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Introduction
and Risks
Documentation
Letter
of credit and Insurance
Documentation
The necessary documents form the time and contract required
by Libya to get payment and USA to take delivery are:
The Export Quotations
On these quotations the contract is based.
1. Goods Description, CIF 10,000 metric tons of HBI packed
for industrial use
2. Price.
3. Delivery period; time taken for the vessel to come from
Libya to US
4. Terms and methods of payment. By an irrevocable letter
of credit which is to pay 30 days from the bills of lading
in a form and a bank acceptable to the seller.
Ex works (Exw) the buyer would have to include Price of physically
transporting the goods to the US buyers warehouse. This is
decided in the term of contract. The export Price does not
clearly include the variables, which have to be included in
the Price. The buyer may specify the range of products, size;
in this case HBI there is a variety of industrial steel that
is traded and requires specification. Other variables include
the cost of packing and transporting. DDP Price includes all
the costs quoted in the Price. The exporter would then have
to make sure that their product reaches safely to the US port. Mode of Transport -Sea Freight
Services between Libya and USA can be maintained by a number
of international shippers, this report recommends P&O
Stena, the HBI would move by containerisation, the process
which would move goods in standard size units. This report
recommends the use containers that are to the international
Standards Organisation specification, that is 8ft6in 20ft,
refrigerated (Reefers) design. Since the standard container
is suitable for all-surface freight, and not just sea, this
leads to one of its major advantages. As containers move goods
door to door, the documentation covers more than just the
sea freight part of the journey. This also means that "freight
rates" are used, which cover the entire journey. [1]
Delivery
The arrival terms used for this contract is going to be DDP
(Delivery Duty Paid), under this incoterms the
seller, Libyan Steel and Iron would have to bear all costs
and risks of delivering the HBI cargo to the USA.
Other variables include the cost of packing and transporting.
DDP Price includes all the costs quoted in the Price .The
Libyan Steel and Iron is going to pay for all the costs including
shipping, packing and the paying the customs duty before the
goods can be handed over to the buyers in the USA. There is
no obligation under Incoterms to arrange insurance, however
it is wise to get insurance cover; the specified destination
is usually the buyer's premises.
The contract is further clarified by the incoterms FCA the
seller must deliver the products to the buyer at the port.
Under DAF delivered at frontier, the risk passes at the frontier.
If the shipment is in a container base it can be transported
according to multi-modal methods. Once the Libyan Iron and
Steel get their cargo in the US they will hand over the goods
to the buyers and that is the point where the risk will pass
from the seller to the buyer.
Export Cargo Shipping Instruction
Libya Iron and Steel would raise the ECSI, also referred as
shippers letter of instruction (SLI) for ship freight. This
document would give full details of the consignment and instructions
for shipment of the carrier
SAD
The single administrative document is based as the basic customs
form for export. Libyan Steel will have to prepare an export
declaration for its goods before they leave Libya. . [2]
Certificate of Origin
The Certificate of Origin acts as a documentary proof of foreign
goods for goods entering a country. The customs authorities
in US can use this document to calculate the custom duties
[3]
The Certificate includes
1. SHIPPED ON Name- of the shipping company and the particular
ship
2. DATE- The date the carrier left the port in the Libya
3. CONSIGNED TO- The bank in Libya, it appears on the Letter
of Credit
4. MARKS AND NUMBERS- the marks recorded on each package,
Country of Origin (Libya) Destination Port of Entry and Customs.
5. NO OF PACKAGES the total number of packages, carton boxes.
6. Gross Weight
7. Net Weight
Standard Shipping Note (SSN)
This document is used when the goods are delivered to the
carrier. It provides all the physical details about the shipment,
which may be used to check the delivered cargo for size, weight
and this becomes the basis for calculating the freight and
handling charges at the Libyan Port, based on the documentation
provided by the Libya Steel in Libya.
The Bill of Lading
The most important export documentation is The Bill of Lading;
the bill has three major functions [4]
1. A receipt of goods
2. Evidence for the Contract of Carriage
3. A document of Title
Receipt of goods
The bill of lading obliges the carrier to deliver the goods
according to the standards agreed. There are problems like
bad packaging or damage to goods that an exporter might face.
Contract of carriage
The bill of lading is the evidence the contract of carriage.
The contract is a verbal one the carrier is able to charge
freight for space booked even if it is not used by the shipper.
This is known as dead freight and is reduced should the carrier
obtain alternative cargo to take up the space. This would
have to be arranged by the Libyan Steel and Iron and agreed
by the US buyers.
Document of Title
This is the most important function of the bill of lading.
The bills are issued in original copies of three or four are
signed on behalf of the Ship's Master and are refer to as
negotiable as they contain, and are able to transfer, property
in the goods. This function determines the ownership of the
cargo when it is being transported abroad in this case the
HBI which is an expensive industrial export would have to
be carefully packaged and then priced.
Paramount Clause
The Hague rules include in the International Convention for
the Unification of certain rules relating to the Bill of Lading,
dating 25th August 1924, Brussels. If there is no enactment
in force in the country (Libya) of shipment, then the legislation
of the destination country would apply. [5]
Jurisdiction
If any conflict arises under the Bill of lading it would be
decided in the country where the carrier has its main business
in this case the Carrier would be P&O Stena. The law of
that country would apply unless another situation arises.
Period of Responsibility
The carrier is not responsible for the goods once they have
been handed over to the other party after discharge from the
vessel. The carrier is not responsible for any kind loss or
damage to the cargo after that period.
The scope of the voyage
The vessel may stop other ports, or take a different route
than directly go to the destination port at once. The liner
can be carrying a variety of products. In a situation where
the liner needs to stop for maintenance or any other unforeseen
situation the liner can stop at a port and would not be liable
for the delay.
Substitution of Vessel, Transhipment and Forwarding
Whether arranged before hand or not. The Carrier is at liberty
to carry the port of destination by other vessel or the one
that was agreed to carry the goods. The carrier can also store
the goods when they are in transit.
Loading, Discharging and Delivery
These are the responsibility of the carrier. Landing, storing
is the expense of the buying company. All these requirements
will have to understand by the US buyers and the Libyan company
and the details must be documented to avoid any future conflict
or unforeseen situation.
- Principles of International
Trade and Payments Peter Briggs[Return]
- Principles of International
Trade and Payments, P. Briggs, 1994[Return]
- International Physical Distribution
Jim Sherlock[Return]
- International Trade: A Business
Perspective, C. J. Jepma, A. P. Rhoen, 1996[Return]
- International Trade: A Business
Perspective, C. J. Jepma, A. P. Rhoen, 1996[Return]
- REFERENCES
- http://www.odci.gov/cia/publications/factbook/geos/ly.htmlTrade
with Libya: 2002
- http://www.libyansteel.com/index.htm
- International Physical Distribution Jim Sherlock
- Principles of International Trade and Payments Peter
Briggs
- International Trade: A Business Perspective, C. J.
Jepma, A. P. Rhoen, 1996
- APPENDIX 1
- Hot Briquetted Iron (HBI)
- Total Iron : 90 - 94 %
- Metallic Iron : 84 min
- Metallization Degree : 90 - 95 %
- Carbon : 1.0% ±0.2
- Average Size : 106×48×32 mm
- Average Weight : 500 - 600 gm
- Bulk Density : 2.4 - 2.8 ton/m³
- Apparent Density : 4.9 - 5.5 ton/
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