ex-import procedure(to way of payment)

Ex-Import Procedure(to Way of Payment)

Export-Import procedure according to the Irrevocable Documentary Credit method

Opening L/C

[1] Definition- When the Seller acquire export license, the seller should make L/C transaction greement with foreign currency exchange bank based on the sales contract or the offer sheet created with the buyer and present the import L/C to establish L/C.

[2] Basis of opening - When a seller and the buyer choose payment transaction method as L/C method, this is the basis to open a L/C.

[3] Opening procedure(1) Import Contract(Offer sheet)

- Confirming Offer

1. For domestic use import: Either attach a domestic agency's offer sheet or the details of foreign agency to receive import license. 2. If under a certain amount or if it is the material to acquire foreign currency the procedure is not necessary

(2) Import license

- Documents required for application

(3) Transaction agreement for L/C

- The details for agreement

1. Payment confirmation for the importing goods 2. service fee to open L/C and all the incidental fee to open up L/C 3. security on borrowing the import cargo and the right to disposal 4. handling matter with the unclear, injustice items on the shipping documents 5. waiver due to mails or telegram.

(4) Request for L/C Opening or Request for L/C opening

- Documents required for application

(5) Opening import L/C

[4] Documents required for opening (1) If the important contract or offer sheet(is as per offer No.~) (2) application for commercial letter of credit (3) commercial letter of credit agreement (4) import licence (I/L)(If needed) (5) Security borrowing certificate (6) Insurance certificate (CIF, CIP terms are excluded) (7) other necessary documents (Security certificates etc.)

[5] Things to be cautious when opening L/C (1) Directly related to L/C

- It is good not using a beneficiary, applicant's company name, address and name in shorten word. - For the L/C amount, it is good to use numeric numbers and words together (US$39,600(Thirty Nine Thousand Six Hundred US dollars Only)). And if there expressions such as 'about, circa' or anything similar to those in front of the amount, acknowledge more or less within 10%. - By marking available amount of credit, issuing bill of change exceeding this amount is not possible. - When marking (S/D, Shopping Date), (E/D, Expiry date) and offering period make sure they are easy to understand by marking month in wording (30th September 1993 or 10. DEC 1993) and when there are expressions such as "to, until" in front of the dates, the date is also included. - When not marking presenting period : In uniformity, 21 days after the shipping documents are issued is regarded as Presented Date, and those documents exceed 21 days, they become Stable B/L and face rejection.

(2) Things about bill of exchange

- Bill of exchange issuing amount: Generally it should equal amount (for 100% Invoice value) with the Invoice and not exceed the face value of L/C amount however, mediation service fee, inspection fee, counselor invoice service fee and interest items are exclude. (Grains, minerals are acceptable under 100% fixed rate--for 95% Invoice Value)

- Tenor : Needs to match with I/L

-Sight Draft - at sight -Usance Draft - 90days after sight, 90days after B/L date.

- 90days sight, correspond with B/L date.

but there are Sight Draft and Usance.

(3) Things about shipping documents

- Must specifically mark all the requiring documents, number of copies and the shipping documents.

- Shipping documents :

1. Basic documents : Bill of Lading, Commercial Invoice, Insurance Policy 2. supplementing documents : Certificate of Origin, Packing List, Consular Invoice and Inspection certificate.

(4) Things about shipping goods

- When the packing list of goods is complicate : Only write down representing commercial description and mark other as 'Details as per Offer No~'.- Price term must be indicated and the amount has to be consistent with L/C amount.- When there is no mention about Partial Shipment and Transshipment: In this case, it would be safe to interpret that the Partial Shipment is allowed butTransshipment isn't (Mark as 'permitted or Allowed' and 'prohibited or not permitted')

(5) Special instruction

- It requires with a country of importer and depend on the import goods or on transaction method. Generally, the L/C applicant (Buyer) insert this clause without prior consent of the beneficiary (Seller). - A beneficiary may request the applicant about all the obscure expressions or the items that are impossible to execute to either change or delete. 1. document of transport

<1> Invoice--This is a document that approve to the buyer of the Seller executed all the export terms lawfully. Unlike a bill, B/L and insurance policy, it doesn't represent the right of appeal. <2> Insurance policy--If importing price is CIF term : Make sure the coverage amount and coverage condition (Free from Particular Average, With Average, All Risk etc.). If it is FOB term : Indicate 'Buyer's Insurance'.<3> Bill of lading(B/L)-- Except some special condition according to UCP, the following wordings are generally used.Ex)-full set of clean on board bill(s) of lading, made out to the order---- marked freight---and notify accountee. <4> Packing List, Certificate of Inspection etc.-- These are required by the applicant if necessary but sometimes, it is a must documents under the condition import permit requirement.

2. shipping and arrival port--It must be identical to the port indicated on the import license. If the shipping port is indicated as European ports per the license: It can be nominated within the I/L range.

3. Appointing vessel --Mark if it is a special request of a buyer to appoint a vessel. That is, when the price term is within the F group (FCA, FAS, FOB) then the right of appointment of a vessel is with a buyer but if the price term is within the C group (CFR,CIF, CPT, CIP) then a seller can appoint a vessel. 4. Whether the payment method, shipping port and arrival port are consistent to the contract.5. Whether the goods, standard, unit price, country origin and price terms are consistent to the contract. 6. Whether the shipping date and validity period are consistent to the contract and if the shipping date is within the validity period. 7. Whether the requesting amount is within I/L range and if the currency is acknowledged.8. Responsibility for Less Charge

- Less Charge is, when a seller process Neg, a purchasing bank pay its own capital to the seller and receive payments from opening bank. - If the opening bank make payment to the purchasing bank exceeding the said period or pass through third bank (Reimbursing Bank), additional foreign currency service fee developed by this cause is to be impose to the seller and this is called Less Charge. - Generally, those Less Charges burden by a beneficiary (Seller) could develope into a dispute between L/C transaction parties therefore, a very clear indication is essential.

- If burden by a beneficiary---For account of beneficiary - If burden by a applicant---For account of accountee (Applicant)- All banking Charges outside USA are for beneficiary's account

9. Shipping documents presenting time

- It is normally scheduled for within 2 weeks and if it exceed 21 days from the issuance of shipping documents, and as long as there is no more or less clause for delay documents, it will be considered as a Stale B/L(Document) causing a factor for the payment rejection. - If possible, using [Stale B/L acceptable] sentence is recommendable and sentences such specifically written such as [Documents presented later than 21days after the date of the issuance of the transport documents acceptable.] are required.Ex)-Documents to be presented for negotiation within10days after the date of issuance of the transport documents.

10. L/C transferability

- If permitting assign : Make clear whether permission is up to overseas. Ex)-This credit if transferable in USA only.

11. Permission for T/T Reimbursement

- If a transaction is large : The Telegraphic Transfer Reimbursement might work against a seller therefore, a detail review for the permissions are a must. Ex)-Telegraphic Transfer Reimbursement is allowed- When a purchasing bank sent a reimburse request to a reimburse bank using telegram instead

of mail: As much as the mailing date, a buyer is ultimately responsible for the interest.

12. Restricted L/C

- In case with Restricted Credit which limites purchasing bank, in case purchase was made through a corresponding bank without asking for a consent of purchasing bank, it is a factor for unpaid.Ex)-Negotiation under this credit is restricted to the advising bank only. - If a nominated purchasing bank allows the 1st purchase through a corresponding bank this becomes nomination release therefore, a opening bank has to right to intervene.

13. If permitting third parties' documents when processing Intermediary Trade

- In case with Intermediary Trade, there must a expression that a shipping document appointed third parties as a consignor is approval. - It is recommended to use [Third party documents] sentence and as [The transport documents indicating as the consignor of the goods a party other than the beneficiary of the credit acceptable.] wording are required.

14. More or Less Clause

- In case with Bulky Cargo :As long as there is no more or less clause and even if partial shipment is not allowed, amount of bill issued that doesn't exceed L/C amount 5% tolerance is acceptable. - Not acceptable when good's quantity is indicated or if the goods are marked as individual goods.Ex)-Tolerance of 5% more or less in amount and quantity is acceptable.

[6] L/C opening method(1) Opening mail credit

- Prepare 1set of L/C application. Dispatch 1original and 1 copy to a advising bank and 1 copy to a settling bank together with reimbursement request.- On this L/C, a autograph signature by a person with the right to signature at opening bank is a must.

(2) Cable credit

<1> Opening by short cable

- Inform to advise that a L/C is opened so that a beneficiary to prepare for exporting. Insert "Details to follow" sentence, and send original copy of L/C using mail confirmation. A Seller Nego and ship goods according to this orignal document.

<2> Opening by full cable

- A L/C sent by a opening bank to a advising bank as identical as original L/C using Telex. - This kind of L/C is considered as a original L/C since the copy contain the exact contents as the original one. When using full cable, the opening banks no longer sends the original L/C and about 80% of L/C that are currently used through out the world is using this method. - One negative point of this method is that there is a higher cost with Telex althoughit prevents any mistranslation by the advising bank.

(3) Opening by Swift (society for worldwide inter-bank financial telecommunication)

- SWIFT : It refers to a document transposition system by EDI method. EDI : Together with telecommunication and computers, this method is consider to be a revolution in telecommunication method which has "Security maintenance" unlike old cables and fax method. - Documents transportation structure using this method: Both transmission and reception organizations are suppose have this SWIFT machine and it requires above average skill to operate or maintain the machine. - L/C opening by SWIFT: Format of L/C is standardized and coded as bar Authenticator Key. Same as a Test Key, it doesn't use repeated alphabet using 16 code with 0~9 basic numbers, A~F and composite with 16 digits passwords.


Trade contract

[1] Concept- When trading, preserve consistency and make General Agreement (General Terms andConditions, Master Contract) to prevent claims and to resolve before the initial transaction.

[2] Contracting method in trading (1) Master Contract(General Agreement)

- If expected to be a continue transaction: Do not make contract per case by case butmake Agreement of Memorandum on General Terms and Conditions of Business and exchange offer or order to determine contract agreement. - The General Agreement should include, quality, quantity, price, shipping insurance payment conditions, Force Majore article and arbitration article as well as for the claim. - When doing case by case transaction, a decision method with Offer and Order must beclearly stated in the General Agreement.- Principal to Principal contract.- Regard contract established as Acceptance and Acknowledgement.- Acceptance name on Offer or signature by Acknowledgement on Order and keep onecopies. - Sent manifestation by telegram or mail to express acceptance of Seller's confirmedoffer.

(2) Case by Case Contract

- Commonly used for the initial transaction or a transaction that will be terminated by justone time transaction. - Surface clause: Decide on every contract - The back clause : A interpretation base of the surface clause, and it is commonly applicable for the said parties in general. - If anyone of the contract parties send 2 copies of contract after signing it, the other party should keep one copy and send one to the sender with a signature. <1> Prepare by a Seller

- Sales Note, Sales Contract, Confirmation of Order

<2> Prepare by a Buyer

- Purchase Note, Purchase Contract, Purchase Order(Indent Order)

(3) Contract signing method

<1> In case if the contract party is the corporate CEO

<2> If a proxy is signing for the contract party

[3] Trading contract (1) Preparing method

<1> Title

- Title is to provide easy understanding of contract details.

<2> The full text

- In the full text, it usually contains the place where a contract is mad

- Only President and General Manager are representable.Ex - ABC Co., Ltd.

(signature)------------B.S Kim

president or general manager

or Signature--------------B.S Kim

president or general manager ABC Co., Ltd.

1. If a proxy signed by a letter of attorney.- "P.P (per procuration) or His duly authorized attorney in the presence of" in front of a company's title : Arrange (Witness) and a signatory's name. If there is no witness, delete "in the presence"

Ex - P.P ABC CO., Ltd.(signature)

------------------J.S Kim

export manager

2. If signed by a person who doesn't have the right of a proxy- Put "By, For, Per" in front of a company's title and do not record thesignatory's position.

Ex - For ABC Co., Ltd.(signature)

------------------J .P Kim

e, the contract date, proper law for establishment, address and the initial of the parties.

<3> Recitals, Whereas clause

- Whereas clause in the explanation article is to record a summary of the main contracted details

<4> Consideration

- As the principle of the contract it refers to the rights, profits, margin for one partyor damage, loss and responsibility by other party which requires consideration.Ex)- Now, therefore, in consideration of mutual covenant and promises contained herein, both parties agree as follows.

<5> Definition

- In order to avoid a long wording to be repeated everytime clauses overlaps, tomake a contract easy to understand, to have logical consistency. They should be all capital lettering.Ex)- Unless the context clearly requires otherwise, the following terms in this Agreement shall have the meanings attributed to them below.

<6> Clause for main contract details

- This is the important and center part of the contract to clearly stipulate which rights should contract parties should acquired and which duties they are responsible to.

<7> Term, Duration

- If there is not validity period for contract: Either assume parties opinion for a decision or regard the contract date or the day when it was signed. - When acknowledged renew: The procedure and renewing period have to beconfirmed.Ex)- The term of this Agreement shall be three(3) years from the effective date of this Agreement and shall be automatically extended for further three(3) years provided that PRINCIPAL shall give, at least three months prior to termination, a written notice to Agent.

<8> Termination

- Generally, they are terminated for the following reasons: 1. Expiration of the contract period 2. Accomplishment of resolutive condition 3. exercise cancellation engagement

4. exercise court cancellation

<9> Force Majeure

- In certain cases, the reasonability may be exempt

<10> Assignment

- If there is not assignment stipulated : Assignment is possible. - To prohibit a contract assignment : Indicate it on the contract.Ex)- None of this party of this Agreement may directly or indirectly sell, assign or otherwise of this Agreement to any third party unless it is assigned by the operation of law.

<11> arbitration

- To resolve a dispute related to the contract parties according to the arbitration decision

<12> Jurisdiction

- If there is no provision for arbitration, it is good idea to agree upon a Jurisdiction for a lawsuit in advance between the contract parties except for the scope of arbitration.

<13> Applicable Law, Proper Law, Governing Law

- It is a article to arrange from which country's positive law should be followed tomaterialize execute, interpret the contract. The procedure law follows the law of the forum apart from applicable Law.Ex)- The formation, validity, construction and the performance of this Agreement are governed by the laws of the xxxxxxx.

<14> Integration

- As long as the contract is materialized, all the prior agreement made verbally, inpaper and a parley would assimilate to the contract and the wording that described that would become extinct is called a complete contract clause.Ex)- This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter of this Agreement and merges and supersedes all prior discussions, agreements and understandings of any every nature between them, and neither party shall be bound by any condition, definition, warranty or representation other than as expressly provided for in this Agreement or as may be on a subsequent date duly set for in writing and signed by a duly authorized officer of the party to be bound.

<15> Amendments

- It is necessary to set up the method and clause for partial changes andmodification in credit details to avoid any possible disputes in the future.Ex)- This Agreement is not changed, modified by the parties of this Agreement except as such change, modification or amendment is in writing and signed by both parties.

<16> Notice

<17> Miscellaneous

1. Waiver

- If a request to exercise was not made momentary, it shouldn't be regard as a surrendering to the right to exercise with other similar clause or other conditions later time.Ex)-The failure or delay of either party to require performance by the other party of any provision of this Agreement shall not constitute a waiver of, or shall not affect, its right to require performance of such provision.

2. Severability

- If Some parts of clauses excluding the main part of the contract became practical effect because of arbitration or due to a judgement of court, it doesn't disturb the effectivity of other clause.Ex)-If any provision of this Agreement or the application of any such provision to any person or circumstance shall be determined by any arbitration or court of competent jurisdiction to be invalid or unenforceable to any extent, x company may upon fifteen(15) days notice elect to (1)terminate this Agreement or (2)continue this Agreement, in which case the reminder of this Agreement or the application of such provision to such person or of this Agreement or the application of such provision to such person or ircumstance(other than those for which it is so determined to be invalid and unenforceable), shall not be affected thereby and each provision of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law.

3. Indemnification

- It stipulates compensation for a damage of the default by one party or by third parties.Ex)-In the event either party breaches an obligation under this Agreement or toward a third party, or delays or interferes with the other party in the performance of this Agreement, it shall be

- If standardizing notice for certain action, it needs the party's name, address, a method for contact and the valid period in detail. - Be cautious with Receipt rule and post-mail rule.Ex)- Any notice, request, consent or demand required or permitted to be given in this Agreement, must be in writing and must be sufficiently given if delivered in person or sent by registered airmail or by cable confirmed by registered airmailed letter addressed as follow; TO :

(address)Telex :Answerback :

Notice must be deemed to have been given on the date of mailing except the notice of change of address which must be deemed to have been given when received.

liable to the other party for any reasonable direct damages thereby sustained by the other party, but neither party shall be liable to the other party for any consequential damages or incidental damages, such as loss of profit. Each party shall pay all reasonable expenses, including the costs of litigation and attorney's fees, reasonably incurred by the other party in enforcing this Agreement. In the event a third party commences any proceeding for which a party hereto intends to claim indemnification against the other party, such party shall promptly notify thereof the other party and allow equitable particification in all stages of the proceeding and settlement thereof.Failure to promptly notify therof or allow equitable particification by the other party shall reduce the right of indemnification to the extent of actual resultant prejudice.

<18> Testimonium Clause

- When the main body of the contract is completed, the Testimonium Clause will be recorded and materialized. 1. A contract without a sealing certificate

Ex)-In witness whereof, the parties have executed this Agreement in duplicate by their duly authorized representatives as of the date first above written.

2. A contract with a sealing certificate

Ex)-In witness whereof, the parties have executed this Agreement by causing their corporate seals to be hereunto affixed and duly attested and these presents to be signed by their duly authorized representatives, this ~ day of, ~ 1997.

<19> Signing method

1. If the contract party is individual

- The contract party should mark the name or other special mark that represent him/herself.

2. If a proxy is signing a contract for the contract party

<20> Seal

1. If by individual,

Should follow each country's costume and there is no need to proof of date on the print of a sea.

2. If by a corporate,

- Proof common seal, guarantee in front of one director and one secretary and receive sign.

<21> Amendment

- If comply to the changes of contract or if there are many changes. : Re-type- Deleting : Write-off the spots to be delete in a parallel line but you will need to know later what it was and it is common practice for the both party to insert initial excluding the spot and section that have been deleted. - If corrected : Insert the words to be correct between the upper line and the bottom line of where delete was made and it is common to put initial by the both party in the corrected section.

- To prevent the part of contract from switching, usually the both party put initial on each pages.

<22> Registering contracts, stamp and notary

3. If the contract party is a corporation- Only President and General Manager are representable.

Ex)- ABC Co., Ltd.(signature)------------B.S Kim

president or general manager

or Signature------------B.S Kim

president or general manager ABC Co., Ltd.

a. If a proxy signed by a letter of attorney.- "P.P (per procuration) or His duly authorized attorney in the presence of" in front of a company's title : Arrange (Witness) and a signatory's name. If there is no witness, delete "in the presence"

Ex)-

P.P ABC CO., Ltd.(signature)

------------------J.S Kim

export manager

b. If signed by a person who doesn't have the right of a proxy- Put "By, For, Per" in front of a company's title and do not record thesignatory's position.

Ex)-

For ABC Co., Ltd.(signature)

------------------J .P Kim

- If need to register through a government office: Notarization by a notarial or needto obtain acknowledgement.

(2) A literary style

<1> Avoid long sentences and prefer shorter remarks. If the details are creating confusion: categorize by a paragraph or by a number as in a list form. <2> The present tense is used in principle. <3> Using active is not recommendable. <4> The way of using shall, will and may

1. shall- Used when forcing the execution 2. will - Less stronger than using shall in forcing and used when there is no legal force.- In practice: Note that shall and will are in use while not differentiated strictly.3. may- Used when describing the rights, prestige and authority in contract.

<5> Expression for time and period

1. on-- Use it to describe a certain period.Ex)-Seller shall deliver the goods to Buyer on July 30. 1997.2. by or before--Use it to describe x month x date that has a expiration date.Ex)-Seller shall deliver the goods to Buyer by(or before) July 30. 1997. 3. until(till)--Only using until isn't clear enough. : including. : not including4. from, connecting with, after-- These words describe period but they all have some difference.

a. If calculate from July 31. 1997

- Seller shall deliver the goods to Buyer thirty days from July 30. 1997.- Seller shall deliver the goods to Buyer at any time after July 30.1997. Upon the request Buyer.- If there is no date after "after" which is same as occurrence day, the date becomes the time. (...at any time after the effective date of this Agreement)

b. If calculate from July 30. 1997

- ...from and including July 30. 1997.- Seller shall deliver the goods to Buyer within thirty days connecting with July 30. 1997.

5. from...to

- Using only "from... to" is not enough wording to describe expiration period therefore, "both days included", "connecting with...ending with..." are appropriate expressions.- ...from January 1 to March 31, both days included or ...in the period connecting with January 1 and ending with March 31.

<6> Indication for provision

- Indication for provision is provided in the operative part. If for "Only...allow in case" wording : "provided that". "...is not acceptable" case : should be interpreted as "except that" or "unless and until" etc.

(3) General common clause in a contract

<1> Title of Agreement<2> Nonoperative Part

- Date - Parties - Recitals, whereas clause

<3> Operative Part

- Definition--Clause for the key details of a contract- General Clause

o Period of Agreement, duration, term o Termination o Force majeure o Arbitration o Application law, governing law o Jurisdiction o Notice o Integration(Entire agreement) o Amendment o Headings o Etc

<4> Testimonium Clauses

- Signature - Seal

(4) Check points when make a contract

<1> Understand the contract party's intention. <2> Review any possible problem that might arise in the future. <3> Review related documents that exists.<4> Whether the intended contract detail of the party is lawful and has a legal bindingforce.<5> Whether the contract party has capacity to follow through the contract.

<6> If there are more than one debtor, check if the responsibility is joint, several orsolidarity<7> Whether the contract is assignable.<8> The default period, exemption delay in performance and the relationship of duty inother party or whether the grace period for the delay in performance is appropriate.<9> Whether the Contract period and Contract renewing period are appropriate. <10>Whether the provisions are appropriately written for contract cancellation, procedureand the interest of rights <11>Whether the Proper law and dispute procedures are appropriate.<12>Whether the tax or other expenses related in performing the contract is clear andnot disadvantageous.<13>Whether the contract is logically consistent. <14>If the contract requires to refer to other text, is the relation of referencereasonable? <15>Whether the terminologies in use lack of unity. <16>Whether the sentences are clear and simple.<17>Whether the contract is based on the common law system?<18>Wouldn't the contract become invalid due to a violation against a law?

[4] Things to be cautious when making contract - Make sure of the rights and duty of the parties.- Make a clear contract to prevent any possible disputes due to misinterpretation. - Review offer condition sufficiently before agreeing the contract. - Make sure the wordings are clear so there is no mistake in accepting price as a offer. - Closely review about the intended country's legislation rule for the contract materializingperiod. - Before the contract is made, mare sure to obtain legal advisory from a specialist so thatthere is no disadvantageous contents and always prepare the contract in writing. - The contract parties should input a clause stipulating that when there is a claim, the parties follow arbitrary award of a special organization for a speedy resolution.

[5] Things to be aware for a favorable contract - When exchanging a letter, you must clearly make the claims and advocacy.- You need to show aggressiveness in a meeting.- Who ever makes the first draft is in a much favorable stand. - You need to realize that the letter of intent is the prior step of a complete contract.

[6] The basic conditions for trading contract - Recommended to use Trade Terms of Incoterms because it provides the standard to interpret trading transaction and to prevent trade claims as well as to supplement trading conditions.(1) Terms of quality

- The terms of quality is to mark Items (Commodity Name) more specific way.

<1> Agreement method of products in transaction

1. Sales by Samples

- A hand over method of samples or the product that is duplicate to the samplethat were offered by the Parties Concerned.- Just in case for a inquiry or a dispute, the Seller should Keep Sample(CheckedSample) or a Duplicate Sample which was sent to the Buyer.

a. Counter Sample(Buyer's Sample)- A sample that has been partially or completely changed with color and the shape to the original sample. b. Things to be cautious when using sample terms- Expressions such as "Up to the Sample No.123, Same as the Sample No.123, Fully Equal to the Sample No.123" : If there is a slight different to the original sample, it could be rejected or possible for a claim.- Seller's standpoint : As long a product is not a standard or precision products, using "As Per the Sample No.123, Similar to the Sample No.123, About Equal to the Sample No.123 etc" would be advantageous.

2. Sales by Trade(Brand) Mark

- This is a case where you don't need to send samples because the transactionis made based on the trade mark of the product for the agreement.Ex)-CoCa CoLa, YKK Zipper etc

3. Sales by Specification(Dimensions, Description)

- Used when sample offering is impossible. The contract is made by recording theproduct's information and with a blue print to specify the product's quality.Ex)- Vessel, Plant etc

4. Sales by Standard

- Offering a Standard Type in the abstract and to hand over the similar productsas described. a. FAQ(Fare Average Quality)Term- Handing over the quality that are normally average quality.Ex-Quality to be fair average at the time and the place of shipmentb. GMQ(Good Merchantable Quality) Term- At the time of the product received, the products have to be merchantable as in common practice. A claim is impossible even if the products have hidden defects after receiving. Ex-Timber(Lumber), Frozen fishes, minerals etc.

5. Sales by Grade

- According to a country or a official organization's standard, the product's qualitylevel would be determined.

<2> Quality determining period

- The period when to inspect the quality of products has to be specified.1. Shipped Quality Terms

- It is acceptable if the inspection record by a official inspection organization and the contract term is consistent.

2. Landed(Arrival) Quality Terms

- It is acceptable if the inspection record at the arrival site and the contract term is consistent.

3. The condition with grain transaction

- It stand in a trio based on the center of London grain market.

a. TQ(Tale Quale)--Shipped Quality Term

- TQ means As it is and just as they come

b. RT(Ryle Terms)

- It is Landed Quaity Term and the Seller is responsible for all the change inquality while in transportation.

c. SD(Sea Damaged; Shipping quality terms)

- Additional condition to TQ and RT.- this condition is to reserve the Buyer's right in case there is a claim for the problems arisen while in transit such as Wet(Damaged by wet, that is Wet by sea water, Wet by Rain, Wet by Fresh Water, Wet by Vapour, Moisture Damage, decomposition (Mildew(Mould) and fermentation.

(2) Terms of Quantity

- Mark as Weight, Length, Measurement, Package, Piece Number, TEU(Twenty FeetEquivalent Unit), FEU(Forty Feet Equivalent Unit) etc. - For the Individual Items or Packing Units, specify the quantity in the contract.

<1> Units to be cautious with weight

1. A custom of England--L/T(long ton; English Ton, Gross Ton)2. A custom of America--S/T(short ton; american ton, net ton)

3. A custom of the content of Europe--M/T(metric ton; french ton, kilo ton, middle ton)4. Hundred Weight--English CWT, American CWT

- 1L/T = 2240Lbs, 1S/T = 2000Lbs, 1M/T = 1000Kgs = 2204Lbs,1English Ton = 1016Kg, 1American Ton = 907Kg

<2> Units to be cautious with capacity

1. SF(Super Foot)2. M/T(Measurement Ton)--1M/T = 480SF = 40Cubic Feet

<3> Units to be cautious with numbers--Gross, Small Gross, Great Gross<4> Terms of quantity with Bulk Products

- With Bulk Products, Loss are unavoidable. But this is not regarded as breaching the contract and for the excess and deficiency, payment must be made in late time. - Specification settlement price

a. Day-of-Shipment Price b. Day-of Arrival Price c. Contract Price

1. M/L(More or Less)Clause

- If ship within the percentage range stipulated in M/L Clause, the seller can beexempt from the quantity problem.Ex)-"5% More or Less at sellers option" or "Seller has the option of delivering 5% more or less on the contracted quantity"

2. No M/L clause definition

- B/L transaction method : Unless there is Tolerance(More or less) prohibited clause, 5% is tolerable (The Sub-Article 39(b) of UCP )- D/P, D/A, Non L/C transaction method: 5% Tolerance(More or less) is not allowed. - If "interpret in accordance to INCOTERMS" basis provision is on the contract M/L clause not required.

3. Approximate Quantity Terms interpretation

- If there is no M/L Clause but using just simple ABT(about), Circa, Some, Approximate and Around terms. - If transaction is based on credit(B/L) : Interpret as 10% difference is allowable. (The Sub-Article 39(a) of UCP)- If there is no specific provision with Non L/C transaction method: There is dispute probable.

<5> Quantity inspection period

1. shipped quantity term 2. landed quantity term

(3) Terms of Price- Based on the trade terms of INCOTERMS, the person responsible for the respective expense, risk transferred period and reversion of the right of ownership is different.

<1> Price determining elements - Product manufacturing cost + Profit + Incidental Expenses

1. Incidental Expenses

a. packing charges b. inspection charges c. inland freight(shipping fees arisen from inland of exported country) d. Port expense--storage(go-down rent; storage fee), wharfage charge, port dues etc. e. administration fee--E/L(exporting license), I/L (importing license) expenses etc. f. Shipping expenses--Cost of Export Clearance(Clearing Fees; Charges for Exportation; Customs clear fee), Export Duties, Export Permission, Shipping Charges ,Loading Charges, Stowing Charges f. freight(carriage) or charterage --ocean freight, air freight etch. insurance premium--marine cargo insurance, transport insurance etc.i. unloading charges(from intended port) j. wharfage expense at the target port--wharfage charge, port dues ,storage(go-down rent) etc. k. import duties l. cost of import clearance(import permission) m. Inland Freight and Insurance Premium n. All kinds of commission, interest or cost of exchangeo. All other sales expenses and petties

2. inboard stevedoring charges

a. liner term(berth term)- Shipping charges, arrival charges are included in transportation fee. FOB term is by debtor and CIF term is by Seller responsibility. b. FIO(free in and out)--Shipping, Arrival is not responsible of shipping company.c. FI(free in)--The shipping company adds arrival fees only to transportation fee . d. FO(free out)--The shipping company adds only the shipping fees to transportation fee.

<2> Type of price condition

1. shipment contracts- The right of ownership is shifted from the exporting region to the debtor so if the goods are hand over to the designated location safely, there is no more responsibility.

a. EXW(EX works) or LoCo- Reverse expenses for Seller's shoulder are the first cost(manufacturingcost and expected profit, inspection fee for quality, quantity and customary packing charges etc. b. On spot, Ex origin, Ex factory, Ex mill, Ex mine, Ex plantation, Ex store, etc.c. At station- Seller shoulders transportation fee from the shipping location to the station to delivery. d. FOR/FOT(free on rail/ free on truck- The condition exclusive for only rail road transit.e. Free~(named port of shipment)- Incidental expense At station and Inland Freight to named port (Sometimes shoulder storage fee at the named port).f. FAS(Free Alongside ship)- Seller shoulders all the expense from Ship Vessel up to products are hand over. g. FOB(Free on Board)- Seller shoulders all the expense from until products are hand over. h. CIF(Cost, Insurance and Freight) - Seller shoulder expense from FOB, stowing charges, ocean freight and Insurance premium(Follow by FPA term).i. CIFs variation- C&F(cost and freight)- C&I(Cost and Insurance)- CIF&C(Cost, Insurance, Freight and Commission) - CIF&I(cost, Insurance, Freight and Interest)- CIF&E(cost, Insurance, Freight and cost of exchange)- CIF Landed- CIF Duty Paid- CIF Clearedj. DAF(Delivered at Frontier--Seller shoulder transportation fee to import frontier)k. FOA(FOB Airport)--Inland freight to carrying airport shoulder by the seller l. FCA(Free Carrier) - The seller shoulders E/L, E/P(Export Permit), all other tax and service charges impose to export. m. CIP(carriage and Insurance paid to ~)- The Seller shoulders transportation fee, insurance fee follow by final destination or intended port's combined transport fee.n. CPT(Carriage Paid to ~)- The Seller shoulders transportation fee excluding insurance fee follow by final destination or intended port's combined transport fee.

2. Arrival Contracts- Since the right of ownership of the products is shifted from the importing regionto the debtor so if the goods disappear or get damage, the seller shouldersall the responsibility. - Ocean freight or Carriage by inland waterway - DES, DEQ - DAF, DDU, DDP

a. DES(Delivered Ex Ship)--Seller shoulders all the expenses up to intended port.b. Ex Lighter- For unloading from intended port, the Seller shoulders expenses of transship from on board to Light(Craft, Barge) to be completed. c. DEQ(Delivered Ex Quay )- Lighter range, other stevedorage fees for landing ship at the intended port are shoulder by the seller.Ref-DEQ duty paid(DEQ duties an seller's account) -DEQ duty unpaid(DEQ duties on Buyer's account) d. In Bond- Carrying in fee to Bonded Area of a intended quay is shoulder by the seller. e. Duty Paid and Ex Customs Compounds- The seller shoulders all the expense for the import customs clearing.f.DDP (Delivered Duty Paid)- Until shipment is completed to the final destination of inland of importing country, all the expenses are shoulder by the seller.

(4) Terms of Packing- A process to distinguish externally that the products are the object for shipping by protecting the product's contents and exterior parts as well as preserving the value while shipping, keeping and distributing.

<1> Selecting packing materials

1. case, bale--It is a unit in individual packing for retail.2. unitary packing--Individual packing to minimize the units such as dozen and gross.3. interior packing(inner protection)- Unitary packing is to help convenient cargo dealing or shipping by combining several internal packing. 4. outer packing- In each internal packing or combine several internal packing to make packing into a bigger packaging.

<2> Selecting packing units

- You must stipulate product's character, transporting method and distance as well as transshipment, packing fee and freight, weather condition, the concerned country's packing Specification and customs however, you must carefully consider not to over pack.

<3> shipping mark(cargo mark)

- This is to help the buyer or the shipper to easily distinguish the said transactingproducts and to distinguish transporting destination of cargo or cargo handling by marking a symbol or special word on the outer packing. - You should stipulate this as a packing condition. 1. main mark

2. counter mark

- When distinguishing with other cargo with only main mark is difficult, mark manufacturer or supplier's initial at the bottom of main mark.

3. case number

- A serial number on the cover to distinguish, confirm with invoice, manifest (MF; loading list) or other transport document.

4. port mark

- To clarify loading and unloading(discharge) of cargo and mark target port, destination to prevent mis-delivery.- Double transport indicating methodEx)-New York via panama, New York overland via seattle, etc

5. weight mark

- Mark gross weight and net weight for easy compute freight,

- triangle, double triangles, crossed triangles square(box), rectangle, diamond, upright diamond, circle, concentric circles, crossed circles, zoned circles, triangle in circles, crossed in circle, oval, hexagon, star, cross, heart, spade, diamond with crossed ends, three diamonds, diamond with looped ends, hourglass(touching triangles), etc

- To make easy distinguishing from other cargo by marking a special symbol andinput the debtor's company name or initial.- symbols

customs clear, andstevedoring.

6. origin mark--Mark at the lowest part of outer packing.

9. care mark(side mark, caution mark)

- Is is to mark general things to be cautious for cargo dealing (cargo handling)and it is usually market at the front of outer packing.Ex)-this side up, stand on end, do not turn over, keep flat, keep dry,keep cool, no hooks, fragile, perishable goods, liquid, inflammable, explosive, etc

10. Other marking

11 A must Shipping Mark

- main mark, port mark, case number, original mark etc : A must mark- Cargos without port mark and case number: It is called NM(no mark cargo) but sometimes it causes tremendous damage as non-delivery.- Contents and style of mark: Usually marked on sales note or on purchase note.

(5) Terms of shipment- The meaning of Shipment is not just "ship(vessel)" but it also refers to air or train of all kinds of loading.

<1> Provision for Shipping period

1. Special condition - It is general to propose specific terms as month and date when stipulating thetime of shipment.

2 Interpreting Time terms and date terms

a. Single month and Year month condition

Ex)-september shipment-shipment shall be made during september, 1995-september / October shipment

- Order number per buyer's request. attention mark, grade and quality mark, etc. Ex- main mark

counter mark port mark

case numberweight mark

original mark

----

--------

--------

-----

YPNew Tork ViapanamaC/N8-20GRS; 120kgsNET; 100kgsmade in xxxxx

A ----

----

quality mark

care mark

-shipment shall be made from september to october, 1995

b. Shipping condition before specified date

Ex)-latest shipping date; september 15, 1995-shipment shall be made by september 15, 1995

c. Shipping condition after specified date on regular basis

Ex)-shipment should be made within three month after seller's receipt of L/C

- Cautious (Refer to The Sub-Article 50(b) and 51, 53 of UCP)

- from, till(until), to---Include the said date - after---Exclude the said date- on or about---5 days before/after from specified date, include both the last day before/after - first half, second half of any month---1day~15 day, 16~the last day - beginning, middle, end of any month---1day~10day, 11day~20day, 21day ~the last day

- The expiry date(E/D) and shipping date(S/D) of credit (The Sub-Article 48(a,b) of UCP)

- E/D is specified with L/C but the latest S/D is not specified: With L/C, E/D is considered the latest S/D. - When E/D falls in Sunday, national holiday, bank closed day rather than force majeure (E/D automatically extend to the next business day but S/D won't be extend.

3 general terms

- A type of immediate shipping request not specified by month or date. - When the general terms were selected from credit transaction, UCP regards thisas there is no provision for shipping period. (The Sub-Article 46(b) of UCP)Ex)-as soon as possible(ASPA), promptly, immediately, soonest quickly, at once, without delay, as early as possible, ready shipment, near delivery, etc

<2> Provision for shipping method

1. Partial shipment and shipment by installments (The article 41 and 44 of UCP)

- Depends on the transacting quality or amount and sales plan of buyer as well as market situation, the products would be partially shipped. - Things to be cautious

- With credit transaction, if a partial a shipment is not made as contracted, the opening bank has the right to cancellation for the said unpaid remaining contracted portion. - Interpret a partial shipment is allowed if there is not provision or prohibition for partial

shipment.Ex)-September and October Shipment Equally Divided-Half in September and the Balance Two Months After-Shipment; 20C/S During September, and 30C/S During October,1995.

2. Transshipment

- Unload the boarded products and reload the products to the other means of transportation. - If there is a provision for Direct shipment(or steamer) by customary route: Consider Transship is prohibited. - If there is a provision for a direct shipment: Stop at a port of refuge due to a shipwreck or to furnish necessary products on vessel is permitted. - Reshipping due to a special condition : This is not act of transshipment.

3. delayed shipment

- Force majeure that is, any causes beyond seller's control: The seller is exemptfrom seller accountability and the shipping period would be extended for 3 weeks~1month as a practical custom. - Shipping period extension for Force majeure : A seller should obtain a document for confirmation from a authorized organization and notify the buyer immediately. - If the Force majeure continues in long term even after a extension was given: The rights to continue the contract is with buyer totally.

<3> Proof of shipment

1 shipped B/L- The B/L issuing date should be earlier than the shipping date of the credit invoice. 2 received for shipment B/L- The on board notation of B/L has to be earlier than the credit shipping date.Ex-The date of bill of lading shall be taken as conclusive proof of the day of shipment

(6) Terms of payment

<1> Payment method- Letter of credit method: A debtor should open a credit within the stipulated date. - Non credit method : Settle wether D/P, D/A, CAD or COD.

1. Advanced payment--Advance payment method before products are shipped or hand over.

a CWO(cash with order)Basis b Remittance Basis c Red Clause L/C(packing L/C) Basis

2. Concurrent Payment--Payment method in exchange with Spot goods or with B/L.

- At sight basis method

a D/P Basis b COD Basis c CAD Basis

3. Deferred payment--Payment method after certain period or after products are shipped, had over or after a bill inspection. - Classify as Deferred Payment on Short term and on Long or Mid-term Basis.

a. usance basis ; D/S, D/D b. D/A Basisc. Deferred payment on long or mid term basise. Open account and Escorw mode

4 Mixture method --More than two payment methods in Advance payment, concurrent payment, deferred payment.- progressive payment basis

- The most representative mixture method which is used with Deferred payment on long or mid-term basis and with large transaction.

<2> Payment method- There are cash, bill(draft) and transfer payment method but usually documentary bill (draft) is used.

1. Bill settlement(documentary bill)

a. documentary bill(draft)- documentary bill with L/C---sight bill, usance bill(time draft)- There are documentary bill without L/C---D/P bill and D/A bill, and if thee is no D/P, D/A with bill, it is regarded as D/P billb. clean bill(draft)--red clause L/C, repayment L/C

2. Cash payment

a. COD, CAD, CWO b. payment on receipt L/C

3. Transfer payment

- Remittance basis - Used when making advance payment in Deferred payment on Long or Mid-term Basis or progressive payment or making down payment- T/T(telegraphic transfer), M/T(mail transfer)

4. Check payment --T/C(traveller's cheque)

<3> Payment Currency

- Select a currency that is not fluctuated by exchange risk or rate of foreign exchange which is stabilized currency that has high international popularity and public trust. The kind of designated currency allows stability, convertibility and circulativeness.

<4> Security with payment terms

- The most risky payment method in the standpoint of a seller::In the order of remittance method, collection method and letter of credit method. - Reason why remittance method is risky : When there is a payment dispute, the dispute is based on the contract only so problem solving is not easy. - Secondary apparatus for safety in reclaiming payments: Exporting insurance or confirmation of a highly reliable bank. - In order to come out from recourse risk of a Nego bank and to reduce exchange commission, you may using forfeiting.1. Safety order for a seller when reclaiming payment:

a. Advance payment, b. CADc. D/P, d. COD, e. D/A, f. open account (a kind of deferred payment but difficult to use this method if the transaction is not with a fixed party)

2. Safety order for a debtor when reclaiming payment:

a. open account, b. COD, c. D/A, d. D/P, e. CAD, f. advance payment

(7) Terms of Insurance

- There could be loss of or damage to the goods while transporting the goods so in order to eliminate the risk, buy insurance.- For a ocean fright, buy cargo insurance, for a ground freight, buy transport insurance),for air freight buy air transport insurance or aviation insurance and for the multimodalfreight, buy through insurance. - For a marine cargo insurance there is an exemplar provision which is ICC(institutecargo clause) by the institute of London under/writers for the insurance risk and the

ranges for preserve designated loss. <1> Cargo insurance range per transaction (Refer to Trade Terms by INCOTERMS 2000)

1. EXW(Refer to the {6} [8] (4))2. FAS( " )3. FOB( " ) 4. CFR( " )5. CIF ( " )6. FCA, CPT, CIP( " )

<2> Terms of security

- In the standard ICC provision, the FPA, WA, AR and amended ICC(A), ICC(B), ICC(C) are used in combination- ICC(C) for FPA, ICC(B) for WA and A/R is similar to ICC(A).1. Former Institute Cargo Clause

a. FPA(free from particular average) and ICC(C)

1. List risks in Positive List2. a provision which the insurer will not preserve a particular average for the specified shipper. This kind of insurance is the lowest insurance premium. 3. Security from FPA for a range of maritime losses

- Total loss --Actual total loss and entire constructive total loss.- G/A (general average) and justifiable sue and labour expenses- S.P.A.(specified particular average)--Product loss due to a vessel's SSBC(major casualties) and total loss per package while stevedoring process.

4. Range of maritime losses in ICC(C)

- Fire or explosion, a vessel or a craft's stranding, Grounded and capsize- Overturning or derailment with land conveyance- Collision or contact with intended vessel and a craft or conveyance with other object outer than water- From the port of distress, discharging of cargo, the subject-mattered insured's extinction or damage or in related with the said party.- Due to general average sacrifice and jettison's extinction or damage to the subject-mattered insured.

5. Non-secured risk

- Within the marine insurance, those exclusion that is, general exclusions clause, unseaworthiness and unfitness exclusion clause, war exclusion clause, strikes exclusion clause are not secured risk from ICC(C), ICC(B) and ICC(A).

b. WA(with average) and ICC(B)

1. A provision that preserves total loss, general average and up to particular average.2. For a small petty claim, mark as WA~% and apply a franchise system.The ~% is franchise, and to preserve 'without franchise', the contract has to be cover with WAIOP(With Average Irrespective of percentage) as a provision. 3. Preserve range in ICC(B)

- Security, risk and loss that would be preserve in ICC(C)- Damage or extinction subject-mattered insured in relations with the subject party or earthquake, element of volcano and lightening. - Washing overboard- Risk with Intended vessel, a craft, hold, conveyance , container, lift van or seawater at the storage area, lake water or rainfall.- Product extinction or damage called total loss of any package while shipping to a intended vessel or a craft during a unloading process.

4. Non-security risk


c. A/R(all risks), AAR (against all risks) and ICC(A)

1. List all the Non-security in Negative List.2. Excluding common risk-exclusion risk, petty claim, total loss, general average, particular average are accepted as risks in the cargo insurance. 3. Exclusion clauses

- Sailing delay- nature's particular with subject-mattered insured or a vice.- Unlawful action of a insured - unseaworthine of a vessel - FW/SRCC(war, strike, riot, disturbance) - FC & S(seizure, capture)

4. Non-security risks


d. TLO(total loss only; total loss risks provision)

- It is a insurance that would pay the subject-mattered insured in total loss which is not in used with marine cargo insurance at all.

2. New Institute Cargo Clause

a. ICC(A) : ICC(A/R), b. ICC(B) : ICC(WA), c. ICC(C) : ICC(FPA)

3. A extraneous clauses to secure Memorandum clauses additionally

- If cover as ICC(A) or A/R, there is no need to cover additional risks but if coveras ICC(B), ICC(C), W.A abd F.P.A or ICC(A) and A/R, additional premium fee has to be made if intended to cover additionally according to the cargo's characteristics.

- TPND(Theft, Pilferage and Non-Delivery) - Breakage - Sweat and Heating Damage - Leakage/Shortage - JWOB(Jettison and Washing Over Board) - Denting and/or Bending - Spontaneous Combustion - Mould and Mildew - ROD(Rust, Oxidation, Discolouration) - Hook and Holo - Contamination- RFWD(Rain and/or Fresh Water Damage)

(8) Terms of Claim, Arbitration & Governing Law

- Related to the parties performing against the contract, the specific accompanying request such as compensation to Trade Dispute is called Claim.- It is wise to indicate arbitrary organization, the place for arbitration, overning Law on a Sales contract.<1> Claims resolving method

- There are Amicable settlement, Conciliation, Arbitration ,Litigation but the rbitration is more generalized for the following reasons.a. Voluntary reference

- The essence of arbitration and the strong point of the system is that without pecial restriction, all the procedure can be decided between the party's greement.

b. peaceful atmosphere

- Progress non-formal procedure in a peaceful atmosphere.

c. speediness or single trial system (arbitration law the sub-article 11 (5))

d. closed proceedings (Procedure not open to the public)e. expertness of arbitrators f. low costs (Economical)

- Since single trial system, expertness of arbitrators and selecting in proxy is recognized without restriction, cost is relatively low.

g. Effects of Arbitral Award internationalism

- There are internal effect and international effect with the arbitral award.

<2> Things for Caution

1. Check for the each country's weight and measures difference. 2. State insurance coverage for transpiration risks--Be cautious for the risks that areunable to cover by insurance per insurance condition. 3. Specific force majeure lists4. Lists of Infringement5. State governing law

- State revision year, the title of international provision which standardizes interpretation of the trading terminologies in the contract. - State which legal regulations for a special issue should be accepted from the host country of seller/debtor.Ex)-This contract shall be governed in all respects by the law of China-This credit is issued subject to Uniform and Practice for Documentary Credit, 1993 revision, ICC Publication No.500

6. State arbitration lists

- State in the contract which commercial arbitration committee's rule you choose to follow by to resolve problems.Ex)-All disputes, controversies, or differences which may arise between the parties, out of or in relation to or in connection with this contract or for the breach thereof, shall be settled by arbitration in Seoul, Korea in accordance with the Commercial Arbitration Rules of the Korea Commercial Arbitration Board and the Law of Korea.-The award rendered by arbitrator(s) shall be final and bind upon parties concerned

7. State claim clause

Ex)-Any claim by buyer must be made in writing 14 days receipt the goods at destination stated on the face hereof, and no claim will be recognised if they are used-Any claim or complaint by buyer of whatever arising under this contract, shall be made in cable within one week after arrival of cargo in destination port.-Full particulars of such claim shall be made in writing and forward by airmail to seller within 15days after cable.

-Buyer must submit with such particulars as Suwon Public Survey's report, when must the quality and/or quantity of merchandise is in dispute.

(9) Other conditions for a contract

<1> Contract materializing date and its validity period <2> Contract number <3> Confirming statement for a contract materializing <4> Cautious and notice <5> Contract parties' signature

[7] Frustration of contract and breach(1) frustration of contract

<1> Definition

- The frustration of contract is referred to a case where after a contract is made, if a contract is unable to perform or no need to perform the contract. When it occurs, the contract party is exempt from the further duty and the contract will be canceled.

<2> Required elements

- When a frustration is formed with a individual transaction: Destroying of the contract subjected product, outbreak of a war, export prohibition and lawbreaking, the changes with a basic condition, export/import approval and import quota etc.- Prepare for force majeure clause of the contract parties' sales contract (open contract or individual contract's back clause).

(2) Breach and remedy

<1> Definition

- The sales contract parties' duty to perform : Unless a provision is stated with a basic contract, it is followed by the adopted trade term. - The required elements for a contract and breach or remedies of the other party: There is no international standard for trade term interpretations therefore, the governing law of a contract is to be follow by.

<2> Governing law

- In general, the Vienna Convention selected by UN is favorable rather than a locallaw of a specific country,

<3> Remedy method

- A remedy method when a buyer breach the duty: The person remedy is the rights for the Seller for the hand over products such as the right to cancel, right to request payment and right to request compensation and right to custody as well as the right to payment return against products. - A remedy method when a seller breach the duty : If the products are inconsistent to the contract, the buyer has right to refuse, right to request compensation and the right to request payment return.

(3) Problem solving method

- Claims in trading : For a continues business, a resolve according to the independent agreement of the parties is most favorable. - If necessary to ask a favor to third parties for a problem solving: Intermediation or adjustment are the good methods.

[8] INCOTERMS (International Rules for the Interpretation of Trade Terms)(1) Definition and purpose

- The trade terms are different from each country due to the trading practice. The kind of unclear interpretation may bring a misunderstanding and a lawsuit. In order prevent or to minimize the damage, the ICC is established. - The International trade contract law which unified the seller and buyer's rights-obligation relationship internationally is generalized.

(2) The structure of Incoterms 2000

<1> 'E' requirement group is departure term. The Seller delivery products to the buyer in the premises.<2> 'F' requirement group is main carriage unpaid term. The seller delivery the products to the shipment contracted shipper but the fright fee is not burden by the seller which as a pont of sameness.<3> 'C' requirement group is main carriage paid term. The Seller will basically burden the freight to the destination and establish a insurance contract but the risk aftershipment and additional expenses are not burden by the seller. <4> 'D' requirement group is arrival term. The Seller pays all the expenses necessary for transportation.

(3) The trait of INCOTERMS 2000

<1> Made sure of the definition of delivery on the preamble of each terms. <2> FCA terms delivery method: Either delivery form the seller's premises or other location but the statement is clear and simple. <3> Delivery method : State the provision whether the (i)Seller is making a delivery, loaded specified by the seller using specified means of transportations or deliveringusing specified menas of transportation by a shipper or a buyer or (iii) by carried in to a

specified location in loaded or (iv) by carried in and unloaded at a specified location etc.<4> As EU or customs free regions are expanding, by inserting 'where applicable" words on each condition's customs duty regulation, it made possible to be used without aconfusion even when a Customs Clearance is not necessary.<5> Customs Clearance duty of FAS terms: Seller shoulder burden. Import clearance duty in DEQ terms : Regulated as a Buyer to shoulder the burden.<6> Even on a Buyer's duty it regulates a) a duty to contract transportation b)a duty to contract insurance and it also regulates that when a Buyer doesn't have a responsibility for the insurance it should stipulate (no obligation) for consistency.<7> If used terminologies are unclear or not corresponding to the commercial custom, it has been changed to appropriate terminologies. <8> It stipulates that it prepares for electronic commerce by stating BOLERO service (1999) from revised preface, CMI regulation for Electronic Bill of Lading, CMI regulation for electronic marine cargo invoice, UNCITRAL Model Law for electronic commerce.

(4) Trade Terms for INCOTERMS 2000

1. Group E (departure)

<1> EXW ; Ex Works...(named place)

- Seller premises, working place, factory, warehouse etc can be named as a delivery place. - If adding a vehicle carrying duty to the Seller: Only possible if written in the contract. (EWX preamble)- A buyer take over products from the Seller's premises but not able to execute export clearance: To change this as FCA term, the seller must agree to burden vehicle carrying expenses and risk in order to make it possible. (EWX preamble)- If a name place is not yet agreed upon or if the place is not located in a accessible place : The Seller may choose an appropriate place. (The article 4)- The expense that occurs when passing third countries while importing products: Buyer is exempt from expense burden. Because these expense occurs to his/her own interest.

2. Group F (marine carriage unpaid)

<1> FCA ; Free Carrier...(named place)

1. Definition for FCA

- FCA term: Seller clearance exported products and products are delivered to a shipper appointed by the buyer from the named place. - If the pont of delivery is not appointed by the Buyer: The Seller has a right to select an appropriate location that fits to his/her purpose within the named place.- These terms are applicable to all the transportation method.

2. Risk . Critical point

- All the risk and the critical point regarding goods: When the Seller delivered goods to the carrier at the agreed period at the named place. - When the Seller contracts transportation contract by a Buyer's request and according to a customer of a trade and the Buyer takes risk and burden.- If in Seller's premises: From the point when the good are loaded on the means of transportation provided by the carrier in the Seller's premisses, the buyer takes all the risk and critical point. - All other named places: If the goods are not loaded within the seller's means of transportation in the named place, and the time when the goods were piled up at the proxy's desecration, the risk and critical point is shift to the buyer.

3. The main duty of the parties

- Seller :

a. The contracted goods are to be delivery to the carrier appointed by the buyer at the named place. b. Export permit and export clearance is executed with the Seller burden c. provide commercial invoice, export permit that proof the consistency of the contract and the delivery certificate that the good are delivered to the custom carrier. If the documents are not the proof of transportation contract, the Seller contracts transportation contract with Buyer burden and provide transport document.

- The meaning to "transportation documents" are, negotiable bill of lading, non-negotiable sea waybills, inland waterway document, air waybills, railway consignment note, road consignment note and multimodal transport document and such documents can be replaced with a electronic message. - Buyer :

1. Name the carrier to deliver the Seller's good and transportation method, delivery date and notify the location 2. As long as a special transportation contract is not requested to the Seller, make transportation expense by contracting transportation agreement for goods shipment at the name place.

<2> FAS ; Free Alongside Ship...(named port of shipment)

1. FCA: Delivering goods to alongside the ship of intended vessel from the port of shipment that modifies the seller who resides in the export country to execute customs clearance (FCA preamble ).2. Additional duty have been added for Seller to pay all the customs duty for export clearance, rates and a levy of the exporting country (Article A6).3. A craft of the intended vessel is a place where the loading equipments such as winch and tackle could arrive. 4. This term can be only used with marine or local transport. It is usually used by lumber, grains and mineral transportation where the loading charge is much needed.

<3> FOB ; Free on Board...(named port of shipment)

1. Definition of FOB

- FOB term : A transaction term when the Seller delivers goods through ship's rail from the intended vessel in the port of shipment. - Only used with marine or local transport.- Irreverent terms to Roll on-roll off transport or container transport which has no meaning of ship's rail.

2. The essence of FOB

- Goods delivery, risk and critical point for goods, the right to posses goods are to shift so it belongs to the Shipped sales contract.- Since it pre-conditions only the marine transport it is regarded as a marine sales contract, and especially since it loads goods on the board of the intended vessel it is regarded as a intended vessel delivery contract. - Since the goods of Seller are actual delivery it is regarded as a delivery sales contract.

3. The kinds of FOB

a. In England the "classical FOB" is when a Seller load products on the intended vessel by a buyer, all the expenses thereafter is burden by the buyer. b. In England "FOB with additional duties" exists to prevent in case if a buyer is unable to contract transport contract and export procedure by the buyer. c. America has adopted the FOB of England in 1990 on Revised American Foreign Trade Definitions to be used for a vast inland transport and with marine shipment and there are the following 6 FOB provisions.

- FOB(named inland carrier at named inland point of departure) - FOB(named inland carrier at named inland point of departure) Freight prepaid to(named point if exportation)- FOB(named inland carrier at named inland point of departure) Freight allowed to(named point of exportation)- FOB(named inland carrier at named inland point of exportation) - FOB Vessel(named port of shipment)- FOB(named inland point in country of importation) - These are not accurately consistent to INCOTERMS so when contracting FOB trading with these region, a cautious is required.

4. Risk - Critical point

- Risk and critical point in payment : When products passed the ship's rail.- Seller : Export permit and customs clearance expense of the goods.Expense burden by FAS terms, Products shipped inspection (PSI) expenses and responsible for loading costs. - Buyer : Goods stowage and trimming charge on the intended vessel. Insurance and shipping

fee to the target port, all the expenses related to import.

5. Main duty for the sales party

- Seller : 1. Delivering goods consistent to the sales contract from on board of intended vessel in named port. 2. Export permit and export clearance is executed with the Seller burden 3. provide commercial invoice and clean on board receipt or mate's receipt which proof the consistency of the contract. If the documents are not the proof of transportation contract, the Seller contracts transportation contract with Buyer burden and provide transport document. The meaning to "transportation documents" are, negotiable bill of lading, non-negotiable sea waybills, inland waterway document, air waybills, railway consignment note, road consignment note and multimodal transport document and such documents can be replaced with a electronic message. 4. Pay on board expenses according to the port's custom if the loading costs are not included in shipping fee.

- Buyer : 1. Buyer burden transport contract til intented port and notifyseller the name of vessel, loading place and its period to the Seller 2. if loading costs are including in shipping fee, pay on board expense and unloading costs at intended port 3. Not notifying to Seller, intended vessel's delay in arrival or acceptance discrepancy and all other risks are pay by the buyer.

3. Group C (marine carriage paid)

<1> CFR ; Cost and Freight...(named port of destination)

1. Definition of CFR

- Seller pays freight fee to the intended port. - Seller requests customs clearance and able to use with only marine shipmentor local shipment.- Irreverent terms to Roll on-roll off transport or container transport whichhas no meaning of ship's rail.

2. Risk . critical point

- As one of Shipped contract, when the Seller delivery goods on intendedvessel's on board the duty is fulfilled but under this term, there are inconsistency with a risk and critical point.a. Seller : From the point the goods passed the ship's rail all the risk andcritical points and additional expenses are burden by the buyer. b. Seller : Until the goods are delivery to intended vessel's on board all theexpenses are additionally burden to the Seller. c. Buyer : Excluding freight charge to the intended port, the buyer is burden

for all the additional expenses from the goods are on board on the intended vessel from the intended port. d. Seller : Entire export costs until the goods are loaded on the intended vessel, stowage and trimming charge, costs related to freight contract from shipped port to the intended port, ocean freight, in case with liner, the unloading costs that are levy from intended port.


- Seller : a. Seller burden with his/her own expense to contract transportationcontract for the normal vessel and sea route to the intended port of the goods b. delivery goods that are consistent to the sales contract to theshipped intended vessel. c. Export permit and export clearance is executed with the Seller burden d. immediately provide clean shipping documents and the commercial invoice that provides the consistency to the contract. Such documents can be replaced with a electronic message. e. Not only the loading costs for goods but also the unloading costs from intended port that could be added for liner when contracting a freight contract.

- Buyer : a. Upon receiving the commercial invoice and the shippingdocuments, consent on board delivery from shipped port and accept goods from the carrier at the intended port. b. if unloading costs are not included from intended port, pay the fee c. pay all the risk and additional expenses that occurred from not notifying the seller.

<2> CIF ; Cost, Insurance and Freight(named port of destination)

1. Definition of CIF

- Seller pays necessary freight and insurance premium to delivery goods tointended port. - All the risk for goods and additional expenses are shift to the buyer whenthe goods passed ship's rail from shipped port. - Unless there is a Seller's opposing wording, it should be covered byinsurance with (ICC) or (FPA or C).- Seller execute goods customs clearance - Use only with marine transport or Carriage by inland waterway- Irreverent terms to Roll on-roll off transport or container transport whichhas no meaning of ship's rail.

2. The essence of CIF

- Because it prerequisite with only FOB and CFR term, it belongs to the contract of marine sales. - Seller only pays freight and insurance til the intended port, but the additional expenses and

risk are shift to the buyer from the point where the goods are delivered at shipped port, this term belongs to the contract of shipped sales. - It has a special feature that the seller's delivery method for payment request is based on the symbolic delivery instead of actual delivery. - Sales term that is constructed in multi price together with Seller's cost horizon which is time of ship and Buyer's cost horizon till intended port.

3. Risk . critical point

- Seller is completed with the duty when delivery the goods from ship port to on board of intended vessel.- Seller : From the point the goods passed the ship's rail all the risk and critical points and additional expenses are burden by the buyer. - Seller : Until the goods are delivery to intended vessel's on board all the expenses are additionally burden to the Seller. - Seller : Entire export costs until the goods are loaded on the intended vessel, stowage and trimming charge, costs related to freight contract from shipped port to the intended port, ocean freight, in case with liner, the unloading costs that are levy from intended port, and responsible for insurance premium of marine cargo insurance till intended port.


- Seller : a Seller burden with his/her own expense to contract transportation contract for the normal vessel and sea route to the intended port of the goods b. delivery goods that are consistent to the sales contract to the shipped intended vessel.c. Export permit and export clearance is executed with the Seller burden d. Pay insurance premium with own expense till intended port for transportation. The insurance must be with the currency unit within the contract up to 110% of the goods amount using minimal risk condition similar to ICC or other similar provision. e. should provide a transferable insurance documents, clean shipping documents and the commercial invoice that provides the consistency to the contract. All these documents can be replaced by the electronic message as per the party's agreement f. Not only the loading costs for goods but also the unloading costs from intended port that could be added for liner when contracting a freight contract.

- Buyer : a. Upon receiving the commercial invoice and the shipping documents, consent on board delivery from shipped port and accept goods from the carrier at the intended port. b. if unloading costs are not included from intended port, pay the fee c. pay all the risk and additional expenses that occurred from not notifying the seller.

<3> CPT ; Carriage Paid to...(named place of destination)

- If included with freight contract, the passing fee to third countries should be burden by the Seller. (The Article A6)- Pay the freight to carrier til the named place of destination chosen by the Seller and delivery the goods. - Buyer burden damages and all other risks after the good are delivery to the carrier.- Seller should clear customs for goods and this method can be used with all freight method.

<4> CIP ; Carriage and Insurance paid to...(named place of destination)

1. Definition of CIP

- Seller pays carriage and insurance premium to the named place of destination. - All the risk and additional costs for goods: Term that shift to buyer when the goods are delivered to the carrier from the ship port. - Seller : minimal risk condition similar to ICC or other similar provision of London insurance market, execute goods customs clearance. - This term can be used with all the transport method including multimodal transport.

2. Risk . Critical point

- As Seller delivery the goods to the carrier he/she chose the duty is over, but some risk and critical points are not consistent. - When the goods are delivered to the carrie the risk of goods are shift to the buyer. - Seller : All the export costs until the goods are delivered to the carrier, loading costs, cost for named destination and carriage, unloading costs that are levy from the named destination when contracting transportation, insurance premium to the final destination are burden by the Seller.


- Seller : a. Seller burden with his/her own expense to contract transportation contract for the normal vessel and sea route to the intended port of the goods b. The goods that are consistent to the contract has to be delivery to the carrier or the initial carrier c. Export permit and export clearance is executed with the Seller burden d. Pay insurance premium with own expense till intended port for transportation. The insurance must be with the currency unit within the contract up to 110% of the goods amount using minimal risk condition similar to ICC or other similar provision. e. In case if there is a Buyer request: If possible purchase insurance premium on a possible war, strike and a risk with strike. f. commercial insurance, the normal shipping documents and the transferable insurance documents that proof consistency to the contract. All these documents can be replaced by the electronic message as per the party's agreement g. Non only the loading costs but the unloading costs at the intended destination that might be included when making shipping agreement.

- Buyer : 1. When goods are delivered to the carrier and in case of a customary case when

the shipping documents are delivered to the said person, approve the goods when the goods are delivered to the carrier and receive the goods from the carrier. 2. When the unloading costs are not included in the shipping cost at the intended destination, pay the unloading cost 3. pay all the risk and additional expenses that occurred from not notifying the seller.

4. Group D (arrival)

<1> DAF ; Delivered at Frontier...(named place)

- A term that allows the buyer to process the goods as per the buyer's discretions when the goods are not unloaded from the means of transportation after the goods have been through customs clearance, and not processing import process at the intended boarder and the location. - It can be used regardless of transportation method at the boarder of land but in case if delivery on board by sea and a wharf, there is DES or DEQ recommendation clause. (DAF preamble).- Per modified regulation, a Seller may agree on a Inter-modal Transportation contract upon a Buyer's request, expense burden and risk taking over by the buyer beyond a boarder's delivery destination to the buyer has appointed for the final destination.

<2> DES ; Delivered Ex ship...(named port of destination)

- The goods are not cleared from named port of shipment and under the discretion of the buyer the goods are delivered.- Seller : Delivering the goods to the named port of shipment and take over all the expenses and the risk until unloading point. - Buyer : Take over unloading expense and customs duty clearance expense. - When a Seller request to take over the unloading expense and risks: Use DEQ terms. - This term can be used only with ocean freight, Carriage by inland waterway or multi-modal transportation to delivery the goods on the vessel at the intended port. - Seller is to take over customer clearance expense to third countries. All the cost after importing process and the processing fee for transportation is responsible by a Buyer.

<3> DEQ ; Delivered Ex Quay...(duty paid)...(named port of destination)

- DEQ term is to delivery goods at a wharf of intended port however, it has been remodified that a Seller take over unloading expense from intended port and a buyer take over import duty expense (DEQ preamble ).- If a Seller take over expense for import process: It made to clarify the meaning on the contract.

- Seller : Pay only the through expense of third countries and export customs clearance expense Buyer : Transportation or any other stevedoring charges including stacking toterminal followed by a harbor. Contents revised to pay customs clearance expense that develops after importing goods followed by transportation. (Article B6) - Since importing clearance is for a Buyer to handle, the buyer has no responsibility to make

payment for the Seller to obtain necessary documents for import clearance from the dispatching country or the country of origin. But the buyer must support for the other party to acquire all the necessary documents and the buyer is to make payment for any expense that arise from supporting the seller. (The Article A10 and Article WPB10).

<4> DDU ; Delivered Duty Unpaid.

- DDU term is to delivery goods to the intended destination excluding import customs expense and duty. As the means of transportation, the goods are not necessary to be unloaded at the destination (DDU preamble )- Duty with this term is referring to a payment responsibility in customs clearance procedure, duty, taxes and a levy (DDU preamble ).- If a Seller is to take expenses for import clearance procedure and risks : It made to clarify the meaning on the contract. (DDU preamble ).- This term can be used with all kinds of transportation method.- This is a distinctive clause which added that a party appointed by a Seller or a Buyer may delivery goods so that a buyer or the appointee may take the responsibility to unload which is distinctive. (The article A4).

<5> DDP ; Delivered Duty Paid...(named place of destination)

- A term that lets a Seller to clear goods and delivery the goods to a buyer without unloading the goods from the means of transportation at the destination.- Seller : Take all the responsibility and risks from the intended country for customs clearance expense, duty and the transportation fee to the destination. - This term can not be used when a Seller can not execute import license and customs clearance directly or indirectly. If a Buyer wants to take over import customs clearance and the risks, DDU term is a better use. - This term can be used with all kinds of transportation method.

(6) INCOTERMS preamble (Refer to international trade rules)

[9] International Rules for the International Trade Contract(Refer to international trade rules)

(1) Incoterms 2000

- It contains standard trade terms of 13 countries.

(2) Warsaw- Oxford Rules for C.I.F Contract, 1932

- The parties right in CIF contract, A special law of CIF that shows contents of duty and the execution method.

(3) Revised American Foreign Trade Definitions, 1990

- It stressed on 6 types of FOB condition applied with the U.S. regulation in trade.- The modified Definitions of Export Quotations (India House Rules for F. O. B) in 1941 that was adopted by National Foreign Trade Convention of National Foreign Trade Council, Inc in 1919 was re-modified in 1990. - The Trade terms regulated in main clause included 6 types of FOB are as the following 11 items.

a. Ex~(point of origin)b. F.O.B.~(named inland carrier at named inland point of departure)c. F.O.B.~(named inland carrier at named inland point of departure)Freight prepaid to~(named point of exportation)d. F.O.B.~(named inland carrier at named inland point of departure)Freight allowed to~(named point of exportation)e. F.O.B.~(named inland carrier at named point of exportation)f. F.O.B. vessel~(named port of shipment)g. F.O.B~(named inland point in country of importation)h. F.A.S. vessel~(named port of shipment)i. C.&.F.~(named point of destination)j. C.I.F.~(named point of destination)k. Ex Dock~(named port of importation)

(4) Vienna Convention, 1980 (United Convention on Contract for the International Sale of Goods, 1980 ; CISG)

- ECOSOC subsidiary of UN UNCITRAL (United Nations Commission on International Trade Law) modified in 1980.


Import Licence (I/L)

[1] Concept

[2] Requirements for import license (1) Whether applicants is qualified to acquire approval. (2) If import/export is restricted due to related laws, meet the restriction items.(3) Import/export region should be free of restriction regards to the related law. (4) Applying H.S should be appropriated. (5) Payment currency and payment method should be recognized transaction against foreign currency Act. (6) Import fine should have been paid (For domestic import only)

[3] Required documents for application

(1) Import approval application (2) Importing contract or offer sheet- The requisites of offer sheet to approve import1. Local issued offer2. Overseas issued offers are approved as exceptional - Approving range for overseas issued offers - Material to acquisite foreign currencies, importing materials for making tools (if the import is not for domestic use)- When importing goods that are under the fixed amount according to the related law's regulation - When a defence industry is importing for a defence industry - If the import is according to the contract between joint venture, technology adopting for investing or from technology partnership3. Firm offer- Offer confirmed with general items of products, quantities, unit price and validity - With proforma invoice, be cautious because it usually exclude validity. (3) Import agency contract (4) Payment certification for import fine (5) Payment certification for deposit refund (Relevant goods) (6) All other documents required by import permit organization

[4] Import permit waiver(1) The purport of the system - Import permit is waived if importing for small sum transaction, goods for special service, goods for international diplomacy customarily and that they are non-commercial transaction having small contribution to the national economy. (2) If import permit is waived - On the stand of a person with a particular social position is waived. 1. Personal belongings of the travellers for temporary staying purpose 2. Moving goods of the people that enter into and departure from the county and those long-term staying or people with moving purpose 3. Crew members' belongings of a aircraft or a vessel 4. Belongings of the chief of the country, a personage and the attendants 5. Government invited personage's belongings- Goods that are importing/exporting in the purpose for special service usage. 1. Samples or for advertisement 2. Goods for exhibition or a show 3. Replacement goods for claims and such 4. Goods for repair or inspection purpose 5. a bareboat charter, rented aircraft6. Raw materials for no draft consignment process trade 7. Goods for technology adoption or to compensate the adoption. 8. Business goods for foreign business partners 9. General goods or goods for aircraft- Goods release/ Carrying in for no charge1. Repeat usage tools (container) for goods transportation

2. Tools for filming movies 3. Films for TV broadcasting 4. Tools for repair or for inspection 5. Aircraft or vessel- Goods take out/ Carrying in for public usage purpose1. Goods of diplomacy for business 2. the righteous goods such as a decoration, a3. Gift of friendship purpose (Government - for local government organizations, for religious organizations, for schools and such) 4. Goods for sports players participating for international games 5. Fluid, ashes- Good for emergency rescue or that requires urgency1. Goods to repair wrecked vessel 2. Goods to repair an aircraft 3. Goods to repair international communicating system 4. Goods to repair a foreign voyage- Small sum goods 1. Label, tags 2. small amount of raw materials at no-charge 3. regular publication, micro films and school supplies 4. medicines under fixed amount (3) Applying principles- Although the goods are subjected for export approval the customs clearance is a must If one can present a proof that the goods are subjected for approval waiver instead of export approval certification, the goods can be cleared with the customs officer's confirmation. - Goods that are publicized in public according to the specific law: They are not included in approval waiver, If subjected for export wavier : Goods can be export without fulfilling the purports regulated in the integration public notice - There are export automatic approval goods or export restricted goods (Taxable amount has to be under fixed amount) for export wavier goods: In principle, customs clearance is permitted by a ground statement but with the export restricted goods that exceeds taxable fixed amount, other documents that proof the same fact is necessary to be presented for clearance. (4) Export waiver procedure 1. Goods subjected for export waiver 2. vessel arrival 3. goods unload 4. Carrying in the goods to bonded area 5. check systems 6. report import7. Goods inspection- Goods inspection that are not subjected for export waiver: Entire goods inspection in principle. Some inspects can be eliminated according to the goods character and the company's credibility. 8. Customs clearance inspection a. Goods to be exemption from taxation- Goods that are recognized for only sample usage considering the goods shape, character and performance

- Goods that are recognized for only sample usage because it is perforated or it has been cut or processed in a way it can not be fabricated. - Goods that are recognized for only sample usage because taxation amount is under fixed amount b. Required documents for customs clearance (Follow each country's related law)9. Statement of payment 10. customs duty and juridical payment 11. import license 12. Goods release

[5] Import license approval modification (1) Definition - Export by the person who acquired export approval in the beginning - To change approved items of export, a changing approval has to be requested to the initial approval organization (if done by recommending authority, it has to go through the export recommending authority), and such request has to be done within the validity period. - If trying to change import approval items after export earning is fulfilled and after acquiring the shipping documents, changing approval can be made after the validity period is expired. (In this case, the changes made to the approval has to be reported to the said customs officer. (2) Important facts in modifying approval 1. Items--If the goods are restricted for import/export related to the law and requires related personnel's approval, the approval is necessary. 2. Unit price--If try to change unit price of exporting goods or to increase the unit price, the change has to be done before the shipping. Ref--If the other party refuse to pay/take over and resale to third parties, if import/export 1st industry goods which unit prices are to be determined after the shipment such as Nonferrous metal and minerals according to the international trade custom : Modification available after shipment.3. Payment method-- Payment currency of import/export earning. Period for payment or changing payment method: Permitted by the Foreign Exchange Regulation Act.4. Destination--Changing countries to import/export : There should be no obstacles to change to other country according to the related regulations.5. Documenting the changed contents--Contents to be modified should be indicated in the L/C, import/export contract, purchase order and on the offer sheet. (3) Modification approving authority1. Principle--The import/export approving authority in the prior (If export approved is by recommending authority, then it has to go through the authority)2. Exception--Custom officer's modification approval (selectively apply between the export approval authority )(4) Changes of import license - Dimension, Weight, HS, Items --Modification for the goods that are not restricted for importing/exporting against the related regulation and limited to fulfil the both requirement. (5) Items that are not acceptable for modifications 1. HS and name of goods--Modification for the goods that are not restricted for importing/exporting against the related regulation.2. Dimensions and weights --Modification for the goods that are not restricted for

importing/exporting against the related regulation that are not subjected for limitation to the regulation. Unit price, amount and standard taxation are not to be changed. (6) Procedure for modification approving 1. Documentary evidence for the modification 2. Application to request modification approval (Banks, recommending authority, the customs)- 4 application to request export license modification approval - The original import/export license - Documents that can proof reason for modification (Changed L/C, contract, offer sheets etc.)- Recommendation letter, permission and all other documents 3. Reviewing important things in modification a Documenting modification approver - Contents of modified approver :Indicate on L/C, exporting contract and offer sheets for export. Indicate on offer sheets and on contract for the import. b Changing the parties and the type of transaction- Changing the parties for import/export and the type of transaction : Since it would prerequisite another separate contract, it can not be subjected for modification approval. c The usage modification for customs cleared goods - This is not a change for the usage purpose but subjected for the export license changes.- If changing from domestic usage to foreign currency acquiring : Levy import duty and if there is a restriction, it must be fulfilled. 4. Modification approving

[6] Extending import license validity (1) Definition 1. A person acquired export/import license has to export/import the goods that have been approved within the valid export/import license period and make or pay the payment.2. Validity period for export/import license : In principle it is from the date export/import license was issued to ~ years. However, it can be re-adjusted separately within ~ years according to the goods delivery terms, goods payment period and for other necessary requirements. 3. If either export/import of the goods or export/import payments are not executed in the valid period, the period has to be extend. (2) Import license validity period for a new restricted goods for import - When the said goods are subjected for the newly restricted goods within the import license valid period : Anyone who has not made import of the goods, or opening L/C or not made payment before the limited public notice period, the valid period will be expired on the newly restricted public notice period. - L/C opening date : L/C Cable dispatching date is the opening date.(3) Procedure<1> A fine processed <2> extend validity or extend authority <3> review reason for extension <4> extension approve

[7] Managing import license after process (1) Definition

- The director of the export/import license authority has to make sure if the goods that are approved for export license have been export within the export/import valid period and also whether the payment recognized for the export/import goods are received or paid.(2) Payment process approving - Importance of outstanding payment approval 1. After the goods are delivered, the transaction party is missing therefore, there is no one who can claim for the payment and the fact is confirmed by the transaction party's bank, KOCHAM or other public organizations. 2. When the transaction party gave up on the part/whole of the payment bond or when the transaction party agree to reduce the amount. 3. Due to the transaction parties' dispute, some portions of the payment are to be reduced or used as expense and such are confirmed by a arbitrary organization, a court or by the insurance organization. - Exception for payment process approval (Waive ex post facto management )1. Executing export/import is impossible due to the person who acquired xport/import license is bankrupt or missing. 2. When the outstanding balance of payment or unpaid balance for payment is less than the fixed amount. 3. When there is no one to continue the transaction because after the deposit was sent, the person is missing. (3) Procedure1. Export license2. Appoint ex post facto management authority (banks) 3. Customs clear export goods, payment received or paid, customers clear not performed for the export goods or non-collection and unpaid 4. Extend export license validation period (If needed)5. Subjected for ex post facto management waiver and approve payment process for export/import 6. Inspect ex post facto management 7. Terminate ex post facto management (4) ex post facto management report1. L/C method , D/P . D/A method, Payment after method, local delivery method -- No need to execute separate ex post facto management 2. Remittence base--Within the ~ das from the export/import customs clearance, attach the export/import permit and report the execution conducted. 3. Consignment transaction--Non-sold goods to be reported for export/import again within ~ months of the contract period is expired. 4. Rental transaction--Report export/import again with months after the rental contract is over 5. Inter transaction--Within ~ days from the export/import customs clear attach a copy of export/import permit and report the execution conducted. 6. Consignment processing trading--Execute export/import within the valid export/import period .Report within the ~ days of export/import customs clear and report the execution conducted. 7. Overseas arrival import --Within the ~ days of imported goods are delivered report the imported goods acquired status.

Advising and Receiving L/C

[1] Advising L/C (1) Concept- It is an act to notify the L/C opening fact to the beneficiary in accordance with the opening bank by third banks located in the export region.- An advising bank advise L/C to a Seller and when at the time of advising, the bank confirms the authentification of the L/C by the Test Key or by the signature. - correspondent contract- Following documents are to be exchanged when making Non-Depositary Correspondent Contract. <1> List of authorized signature : A list of authorized personnel in charge of foreign currency business at both banks or a booklet that contains the signature of the said people or a micro film. (To compare and confirm document's authenticity)<2> Cyper code : A booklet containing all kinds of terminology cyper code related to foreign currency business (Use to reduce telex fee and security maintenance)<3> Test key : It is a code mark when exchanging Telex by both banks, it is used to display the bank's position. (For security purpose)<4> Schedule of Terms and Conditions : A table that indicates the said service fees in US dollars as per the kinds of foreign currency business. (For fair service fee charge purpose)- When contracting, a Credit Facility Agreement should be made to resolve a temporary

insufficient balance.(2) Role of advising bank - When a opening bank opened a L/C by mail or short cable, a advising bank has a simple role as a messenger however, when opening method are as following, the bank executes special duties. <1> Full cable L/C- When entire contents of L/C is sent to advising bank by Telex, it is called Full Cable. In this case a opening bank doesn't send a separate original L/C therefore, the advising bank upon receiving the Telex has to transfer onto the bank's own L/C form and include following sentences to delivery. Then this message act as the original L/C.- "This letter is solely an advice of credit opened by the above mentioned correspondent and conveys no engagement by us.""We reserve the right to make such amendments to this advice as may be necessary upon receipt of mail confirmation and assume no responsibility for any errors and/or omissions in the transmission and/or translation of the cable."<2> Cyper L/C- When a opening bank open a L/C using test codes only, a advising bank then compare these with "cyper code" and decoded documents are sent to the beneficiary.<3> Refer to our previous credit- Frequent L/C transaction with same business partner: To save Telex cost, send only the different contents to the currently opened L/C and the rest should be referred to the prior L/C. The advising bank prepares and delivery them. - Instruction sentence : "Repeat our credit No. OOOO except XXX".(3) Duty of advising bank- Responsible to delivery the opinion of a opening bank to a beneficiary 'fast' and 'clearly' therefore, advising should take place at the bank by having the beneficiary come in person to the bank to delivery the original L/C. - While transferring arrived L/C by Telex on its own bank, there could be problems with translation, indicating error occurred by the advising bank and the beneficiary is damaged for it however, if the advising bank insist on "reasonable care and reasonable time' the bank is waived.

[2] Advice of L/C Received

[3] Review L/C contents (1) Items to confirm when receiving L/C - A seller must review and confirm the following items to prevent an risks in the prior when L/C is received. <1> Check for L/C's authenticity - As per UCP 500, when a bank declined a request to advise or has no intention to participate and when there is authentification doubt from the appenance of L/C : Request all the doubtful items to be confirmed by the opening bank. If the L/C is notified to the beneficiary as is : Must send together with 'authenticity is doubtful'1. L/C received only by mail-- AS per the Specimen Signature Booklet exchanged with opening bank, compare the signature and check for authenticity of L/C. 2. L/C received by telex-- As per the Test Key exchanged with the opening bank confirm the Test Key number and heck for authenticity of L/C.<2> Check possession of L/C form

1. Check wither it is irrevocable L/C : If there is no clause for irrevocable clause, it should be translated as non-irrevocable as per UCP 500, 2. Check for UCP observance existence 3. Check for payment confirmation clause existence 4. Goods, price, unit price and correction of total calculation 5. Mistype, Misspelled and Logically inconsistent. <3> Check the opening bank's credibility- If it confirms to be there is a credit problem with the opening bank, it is safe to execute export after receiving confirmed L/C. 1. Check for the opening bank's insolvency and payment default possibility.2. Check for delaying or possible foreign payment stop due to the country of opening bank's weak foreign exchange circumstances 3. Check for possible payment default or whether dispatching documents would become incapable due to a war status of opening bank's location.<4> Check for any possible items that might cause a trouble in executing the process. - Check for any sentence structure that might make the applicant to make unilateral opinion and ultimately determine the L/C execution by it. Ex)-Appoint a vessel of applicants1. If requesting coverage of marine insurance or freight prepaid with L/C although the term is FOB. 2. Request to supply a confirmation of the chief of a customs clearance who isn't residing in the importing country resides.Ex)-Certificate of Origin must be legalized by XYZ Embassy in XXX.3. Requesting Shipment to be made from xxxxx,xxxxx etc., while requesting Marine Bill Lading.4. Requesting a goods inspection certificate by an agent that applicant appointed. Ex)-Inspection Certificate approved and signed by Buyer's Agent in triplicate.5. Requesting a inspection to be made on a sample by a buyer before the shipment and attach the inspection certificate onto the Nego documents.Ex)-Shipment sample should be inspected and approved by buyer before Shipment, and the Certificate issued by Buyer must be presented for Negotiation.- If found above special agreements, you should request to delete or change. L/C with above special agreements are called Conditional L/C.<5> Consistency with contract 1. Check if a item, standard and shipping date are consistent to the contract. 2. Check if enough and appropriate time is given for documents presenting 3. Check for a wrong word, an omitted word and pitfall phrases <6> Check also the documents other than L/C 1. Check whether the bill of lading is consistent to the L/C 2. Packing list 3. Inspection certificate 4. Insurance documents<7> Risks per each countries <8> Check whether the country to deal is established with commercial practice<9> Check terms with L/C not with sales contract <10>Check for any impossible practice1. Inspection at destination

Ex)-"60% of invice value available at sight and remainder go be negotiated upon receipt of notice from drawee that they satisfied with merchandise"2. Instruct shippingEx)-"This L/C is available for negociation only after receipt by the beneficiaryof further instruction of shipment from us"-"The name of vessel will be indicated by us"3. samplesEx)-"Sample must be approved by the buyer prior to shipment"<11> You need to make sure of the authenticity with a advising bank in the following cases.- If the consignee of the shipping documents is third party rather than the one appointed by the opening bank or as what the opening bank have instructed. - If one of the original shipping documents is requested to be directly deliver to third parties. (2) Requesting L/C correction - It is normal process to request the applicant to correct any unclear statement found in the L/C as it is discrepancy to the sales contract. - A contradiction of L/C, an ommission of necessary items or items regarding as a mistake of a opening bank are more efficient to notified to a opening bank by an advising bank.

[4] Shipping documents to be prepared by a exporter- If a exporter do not institute a different view upon reviewing a L/C, it is regarded as a consent to the opened L/C having its unique irrevocable nature. - Since changing the contents of L/C is impossible without a consent of a exporter, shipping documents can be prepared.


Export Licence (E/L) (If needed)

[1] Definition - A procedure that allows exporting through a recommending authority if goods are restricted for exporting. - It is generally formed in negative list system.

[2] Subject for export license - Goods restricted to export according to the related laws

[3] Importance of export license (1) Whether the applicant is qualified for license (2) If import/export is restricted due to related laws, meet the restriction items. (3) Import/export region should be free of restriction regards to the related law. (4) Payment currency and payment method should be recognized transaction against foreigncurrency Act. (5) H.S application should be appropriate(6) Import fine should have been paid (For domestic import only)

[4] Required documents (1) Export license application (2) Export L/C or sales contract (D/A, D/P etc.), Offer sheet (3) Contract for export service (If done by agency)

(4) Certificate of Bills Purchased in Foreign Currency (for remittance base method) (5) Certificate of foreign currency deposit (If advance remittance base)(6) Design certificate for exporting goods (Designated goods) (7) Other documents required by the export licensing organizations

[5] Changing export license items (Identical to changing import license)- Changing export license items by authority of a customs1. HS code and items (If not restricted items)2. Standards and weight (If fulfilled restricted conditions and if unit price or amount is unchangeable if the items are restricted goods)3. For the goods reported as open general license goods or small sum export license goods, a inspection is rendered accordingly. For the payment whether it is in accordance with irrevocable documentary L/C, it can be confirmed and approved with the L/C No. that is indicated.

[6] Waiver for export license (Refer to import license waiver)(1) Meaning of system (2) In case export license is waived(3) Applying principles (4) Export license waiver procedure1. Goods waived for export license 2. Vessel arrival 3. Goods unload 4. Goods Carrying in to bonded area 5. Check apparatus 6. Reporting Export - Air-consigned cargo with Non-Draft export under ~ US currency FOB based: Eliminate export declaration by presenting bundle list (Prepare an invoice if in inevitable case).7. Goods inspection8. Customs clearance- Required documents - Exporting application - Export license waiver statement - A document able to proof export license waiver (If difficult to clear customs with a waiver statement only) - A confirmation or a letter of recommendation in accordance with related law etc. (For the said goods only) - Packing list (For the goods subject for inspection only)9. Export permit 10. shipping

[7] Approve export in small amount(1) Definition - A system that allows export without a license when the export is a small sum withcertain qualification. - The time when export is registered to a customs is regarded as a export approval date.Unlike export license waiver, the collection of export earning must be executed within the fixed

period. (2) Importance- Goods that are not restricted or prohibited for export in accordance with related law. - Payment method in irrevocable sight bill documentary L/C method and the goods amount is under certain amount. (3) Procedures1. Export contract 2. receive Irrevocable L/C 3. Report export 4. Check whether it fulfills small amount export license requirements, 5. Export permit 6. Ship export goods 7. Collect export earning 8. ex post facto management

[8] Extending export license validity period (Identical to import license validity period)(1) Definition (2) Extending import license validity period for the newly restricted importing goods (3) Procedures

[9] Open export License(1) Definition - instead of going to a process to acquire a export license on each export for the identical goods repeatedly, this open general license allows exporting continuously for fixed period when qualified for ceratin requirement. - For the exports acquired this license, the collection of export earning must be executedwithin the fixed period as per each reported exportation. (2) Importance- Goods that are not restricted or prohibited for export in accordance with related law. - Payment method in irrevocable sight bill documentary L/C method.- The exporter who successfully exported the goods (based on the 10 unit of HS ) that were subjected to acquired the open general license for certain number of times inthe prior year or 1 year prior to applying for the open general license (Counting from the last day of applying month to ~year) .- The export who received open general license in accordance with the related law if goods to receive open general license are strategic goods.(3) Procedures<1> Issue or request a confirmation of number of export frequency per items <2> Apply open general license <3> Approve open general license <4> Receive either a exporting contract or a irrevocable sight bill documentary L/C <5> Report exporting <6> Export permit <7> Ship goods to export <8> Collect export earning <9> ex post facto management

[10] Export license by the chief of export recommending authority(1) Definition - A system which in order to avoid license procedure from a export license organization to receive a license again, fixed range for payment method and goods are prescribed to be consider it as a export license. (2) Importance<1> Goods subjected to approval - Goods recommended by export recommending authority (Including automatic license goods that are recommended together included in the same letter of recommendation)<2> Importance of payment1. L/C method (At Sight L/C or Usance L/C method within ~ years)2. D/P method or D/A method within ~ years3. Remittence method (Under certain amount)4. Mixture method of above payment method(3) Procedures<1> Sales contract <2> Receive cash or L/C <3> Export license application (Recommending authority)<4> Execute exporting process <5> Export completed

[11] Export license ex post facto management (Identical to import license ex post facto management )(1) Definition (2) Payment process approval for export/Import - export earning uncollected approval 1. Payment impossible to collect due to Insolvency of the business party . the transaction party is missing and force majure that corresponds to such and these are confirmed by the local bank, KOCHAM or other public organizations. 2. Due to the transaction parties' dispute, some portions of the payment are to be reduced or used as expense and such are confirmed by a arbitrary organization, a court or by the insurance organization. 3. If for the refusal rejection of the other party or taking over rejection, there is agreed reduced amount from a export earning (Exclude if transaction is between the branch office) and if it had been proved by a correspondent bank - a investigation rganization - a notary public or other public organizations. 4. Due to the other party's payment refusal and take over refusal, export earning is difficult to collect and that there is actually no real profit from the collection of the exporting goods. - Exception for payment process approval (Waive ex post facto management)(3) Procedures (4) ex post facto management report


Insurance and Transportation Contract

[1] Insurance contract- Insurance policy should be issued before a bill of lading issuance (1) Acceptable insurance documents

- As per the Article No. 34 of UCP, it regulates in a written statement of therequisites of the insurance documents for a bank to accept.

1 Insurance policy

- If the insured conclude an insurance contract, a bank should accept this since it is a insurance contract documents issued by an insurance company. (The Sub-Article No. 34-a of UCP)

2 Insurance certificate

- A professional exporter computes the amount for the insurance subjected goods for a certain period (Per 6 month or per 1 year ) and conclude a comprehensive contract with an insurance company. It should be accepted because this is the actual insurance certificate received by an insurance company when an insurance is actually purchased. (The Sub-Article No. 34-d of UCP)

3 Insurance cover note

- If the insured purchase insurance through an insurance broker, the insurance documents issued by the insurance broker are not acceptable by a bank.(The Sub-Article No. 34-c of UCP).

(2) Insurance terms required by L/C

1 Issuing date of insurance documents

- A bank refuse to accept the insurance documents that are issued later thanthe date indicated on the transportation documents in general. (The Sub-Article No. 34-e of UCP).- If an insurance policy is presented based on the open policy and if a specialagreement for compensation for retroactive is indicated in an insurance policy: Subject to acceptance regardless of issuing date.- Insurance documents acceptance condition that are issued after shipping date.

- Except for the following examples, there is a doctrine that a banks shouldaccept by recognizing the effect.

a. If "Lost or not Lost clause" is indicated as an insurance term which is aretroactive agreement, an insurance company is also liable for paymentregardless of coverage date so a bank accepts this. (ICC's opinion isinjustice).b. If insurance is purchased on "warehouse to warehouse" term: Since aninsurance company's payment liability ranges extends from a exporter's warehouse to an importer's warehouse, the coverage date becomemeaningless therefore, accepts. (ICC's opinion is injustice)c. If an Insurance certificate is presented as the insurance documents: Since a exporter is suppose to present a certificate for the said shipping portion that is already cover by an open policy before the shipping bankaccepts the documents. (ICC's opinion is also positive)

2 Insurance payment currency and currency of a L/C's correspondence

- To eliminate inconvenience of the possible foreign exchange rate changes if the payment is not made with the L/C indicated currency, acceptance is refused. (The Sub-Article No. 34-f-i of UCP)

3 More than 110% coverage of L/C amount

- Coverage should be 10% more increase term on the minimum insurance amount from CIF or CIP and if computing CIF or CIP amount is difficult, the larger amount between Nego amount (Bill amount) and the commercialinvoice amount should be the standard.(The Sub-Article No. 34-f-ij of UCP)

- Reason for 10% increase than the subject goods : In assuming that an importer has made at least 10% profit from the transaction, this is a tenor toreserve the expected profit and this 10% is called expected profit.

4 Risk range of coverage

- The ranges of incident to be cover by an insurance have to be specifically regulated in L/C and refrain from using expressions such as usual risks and customary risks.(The Sub-Article No. 35-a of UCP)- For the marine carrier according to ICC regulations: It request that the range of risks should be more than minimum -FPA(Icc (c)), and TLO term is now allow to be apply on the marine transportation. - Coverage terms for the airline carrier: According to IATA(International Air Transport Association) regulation, only A/R Air term is permitted, and the range of a marine transportation's A/R is different and rather similar to TLO. - Ranges of risks that insurance guarantees

1 TLO (Total Loss Only)

- The kinds of accident is caused by a strand of vessel, capsized, a fire and collation, which all the insurance subjected matters are total loss. The compensation is made in this case. .

2 FPA(Free from particular Average) : ICC(C)

- Other contacts than TLO, Compensation is made only when the insurance subjected matters are total loss due Stevedoring and jettison from the port of distress. ICC(c) includes total loss of packaging in units for compensation range during Stevedoring process.

3 WA(with Average) : ICC(B)

- It has been expended from FPA terms to earth quake, struck by lightening, washing overboard, seawater damage etc and also it covers for the partial loss for the insurance subjected matters.

4 AR(All risk) : ICC(A)

- Except war and riot, all the risks are covered. New agreement should indicate this as ICC(A).

- Risks that are covered only by special agreement.

- If an accident occurs due to war, riot and strike : A/R is not enough for coverage so, conclude a special agreement by paying extra fee.

- Cases that are not subjected for coverage

- If a cause of incident is not by an accident and found as "necessity", it would be terminated from subjected for coverage. It can not also be compensated by the special agreement. (War

agreement etc.).- ICC lists these examples in waiver clauses (General waiver clauses)

1. Accident occurred intentionally 2. Necessity accident3. Accident occurred by packing defect 4. If a vessel is awarded as lack of seaworthiness

5 Problems with Irrespective of percentage

- The principle of petty claim non-indemnity is regulated on the back of insurance certificate as print clause. - If the insurer wish to receive indemnity for the petty claims, it has to be concluded as Irrespective of percentage agreement. - As per the Sub-Article No. 35-c of UCP, even the insurance without Irrespective of percentage is regarded as valid insurance contract. a. Irrespective of percentage(Franchise)

- For WA term coverage : Insurance are not suppose to cover smallest damages in general rule, it indicates non-covering range differently as per the items.

1. Partial loss for Bulky cargo such as grains and salts are not for indemnity except general average and vessel strand. 2. Goods that are 5% damage with sugars, cigarettes, hemp and raw hide are not for indemnity. 3. Other items except above state items, are not for indemnity those damages are less than 3%/

- Even with Irrespective of percentage application, insurance companies will deduct 3% or 5% from damage occurred amount for the "deductible Franchise" compensation indemnity. - As long as the range of damage exceed more than waiver rate for "Non-deductible Franchise", entire amount is for indemnity without any deduction.

b. WAIOP(With Average Irrespective of percentage)

- For insurance contract with WA terms : If wish to receive indemnity for even petty damages, this term should be indicated in L/C and conclude special agreement of WAIOP with an insurance company. - For those Bulky condition grains or fish types: Apply petty claim additionally is physically impossible and an insurance company refuses to conclude WAIOP agreement.

c. Additional risks rate

6. Others

1. Insurance period--For marine insurance, compensation is only from the riskthat a cargo get loaded on board until unloading from the arrival port. If agree to extend the insurance period as "warehouse to warehouse", up to 60 days from the unloading can be cover. 2. Transfer the right to request insurance --Since an insurance policy ismarketable securities, it can be transfer to others by endorsement. If insert"....endorsed in blank" term in L/C, the right to request insurance can beexercised by an exporter before on board, and importer after on board. 3. Indicating insurance payment period--With CIF contract, in order to facilitatethe convenience of the request when an accident occurs, indicate the insurance payment location as the importing country and also a claims setting agent should be nominated on the insurance contract. 4. The insurance coverage date should be before the shipping date of B/L, orthere should be a special decapitate compensation agreement.

(3) Marine cargo insurance

<1> Summary

- There are export insurance and cargo insurance for trading. The export insurance is to cover if the trading party's creditability is unstable. The cargo insurance is to cover any loss while transportation of the goods to be export/import.

<2> Basic terminology for cargo insurance

1. Insurer, Assurer, Underwriter--A person who took over the insurance contract responsible for compensation when there are accident. 2. Insured, Assured-- As a offerer of the insurance contract, the one has responsible for insurance premium, notifying important matters or any risk increase. 3. Insured, Assured--A person who is entitled to right to compensation when there is a damage caused by an accident. 4. Premium-- Payment for the risk by insured. 5. Claim--Compensation of the damage by insured.6. Subject-Matter Insured-- As an object of risk occurrence, there are Cargo Insurance and Hull Insurance in large to divide. 7. Insurable Interest--Interests If there is a concern of economical damage to a person insured

- Contract with FPA, WA: If wish to be cover for special risks that are not listed in the insurance policy, the said risks item should be added to theinsurance subjected matter and pay additional risks rate. - The kinds of risks to be added 1 TPND

2 RFWD 3 Breakage 4 Leakage and Shortage5 contamination 6 Hook & Hole 7 Denting & Bending

due to a claim occurrence on the subject-mattered insurance.8. Insurable Value--A maximum limit of economical damage that is likely to occurred to the insured's profit 9. Sum Insured--The actual amount cover by insurance. The maximum amount that a insured has to pay in liability and compensation.

<3> The types of sea damage

1. Direct damage--Damage occurred on subject-matter of insurance due to a claim. 2. Indirect damage--Damages rather than a direct damage due to claim to a person insured.3. Property damage

a. total loss

- actual total loss- constructive total loss--If a damaged occurred on the subjected-matter insured article

- If a vessel is missing even after a certain period of time and regarded the incident as a total loss. - Because the loss is severe and impossible to be used for its original purpose or if mending expense is high although subject-mattered insurance is not wiped out.- When requesting compensation, accept compensation after abandonment subject-mattered insured and the insurer subrogation the right to request to the insured assured

b. partial loss

- particular average- general average

- When a vessel and a loading cargo is under a calamity- A damaged occurred by a captain's action for the common profit. Expense for the sacrifice and risks the expense is burden by the owner of a ship who was able to be saved from the disaster and the owner of a goods.

4. Expense damage

- Exclusion expense of possible risks to subject-mattered insureda. sue and labour charge b. survey free c. salvage charge d. salvage e. partial charge

<4> Compensation condition for Marine loss

1 Standard conditions

a. Previous regulation of committee

Damage to be compensate F.P.A W.A A/R

1 Total loss O O O

2 General average O O O

3 Marine salvage expense and loss prevention expense O O O

4 Strand. capsized. and particular average when a there is a big fire occurred O O O

5 Shipping. transship. total loss while unloading as per every unit package. O O O

6 Fire, explosion, collation . loss due to contact or damage from the port of distress

O O O

7 Particular average excluding above 4~6 X O O

8 Damage by seawater due to foul weather X X O

9 All the loss due to external and contingencies of the bottom exclusion X X O

- Exclusion : Detail list on the printed agreement of Insurance Policy.

1. All the loss due to the illegality or deliberation of the person who contracted the insurance or a person insured2. Shipping delay loss due to characteristic defect or vice of subject-mattered insured.3. Damage due to insecure packaging4. Loss due to non-prepared necessary risk. Ordinary Loss or Trade Loss5. Damage due to war, rite and strike6. Accident due to insufficient capability of transport vessel's sailing.

- If requires additional insurance premium according to a special agreement

1. Passing through a special danger zone: a war, a civil war, a rite, a strike 2. Trifling damage (Under 5% loss with grains and minerals, under 3% loss in others)

b New regulation of committee

Damage to be compensate ICC(C) ICC(b) iCC(A)

1 Fire or Explosion O O O

2 Vessel or a craft's strand. grounded. capsized. overturning O O O

3 Overturning of land conveyance O O O

4 Vessel. a craft. conveyance collision with other contact O O O

5 Cargo unloading at the port of distress O O O

6 Earth quate, volcanic activity . struck X O O

7 General average sacrifice O O O

8 Jettison O O O

9 Washing Overboard X O O

10 Vessel . a craft . hold. conveyance . container . Lift van Or in-flowing of river , lake and seawater to the storage area.

X O O

11 Total loss due to goods drop to a sea or on washing board in unit packages while unloading/loading to/from Vessel or a craft

X O O

12 All other extinction .Risk in all damage X X O

13 General average . salvage expense O O O

14 Both Blame Collision O O O

- In case with ICC(A), A/R exclusion items are not coveredc. New Old Committee Agreement's Risk covered comparison

Damage to be compensate A/R ICC(A) W.A ICC(B) F.P.A ICC(C)

1 Total loss O O O O O O

2 General average O O O O O O

3 Rescue expense O O O O O O

4 Unusual expense O O O O O O

5 Loss prevention expense O O O O O O

6 Particular average due to strand, capsized, fire and collision

O O O O O O

7 Total loss of units at port of distress O O O O O O

8 Total loss of units while unloading process O O O O O X

9 Jettison O O O O O O

10 Washing overboard O O O O X X

11 Seawater damage due to foul weather O O O O X X

12 Partial loss of others O O X X X X

- The cases that can not receive compensation even if there is a accident

- Accidents occurred due to the insured assured- Accidents occurred due to defects with packing on the subject-mattered insured

2. Extraneous Risks Conditions

a. By considering types of cargo, packing method an shipping method, additionally cover the bottom listed insurance terms with basic terms F.P.A., W.A or ICC(B), ICC(C) at lower insurance premium that has same effect as total risk terms coverage. b. Types

- T.P.N.D (Theft. Pilferage & Non-Delivery) - R.E.W.D (Rain and/or Fresh Water Damage) - C.O.O.C (Contact with Oil and/or Other Cargo) - Breakage - Leakage and/or Shortage - Sweat & Heating - J.W.O.B(Jettison & Washing Over-Board) - Hook & Hole - Denting & Bending

3. Extension Conditions

- Inland transportation extension term : Additional terms to marine insurance policy of the risks of the land transportation. - Inland storing extension term : In ordinary transportation process, a risk tern to extend the risk while warehousing intermediate storage or bonded storage more than the period indicated in the marine insurance policy (Export : 60 days after unloading from a vessel, Import: 30 days after unloading from the first arrival port).

<5> Insurance rate

- Separate rate is applied to the import/export cargo and calculate based on the condition of a vessel, sea route, types of cargo and the insurance terms. - Flat rate (Port to Port), Ordinary rate (Additional risk rate, extension, risk term rate, surcharge rate) and composite in other rates.

<6> Insurance Indemnity

1. duty to notify loss

2. Documents required for insurance claim

a. With general average

1. General average claim letter 2. Original or copy of insurance policy 3. Copy of B/L

- A person insured duty and a loss occurred to the subject-mattered insurance cargo : Immediately notify to the insurer. Methods to notify: Verbally (Telephone), Any written statement is acceptable but the filing of a claim for recovery in insurance for export cargo, a written notification of the loss may be necessary depends on the destination's custom. - Details of notification : a. Details of insurance contract (Policy number, detail list of

the cargo, name of vessel, insurance premium amount and insurance terms etc.) b. The condition of the damaged cargo c. cargo storage location and the prearrangement thereafter.

4. Copy of commercial invoice5. Copy of General average notification 6. Other documents (General average letter of certificate or General average security deposit, a pledge of General average, Valuation Form)

b. In case with total loss and particular average

1. A letter of insurance claim (Attach detail statement of damage amount ) 2. Insurance policy or insurance certificate in original or copy. 3. Commercial invoice (Signed duplicate) 4. Bill of lading<8> Examples of marine loss claims- Claim for Cargo Loss and/or Damage

<7> Examples of insurance calculation

1. Partial loss of Quantitative damage

- If 1,000 units of refrigerators are covered as US$ 300,000 and 200 units of them are damaged while transportation for insurance and lost commercial value: Compensation amount is [U$ 300,000 X 200 units/1,000 units] U$60,000.

2. Partial loss of Quantitative damage

a. Average Loss Settlement

- If 1,000 units of refrigerators are covered as US$ 300,000 and 400 of them declined for commercial value due to seawater damage. As the result of public sales, the total proceed was (Damaged value of 400 units by seawater damage) U$80,000 but the original value of the products is U$160,000 : Loss rate is [(U$160,000 - U$80,000) / U$ 160,000 = 1/2]- Compensation amount : [Insurance amount for 400(U$ 120,000) multiply loss rate (1/2) is U$60,000]

b. Salvage Loss Settlement

- If 1,000 units of refrigerators are covered as US$ 300,000. While transportation, due to the peril insured again the total goods are damaged by submersion loss, unload the goods at intermediate port and decided the public sales is gainful at the site earned U$70,000 as net sales amount (New Proceed) : Compensation amount is [Deduct U$70,000 for saved goods net amount from the Insurance amount (U$ 300,000) which is U$230,000]

Policy No :Amount :Shipment :

Conveyance :

We enclose here with documents in support of a claim for in the abovementioned shipment together with our claim statement amounting toIn this connection, we trust that you, upon examination, will find this in good order and justify in accordance with the terms of the above insurance policy issued for this goods.In our opinion, this full set of claim documents can be accepted as sufficient proof of the above loss and /or damage.Your settlement of the claim amount is anticipated at your earliest convenience.

Signature

Documents :1. Claim Statement showing the Claim Amount2. Survey Report of Other Certificate of Loss and/or Damage3. Letter of Claim against Shipping Company and their Reply4. Bill of Lading with Packing List5. Commercial Invoice6. Original Policy or Certificate of Insurance.

[2] Transport contract(1) Basic understanding of transport

<1> Sales terms and shipping duty

- A person arranging a vessel to transport cargo is the owner of the goods who will pay the transportation fee to the said vessel. - Depends on the transaction of Seller & Buyer, the Seller sometimes arrange a vessel as per the other party's request even though the term is FOB.

<2> The kinds of cargo and vessel selection

- If arranging a vessel :A vessel varies depends on the goods quantity and its kind- General finished products, machineries etc : Grains, minerals and coals on the General Cargo Carrier or on the Full Container Ship (Bulk Cargo) : load on bulk carries.

<3> Service sea route

- In sea route, there is a Linear that regularly commission maintaining fixed period and a Tramper that changes its commission depends on its schedule in time.

<4> Applying condition for Marine tariff

- The tariff is usually based on the said cargo's weight and capacity. And the higher calculation result which is tons by comparing the two become the standard for the tariff. (It is referred as

Revenue ton) - Apply conference freight shipping company's Tariff- There are Basic Freight and Surcharge

<5> Contacting with vessel companies

- With a liners : It varies from region to region but contacting 2 weeks before the shipping date is allowed. (Shipment expiry date of L/C ). If Tramper is to be used for the shipment : Arrange a vessel at least 1~2 months prior.

<6> Concluding a shipping contract

- A liner carrying general liners : A vessel company will issue a bill of lading using standard form which supplements a transportation contract. - Agreement details on the back : It states the duty and responsibility of the involved parties to back up a possible dispute - When transporting a Tramper cargo: A B/L is issued separately when a shipping document is prepared. - Unlike Liner, professional knowledge or experience is required for a transportation contract therefore, advice from a marine company or a layer's support is recommended.

<7> Shipping procedure

1 Booking 2 Submit a Shipping Request 3 Freight packaging and prepare for a delivery 4 Delivery and land transportation 5 Shipping Order6 Mate's Receipt 7 Issue B/L 8 Receive B/L

<8> Shipping procedure of FCL fright

1 Request for vacant container rental 2 stowing 3 Seal the container 4 land transportation5 Container yard arrival and issue Dock Receipt 6 Issue Bill of Lading

<9> LCL freight (Less Than Container Load ) : A shipper has to bring freight to CFS(container freight station)

(2) Transport documents

<1> Summary

- Depends on the transportation, the level of cargo's safety is different. UCP defines the following requisites of transportation documents per transportation method.

1 Marine transportation documents (The Article No. 23-24 of UCP)

- Ocean Bill of Lading, Non-negotiable Seaway bill

2 Mail transportation documents (The Article No. 29 of UCP)

- Post Receipt(PR), Certificate of Posting, Courier Receipt

3 General transportation documents (The Article No. 26-28 of UCP)

- Combined Transport Document(CTD), Airway bill(AWB), Land transportation documents (Railroad cargo way bill, Truck company transportation cargo way bill)

<2> Marine transportation(B/L)

1 Character

a. Evidence of contract b. cargo receipt(transportation goods's shipping and evidence of documents received)c. Entitled document(The right of bill ) d. Transfer acknowledgement based on endorsement (Order bill)

2 Acceptance conditions for marine transportation documents

a Automatically accepting transportation documents

- Automatically accepted by a bank if the transportation documents are equipped with the following terms

- Should be issued by the person in charge of transportation (Actual Carrier) or the representative.- Wording proving the goods on board shipping should be indicated. - Full set of issued original transportation documents should be presented. - Fulfil terms required by L/C.

b Transportation documents that are not rejectable for acceptance

- If B/L is equipped with requisites of transportation documents which will be accept by B/L automatically, unless L/C refuse to accept in witting, banks should accept the documents.

- Combined Transport Bill of Lading

- Short from B/L- B/L displaying a place of receipt different from a shipping or a final destination different from unloading port- B/L issued subject to a cargo loaded in a transportation instrument like a container. (unitized - cargo B/L)- Intended clause B/L that added on board notation indication for on board shipping.

c Special B/L accept by bank

- Through B/L : When transship is unavoidable, covering the whole sea route by a single B/L (Almost all combine carrier uses this B/L)- Third party B/L : B/L that display third parties as a consignee not an exporter as in L/C (Intermediary Trade, Transfer L/C uses this B/L)- Insurance covering Red B/L : A B/L with insurance coverage should mark the necessary regulations with a red ink.- Short Form N/L: B/L that omitted printing clause on the back side. Accepting means, automatic acceptance as long as there is no specific restrictions in L/C.

d The kinds of B/L that are refuse to be accepted by a bank in principle.

1. charter party B/L: If the B/L issuer is a lessee not the owner of a vessel. 2. Sailing B/L : If the operating vessel is old vessel that operates only with a sail (carrying vessel propelled by sail only B/L),3. Stale B/L: If presenting to a bank after more than 21 days have been elapsed from the B/L issue date. 4. Foul B/L or Dirty B/L : If defect status is indicated in the comment section of a B/L. 5. Forwarder's B/L issued by transportation mediator: If the drawer of B/L is a transport agent instead of a vessel company.

- If indicates it as agent for (qualified for representative), it is acceptable. - For transportation companies, there are the shipping companies that equipped with a vessel or without a vessel and it is called FORWARDER, VOCC(transportation brokerage) and if coinclude a transportation contract with a transportation brokerage (shipping request(S/R)) the transportation brokerage should conclude another transportation contract with a shipping company (Re-S/R)cf-Contractual Carrier and Actual Carrier

6. Intended clause B/L) or Received B/L : If the shipping date is omitted from the actual B/L but it has wording 'intended to be on board'. If add shipping completion after loading on board, then it is acceptable. 1~3. are, either payment is unconditionally paid or refused as long as there is no permission provision on L/C but 4~5 are B/L that are possible to correct vice by presenting supplementing documents.

e. Received B/L acceptance

- If a written provision requesting on board on L/C : Simple received B/L (the one without 'on board notation' ) may not be accepted.- If there is not mention about on board but permits combined transportation:Received B/L is acceptable.

2. B/L terms required by L/C

a. full set B/L(The Sub-Article No. 23-A-iv of UCP)

- 3 sets of B/L are issued in general, and a vessel company use 1 set of those to delivery cargo, an purchasing bank request full sets(3 sets) to secure the said goods guarantee. - If using air shipment method for transportation: Although L/C request full set of B/L, it is possible to just present one set of AWB(for shipper) because, on the original 3 sets of AWB, the each purpose for usage is indicated and when shipped, a airline company do not send the full set (3 sets of AWB) to an exporter.

b. Clean B/L

- When receiving cargo for shipping, a vessel company indicates for any incomplete packing condition if found any in the remark section of B/L and such B/L is called Foul B/L(Dirty B/L) which bank refuse to accept. (The Article No. 32 of UCP)- For Foul B/L, a Letter of Indemnity(L/I) is to be present to a vessel company to receive a clean B/L so a bank may accept. - L/I(letter of indemnity) is a memorandum to change a foul B/L to clean B/L presented to a vessel company by an exporter, and the reason for the detail is for a consignee to take over all the responsibility if there is any problem caused by the damaged cargo. - While transporting container, a vessel is to indicate an unknown clause as "Shipper's Load & Count" in the remark section of B/L and the B/L is consider as a Clean one (The Article No. 31 of UCP).

c. On board B/L

- B/L as received B/L, there are Shipped B/L(On Board B/L) are received B/L(Received B/L).- Received B/L or Intended clause B/L : B/L issued while an export cargo is not loaded in a transportation vessel. - Combine transportation or container carrier : On board terms are very much mitigated to accept even received B/L.(The Sub-Article No. 32-c of UCP)- On board B/L: It should be issued when the goods are loaded on board but usually, it is likely to be issued at the time of arrival in another words, the controllable time CY(container yard) which is after the transported goods are delivered by the carrier. cf. Advance issued B/L and back-dated B/L

d. Should be order

- In order to secure the negotiability of B/L, request transferable order B/L according to an endorsement.

e. For notify party, it should be either an importer or a customs broker nominated by an importer

- An exporter becomes normally, when a cargo arrive, a vessel sends a arrival notice to a Notify Party.

3. The kinds of endorsement of B/L

a. Full endorsement

- Indicate "... endorsed to the order of xxBank 'Ltd". The consignee of B/L is to be indicated in full name, and the nominated person by the consignee's endorsement become a grantee of B/L . (Order with registering indication )

b. order endorsement

- A method to endorse in simple "order of A" or 'A or order' for endorsee and the consignee of B/L is not to be indicate here.

c. beared endorsement

- Endorse after indicating "A or bearer" d blank endorsement- If "endorsed in blank" or "blank endorsed' is indicated in L/C : Endorse bill, B/L or insurance documents without nominating a endorsee.

<3> Other transportation documents

a. Air waybills (Air line transportation form)

- Air line transportation bill is only a proof of consign. Unlike B/L, it does not have a character like marketable securities, it is issued only as registered and received method. - Kinds

1. House AWB--transportation broker issue to a shipper. 2. Master AWB--A custom for airline to issue to the transportation broker. Be advise that if there is not representative indication for the airline company, acceptance will be refuse. (The Sub-Article No. 27-a-i of UCP)

- Per IATA regulation, transship of cargo is a general rule with air transportation, therefore, even of L/C prohibits transship in L/C in written statement, banks accepts the transportation documents if it combined the whole transportation as one transportation documents.(The Sub-Article No. 27-c of UCP)- Original IATA airway bill

- Only For shipper portion can be presented even if L/C request full set(3 sets).1. original 1(for carrier) 2. original 2(for consignee) 3. original 3(for shipper)

b. CTD or MTD(combined(multimodel)

- combined transportation refers to a transportation that a cargo is transporting using land road, sea route or waterway. Because of its special trait which one person takes responsible to transport for the entire route, and that it issue single transportation L/C, UCP also regulates this method separately from marine transportation. - Those Intended B/L, and Forwarder's B/L that are likely to be refused for acceptance in marine transportation as a general rule, combinedtransportation permit the acceptance and it takes Received B/L for granted and also acknowledges a special case in transship(Transshipment).(The Article No. 26 of UCP)- The following details are the reason why the combined transportation are handled differently from marine transportation in UCP.

1. The transportation documents are issued from the combine carrier taking in charge point and as long as L/C is not requesting in written statement, it doesn't necessary need to receive on board notation.2. The carrier that received a initial cargo takes uniform liability of the entire transportation route. 3. Acceptable even if there is an indications "intended" related to vessel, shipping port and unloading port. But if L/C prohibits "intended" indication or if the name of vessel, shipping port and unloading port are clearly stated : Can not be accepted if on board notation is not received in the later time. 4. Acceptable even if L/C prohibits transship in written statement. Because combined transportation is preconditioning transship as per its character.

- The kinds

1. Forwarder's B/L issued by a forwarder 2. FIATA B/L(international air transport association) 3. common carrier(NVOCC) B/L

c. Non-negotiable seaway bill(non-negotiable marine transportation)

- B/L(Bill of Lading) is marketable securities for Seaway bill is a proof of documents of marine transportation that denied negotiation.- The function is a simple consign of cargo and documents to proof documents received.(The Article No. 24 of UCP). - Acceptance requisites for Sea waybills

1. Should be issued as the carrier , a commender or a qualified representative.2. On the transportation form, there should be clear indication that the goods are on board of vessel.3. If "Intended" indication is on the vessel, port, on board section of the transportation form,

supplement this as a on board notation.4. Original full set issued should be presented. 5. Charter or a sailor boat should not be indicated in transportation form.

d. road, rail or inland waterway transport document

- If marine transportation is impossible due to import location is in the center of inland, the cargos may be transport using land road or waterways. - Requirements for the transportation documents (The Article No. 28 of UCP)

1. should be issued as the carrier or the qualified representative.2. While transportation, I received of cargo date is indicated, it is regarded as the cargo loaded date. 3. Although orignal indication is not on transportation documents, regard it as original and accept. 4. Although transship prohibition indication is in L/C, as long as entire transportation route is covered by the same transportation documents, the transship prohibition exception is acknowledged.

e. courier and post receipts

- Small cargo and documents are to be delivery by courier and post delivery companies as a practice. In respecting the practice of circles UCP accepts the contents. (The Article No. 29 of UCP)- Acceptance requisites for the documents

1. Post Receipt

- The nominated post office by L/C should stamp on a post receipt - Post receipt date is regarded as the dispatching date.

2. Courier Receipt

- The service rendering company's name should be on the delivery receipt by kind of stamps. - Cargo received date should be on the receipt, ad the part is regarded as the dispatching date.

f. Transport document issued by freight forwarders

- Forwarder's B/L and House B/L issued by a transportation broker will be refused by a bank for acceptance if not equipped with the special requisites - UCP Article No. 30 regulates the acceptance requisites of the transportation documents issued by Forwarders in the separate text.

1. The name of the transportation broker should be indicated as the carrier or as a qualified representative.2. Must meet all the terms required by L/C.

(3) Kinds of transport

<1> Marine transportation

- Varies from a liner, tramper, a bulky cargo and freight packaging - Transportation by a container : There are following methods depends on the cargo CFS/CFS transportation, CFS/CY transportation, CY/CFS transportation, CY/CY transportation

<2> Inland transportation

- Inland transportation can be understand by transportation preparation and the transportation process to the shipping port (Bonded transportation).- Preparing transportation : Measuring/mark and export packaging, customs clearance, container stowing process. transportation process: The destination for FCL freight is CY and CFS for LCL.- 20F container is 25CBM, if 40F container is 55CBM generally process it as FCL freight.

<3> Multi-modal transportation


Shipment

[1] Shipping documents(1) Transport documents<1> B/L(bill of lading) <2> AWB(airway bill) <3> CTD or MTD(2) Insurance documents - If L/C price term is C&F, FOB, insurance documents are not necessary<1> IP(insurance policy) <2> CI(certificate of insurance) <3> insurance cover note (3) Contract document<1> C/I(commercial invoice)(4) Supplement document<1> P/L(packing list) <2> C/I(certificate of inspection) <3> certificate of weight & measurement (5) Counselor documents<1> C/O(certificate of origin) <2> GSP C/O(form A) <3> consular invoice <4> customs invoice (6) Others<1> Beneficiary certificate proofing exporter's action

[2] Shipping procedure(1) Booking (2) Submit a Shipping Request (3) Freight packaging and prepare for a delivery (4) Delivery and land transportation (5) shipping order (6) Mate's Receipt(7) Issue B/L (8) Collect B/L

Export/Import procedure according to the Red Clause L/C method (Details should be followed by the each countries laws of regulations)

[1] Definition - A transaction method that receives the part of payment from the importer in advance to purchase materials or to manufacture the goods to export and collect the balance after completing the said export. - The ranges of amount receivable as a downpayment follows the export downpayment receipt limit of related laws of regulations and the export should be executed within ~ date received.

[2] Subject to receipt [3] Receipt limitation [4] Things to be cautious when contracting - Consider should be made whether the party is qualified to receive the export downpayment and if the amount is within the receipt limit.

[5] Sales of downpayment- The downpayment can be sold as a home money upon receiving E/L after a red clause indicated L/C is received.

[6] Downpayment refundment guarantee[7] Downpayment receipt limitation confirmation [8] Execute counter export[9] Procedure(1) Export contract(2) Red-clause L/C collection (3) Export recommendation (If requires recommendation system)(4) Export license and downpayment receipt(5) Procuring export goods (6) Export clearance (7) Shipping (8) Export earning collection

Export/Import procedure according to the Non-L/C method

- Trade settlement : Divide in L/C method and Non-L/C methodNon-L/C method : Divided in collection method (D/P, D/A) and remittance method.- Although the L/C method provides payment guarantee to an exporter by a opening bank, the transaction has number of shortcomings to pay high service fee to banks by the sales involved parties and that the transaction amount is the lowest, - In the stand point of a exporter, Non-L/C could be profitable transaction as long as a importer's creditability is definite. - Since the Uniform Rules for Collection of the Commercial paper to regulate a collection method, there is a special trait to this method as a draft transaction, sending documents through banks and collecting payment. - Remitting method : Since there is no international regulation to regulate this method, the contract terms can be determined freely as long as the contents are not violating the said countries' a forced legislation.

Export/Import procedure according to the collection payment method

[1] Definition - Collection is a process to receive payment by requesting the payment through a corresponding bank or receive inquiry from a customer to purchase a check or a draft of which the place to pay is located in a foreign country. - This is a trading method for a exporter to ship the contract goods in advance and issue a bill of change to a importer which is a debtor at the same time and request a payment to a importer through a foreign exchange bank to receive the payment. - The importer's bank will not guarantee the payment for import earning but execute only collection task for payment. - Since the basis for payment and receiving is "a draft", the existence of a draft is essentially indispensible requisite and the role of the related bank is mere export earning collection and remitting the payment in the behalf of the sales involved parties.

[2] A description (1) D/P(document against payment) method - This method is for a collection bank to present at sight documentary bill and the shipping documents to a importer, and exchange importer's cash to shipping documents. - Usance D/P(Usance D/P)- In principle, D/P is sight bill term in general but if a importer wants to concord payment period with goods obtain period, there is usually "D/P, 20days after B/L date" indication. At this pont, a collection bank only notifies to a importer of the shipping documents arrival and keep the documents itself. When the due date arrives, the bank reimburse the documents and cash to collection.

(2) D/A (document against acceptance) method - A importer indicates "acceptance" on the bill of change document usance bill presented by a collection bank and hand over the shipping documents to a collection bank by signing the documents and collect cash on the maturity date.- In the process of collection procedures, only the bill of change is received from a importer and hand over documents to a importer and receive payment on the D/A maturity date is the different process from D/P method. - If a importer refuse a collection request of a collection bank, a collection bank should prepare a certificate of refusal and send it to a collection requested bank or deliver a collection refusal purpose to a collection requested bank.(3) The kinds of collection according to its direction <1> Outward collection- If a drawee for a check or a draft is overseas, this method is used for requesting payment through a corresponding bank. <2> Inward collection)- Accordion to a foreign bank's request, payment is collected and remit to a debtor. (4) The kinds of collections depends on before/after payment <1> collection (bill purchased)- A method while collecting a check or a draft, the payment is made to a customer in advance and request collection after to receive payment. - Since payment is prepaid, there is a large risk possibility for unpaid.- The kinds of foreign currency feasible to purchase before collection 1. Traveller's check2. Bank's check, Cashier's check(A check issued by a bank)3. Money order(Bank Money Order, Personal Money Order, Postal Money Order)4. Bank-Certified Personal Check(A check guaranteed by a bank)5. Bill of change or non-documentary bill by L/C. 6. A personal check guaranteed for payment (Personal check )- Procedure1 Collection inquiry 2 Payment 3 Send bill and check 4 Present bill and check 5 Import earning6 Payment notification and debit authorization7 Stand-by advise- If a collection bank is the depositary correspondent bank of a remitting bank, payment can be directly deposit from a collection bank without passing through a paying bank. <2> Pay after collection (bill collection)- Method of payment to make payment when a collection bank collects a check or a draft by collection method.

[3] Procedure(1) Contract conclusion (Contract)(2) Export license (Request by attaching a contract on the export license)(3) Securing required raw materials (Domestic L/C, Purchasing approval, Open import L/C)

(4) Procuring required fund (Trade fund's loan)(5) transportation and concluding a insurance contract (transportation documents, insurance documents)(6) Collection inquiry (bill of change, transportation documents, insurance documents, Commercial invoice, packing list,.....)(7) Send collection documents (8) Present / acceptance collection bank's collection documents (For D/A, prepare delivery certificate for a importer)(9) Payment or receipt of delivery certificate (10)Send Payment or receipt of delivery to a collection requested bank(11)A collection transfer arrived payment or a receipt of delivery to a exporter.

[4] Things to be cautious when concluding a contract(1) Thorough credit research of a importer <1> Since D/A, D/P are the transaction that grants credit to a importer without the payment guarantee of a bank, they require detail and through investigation about a importer's credit in advance. (2) Loss prevention <1> Export draft insurance coverage - Since the credit limit is fixed per each countries, it needs to be checked in advance. <2> Request to importer to provide security. - Stand-by L/C opening, making deposits and so on.

Export/Import procedure according to the remittance method

[1] Definition - The common traits of remittance method is that it is not necessary for a bank to intervene to exchange transaction exist and since it is not limited to paying a debtor by a creditor's request, bill of change preparation is not needed in general. - A transaction method to export under a condition to receive remittance directly.

[2] Remittance method (1) D/D(demand draft; check remittence )- A method of a remitter sending a check received from a bank under his/her reasonability. - There is a risk that the mail might get loss while delivering so the method is not prefer to use for a trade payment method. - According to the exchange transaction contract, if a issuing bank is issuing money order over a fixed amount, the issuing bank is bound to notify a money order drawing advice to a paying bank, and the paying bank may confirm the authenticity of the drawing advice and the money order if a payment presentation is requested by a payee.<1> Procedure 1. Remittance inquiry (Remittance deposit) 2. Issue money order 3. Forward debit authorization and money order issuing notification - If a paying bank is the depositary correspondent bank of the remittance bank, it is regarded as a debit authorization of money order issuing certificate to settle fund and if the remittance amount is small sum, money order issuing notification can be omitted according to the correspondent contract of the paying bank.4. Send money order 5. Present money order 6. Pay remittance7. Credit advice and debit advice - On the basis of remittance bank's debit order, the bank's current withholding account is debit processed and stand by in the paying banks account, the paying bank sends a debit advice to the remittance bank and stand by advise to the paying bank to notify the completion of the transaction. (2) M/T(mail transfer)- A method when a remitter entrust to a bank, the bank sends a payment order to a bank where the recipient is located under the bank's responsibility. - It is usually used for non-urgent remittance or for the small sum remittance. <1> Procedure1. Remittance inquiry (Remittance deposit) 2. Debit order and payment order (T/T or mail) 3. Remittance arrived notification4. Payment 5. Stand-by advice and debit advice

- If a paying bank is depositary correspondent bank, the method instructs to pay in the order of paying bank from remittance bank directly debiting without selecting a separate settling bank. (3) T/T(telegraphic transfer)- This method is same as mail remittance but different from M/T method with the instruction method which is telegraphic method. - Although this method has a shortcoming for excess expense due to the telegraphic transferring fee but it is used with a urgent remittance and for the large amount remittance. <1> Advantages with T/T transaction 1. Pay only remittance service fee and telegraphic cable service fee. 2. T/T method is fixed amount system regardless of transaction amount and it is possible deposit as a foreign currency and can avoid exchange risk. 3. It can choose the export earning before or after shipping and it is effective to move up the payment period to installment receipt. 4. No security is needed when importing.<2> Things to be cautious for T/T transaction 1. Since the method has no bank involvedness and deals with only the importer's creditability, there is a risk with payment unpaid so before sending a B/L after shipping, there must be a procedure to confirm deposit of payment. 2. In order to receive the export earning at the right time, the payment deposit and payment order (P/O) have to be confirmed at the same time. 3. There could be a cancellation with payment therefore, a schedule notice and the actual deposit have to be confirmed in advance. <3> Procedure1. Remit inquiry (remittance deposit) 2. debit advice and payment order (T/T or mail) 3. Advise remittance arrival4. Payment 5. Advice stand-by and debit- If a paying bank is depositary correspondent bank, the method instructs to pay in the order of paying bank from remittance bank directly debiting without selecting a separate settling bank. <4> Examples of T/T remittance 1. If paying bank is depositary correspondent bank- LT CHAMANBANK NEWYORK MAY 10 1996 ADVISE AND PAY USDLS ONE HUNDRED LESS YOUR CHARGES TO KIM JONG SIK 3200 5TH AVE NEWYORK ORDER HONGKILDONG SEOUL OUR REF CH101TT 1234

KOIN BANK2. If paying bank is non-depositary correspondent bank- To the order of paying bankLT FUJI BANK TOKYO MAY 10 1996 ADVISE AND PAY USDLS ONEHUNDRED LESS YOUR CHARGES TO KOREA TRADING CO 5-1 NISHISHIMBASHI 2CHOME MINATO KU TOKYO ORDER KOREA TRADING CO SEOUL COVER CABLED THRU CHAMANBANK NEWYORK OUR REF CH101TT 1235

KOIN BANK

- To the order of settling bankLT CHAMANBANK NEWYORK MAY 10 1996 PLS DEBIT OUR ACCOUNT USDLS ONE HUNDRED AND CREDIT TO FUJIBANK TOKYOIN REIMBURSING OF OUR REF CH101TT 1235

KOIN BANK(4) Depends on payment period <1> CWO (Remit in advance or remittance method)- A trading method which a importer remits the total payment for goods to a importer in advance using T/T or with cash after a sales contract is concluded, the exporter ships the contract goods after procuring the contract goods. - ex post facto management and transaction credit limit for this method is determined by laws of regulations separately. - Procedure1. Concluding contract 2. Receive exporter's downpayment 3. Export license request (Export license application, contract, a certificate of foreign currency purchase) 4. Procuring raw materials (Purchasing approval form, Open import L/C (Not allow to open domestic L/C)5. Procuring funds 6. Transportation and concluding insurance contract (Transportation documents, insurance documents)7. Export clearance 8. Sending shipping documents (Transportation documents, insurance documents, commercial invoice, packing list etc; bill of change is not necessary to send) 9. Export execution declaration<2> Later remittance- A transaction to receive the total export earning through a foreign exchange bank within ~ date from the delivery day or at the same time of goods delivering period which is a preferable method to be used when opening L/C or settling foreign currency is difficult in a certain region. 1. COD(cash on delivery)- A method for a representative of a exporter in the import location to present the goods to a importer which were shipped by the main office to exchange the actual goods with cash after inspecting goods. - This method is utilized for the precious metals which are expensive items and that are difficult to get hold of the quality of the goods before an actual inspection of the goods. 2. CAD(cash against document)- A payment method which a representative of a importer in the export location confirms shipping documents and actual goods that are shipped to the main office and a exporter sends the shipping documents to a importer to pay the payment by reimbursing with the documents. - D/P is an alias of Europe styles when a bank intervenes for sending documents or payment collection this method is difficult to differentiate with D/P but since a bill of change is not required, it can be divided. - Procedurea. Concluding a contract

b. Appling for export license (Export license application, contract)c. Procuring raw materials (Local L/C, purchasing approval form, opening import L/C) d. Procuring funds (Required funds can be procured by trading loan) e. Goods inspection (a representative of importer inspect the goods directly)f. Conclude transportation and insurance contract (transportation documents, insurance documents) g. Requesting shipping documents take over (May request to the representative who took charge of goods inspection for 1st time) h. Export clearancei. Send shipping documents (If representative of a importer refuse to take over the documents, documents such as transportation documents, insurance documents, commercial invoice, packing list can be directly sent to a importer)j. Accepting shipping documents and payment k. Accept exporter's remittance l. Declare export performance 3 BWT (bonded warehouse transaction)- Unlike COD, CAD which a transaction party is determined in advance before shipping, this method is a selling method to carry in the goods of a exporter to the transaction party's bonded warehouse and the representative of the exporter exercise local sales with a sample by taking out the goods from the bonded warehouse as needed after clearance. 4 CTS(central terminal station)- A method which a exporter establish a local sales cooperation as a foreign local CTS and a exporter ship goods to the local sales cooperation then the local sales cooperation exercise sales and send the sales earning to the exporter which is used by many consignment sales exports.

[3] Thing sto be cautious for remittance method transaction(1) For export earning, the remittance must be received by a foreign exchange bank. (2) If there is no representative in the place of importing, a exporter prepares a consignee as the correspondent bank in the place of importing when preparing the transportation documents and assign a notify party as a importer to prevent importer receiving goods from a the carrier without payment settle.

Export/Import method according to the factoring method

[1] Definition - International factoring is which a transacting non-L/C method trading, a factoring company provides credit research, undertaking commercial risk, offer finance and collect payments etc. - The transaction party would be an exporter, an export factor, a importer, a import factor, where an export factor conclude an agreement with an exporter and determines export bond limit, and a import factor investigate credit status of a importer upon a import factor's credit investigation request and base on this, notify to an export factor of credit approval concerning the payment guarantee and when the party approve the credit, an exporter can ship the goods safety according to a contract concluded with a importer.

[2] Subject to transaction - Export-- From Non-L/C document against acceptance term method or remittance base export if decided to receive total export earning within ~ year after shipping, the transaction is excluded between the representative companies. - Import--As a remittance base import, if decided to pay total export earning through a foreign exchange bank within ~ days after goods or documents are receive, the transaction is possible if obtain a foreign exchange bank's commissioner's approval. Except, the transaction between the representing companies is excluded and if goods are not subjected for the usance the transaction is acknowledge only for the transaction under certain amount.

[3] Procedure(1) For exporting <1> Export factoring transaction consulting - Key items to examine for export factoring1. The agreement with the debtor about exporting transaction using factoring service.2. Existence of factoring company in the importing country.3. Whether the exporting goods and the type of transactions are appropriate forfactoring transaction. 4. Whether the payment terms are appropriate for the related laws.5. Credit status of the Seller and ability to offer security etc. <2> L/C approval inquiry - After having a consultation with a importer who is eligible for factoring transaction inquiry to the import factor to send Credit Approval Request : CAR of the importer. <3> Credit research1. The export factor will request import factor for the possibility of guarantee on the debtor. 2. Import factor then investigate the debtor's credit status and notify the import factoring of the limit of liability and the service fee of the import factoring.3. Investigation period : 20 days (By telegraph 2 weeks) <4> Export factoring transaction agreement conclusion1. Submit a summary of the company, business balancing accounts reports for the last 3 years, per debtors, exporting amount per transaction types and product information to the export factor and sign the factoring transaction agreement. 2. Export factor decides limitation on invoice purchasing and export factoring service fee. 3. Since the seller is responsible with debtor's factoring service fee, it requires guarantee to the fee.

4. Arrange payment terms between the seller and debtor upon the approval of credit approval and signed the export contract by clearly stating that the target business is based on the factoring method and obtain export licensing (E/L) from the bank or recommending organizations. <5> Credit approval of import factoring- For a seller to have export factoring transaction, a credit approval of a debtorfrom a import factor is a must.- The key details of credit approval 1 The definition of credit approval is that the import factor guarantees payment for the goods if the debtor fail to make payment. 2 A payment will be made on the 90th day from a invoice expiration date. 3 No guarantee if there is a problem with the exported goods or delay due to breach of the contract by the seller. 4 Credit approval works in the method of Credit line and cancellation or reduction is possible. In this case the import factor is responsible to notify the debtor's credit information to the export factor.5 Even if the import factor reject credit approval, collection basis only (clean collection) method transaction is possible. <6> Export recommendation <7> Export license<8> Request shipping documents Nego and offer entire financing amount. - An exporter should present invoice Nego request, E/L, export permit, commercial invoice, B/L and transportation documents to an export factor to receive entire financing amount within the invoice amount. At this time, an export factor preempt the interest for the entire financed amount and factoring service fee. <9> Export clearance <10>Transferring or negotiating the right of shipping and invoice- After shipping, request to an export factor to transfer invoice and Nego - Seller should submit "Export factoring assignment of an obligation and a application for purchasing" along with commercial invoice, export permit and shipping document to the bank. - On the commercial invoice, indicate export assignment of an obligation clauses as per instruction of the import factor. - The export factor then send shipping document to the oversea debtor. And also notify accounts receivable assignment to the import factor. - Required documents when requesting transfer of invoice and Nego 1. Export factoring bond transfer and request for Nego 2. Commercial invoice(Indicate invoice transferring statement)3. export permit 4. transportation documents 5. bill of change<11>Collecting invoice - Collecting method1. Same procedure as L/C method shipping document purchasing. Apply same interest.2. The export factor sends shipping document and invoice to the import factor.Then collects payment. 3. If debtor files bankrupt or in payment default status, the import factor pay the whole invoice

amount on the 90 days of the invoice expiration date. 4. If the debtor reject to make payment due to exporter's breach of contract or of the product defect, the import factor does not hold payment responsibility. (2) For importing <1> Import factoring transaction consultation- Examination items of import factor1. The agreement with the seller about exporting transaction using factoring service.2. Existence of factoring company in the exporting country.3. Whether the importing goods and the type of transactions are appropriate for factoring transaction.4. Whether the payment terms are appropriate for the related laws.5. Credit status of the debtor and ability to offer security etc. <2> Determining credit approval limitation and transaction agreement- The details of transaction agreement1. The debtor and import factor singes a transaction agreement.2. The credit line approval will be based on the debtor's credit status, the necessity of the transaction, and the ability of collateral.<3> Answer to CAR1. After import factor review the debtor's Credit Line: CL or Individual Credit Approval Request : ICAR), amount approving and the payment period, the factor will then notify Answer to CAR to the seller through the export factor.2.The seller then request credit approval to the import factor to approve credit. 3. The import factor notifies credit approval within the credit line agreed upon. 4. Notify import factoring service fee etc. <4> Recommend import<5> Import license- Possible if the settlement period is within the fixed period. (Foreign exchange bank authenticity facts)- If they rae not subject to usance import, only the transaction within the fixed amount will be approved. <6> customs clearance<7> Transportation document delivery1. Transfer the shipping document to the debtor when it arrives. 2. If not obtained shipping document: Issue L/G: Letter of Guarantee3. If obtained the shipping document or L/G: Submit Trust Receipt (TR) for the L/G <8> Settle import earning- The debtor should settle the payment through a foreign exchange bank on thepayment date as per the importing contract. 1. The debtor deposit the payment to the import factor on the due date per contract 2. In case the debtor delays payment: In principle, the seller is responsible for the interest of the finance.In case if the debtor sends the payment including interest for the daly as the ontract stated : It will be reimbursed to the seller. 3. if the debtor delays the payment without a dispute: Apply interest rate as purchasing instead of interest rate for delaying. And extend the finance until certain period from the expiration date. 4. In case there is no payment from the expiration date to a certain period without a dispute:

The import factor makes 100% payment under guarantee of the total invoice amount according to the credit approval information. 5. Settle payment on the contract due date.6. The service fee for import factoring in seller's responsibility in principle. (Except, if the goods are imported from the Japan, debtor is responsible for the related service fees or interest) 7. Debtor's payment default: The fixed date for the payment by the import factor.Payment under guarantee including overdue interest

ex-import procedure(to way of payment)

Documents

opening import lc

lc method

open lc

shipping documents

import license documents

lc applicant buyer

lc transaction greement

face value of lc