English for

International Trade 2

Rubena St. Louis

Marina Meza
 Introduction to International trade 2
Welcome to your second English for Specific Purposes course
in International trade. As in the previous course, you will be
introduced to the world of International trade through English.

As in the previous course, content will be given through f2f classes and online
sessions in the wiki. You will find many interactive links within this book which
will allow you to have direct access to online sources and resources. You can
download this pdf to your smart phone, tablet or laptop for easier access to the
content.

The main objective of this course is to help

you negotiate the world of trade in English.
There, you’ll need to know, not only the
language, but how the terms related to
International trade are used in the world
outside the classroom. So it’s important
that we read, listen and speak English as
much as possible as well as do projects
related to real-world situations.

Interaction is necessary for learning, so the activities you find in this book will lead
to

• group talks
• live and recorded interviews • creation of online
• role play scenarios content material
• individual podcasts
On an individual level, you will improve your skills with

Writing

• Summarising information
Speaking
• Expressing ideas clearly and
coherently • Talking about topics related to
International trade
Listening Justify opinions
• Identifying main and secondary
ideas in conversations, talks,
and interviews.
Reading

• Extracting and evaluating

information from different
texts.

This book and the corresponding wiki cover three additional topics in International
trade.

 Documents in trade: The contract, import and export documents needed for
doing business on an international level.
 Ports and logistics: The major ports in the world and how they function.
 International transport: Multimodal transport, containers and the
documents needed to transport goods on an international level.

We hope you will enjoy researching and discussing the content in this guide and in
the online wiki.

Rubena St. Louis

Marina Meza
March, 2017
 What’s in this unit?
In this unit we’ll review the:

• main terms found in Introduction to

international trade.
• types of E-commerce found today.
• main goals and objectives of the major
international trading organizations.

1
Let’s Talk About It: International trade.

Here are a number of tags with different

terms. In small groups, discuss with your
classmates your understanding of these terms
and how they relate to local and international
trade. Find local of international examples to
support each of the concepts.

Need help? Click on the

hot links in some of the
terms for their definition.

Import vs export Supply vs demand International vs local trade

Comparative vs absolute advantage Free trade vs protectionism

Specialization Foreign Direct Investment Opportunity cost

Terms and definitions

2
 As you read the text, “What is International
trade?” written by Reem Heakal 1, underline
additional terms that you meet. Write those you
consider important in the space above.

What Is International Trade?

International trade is the exchange of goods and services between countries.
This type of trade gives rise to a world economy, in which prices, or supply and
demand, affect and are affected by global events. Political change in Asia, for
example, could result in an increase in the cost of labour, thereby increasing the
manufacturing costs for an American sneaker company based in Malaysia, which
would then result in an increase in the price that you have to pay to buy the tennis
shoes at your local mall. A decrease in the cost of labour, on the other hand, would
result in you having to pay less for your new shoes.

Trading globally gives consumers and countries the opportunity to be

exposed to goods and services not available in their own countries. Almost every
kind of product can be found on the international market: food, clothes, spare
parts, oil, jewellery, wine, stocks, currencies and water. Services are also traded:
tourism, banking, consulting and transportation. A product that is sold to the
global market is an export, and a product that is bought from the global market is
an import. Imports and exports are accounted for in a country's current account in
the balance of payments.

Increased Efficiency of Trading Globally

Global trade allows wealthy countries to use their resources - whether

labour, technology or capital - more efficiently. Because countries are endowed
with different assets and natural resources (land, labour, capital and technology),
some countries may produce the same good more efficiently and therefore sell it
more cheaply than other countries. If a country cannot efficiently produce an item,
it can obtain the item by trading with another country that can. This is known as
specialization in international trade.

Let's take a simple example. Country A and Country B both produce cotton
sweaters and wine. Country A produces 10 sweaters and six bottles of wine a year
while Country B produces six sweaters and 10 bottles of wine a year. Both can
produce a total of 16 units. Country A, however, takes three hours to produce the 10

1
http://www.investopedia.com/articles/03/112503.asp

3
sweaters and two hours to produce the six bottles of wine (total of five hours).
Country B, on the other hand, takes one hour to produce 10 sweaters and three
hours to produce six bottles of wine (total of four hours).

But these two countries realize that they could produce more by focusing on
those products with which they have a comparative advantage. Country A then
begins to produce only wine and Country B produces only cotton sweaters. Each
country can now create a specialized output of 20 units per year and trade equal
proportions of both products. As such, each country now has access to 20 units of
both products.

We can see then that for both countries, the opportunity cost of producing
both products is greater than the cost of specializing. More specifically, for each
country, the opportunity cost of producing 16 units of both sweaters and wine is 20
units of both products (after trading). Specialization reduces their opportunity cost
and therefore maximizes their efficiency in acquiring the goods they need. With the
greater supply, the price of each product would decrease, thus giving an advantage
to the end consumer as well.

Note that, in the example above, Country B could produce both wine and
cotton more efficiently than Country A (less time). This is called an absolute
advantage, and Country B may have it because of a higher level of technology.
However, according to international trade theory, even if a country has an absolute
advantage over another, it can still benefit from specialization.

Other Possible Benefits of Trading Globally

International trade not only results in increased efficiency but also allows
countries to participate in a global economy, encouraging the opportunity of
foreign direct investment (FDI), which is the amount of money that individuals
invest into foreign companies and other assets. In theory, economies can therefore
grow more efficiently and can more easily become competitive economic
participants.

For the receiving government, FDI is a means by which foreign currency and
expertise can enter the country. These raise employment levels and, theoretically,
lead to a growth in the gross domestic product. For the investor, FDI offers
company expansion and growth, which means higher revenues.

4
 Free Trade vs. Protectionism

As with other theories, there are opposing views. International trade has two
contrasting views regarding the level of control placed on trade: free trade and
protectionism. Free trade is the simpler of the two theories: a laissez-faire
approach, with no restrictions on trade. The main idea is that supply and demand
factors, operating on a global scale, will ensure that production happens efficiently.
Therefore, nothing needs to be done to protect or promote trade and growth
because market forces will do so automatically.

In contrast, protectionism holds that regulation of international trade is

important to ensure that markets function properly. Advocates of this theory
believe that market inefficiencies may hamper the benefits of international trade
and they aim to guide the market accordingly. Protectionism exists in many
different forms, but the most common are tariffs, subsidies and quotas. These
strategies attempt to correct any inefficiency in the international market.

Conclusion

As it opens up the opportunity for specialization and therefore more efficient

use of resources, international trade has potential to maximize a country's capacity
to produce and acquire goods. Opponents of global free trade have argued,
however, that international trade still allows for inefficiencies that leave developing
nations compromised. What is certain is that the global economy is in a state of
continual change and, as it develops, so too must all of its participants.

Important terms
Go through the article again and make a list of ALL
the terms found there. In your groups, Remember to make a list of
all new terms. Write their
• define the term in your own words
Spanish equivalent and
• give an example to explain the concept. their English meaning.
Include in Quizlet Term pack.

Make a list of all new

Click here to watch vocabulary you think
a video on important to learn for your
International trade. Quizlet Vocabulary pack.

5
Let’s Talk About It: E-commerce

Shopping online for the first time? Discuss

with your classmates what you, as a
customer, would need to have to engage in
online shopping. Describe the online
shopping experience.

An online shopper? Discuss with your

classmates any problems you or anyone you
know have experienced when purchasing
an item online.

Share your ideas with the class.

Let’s review the different types of ecommerce by writing the acronym which
corresponds to the definition. Read each definition clearly and then determine the
type of ecommerce it describes. Then write the corresponding acronym next to it.

Acronym Definition

Business transactions that are carried out between consumers.

Transactions done by a business that sells its products or services

directly to the consumer.

Consumers who present themselves as a buyer group.

Business that sells its products or services directly to another

business.

Think of an example of each type of ecommerce. Write them in the space provided.

Types of Ecommerce.

1.
2.
3.
4.

6
 E-commerce: Consumer to
Business – Business to
Consumer. 2
As you read, compare what we’ve
discussed with the content in this text.

Since the creation of the first World Wide Web server and browser by Tim
Berners-Lee in 1990, ecommerce has grown and expanded throughout the
world. From the first online Pizza hut in 1991 to Amazon, many people have, at
one time or another, engaged in ecommerce either as a customer or an
entrepreneur. People can engage in many different types of ecommerce. In
Business to Business, companies sell products to each other, as in the case of a
wholesaler selling to a retailer. In Business to Consumer, on the other hand,
the public can purchase articles placing them in virtual shopping carts and
without human interaction. In Consumer to Consumer, people can place their
items online for sale to others while in consumer to business, a client places his
needs on the internet and companies vie to obtain the contract for fulfilling them.

Buying On line
There are certain processes that both customers
and entrepreneurs go through when engaging in
ecommerce. In order to engage in online commerce,
customers must do the following:

• First have access to the Internet either through

a computer or mobile device.
• They must then select the site they wish to
visit and the item they wish to purchase.
• Once the decision has been made, the item is
placed in a shopping cart, or basket, which keeps a record of all the items
the customer wishes to purchase.
• The customer can continue shopping or proceed to the Check O u t for
payment.

2
By Varun s (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia
Commons. Image reference.

7
 • First visitors to the site are required to create an account, filling in a form
with personal data and then choose a user name and password.
Subsequent visits to the site will require this information.
• Once the customer has arrived at checkout and the order is
confirmed payment details are required.
• Once payment has been confirmed via email, the order is then processed
and shipped to the customer.

Setting up An Online Business

If, on the other hand, an online business is to be set up, there are
several things which must be taken into
consideration. One of the most important
is the setting up of the website, the domain,
through which the product will be known
and the client can do business with the
seller. Part of this process includes the
selection of a web server, whether Linux or
Windows based, which will ensure that
service is always available, and most
importantly, security.

Creating an attractive website,

professionally designed with an authentic look is more likely to attract online
clients is the next step. Information to be displayed may include a detailed
description of the product, type and quantity, prices, discounts, legal information,
customer service information and means of payment. For purchasing to be
done, specially designed software, is needed which will allow the transaction to
be carried out. When the customer reaches the checkout, the software will
calculate the total order including taxes, freight and offer the customer different
payment options.

Security and customer privacy are

essential for online commerce and so
special software that records the orders
the client has placed, the processing of
the order and the cash transaction
mechanisms is used. Security
protocols and digital signatures are

8
encryption techniques used to ensure that the client’s personal information is
safe from hackers and virus attacks. The Secure Socket Layer (SLL) allows
websites to have a locked padlock which tells customers that the site is secure.

However, before financial transactions can be undertaken on the web, a

merchant account must be obtained. This is a bank account which will accept
the customer’s online payments. This is done through a payment gateway, an
online processor that connects the credit card to the bank’s account verifying
information, transferring requests and authorizing the credit cards in real time.
Providers like Verisign provide this service.

Finally, advertisement is important in promoting the new business. New

websites should be registered with search engine companies such as Google,
Yahoo and Bing. For those who wish to purchase or engage in ecommerce as
an entrepreneur these are a few of the basic procedures to be carried out.
Security, whether it be financial information or personal data is essential to
ecommerce and care should be taken to ensure that both those who buy and sell
are able to do so confidently.

Essential Vocabulary

Select from the text the words

you consider important to
learn. Write them in the space
provided.

Go through the text and find the

terms below. Using the
information given, try to explain
the term in your own word.

• Secure protocol _
• Domain:
• Digital signature: _
• Payment gateway: _
• Search engine:

9
Use the information in the text, as well as your own knowledge on the topic to do
these two activities. Work in pairs to discuss and write the dialogues.

Two of your friends have decided to open an online

store. However, they are not convinced of the safety of
online purchase and sales.

What advice can you give? Explain some of the safety

measures that exist to safeguard online shopping. Use
the hotlinks in the text to get additional information.

Present your work as a dialogue.

Your grandparents would like to make an online

purchase but they’ve never done so before. They have
found three websites: Ebay, Amazon and Mercado
Libre. Help them to decide on the best site to use.
Then explain, step by step, the process to complete
their purchase.

Present your work as a dialogue.

Words to Indicate a Process

To start, first, then, next, before, after

Finally, to finish
Remember to...
Use the Imperative Check your grammar.

Find a domain provider you can trust Check your punctuation.

Open an email account Use your dictionary.

Choose what you want to buy. Use Quizlet for new vocabulary.

10
Let’s Talk About it: Trade organizations
Time to review the international organizations which contribute
to the smooth functioning of world trade.

Write out in full the acronyms which represent these

organizations.

WTO _
WSC _
ISO _
ICC _
_
WCO

Read the information on the cards below and write in the acronym of the association it
describes in the corner box on each card.
The main goal of this organization is to this organization is
promote trade and investment by opening located in Belgium
This organization guarantees markets for goods and services. and its official

and of good quality. English and French.

This organization works with governments
and other bodies worldwide to find viable
solutions to challenging transportation
problems.
This organization develops standards
and formulates policies to aid business
transactions worldwide.
This organization unifies technical
specifications of products and
services.
This organization is known for being a forum to
negotiate trade agreements and to settle trade
disputes.
This organization takes an active role in
developing programmes to improve
maritime security.

This organization helps The aim of this organization is to help its members One of the goals of
countries that trade through improve the efficiency and effectiveness of this organization
its International Court of customs administration. is to liberalize
Arbitration and Incoterms. world trade.

11
 What would happen if….?
What would world trade be like if all organizations involved
with it were banned?
What would world trade be like without rules and regulations?

In small groups select one (1) trade organizations and list its goals, objectives and
importance to world trade.
Then discuss how the elimination of this organization would affect world trade.

To make these types of predictions we Complete the conditional structure.

need to use the conditionals. Do you
remember how it’s done? First Conditional in English

If I ,I _

In the conditional (if) clause we can use

• present tense Second Conditional in English
• past tense of the verb
• past perfect tense If I ,I _

In the main clause we can use Third Conditional in English

• will + infinitive /present tense
If I _ ,I
• would + infinitive
• would have + past participle

Use the conditional structure to describe the changes to world trade if these organizations
were eliminated.

12
Think Back.
Take a minute to check what we’ve done so far:

We’ve:
 reviewed some of the main terms in International
trade.
 discussed the advantages and disadvantages of trade.
 reviewed the different types of Ecommerce.
 explained how online shopping is done.
 reviewed the goals and objectives of major
international organizations linked to world trade.
 made Quizlet flashcards with the terms we did not
know
 made new Quizlet flashcards with voccabulary we’ve
met in our readings and discussions.

Still need help? Remember you can always review content using
our Gooru collections. Choose the collection you need.

Click here to review protectionist measures

used by governments.

Click here to review Opportunity costs,

Comparative and Absolute advantage.

Click here to review the goals and objectives of

the WTO.

13
 What’s in this unit?
In this unit we’ll examine the:

• information needed in a contract.

• documents needed to sell, purchase, import,
export and transport merchandise.

1
Let’s Talk About It.
Have you thought about the basis of all trade transactions?
Discuss with your classmates the following questions then share
your ideas with the class.

• What are the reasons for drawing up a contract?

• What are the two main types of contracts?
• What would be the advantage or disadvantage of each?
• What types of clauses would you include in a contract?

CONTRACT
… an agreement with specific terms between two or more persons or entities in
which there is a promise to do something in return for a valuable benefit known
as consideration.
contract. (n.d.) Burton’s Legal Thesaurus, 4E. (2007). Retrieved April 10 2017 from http://legal-
dictionary.thefreedictionary.com/contract

• Highlight any words you do not

Vocabulary From Text
know.
• Look up their meaning in your
dictionary.
• Add them to your Quizlet
flashcards.

Some legal terms

Arbitration: Resolution of a dispute

carried out by an independent third party.

Dispute: Disagreement between two

parties.

Indemnity: Protection against damages,

loss or failure to pay.

Parties: Persons involved in a transaction.

Warranty: Promise made by a

manufacturer or seller about a product.

2
The contract

A contract is a “…pact or agreement, oral or written, whereby two or more

parties bind themselves to certain obligations, and whose fulfillment is legally
enforceable…” 1. That is, a contract clearly states the obligations of the parties
involved, the seller offering the product and the buyer making an acceptance. Most
international contracts are regulated by the United Nations Convention on Contracts
for the International Sales of Goods (CISG) signed in Austria on 11th April, 1980 and
which came into effect on 1st January, 1988. The CISG establishes a uniform code
of legal rules for the drafting of international sales contracts, the obligations of both
the buyer and the seller and remedies for breach of contract. The main objective of
the CISG is to eliminate any ambiguity that might be caused by domestic trade laws
which it supersedes. As each party is acquainted with the trade laws of its own
country, it might want these laws to be applied to the transaction and this might lead
to conflicts during negotiation. By using internationally accepted rules, these problems
can be avoided.

The Contracts for the International Sales of Goods applies only to the
international sale of goods between parties whose places of business are located in
countries that have ratified the treaty unless said parties have specifically agreed that
the CISG, or specific parts of the convention, do not apply to their contract. To the
contrary, the companies are bound by this agreement. As of 11th August, 2010, the CISG
had been ratified by 76 countries.

Although contracts may be drawn up according to the wishes of the two parties,
it is important that certain aspects be taken into consideration for a smooth business
transaction to occur. The following are the key elements which must be taken into
account when drawing up a contract.

Key parts of a contract.

1. Contract date: This specifies the date on which the contract is signed and
is of importance if the date of delivery of the goods is fixed with reference to this
date.

2. Identification of the parties: This identifies the names of the parties, i.e.
the buyer and the seller, their relationship to each other and the names of the
individuals authorized to act on their behalf.

3
3. Goods: It is important that a complete and accurate description of the goods be
made so that the contract can be enforced if so needed. The following
information should be included in the contract:

a. Type and quality of the goods.

b. Quantity of the goods. Specify the number of units of other measures of
quantity such as weight.
c. Price. Indicate the unit or price related to the measure of quantity, for
example, $ per kilo.

4. Packing arrangements: Specify the type of packaging required as this is

especially important in the case of goods that can be damaged in transit.

5. Transportation arrangements: The name of the freight carrier and the

party responsible for payment should be supplied here. Information needed
includes:

a. Name of the carrier. Give the name of the shipper or vessel.

b. Storage. Specify the type of storage required.
c. Notice provisions. This requires the seller to notify the buyer when the
goods are ready for delivery. This is very important in the case of perishable
goods.
d. Shipping time. Specify the exact date or an estimated time by which
goods should be shipped.

6. Costs and charges: Specify the party to pay any additional charges if needed.

a. Duties and taxes: Indicate the party to pay for import, export and any
other fees or duties and for obtaining the required licenses.
b. Insurance costs: Identify the party that will be responsible for paying for
the insurance while the goods are in transit. Usually the seller is
responsible for the title of the goods until these pass into the hands of the
buyer. It is important to indicate the time at which the title of goods will
change hands especially if the goods are lost during transit.
c. Handling and transport: The party responsible for paying for shipping,
handling, packaging, security and any additional costs must be specified.

4
 d. Terms defined: The use of INCOTERMS is required to assign responsibility
for the cost of transport and for risks.
e. I n s u r a n c e : The type of insurance, the beneficiary, the party who is
responsible for obtaining and payment and the time period by which the
policy must be obtained should be clearly stated in the contract.

7. Payment: In a one-time transaction, the seller will often require a secure

form of payment before shipment of merchandise and the buyer will require that
goods have been passed through customs and received before emitting payment.
If advance payments cannot be obtained, documentary credit must be obtained.

a. Method of payment. This indicates the form of payment, for example,

through a letter of credit.
b. Medium of exchange. This refers to the currency which will be used.
c. Exchange rate. This refers to the fixed rate of exchange to be used for the
currency.

8. Import documentation: Indicate the import and export documents that each
of the parties will be responsible for obtaining, completing and presenting to the
relevant authorities.

9. Inspection rights: Insure that the buyer has the right to inspect the merchandise
before taking delivery to determine whether or not goods meet the contract
specification. Indicate the person to carryout said inspection.

10. Warranty provisions: Specify the warranty on the property and fitness of the
goods. Limit, extend or define said warranties. For example, the seller can warranty
that the goods will be of the same quality as the sample good shown by the
manufacturer’s representative.

11. Indemnity: Agree that one of the parties will not hold the other responsible
for any flaws due to specific causes. For example, if the merchandise is
flawed or due to manufacturing or design.

12. Enforcement and remedies:

a. T i m e : Specify the time in which enforce must take place, for example two
months after the breach of contract.
b. Modification of contract: This should be done in advance of signing.

5
 c. Cancellation. State the reasons for cancellation of the contract and give
advance warnings before it is done.
d. Contingencies: Specify the events which are required to occur before
the contract is enforced.
e. Governing law: Choose the law of a specific country which will govern
interpretation of the contract.
f. Choice of forum: Identify the place in which any dispute arising between
the two parties might be settled.
g. A r b it r a t ion provisions: Arbitration it is a method of dispute resolution
relating to international contracts of sale. A well-prepared clause on
arbitration provides a basis to duly conduct arbitration in case of litigation.
h. Severability: Provide that individual clauses can be removed from the
contract without invalidating the whole. For example, a clause may be
invalid or unenforceable for a reason but this does not mean that the rest of
the contract is invalid.

To summarise, a contract is an agreement between one party (the seller or

vendor) which makes an offer and another party (the buyer) who accepts said offer. A
contract should indicate where the goods should be delivered, who should arrange for
transport and be responsible for obtaining and paying for insurance. Obligations with
regards to customs procedures and the payment of any duties and taxes should also
be stated.
Besides details with regard to delivery, the contract should also cover
payment of the merchandise. This includes the currency in which payment will be
made, the amount to be paid, when payment is due as well as the method to be used. It is
advisable that internationally agreed Incoterms be used to specify the terms being used
in the contract.
When there is no physical delivery of goods, as in the case of services,
Incoterms cannot be used in the contract. Instead, the services to be provided
should be clearly defined and to what standards. International customers should
also be advised of the manner in which the services to be provided work and the way in
which complaints will be handled. Finally, both parties should agree on the law
governing the contract in case disputes need to be settled.

References
Hinkelman, E.G. 1992 Importers Manual USA, 4th Edition, California, USA, World Trade
Press.

Ventura, Luis Clemente, 2007 International trade contracts: a practical guide For exporters, San Salvador: IICA.

6
 Six Key Parts of a Contract.
Choose six (6) parts of a contract that you consider vital.
Why do you consider them to be so important?

Share your ideas with the group. Are any common among the
group? Which ones? Do you have the same reasons?
Present your six to the group.

Key Parts of a Contract

Part of the contract Reason for importance

1. _
2. _
3. _
4. _
5. _
6. _

Write at least four (4) content

questions and then pass them to
another group. Answer other groups’
questions for a total of 20 questions.

Here’s a quick review of the question structure.

WH + auxiliary + subject + main verb.

If you need more help with questions you can:

• Download the pdf on question structure from your Edmodo class folder.

• Do the exercises in this Gooru collection.

7
 Vocabulary From Text

Click here to learn more

about

United Nations
Convention on
Contracts for the
International Sales of
Goods (CISG)

Form a group of four and create two companies.

Decide on a product to sell which will require goods

or services from one of the companies.

Write your own contract to buy or sell the product

from the other company.

Be sure to include all of the required information.

Research
Find a copy of a contract and see if it contains all of the relevant information required as
stated in this text.
• Click here for an example FIND LAW SAMPLE SALES CONTRACT.
• Find on in the Index.

8
Let’s Talk About It.
Have you thought about the documents you would
need to purchase or sell merchandise? In small
groups make a list of the documents you think
you’d need to engage in:
• domestic trade
• foreign trade
Why would these documents be necessary? Share
your list and reasons with the class.

Documents needed for trade: Domestic and Foreign.

Domestic trade Both foreign and Foreign trade

domestic

Reasons for needing documents. Terms

Check your answers as we read the following

text.

9
Documents needed in International Trade
Those who work in International trade know that a
number of different documents, commercial,
administrative, insurance and transport, are required for
foreign transactions to be undertaken. These different
transactions imply the need for different contracts
and it is precisely this which differentiates
international from local trade. Although the documents
may depend on the type of transaction and may vary
from one country to another, a few are essential for
trade and include commercial invoices, packing lists,
insurance and shipping documents.

Documentation is needed for several reasons. First and foremost, they are proof
of contract, that is, the sale and conditions under which the goods have been acquired.
Secondly, they give title to the goods or the right to collect them from the carrier.
Documents also give information on the goods themselves, the contents and the
purchase price and they are also needed for customs in order for the relevant taxes and
duties to be applied. Finally, documents are also proof of compliance that the conditions
laid out in the contract have been fulfilled.

Documents used in International trade performs fall into several categories and, as seen
below, often overlap.

• Transaction documents are those which show proof that a business

transaction has taken place. These documents are kept for accounting purposes
and are also needed for banking transactions and payment procedures. A key
example is the commercial invoice.
• Export documents vary from country to country and are those required by
customs. These include licenses, export declarations, inspection certificates,
permits and commercial invoices.
• Transport documents are issued by a shipping line, air cargo carrier or land
transport provider and detail the terms of transport of the cargo. The most
important transport document is the Bill of Lading
• Inspection documents are usually issued by a third party and certify the
quantity and quality of the shipment. This is often done at the request of the buyer.
• Insurance documents are required to show that the shipment is insured and
is often in the form of a policy or a certificate.
• Banking and payment documents include letters of credit, various advices
and all other documents used in trade.

10
 • Import documents are required by customs and may vary from country to
country. An entry form and a commercial invoice is the minimum required.
Certificate of origin, certificate of inspection (inspection certificate) consular
invoices and Blacklist certificates may also be required.

These are few of the categories of documents needed in trading internationally.

Additional documents may be required depending on the type of merchandise to be
imported or special requirements dictated by the countries involved in trade.

Reference
Hinkelman, E.G. 2005 Dictionary of International Trade, 6th Edition, California, USA, World Trade Press

As you can see from the text, documents can belong to one or more categories. Fill in the
chart with the appropriate document. Click on the link to obtain more information on the
term.

CATEGORY DOCUMENT

Transaction

Transport

Import

Export

Can you think of any other categories in which you can place the documents?

11
Looking In Detail.

We may often be confused with the terms bill,

receipt and invoice. Look at the image on the left,
an example of a receipt. What information does it
give?

Mi Bella Dama is a cosmetic company in

Mérida which has sold a number of its products
to a distributor, Belleza C.A, in Caracas. Mi
Bella Dama sends an invoice to the purchaser.
What information do you think will appear on
the invoice?

In small groups, decide what information you would

find in the invoice. Then compare with the information found in the receipt.

Information On Invoice. The seller sends an invoice:

before receiving payment.

after receiving payment.

Terms

Now check your information with that found in the text that follows.

12
Purchases and Sales documents
A number of different documents are used during the purchase and sales process to legally
bind the sellers and buyers. First, when companies buy goods, they send a purchase
order to the suppliers. If the buyers are regular customers, the suppliers send the goods
and then send an invoice which is often not paid immediately. The suppliers usually send a
statement at the end of the month which shows all the transactions between the suppliers
and the buyers in that month. The buyers then pay the amount outstanding on the statement.

What is a purchase order (PO)?

A purchase order is a commercial document used to request goods and services from a
supplier or vendor. It contains a unique purchase number and gives the seller information
on the goods and services required by the buyer. It is also a payment agreement whereby
the purchaser, that is the buyer, is legally bond to take possession of the goods if the terms of
the agreement are fulfilled. The purchase order contains the following information:

• Unique purchase order number: This will identify the order.

• Name and address of supplier or vendor.
• Name and address of purchaser:
• Billing address: Indicates where the invoice should be sent.
• Shipping address: Indicates where goods should be delivered.
• Items to be delivered: Describes the items that have been purchased.
• Quantity of items: Indicates the number of each item to be delivered.
• Price: Indicates the price that must be paid for each item.
• Date of delivery: Indicates the time in which the goods must be delivered.
• Terms of payment: Describes time and form of payment.

Check the online simple

Click here for a purchase order template
purchase order. Is there any
additional information given
there? If so, what?
Additional Information

13
What is an invoice?
An invoice is a commercial document which is issued by the vendor or supplier and indicates
the quantities of a product (or a service) and the cost that must be paid by the purchaser or
buyer. It is essentially a request for payment and can be sent on paper or via the Internet as
electronic invoices. The invoice must contain the following basic information:

• Unique invoice number.

• Date: This refers to the date in which the invoice was created.
• Name and address of vendor: Telephone number and email included.
• Name and address of purchaser: Telephone number and email included.
• Billing address: Address where invoice must be sent.
• Shipping address: Address where goods were sent.
• Shipping date: Date on which goods were sent.
• Shipper: Type of transport used.
• List of goods or services: Description of goods.
• Price of goods or services. Unit price for each.
• Total amount: Amount of money to be paid by the buyer.
• Terms of payment: How long the buyer has to pay, for example 30 days.

Additional information may be required according to the country in which the business is
located.

Click here for an invoice template

Discuss with your group the following Who issues the purchase order?
questions:

• What is the role of a purchase

Who issues the invoice?
order and an invoice in sales?
.
• How important is each one?

14
Documents needed for foreign trade.
Before reading the text, try and remember the
information needed on an invoice.

Informantion Needed For Invoices

While reading the text, think of:

• the purpose of these documents.
• their importance to foreign trade
Highlight important information or terms.

The essential documents for purchasing and selling in international transactions are the
Proforma - Invoice, the Commercial Invoice and the Consular Invoice.
The ability to successfully finance an export sale depends on whether the sale is
arranged properly or not. A detailed pro forma invoice, or export quotation letter, is one
tool that can help to reduce the risks associated with international transactions.

What is a Pro Forma Invoice?

The starting point of the export contract is in the form of offer made by the
exporter to a foreign customer. The document, Pro forma from the Latin “as a matter of
form”, is often included in the company’s response to the potential buyer. It is an
estimate given as a reply to an inquiry and forms the basis of all trade transactions
creating a link between the export and import operation. It is not mandatory and is
usually issued to first time buyers or when foreign buyers asks for one.

A Pro-forma invoice is an official quotation in an invoice format specifying the

price of the merchandise with tax and shipping charges which allows the customer to
present the Pro-forma invoice to their Accounting Department and to arrange a
prepayment. The Pro-forma guarantees a price and terms for a 60-day period of time
while the customer acquires and/or transfers the funds to the vendor. It facilitates
financing because, in addition to describing the product and setting the price and
time of shipment, it can be used to establish the terms of sale and payment. It is
most commonly requested by customers pre-paying orders via bank money transfer
before shipping an order.

15
 A pro forma invoice is also an advance copy of the final invoice and is often used
by the importer to apply for a letter of credit (L/C) and foreign exchange (import)
allocation. A Pro- forma is also used as a pre-payment document with new customers
whose credit status is unknown; for information, it may be used as a quotation; and when
goods are sent on approval, that is, when the seller sends samples of goods to the buyer
who can then inspect them before he decides to buy. Preparing a pro forma invoice can
also help to anticipate financing costs, which, in some cases, can be built into the selling
price of the export

Click here for a pro-forma invoice template

What is a Commercial invoice?

The Commercial (or Export) Invoice is the seller's bill of sale for the
goods sold, specifying type of goods, quantity and price of each type and terms of
sale. It is a very important document and is required by banks when they issue credit.
This is an invoice used in exporting and includes details of shipment, freight and
insurance. It is one of the shipping documents. It must be carefully made out, as it is the
basis for the Bill of Lading.

The commercial invoice is considered the most important document in

international trade because goods are not allowed to clear customs at the destination
without one. This document is usually the one that all the service providers first look to
for information about your shipment. It is essential to prepare the commercial invoice as
clearly and accurately as possible to avoid problems with your shipment.

The commercial invoice fulfils these functions:

1. It is a bill or record of transaction between seller (shipper) and buyer (recipient),
listing a complete description and sale price of the goods, the name and addresses
of shipper, recipient, and buyer (if not the recipient), and if possible, purchase
order or reference numbers for the transaction.
2. It is the basis for foreign Customs' identification, classification, duty/tax
assessment, and final approval of entry of the goods.
3. It is the document that confirms the value of goods for insurance purposes.

16
 To summarise, the commercial invoice is the one single document that describes
the entire transaction from start to finish. The basis for all other export and import
documents, the commercial invoice is, in reality, a bill for the goods from the seller to
the buyer. It is also the primary shipping document used by customs worldwide for
commodity control and valuation.

Click here for a commercial invoice template

Some countries also require other "invoices" which need to be prepared in

addition to the commercial invoice. These forms are often country-specific, and they can
usually be purchased from the foreign consulate. This document may also be prepared
by the importer or their customs broker. They are referred to as Consular Invoices.

What is a Consular invoice?

The consular invoice is a special form available through the embassy or consulate
of the importing country which is resident in the exporting country. This invoice has a
detailed description of the goods, their quantity, weight, value and origin. It also
includes the name of the vendor (consignor) and the buyer (consignee) and a declaration
of the accuracy of its contents, that is, that the information in the invoice is true. This
document, purchased from the consul of the importing country, is signed by the
exporter or his authorized agent and legalized by the Consul. A commercial invoice
can also be used and legalized by the Chamber of Commerce and the consul. The
information is used by Customs to classify the goods for tariff rates, duties and other
import taxes and charges and must be written in the language of the importing country.
At least three copies of the invoice should be made: one for the exporter, one for the
importer and another which accompanies the merchandise when shipped.

References
1. Platt, G. (1999). Guide to the Finance of International Trade. Trade Services Marine Midland
Bank. The Journal of Commerce.
2. STEP’s International Finance and Logistics Group.
http://www.sasktrade.sk.ca/membersonly/financelogisitic.shtml

17
 Terms Essential information for a
Pro forma invoice.

Reread the entry on the Pro forma invoice

and write in bullet form the essential data
that should be included in the form.
After reading:

Essential information for a

Commercial invoice.

Reread the entry on the commercial

invoice and write in bullet form the
essential data that should be included in
the form.

1. Form groups of four. Select one of the documents presented in the text. Discuss
with your group the importance of this document to international trade.
Present the information to your class. Make notes on the presentations given by
the other groups to fill out the table below.
Document Importance to trade.

Pro forma

Commercial

Consular

REMEMBER TO USE QUIZLET TO LEARN TERMS AND NEW VOCABULARY!

18
Other Important Import-Export Documents.

Have you ever sent or received a package from a delivery service?

What document did you have to sign? Why did you sign it?
In small groups look at the list of documents in the table.
• Can you define each document?
• What information would you find in each document?

certificate of origin insurance packing list

blacklist certificate inspection certificate certificate of analysis

CERTIFICATE OF ORIGEN
INSURANCE CERTIFICATE

PACKING LIST
CERTIFICATE OF ANALYSIS

BLACK LIST CERTIFICATE

INSPECTION CERTIFICATE

Check your information while you

read the following text.

19
 While the Pro forma, commercial and consular invoices are all important
documents needed in international trade, there are other important documents
that the importer or exporter must have on hand when trading. Here are only a few:

What is a Certificate of Origin (CO)?

A certificate of origin is a signed document stating the country of origin of the
goods and certifying that they have been produced, manufactured or processed in that
country. It should contain a description of the goods being purchased including
information on the consignor, consignee and the details should conform to those found
on other documents like the letter of credit or the commercial invoice.
There are two types of CO:

• Preferential CO: This is issued when the exports are eligible for
preferential tax deductions or exemptions under a Free Trade Agreement.
• Non-preferential CO: This is issued when the exports are not eligible for
preferential deductions or exemptions.

The Certificate of Origin is often required by the importer’s country to determine

the tariff rates. In some countries it is prepared by the exporter on a standard form and
then certified by the city or regional Chamber of Commerce. Other countries sometimes
require that this certificate be issued by a third party, for example, the Chamber of
Commerce and be notarized, legalized or visaed by the embassy or consulate of the
importing country.

Click on the link and

Click here for an example of a
make a list of the
Certificate of Origin
information required.

What is an Inspection Certificate (PSI)?

A certificate of inspection, also known as Pre-Shipment Inspection (PSI), is a
document issued by a recognized independent inspection body declaring the results of
an examination of the goods prior to shipping. This is to guarantee that the goods
conform to the specifications given in the sales contract. When exporting agricultural
products, a phytosanitary inspection certificate might be required. The certificate
includes details regarding shipment, the date of inspection, statement of sampling
methodology, statement of results and the name, signature and stamp or seal of the
inspecting authority.

20
 Buyers request a certificate of inspection to protect themselves from paying when
substandard or worthless goods have been shipped. This is important for the buyer as
banks’ liabilities and responsibilities under documentary credit are limited to documents
and not goods represented by the documents. In some countries and for certain
commodities the inspection must be done by a government entity. The usual
independent body which serves buyers and sellers is the Société Generale de
surveillance.

Click on the link and

Click here for an example of a make a list of the
Inspection certificate. information required.

What is a Packing List?

A packing list is a document prepared by the seller and lists the kinds and
quantities of the merchandise of a particular shipment. It includes a detailed
description of the merchandise, ne t a nd g r o s s w e i g h t a nd d i m e ns i o ns o f t h e
go o d s , the names and addresses of the buyer and seller, date of issue, invoice number,
order or contract number, shipping details and any other information as required by the
sales contract. The packing list carries no price information while the specification list
does.

Shippers and forwarding agents use the information on the packing list to
calculate weight and dimensions of the merchandise and to ensure that the correct
merchandise is being shipped. The packing list is also required by the customs
authorities to enable them to make spot checks or more thorough checks on the
contents of any particular package. As a result, a copy of the packing list is often attached
to each package in a waterproof envelope and another sent to the consignee so the
shipment can be checked on arrival.

Compare the information

Click here for an example of a required in the document
Packing list.
with that given in the text.

Additional Information

21
What is a Weight note or Weight list?
A weight note or weight list is a certificate issued by the seller or by a third party
and indicates the weight of goods, the net and gross weight of the shipment as well as
the weight of each of the packages. The weight list is usually used in commodity trade
as in the shipment of bulk goods such as grain or oil. The information on this
document should tally with that shown on all other documents, like the commercial
invoice. Banks will accept superimposed declaration of weight on shipping
documents unless the credit requires a separate or an independent document be
issued.

Click on the link and

Click here for an example of a make a list of the
Weight list. information required.

What is a Certificate of Analysis?

A certificate of analysis is a signed document issued by the manufacturer of the
product or an authorized authority, stating the specific tests, their specifications and
results carried out on the goods. Tests of this sort are usually done on food products,
wines and beverages, chemicals and pharmaceuticals to guarantee that they conform to
the specifications in the contract. This document can be requested from the seller
(vendor) or requested by the government of the importing country.

Click on the link and

Click here for an example of a make a list of the
Certificate of Analysis.
information required.

What is a Blacklist Certificate?

A blacklist certificate is a document which certifies that the goods being imported
are not from a country that is on the government’s black list and neither are the
parties involved, i.e. the manufacturer, bank, insurance company and shipping lines nor
will the transport vessel call at ports in such a country unless forced to do so.

22
What is a Letter of insurance?
It is normally issued by a broker to provide notice that an insurance has been
placed pending the production of a policy or a certificate. Sometimes this takes the form
of a cover note. The above documents do not contain details of the insurance being
effected and therefore are not considered satisfactory by banks which normally require
evidence of an insurance contract in documents required under a documentary credit.
Broker's certificates and cover notes are issued by a third party and not the insurer
so that in the event of any claim, it would be made against the broker.

What is an Insurance certificate?

A certificate of insurance is issued by insurance companies to embrace either open covers
or floating policies. The systems of open cover and floating policies are similar in that:

Terms

Choose a product that your company

needs to import. Fill out the
corresponding online document to
facilitate the import process.

Choose a product for your company to

export. Fill out the corresponding
online document to facilitate the export

• What documents did you need for

each process?
• Which documents were needed
for both import and export?

23
Documents For International Transport
Have you thought about the documents
needed to transport merchandise?

• What documents do you think

would be needed?
• What is their importance?
• Who are the people involved in
moving merchandise from one
country to another?

Spanish equivalent of terms.

INTERNATIONAL FEDERATION OF
_ FREIGHT FORWARDERS
ASSOCIATIONS. (FIATA)
_
_ Founded in Vienna, Austria on May 13th
1926, this non-governmental
_
organization represents forwarding and
_ logistics firms worldwide. It issues
_ documents to uniform standards for
freight forwarders.
_
_
_
Merchandise can be transported by
_
1.
2.
Those involved in transport 3.
Forwarder: Person or company that arranges
transport of merchandise.
4.

When more than one mode of

Shipper: Seller or buyer who contracts the
transport is used, this is known
services of the carrier.
as transport.
Carrier: Person or company that transports the
merchandise and is responsible for its loss or
damage.

Notify party: Person or company to be informed

when cargo arrives.

24
What is International transport?
Transport plays a vital role in the expansion and efficiency of world trade and many
organizations such as FIATA, IATA (International Air Transport Association), ICS
(International Chamber of Shipping), ISF (International Shipping Federation),
International Road Transport Union (IRU) and the International Union of Railways
(UIR), exist to oversee and supervise the moving of merchandise from the factory to the
warehouse in the importing country.

International transport involves operations such as packaging, handing,

consolidation/break-bulk, loading/unloading, labelling, storage, reconsignment,
distribution, quality checks, weighing and some others. International transport applies
international trade rules and regulations: Incoterms, uniform rules and uses of
documentary credits. On the other hand, it has its own regulations and conventions
and uses its own documents and forms such as Bills of Lading, Airway bills, FIATA
documents as well as other documents specifically created to meet transport needs.

International transport requires guarantees such as insurance covering damage to

goods as well as civil or professional legal responsibility worldwide, official
acknowledgement and accreditation; technical know-how and specific qualifications and
customs ratings to ensure all operations. Furtherm ore, it requires co-ordination, this
is, everything must be provided for and co-ordinated through local specialists and
correspondents throughout the world.

When transporting goods, the importer and the exporter must agree upon how
the consignment must travel and in which conditions. There are various forms of
transportation by air, sea, rail and road and merchandise is often moved by a number of
different modes or multimodal form of transport.

What is the Export Cargo Shipping Instruction 1(ECSI)?

One of the first documents is the Export Cargo Shipping Instruction (ECSI)which
is sent by the exporter to the shipper or carrier. This document gives the shipper the
description of the goods and instructions for their shipping. Information found include;

• route the goods must take.

• customs information
• transport requirements
• person to receive documents
• cost allocation

1
http://www.internationaltrade.co.uk/articles.php?AID=124&Title=Export+Cargo+Shipping+Instruction
25
To transport consignments by sea, there is an essential document in international trade,
which must accompany the cargo called the Bill of Lading.

What is a Bill of Lading (B/L)?

The Bill of Lading is a contract of carriage between an exporter and a service
provider (i.e. airline, steamship line, freight forwarder or shipping company, etc.) that
identifies the parties to the transaction and their responsibility for payment of
transportation and other accessorial fees, such as transfers and delivery. These
responsibilities and liabilities of each party are set out in Conventions (Hague-Visby
Rules and Carriage of Goods by Sea Act 1971).

It is important to consider the commercial use of the bill of lading in relation to

the transfer of title to goods and in relation to the payment for goods. In international
trade, the origin and the destination on the bill of lading are usually for the "main
carriage" transportation between the port of departure and the port of importation.

There are three essential elements to an ocean bill of lading issued by a shipping
line and covering the carriage of goods by sea:

1. It is evidence that a contract of carriage exists between shipper (exporter) and

ship owner.
2. It is a receipt for goods, showing prima facie that they have been received into
the charge of a carrier.
3. It is a document of title, which allows title to the goods to be transferred
by endorsement and delivery of the bill of lading.

These three elements explain the importance of the bill of lading to commerce
over the years. With the bill of lading showing that a contract of carriage exists and that
the goods have been received by the carrier, a buyer and his bank are assured that
the dispatch of goods according to the contract of sale is under way.

What are the different types of Bill of Lading (B/L)?

A number of different types of bills of lading are available to exporters, according
to the type of service being used. Different clausings are applicable to bills of lading and
these are considered under "Clean bills and claused bills", following the details which
must be shown in the bill of lading. The shipper (exporter) or his agent should furnish
the details to the shipping line in writing (e.g. by fax or e-mail) or on blank bills. It is
essential that the details are correct in relation to:

26
 1. the actual goods being shipped;
2. the contract of sale; and
3. any letter of credit or payment requirements

A bill of lading should have the following basic information:

• Name and address of consignor and consignee.
• Any references for tracking the order.
• Name of the vessel.
• Name of port of departure and port of arrival.
• Date of departure and of arrival.
• Description of goods being shipped.
• Marks and numbers on the packages.
• Exact weight of the shipment.
• Freight rate and amount.
Select a product to be imported and
fill in the B/L with the appropriate
information.
Click here for an example of a
Bill of Lading. Why is this the best type of
transport for the product?

Clean bills and claused Bills of Lading

A "clean" bill of lading is one in which no notation is shown on the document
relating to cargo having been received by the line or shipped in any other than good
condition and correct quantity. In the case where the cargo is noted to be wet, damaged
or otherwise in doubtful condition or quantity, bills of lading will be issued "claused"
(or "dirty"), showing the defect in the cargo.

Clean shipped on board Bills of Lading

A contract of sale may stipulate, and a confirmed irrevocable letter of credit is
almost certain to instruct, that an exporter must produce "clean shipped on board" bills
of lading. Whether or not there is this stipulation, this type of bill of lading is clearly the
most useful as it is prima facie evidence that: the goods are actually en route to the
port of destination and at the time of shipment the goods were in good condition.

27
 Under a documentary letter of credit, a bank (which deals only with documents,
not goods) presumes that the goods are en route to the consignee in good order and that
the exporter can be paid for them provided that all other conditions in the credit are
satisfied.

Through Bills of Lading

Bills of lading issued by shipping lines originally covered only port-to-port
shipments of conventional cargo. The "through" bill of lading concept allows door-to-
door shipments to be covered by a bill of lading. This became necessary following the
development of containerization. Thus, this type of bill may cover ocean shipment,
plus inland transport by other modes, with the ocean carrier subcontracting these other
elements.

Combined transport Bills of Lading

Similar to a through bill of lading, the combined transport bill of lading allows
for the contract of carriage to be covered by a single document and a clearly defined
single set of conditions of carriage to include the use of road and/or rail shipment at
either end of the sea. Freight forwarders operating as non-vessel owning carriers
(NVOCS) will most usually issue this type of document.

Consolidation/groupage and house Bills of Lading

The concept of groupage - combining a number of individual consignments into a
complete container load for shipment - has been developed over many years by freight
forwarders operating services between two inland points in different countries working
in conjunction with an overseas office or partner. The forwarder then issues his own
house bills to individual exporters. These house bills become the controlling document
for the release of the cargo at destination and enable the exporter, if required, to
negotiate these with his customer in return for payment of the goods.

Negotiable FIATA multimodal transport bill

The FIATA bill of lading is a document designed to be used as a multimodal or
combined transport document with negotiable status which has been developed by the
International Federation of Forwarding Agents' Associations (FIATA) accepted a marine
ocean B/L. The document operates as a forwarder house bill with a suitable endorsement
or as a multimodal transport document.

28
Negotiation of Bills of Lading
The bill of lading is a negotiable document, which allows title to goods to be
transferred by endorsement and delivery. Two basic types of endorsement are possible:

• To order" bills of lading ("To order blank endorsed"), the shipper must stamp and
sign the bill of lading in order for title to the goods to be transferred to the
consignee.

• To order of (bank ) the bank is the party, which carries out the endorsement in this
instance and which, therefore, exercises control over the goods.

Work with a partner, go over the information on Bills of Lading and fill in the chart.
• What are the different kinds of B/L?
• In what situation is each one used?

Think of three (3) situations in which a different B/L would be used.

Type of B/L Describe situation in which it is used.

29
Documents for Air Transport
Have you thought about the documents
needed to transport merchandise?

• What companies do you know of

that transport merchandise by air?
• What documents do you think
would be needed?

Terms
INTERNATIONAL AIR TRANSPORT
ASSOCIATION. IATA

Founded in 1919 with its headquarters in

Montreal, Canada, this organization
Discussion: represents airline companies worldwide.
1. What is an airway bill? It helps its members achieve and
maintain safety, efficiency and economy
by following well defined rules.

WARSAW CONVENTION

Signed in 1929, this agreement constitutes

the legal framework for the carriage of
passengers, luggage and cargo. It
Advantages of air over ocean transport. establishes liability for loss, damage or
death on aircrafts and requirements for
• documents used in air travel.

Advantages of ocean over air transport.

30
What is an Airway bill (AWB)?
When transportation is carried out by air, there is a document of carriage,
which is issued by airlines to shippers of cargo, called the air waybill. T h e a ir
waybill covers both domestic and international flights transporting goods to a
specified destination, and establishes the terms between a shipper and an air
transportation company for the transport of the goods. The document states the
conditions, limitations of liability, shipping instructions, description of commodity, and
applicable transportation charges. In addition, the air waybill is a non-negotiable
document, which serves as a receipt for the shipper, indicating that the carrier has
accepted the goods listed and obligates it to carry the consignment to the airport of
destination according to specified conditions.

T h e A i r w a y b i l l is issued under conditions stated by the Warsaw Convention and

serves several purposes:
1. It is evidence of a contract of carriage.
2. It proves receipt of goods for shipment.
3. It is a freight bill.

The Warsaw Convention requires that the air waybill is completed in at least three
parts:

1. for the carrier (signed by the consignor);

2. for the consignee (signed by the consignor and carrier);
3. for the consignor (signed by the carrier).

The basic information to be shown on the air waybill is as follows:

• shipper’s name and address.
• consignee's name and address
• customs reference/status
• agent's IATA code
• airport of departure and destination
• first carrier
• value of goods and currency
• description of goods, dimensions, commodity code, rate class,

31
 • chargeable weight and freight rate
• freight charges (prepaid or payable at destination)
• additional charges payable.
All IATA carriers use IATA Standard Air Waybill (those belonging to the
International Air Transport Association) and it embodies standard conditions
associated to those set out in the Warsaw Convention. When issued by an airline, the
air waybill carries a unique reference number, which commences with a carrier prefix.
The air waybill number is the key to tracing and tracking the flight details of the
consignment in question and must be quoted at all times when information is
being requested. It is made up of 11 digits and three parts: three digit carrier code(
airline code), seven digit serial number and check digit.

What is a Master (MAWB) and House (HAWB) Air Waybills?

The freight forwarder may consolidate the consignments of several independent
shippers that are intended for the same airport of destination and dispatch them
together under one air waybill (AWB) issued by the carrier, known as master air waybill
(MAWB). The freight forwarder in turn issues to each shipper its own AWB, known as a
house air waybill (HAWB) or freight forwarder's waybill.

What is an International House Air Waybill?

A non-negotiable bill, produced in conformance with the International Air
Transport Association’s specifications, the International House Air Waybill serves as a
contract between the exporter and the air carrier or his agent.

Click here for an example of a

Airway Bill

Fill in an online airway bill for three

products that need to be imported by
air.

• Why is this the best type of

transport for your product?

32
 Documents for Land Transport

In what countries would land transport

be the best way to transport
merchandise?

What is a Road Waybill?

The road waybill is an international consignment note which is specified under the
Convention for the Contract of the International Carriage of Goods by Road, 1956 (the
CMR Convention). Conventions deal with the substance of this law which governs the
responsibilities and liabilities of the parties to a contract for the carriage of goods by
road internationally.

The road waybill (road consignment note) or rail waybill (rail consignment note)
serves:
1. as a receipt for goods
2. evidence of the contract of carriage,
3. it is not a document of title to the goods.

The consignee can obtain the goods from the carrier at the destination point
without presentation of the road waybill or the rail waybill, as the case may be.

The road waybill or rail waybill must be signed or authenticated and/or bear a
reception stamp or other indication of receipt by the carrier other named agent for or on
behalf of the carrier.

References
Platt, G. (1999). Guide to the Finance of International Trade. Trade Services Marine Midland Bank. The
Journal of Commerce.

33
 What’s in this unit?
In this unit we’ll examine the:

• different types of containers used in trade

• choose the best type of container according to
our shipping needs
 Let’s Talk About It
When we import goods, we often have to
consider the different ways of getting the
merchandise from one place to another. In small
groups, discuss the different ways in which goods
are moved. How does this affect the final price of
the product? Think of at least two factors that
will influence price.

Terms

Think about the advantages of using

container shipping. Write your ideas
in the space provided.

SEND ME BY CONTAINER
Reasons for using containers.
Types of goods to be sent by containers.
Read the definitions of containerization
below. How did this change foreign
trade?
A sh ipping method in wh ich a large amount
of mat erial (as merch andise) is packaged
into large st andardized containers.
h ttp s://www. me r ri a m-
we bste r . c o m/di c tio nar y/c o n ta in er iza ti on
Transport at ion of cargo in cont ainers (that
can be int erch anged between sh ips, t rains
and t rucks) with standardized h andling
equipment and with out reh andling th e
cont ent s.
http://www.businessdictionary.com/definition/containerizatio
n.html
Check your ideas against the information you find in the text that follows.

Containers and International transport.

International transport is one of the most important features related to
international trade. It implies the carrying of goods from one place to another and
involves the handling of consignments, loading and unloading of merchandise,
shipment expenses and other arrangements between the importer and exporter.

International transport covers the whole world and moves all types of goods to
the farthest corners of the globe. It reaches beyond all borders and barriers including
physical, technical, customs-based, language, economic and all other kinds. It uses
all types of modes and means of transport such as: trucks, ships, planes, containers,
roll-on - roll-off, rail and river transport among others. A regularly used mode of
transport is intermodal transportation. This is the containerized movement of cargo
over land and sea, door to door, without the physical handling associated with break-
bulk transportation. A containerized cargo shipment depends on four basic
fundamentals:

1. Matching the cargo to the correct type of container that is best suited
for the forthcoming voyage - be it by land or water.
2. Ensuring that the container is in good condition prior to loading the cargo and
that it is carried and handled correctly throughout the voyage.
3. Ensuring that the cargo is loaded correctly into the container and is properly
secured against movement during the voyage.
4. Ensuring that all the relevant cargo information is communicated to all
appropriate parties to be sure that the container and its contents will arrive at
the consignee in the expected condition.

The most used and secure way to move cargo around the world is in
containers. It is also one of the cheapest methods of transportation. Containers have
been designed to fulfill the function of protecting the cargo from damage.
 What are containers?
Containers are large metal boxes
made up of a rigid frame, usually of steel
or aluminum, with panels between the
frame members. The frame is the
principal structural load-bearing part of
the container. The container’s sidewalls
are usually constructed of corrugated
steel with corrugations of three or four
inches wide except at the two flat areas
that run the full vertical height of the
panels near each end. These areas are
called marking areas, located approximately 12 to 15 inches from and rear walls of the
container. They are reserved for markings required and they often contain ventilation
holes to allow an exchange of air in the container while preventing the entry of solids
or liquids.

There are various types of containers according to their size and height, 20, 40,
45, 48 refrigerated and conventional. Their main function is to protect the cargo from
damage or any other risks. Containers can be classified and defined as follows:

The International Standards Organisation (ISO) has recommended a series

of internal and external dimensions for containers together with gross maximum
weights, which the container may carry. All operating containers fleets, whether
owned or leased, should follow the ISO code. Every container must have a Container
Safety Certificate (CSC) issued by the manufacturer and this must be renewed every
30 months after inspection by a competent inspector. The advantages in utilizing this
method of shipping are:

1. Once a container is loaded and sealed at the suppliers’ warehouse, it is

not opened until its arrival at the consignee’s facility at destination.
2. It alleviates the need for expensive export packing.
3. It reduces the ocean carrier’s charges for terminal handling at the port of
exit.
4. It creates a reduction in the cost of marine insurance
5. It reduces the overall transit time of the shipment.
How do you classify containers?
There are various types of containers according to their size and height, 20, 40,
45, 48 refrigerated and conventional. Containers are available in configurations to
take almost every kind of cargo and mode of transportation (ocean, air, road, and
rail). In terms of the type of cargo for which the containers are mainly intended, they
are classified as general cargo container and specific cargo container.

The General cargo containers:

The general cargo container is used for most general cargo commodities. The
containers are 20 ft or 40 ft in length. The standard external height of general
cargo containers is 8 ft 6 inches although high cube containers at 9 ft 6 inches in
height are becoming common. Specific cargo containers are provided for specific
carriage requirements.
General purpose (dry cargo) container

This container is suitable for the

widest varieties of cargo. It is fully
enclosed and weatherproof, having
rigid walls, roof and floor, with at
least one of its walls, either end wall
(end loading) or side-wall (side
loading), equipped with doors.

Specific purpose container

This container is used to facilitate the packing (loading) and emptying
(unloading) of containers other than by means of doors at one side of the container,
and for other specific purposes like ventilation.

Closed ventilated container

This type of container is used for the carriage of cargo, such as seeds, that
cannot stand excessive moisture. It is similar to the dry cargo container with specially
designed natural or mechanical (forced) ventilation.
Open top container

This is similar to the dry cargo

container except that it has no rigid
roof, but has a movable or removable
cover (e.g. a cover made of canvas,
plastic or reinforced plastic material)
supported on movable or removable
roof bows. The open top container is
used for machinery, sheet glass, and
other heavy, bulky or long objects.

Platform (flat rack)

This container does not have a superstructure,
that is, rigid sidewalls and load-carrying
structures. It is equipped with top and
bottom corner fittings which provide
means of supporting, stacking, handling and
securing the container. The flat rack is used
for machinery, lumber, and other heavy or
large objects.

Reefer container

This type of container has insulated walls, doors, roof,

and floor, which limit the range of temperature loss or
gain. It is used for perishable goods like meat, fruits and
vegetables.
 Mechanically refrigerated container
This type of container uses a refrigerating appliance,
that is, the mechanical compressor or absorption unit.

Refrigerated container (with expendable

refrigerant).
This container uses dry ice or liquefied gases. It does
not require external power supply or fuel supply.

Tank container

This type of container is used for the carriage of

bulk gases and liquids like chemicals.

Dry bulk container

It is used for the carriage of dry solids in bulk

without packaging, such as grains and dry
chemicals. It consists of a cargo-carrying structure
firmly secured within the intercontinental
container framework.

Named cargo types

It consists of various types of containers,

such as automobile (car) containers and
livestock (cattle and poultry) containers.
 The use of containers in export
shipments makes the transport
and handling easier and faster.
The crane and gantry are
commonly used in loading and
The ports
offloading containers while a
P o r t s
forklift is used within
warehouses.

Forklift Gantry crane

Ports worldwide handle over 100 million TEUs annually. The unit TEU (twenty-foot
equivalent unit) is used to express the relative number of containers based on the
equivalent length of a 20' container. For example, 100 containers of 20' is 100 TEUs,
while 100 containers of 40' is 200 TEUs.

What kind of container would you use to transport the

following merchandise?

• cars, cattle, boxes of shoes,

• dishwashing liquid, rice, vegetables
• coffee beans, bags of chemical products
• meat, panes of glass, wooden furniture

Add two goods not found on the list.

Find out more about different types of containers by visiting these two sites:
• 16 types of container
• TIS
Make a chart of all the containers and give an example of merchandise to be shipped in
it.

Learn more about containers

and containerization on the
wiki.

Click on the image.

APPENDIX
Sample International Contract for Sale of Goods, pursuant to the United Nations
Convention on Contracts for the International Sale of Goods

TERAMATE, Ltd.
with its principal office West Road Drive27, Hopson Chart, Briston, AN4 4FL, UK
represented by Matt Wattson, on the basis of Power of Attorney from 23 June 2008
(hereinafter referred to as the „Seller“ on the first side)

and

AGFH, a. s.
ID: 783 33 998
having its principal office at: Palachova 152, Prague 2, Zip Code: 120 00
registered in the Commercial Register, Section B, Entry No. 4127 maintained by the Municipal
Court, Prague
acting by: Ing. Karel Nekola, Chairman of the Board of Directors
(hereinafter referred to as the „Buyer“ on the second side)

(Seller and Buyer referred to also as the “Contracting Parties” or separately each the
“Contracting Party”)

have entered on the day, month and year as bellow, pursuant to the United Nations Convention
on Contracts for the International Sale of Goods (hereinafter referred to as “Convention”),
into the following

CONTRACT FOR SALE OF GOODS

I.
Subject-matter of the Contract

The Subject-matter of this Contract is particularly the obligation of the Seller to deliver goods
specified in the Exhibit No. 1 hereto to the Buyer and to transfer the property in goods to the
Buyer under the terms and conditions herein and the obligation of the Buyer to accept the
delivered goods from the Seller and to pay the agreed purchase price.
 II.
Sale of Goods

1. The Seller hereby agrees to deliver the Buyer goods (movables) specified in Exhibit No. 1
hereto (hereinafter referred to as the „Goods“) and in the time, quality and quantity specified in
Exhibit No. 1 hereto. The Buyer shall collect the Goods and pay Seller for Goods the purchase
price specified in the Article III. hereof.
2. The Seller fulfils his obligation to deliver the Goods when the Goods have been made
available to the Buyer at the place of business of the Seller. The Parties have agreed that the
Buyer shall arrange for carriage of the Goods from the place of business of the Seller through a
carrier the name of which Buyer shall notify Seller. The Seller shall arrange the loading of
Goods, and the Goods shall be packed in the manner set forth in Exhibit No. 2. Unless
otherwise expressly provided herein, the Goods shall be packed in manner adequate to protect
the Goods.
3. The Seller shall deliver the Goods to Buyer’s carrier on 15 December 2008 during regular
working hours (08.00 to 16.00 hours). Seller shall notify Buyer regarding the delivery of Goods
to carrier by fax message sent to phone No. ………….
4. The title in the Goods shall pass to Buyer immediately upon delivery of Goods to the Buyer’s
carrier. Risk of damage to or loss of the Goods shall pass to the Buyer at the time of delivery.
5. The Buyer hereby declares he received all information regarding the Goods necessary to
arrange insurance coverage.
6. Seller shall send the Buyer documents related to the Goods within 10 days after delivery of
Goods and at the Buyer‘s address set out in herein.

III. Purchase
Price

1. The Buyer shall pay the Seller the purchase price of the goods amounting EUR ………………..
(hereinafter referred to as the „Purchase Price“).
2. The Purchase Price shall be due upon the invoice issued and sent by the Seller not later than
10 days from delivery and collection of Goods by the Buyer. The invoice shall be payable not
later than 21 days from the issue of the invoice by Seller.
3. If the Buyer fails to pay the purchase price, the Seller shall have the right to default interest
at the rate of 0,1 % of outstanding amount for each day of default without prejudice to any
claims for damage pursuant to the Article 74 of the Convention.

IV. Product
Liability

1. The Seller shall be liable for any lack of conformity in Goods which exists at the time when
the risk passes to the Buyer and which occurs within 24 months from the date of delivery of
Goods by the Buyer’s carrier. The Seller declares that the Goods during a period of 24 months
from the date of collection by the Buyer’s carrier will remain fit for the purposes for which the
Goods would ordinarily be used or during this period will retain specified qualities (hereinafter
referred to as the „Warranty Period“).
2. The Seller shall not be responsible for the defects arising out of the failure to follow
operation instructions, for the defects caused by improper storage after the Goods were
delivered or for the defects caused by circumstances that were beyond the reasonable control.
3. The Buyer shall, immediately upon delivery of the Goods by the carrier, duly examine the
Goods and if the defects of Goods were apparent upon the collection of Goods, the Buyer shall
promptly give notice on this to the Seller.
4. Should the Buyer discover any defects during the Warranty Period, the Buyer shall give
written notice of the defect to the Seller and not later than within 15 days after such defect had
been detected. In a written notice specifying the defects he shall have the following options:
replace of defective Goods by delivery of non-defective Goods;
demand to repair the defective Goods if the defects are repairable;
demand appropriate Purchase Price reduction; or
to withdraw from the Contract.
5. The Seller, upon receipt a notice from the Buyer stating the defect, promptly shall give a
written statement and reply whether he accepts the claim for defects or not.
 VI. Exclusion of
Liability

1. A party is not liable for a failure to perform any of his obligations if he proves that the failure
was due to an impediment beyond his control and that he could reasonably be expected to
have taken the impediment into account at the time of the conclusion of the Contract or to
have avoided or overcome it or its consequences. The exemption provided by this Article has
effect for the period during which the impediment exists.
2. The non-performing party shall give prompt written notice to the other party of the reason
for its failure to perform and the extent and duration of its inability to perform.

VII. Arbitration

Clause

All the disputes resulting from this agreement or in conjunction with it, will be decided finally in
the arbitration procedure before one arbitrator or the Board composed of three arbitrators by
the course of Proceeding Rules, registered in the list of arbitrators of Czech Arbitration Centre
s.r.o., ID 281 63 427, and appointed in accordance with Act No. 216/1994 coll. of Laws, on
Arbitration Procedure and Execution of Arbitration Awards, and with the Proceeding Rules of
Czech Arbitration Centre announced at it´s websites www.arbitrators.cz. The parties hereby
vest power in Czech Arbitration Centre to appoint arbitrator in accordance of Proceeding Rules,
what the parties declare as a known and concider to be a part of this arbitration clause. The
parties authorize the arbitrator or the Board to settle the dispute based on the principles of
natural equity. Compensation for arbitration costs (including the expenses of the contractual
parties) will be awarded by the arbitrator based on the principle of success in the dispute.

jurisdiction of Court

VIII.
Final Provisions

1. This Contract shall enter into force and shall take effect on the day when it is executed.
2. The Contracting Parties hereby agree that entering into this Contract and performing duties
under this Contract have been duly approved by the relevant company bodies of the
Contracting Parties in a compliance with legal regulations, by-laws and other internal
regulations of the Contracting Parties; and no other approval or consent shall be required.
3. The Contracting Parties agrees to respect the legitimate interests of the other Party, shall
conduct in accordance with the purpose of this Contract and shall not counteract such purpose
and they shall perform all legal and other actions that may prove necessary to reach the
purpose of this Contract.
4. All documents in writing shall be mailed at the address of the Contracting Parties set forth in
the heading of this Contract unless either of the Contracting Parties shall give a written notice
to the other Party on changing its address. Whatever papers the delivery of which is required,
assumed or is made available by this Contract and regardless of any other available way
allowed by the legal regulations to prove such a delivery, shall be deemed to have been served
if such had been delivered to the other Contracting Party at the address set forth in the heading
of this Contract or at the address noticed in written form by either Contracting Party to the
other Party.
5. Any changes and amendments to this Contract shall require a written form.
6. If any provision of this Contract is determined to be invalid or unenforceable, the validity or
enforceability of the other provisions either of this Contract as neither a whole nor other
provisions will be affected unless such an invalid or unenforceable provision is severable.
Contracting Parties herby agrees to supersede such an invalid or unenforceable provision by a
new valid and forceable provision that most closely matches the intent and the purpose of the
original provision.
7. This Contract and the relations arising from shall be governed by the Law of the Czech
Republic, particularly by the United Nations Convention on Contracts for the International Sale
of Goods.
8. This Contract had been made in two duplicates whereby each Contracting Party shall retain
one copy each.

Done n Prague on 13 June 2009 Done in Prague on 13 June 2009

……………………………………….. ………………………………………..
TERAMATE, Ltd. AGFH, a.s.
Matt Wattson Ing. Karel Nekol