International Business Transactions

Forms of International Business Transactions

• Imports and Exports - USA.gov importing and exporting basics
• Licensing Production Abroad - From the archived export.gov page, but still some useful information
• Foreign Investment - Wex Legal Encyclopedia, from Cornell Law School, Legal Information Institute

Incoterms Diagram

Wikimedia - Incoterms Robert Wielgorski Revised

Documentary Sale

Stage One - The Sales Contract

• Simple offer and acceptance; or
• Buyer requests pro forma invoice requesting price quotation for specific type and quantity of goods - most often not a formal offer, because of unresolved issues
• Seller responds with pro forma invoice - "in form only" - shows the price offered for the specific goods and the amount that the buyer will owe if the parties form a contract

Stage Two - The Letter of Credit

• This contains a promise from the buyer's bank to the seller that the bank will pay the amount in the sales contract - condition to the promise being that the seller produce documents to demonstrate that it has shipped the goods according to the sales contract - letters may be confirmed or not

Stage Three - Seller Ships the Goods

• Sellers usually use a "freight forwarder" to whom the seller gives a detailed letter of instructions, the commercial invoice, the packing list, and any information required by the government
• Online Automated Export System (AES) must be filled out by either the seller or the forwarder
• Local chamber of commerce files certificate of origin
• Dock Receipt
• Bill of Lading

Stage Four - Seller Obtains Payment Through the Letter of Credit

• Sight draft - seller draws on the buyer's bank - the contract created earlier between the buyer and the bank allows the bank to do this

Stage Five - Buyer Uses the Bill of Lading to Obtain the Goods

Categories of Commercial Terms -2020

Incoterms that Apply to Any Mode of Transportation Are:

• EXW - Ex Works
• FCA - Free Carrier
• CPT - Carriage Paid To
• CIP - Carriage and Insurance Paid To
• DPU - Delivered at Place Unloaded (DAT - Delivered at Terminal in Incoterms 2010)
• DAP - Delivered at Place
• DDP - Delivered Duty Paid

Incoterms that Apply to Sea and Inland Waterway Transport Only:

• FAS - Free Alongside Ship
• FOB - Free on Board
• CFR - Cost and Freight
• CIF - Cost, Insurance, and Freight