services or to guarantee performance of other business obligations. It is up to the buyer to apply for a letter of credit from a bank. LOC contains instructions, terms, and condition to release the money. Buyer’s application for credit is a contract between the buyer and the bank.
Seller must read the terms and conditions of the LOC very carefully before shipment or manufacturing of product.

9. The letter of credit calls for an ocean bill of lading. The seller presents a trucker's bill of lading showing shipment to an ocean port. So Bank should refuse because the documents did not match the letter of credit. The seller has presented a trucker’s bill of lading that is showing shipment to an ocean port which is not a right documentation there should be ocean bill of lading following the LOC.

10. The CIF contract with the letter of credit calls for on board bill of lading to be dated 12/20. The bill of lading is dated 12/20, but insurance policy is dated 12/21. The Bank should refuse to pay because the documents do not have the same dates they don’t mach and they would not be covered by insurance policy. The requirement that the bank will pay the seller only on the presentation of the documents is what gives the documentary credit its name.