Selection of trade terms in the export of products from inland regions

In May 2000, a trading company in the United States (hereinafter referred to as the importing party) signed a contract with an import and export company in Jiangxi (hereinafter referred to as the exporting party) to purchase a batch of daily-use porcelainware. The price condition is CIF LOS-ANGELES, and the payment terms are not available. For the cancelled documentary credit, the exporter is required to provide valid documents such as the bill of lading. The exporter then signed a contract with a Ningbo transportation company (hereinafter referred to as the carrier). At the beginning of August, the exporter will prepare the goods and load the trucks sent by the carrier. On the way, due to the driver's fault, a car accident occurred, which delayed the time and missed the date of shipment as stipulated in the letter of credit. After receiving the notice of the accident, our exporter immediately negotiated with the importer to extend the validity period of the letter of credit and the shipment period for half a month, and informed the importer that the two boxes of porcelain may be damaged in good faith. The US importer said that it agreed to postpone the extension, but the price should be reduced by 5%. My exporter has tried to call back and agreed to reduce the price of the two boxes of porcelain that were shocked by 1%, but thought that the rest of the goods were not damaged and could not be reduced. However, the importer insisted on all price cuts. At the end of the day, my exporter still made concessions. The two boxes that were shocked were reduced by 2.5%, and the rest were reduced by 1.5%. For this reason, the losses related to the price of goods and interest amounted to 150,000 US dollars.

Afterwards, the exporter, as the shipper, filed a claim against the carrier for the loss. In this regard, the carrier agreed to bear the loss related to warehousing costs and two boxes of shocked goods; interest losses only pay 50%, on the grounds that they only bear part of the responsibility, mainly because the exporter modified the documents to delay the time; but the loss of the price is not Claims are considered to be due to the unilateral agreement of the exporting party with the importing party and have nothing to do with it. The exporter believes that the fundamental reason for the price reduction and interest loss of the goods lies in the carrier’s fault and insists on all compensation. After three months of negotiations, the carrier compensated all parties for a total loss of 55,000 US dollars. The exporter actually lost $95,000.

[Briefly analyze]

In the case, the exporter spent time and effort, and the loss was not fully compensated, which fully demonstrates that the shortcomings of the CIF terminology make it seem "less than enough" when applied to the export business in the inland region.

1. The separation of delivery obligations under the two types of contracts makes the risk transfer seriously lag behind the actual control of the goods.

When a trade contract is entered into in CIF terms, the exporter also enters into a contract of carriage with the carrier, the carrier, as the shipper. The delivery of the goods by the carrier to the export and the completion of the delivery obligation under the contract of carriage does not mean that he has fulfilled the delivery obligation under the trade contract. The exporting party is still liable to the importing party for all risks and losses before the goods pass the ship's rail. After the goods are handed over to the carrier, the shipper (exporter) has lost actual control over the goods. The carrier's custody, stowage, and shipment of the goods are handled by the shipper, and the shipper only supervises this. It is very unreasonable for the exporting party to continue to assume responsibility and risk in the event that it has lost actual control over the goods. Especially when loading from the inland area to the port over the ship's rail, it takes a long time in the middle, and what happens will be unpredictable. Some people may think that if there is a cargo loss during this period, the exporter can take the responsibility of the importer and then transfer the economic loss according to the contract of carriage. However, the agreement on the costs and losses of the relevant litigation cannot be reached, and with the time spent, the exporter is likely to lose more than the gains. In this case, in the event of a car accident under the authority of the carrier, he should be responsible for the loss of goods, delays in loading and storage, but the resulting losses of the price and interest losses could not reach an agreement. The exporter suffered a major loss.

2. There are restrictions on the transport documents, which may make the inland exporters unable to pay the goods locally.

According to the provisions of Incoterms 2000, an exporter may transfer a bill of lading, a non-negotiable sea waybill or a river transport document under CIF conditions, which corresponds to the only way of transporting water. This requirement is easily met in coastal areas and will not delay settlement. After the goods are delivered to the carrier in the inland area, if there is a river shipping, there is not much problem, but in fact it is generally a land route. At this time, the carrier will issue a land transport bill or a land and sea bill of lading instead of the CIF requirements. Shipping documents. In this way, the exporter can only get the bill of lading or get the "shipped" comment on the intermodal bill of lading after the goods are shipped to the port of shipment for shipment, and then remittance. It can be seen that this restriction on the documents will directly affect the time for the export of the bank to settle the foreign exchange, which will affect the cash flow of the exporter and increase the interest burden. In this case, the letter of credit requires the exporter to submit the bill of lading, and the goods are taken by land, so he can only exchange the bills at the port. If the bill can be settled by the local bill delivered by the carrier after receiving the goods in the Mainland, the exporter is responsible for the damage to the importer, but he can avoid the loss of the price and the loss of interest.

3. The use of CIF terminology in inland areas has an additional transportation cost.

The freight included in the CIF price should be the shipping cost from the port of shipment to the destination port. However, there is still a part of the transportation cost from the inland area to the port of shipment. For example, the cost before shipment from Gansu, Qinghai, Xinjiang, etc. to the port of shipment generally accounts for a certain proportion of the export price, and some will reach 20 %about.

As can be seen from the above analysis, CIF terminology does not apply in the export of inland areas. In fact, CIP is more suitable than CIF for more inland areas that use land-sea combined transport or land-export.

The CIP term is an abbreviation of CARRIAGE AND INSURANCE PAID TO...NAMED PLACE OF DESTINATION. It has similarities with CIF. The main reason is that the price component includes the usual freight and insurance, that is, the transportation contract. The insurance contract is the responsibility of the seller; the place of delivery is at the agreed place of the exporting country; the discharge and import customs clearance responsibility is that the exporter is responsible for the export and the importer is responsible for the import customs clearance; the risk is delivered to the buyer at the delivery place and the transfer is completed to the buyer. The freight and insurance premiums are extended to the destination (port). But there are also significant differences between the two, and it is these differences that make CIP terminology more suitable for inland export business than CIF terminology.

1. From the perspective of applicable transportation methods, CIP is more flexible than CIE and more suitable for export in inland areas. CIF is only suitable for water transportation (sea shipping, inland shipping), but CIP is suitable for any mode of transportation. For inland areas, there are many modes of transportation when exporting, such as exporting to the United States and Southeast Asia, generally land and sea combined transport; when exporting to Europe, it is generally land transport.

2. From the perspective of the exporter's responsibility, when the CIP terminology is used, the risk of the exporter is transferred synchronously with the actual control of the goods, and the responsibility can be mitigated as soon as possible. Under the CIF terminology, the exporter is delivered at the port of shipment; the buyer and the seller are divided by the ship's rail. Before the goods pass the ship's rail, the seller shall bear the liability for the goods, etc., regardless of the actual disposal of the goods. Under the CIP terminology, it is more flexible. It can be either a port or an inland area, but wherever the exporter’s responsibility is handled by the carrier, the exporter is only responsible for the safe transfer of the goods to the carrier. That is to complete the delivery task under the sales contract and the transportation contract, after which all losses incurred by the goods are related to the exporting party.

3. From the transportation documents used, the use of CIP terminology is conducive to the settlement of inland export business in the local bill of lading. The scope of the usual transportation documents involved in the CIP is greater than that of the CIF. The specific transportation methods may be the documents used by the CIF mentioned above, or may be land waybills, air waybills, and multimodal transport documents. After the carrier is issued, the exporter can settle the exchange according to the contract. In this way, the settlement and tax refund time is shortened, and the capital turnover rate of the exporter is increased.

In addition, the rapid development of container shipping methods has also facilitated the use of CIP terminology for inland export. At present, many coastal ports in China, such as Qingdao and Lianyungang, are striving to “put the port to the mainland” and develop container-to-port transportation of inland areas to coastal land ports, which will inevitably reduce the time for loading, unloading, warehousing and reducing transportation losses. And the cost of trade, shortening the time of customs declaration and settlement, is conducive to the promotion of CIP terminology in the export of inland areas.

It is foreseeable that with the smooth development of the western region, the export business of inland areas will be more and more, and the selection of appropriate trade terms for the performance of export contracts is very important for the protection of the interests of our exporters. Under this circumstance, the exporters of inland export enterprises must choose trade terms from the actual situation of the region, the industry and the products they operate, and must not be confused by the definition of “export CIF”.

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