Mib 3.6 on 14th aug 2012

MIB 3.6 on 14 th August 2012

Export contractInco terms 2010processing of an EXPORT ORDER

Export contractWhat is exporting?

Exporting is the process of earning money by selling products/services in a foreign market.

• Exporting is the most popular way for many companies to become international.

• Exporting is usually the first mode of foreign entry used by companies.

• Selling to foreign markets involves numerous high risks, arising from a lack of knowledge about and unfamiliarity with foreign environments, which can be heterogeneous, sophisticated, and turbulent.

• Furthermore, conducting market research across national boundaries is more difficult, complex, and subjective than its domestic counterpart.

• Exporting is merely a selling but when it is selling at home, it does not bother you because you are in personal contact with a buyer for which you do not need to comply with several procedural requirements including filling and exchanging of a lot of documents.

• But the difference comes when you intend to sell to some one who is thousands of miles away from you, speaking different language, having different customs, preferences, currency and import regulations.

Reason for Export • Expand sales : this helps firms to earn

profits from the foreign market.• Gain share in the global market: Learning

from

its competitors, analyze the strategies in order to gain market share. • Acquire stability : firms are no longer

controlled by domestic barriers • Enhance competiveness:

Classification of Exports • Good exports: when a product is

physically displaced from one place to another• Services Exports:• Project Exports: exporter may take up

project contract at importers country. E.g Metro …• Deemed Exports:

Sales Contract for Export

"...adopting General Standard Conditions is

legally binding, whether or not both parties are aware

of or understand, every provision..."

Generating Trade EnquiryWeb sites to identify export/import firmsParticipation in trade fairsBusiness promotion visitsContact with marketing agents/brokers in

India and abroadTrade enquiries through ITPO, EPCs,

Commodity Boards, Chambers of Commerce

The SequenceTrade Enquiry

Dispatch of company profile, product range and other details

Indicative quotation and samples, photo on demand

Buyer credibility check & situation analysis

Proforma invoice on receipt of firm enquiry / interest

Before Finalizing the ContractAssess:

• Credit Worthiness of the Customer• Availability of the Steamer/Airlines and its

frequency to the place of projected destination

• Documentation requirement for the customer and government of the importing country

While these are indicative, the requirements will vary from country to country, product to product and buyer to buyer.

The Export Order

• The export order can be procured based on written communication, verbal discussions & negotiations when offer/bid acceptance is finalized between exporter and importer • In many cases the exporter sends the

pro-forma invoice to buyer giving terms & conditions of proposed export sale

contd.

Contents of Proforma Invoice (PI)• Parties to the contract - Correct references of

contracting parties • Description - a detailed description of product or

service with all the technical aspects, details of packing, quantity, weight,

• Price - unit price, mode of payment • Shipment requirements - the Incoterm, mode of

transport and the precise period of shipment/delivery

• Validity of the offer – The date/time within which the offer acceptance to be received

The Export Order contd

• After negotiations, buyer may accept the offer. The buyer confirms the acceptance of offer mentioned in the proforma invoice by signing the proforma invoice as token of acceptance of the sellers’ offer• A contract is then drawn giving details

of the terms agreed

Export ContractMay be defined as a sale and purchase agreement

between the exporter and the importer whereby they bind themselves to certain obligations, fulfillment of which is legally enforceable.

In most cases the terms are standardized and contain specified heads in which the conditions are detailed

The contract defines the responsibilities of both the parties. Ambiguity is avoided & all parties have uniform understanding of terms & conditions

It is essential to scrutinize the terms carefully and in detail to avoid any problems later

General Standard Conditions• When the export contract is made quickly and

informally, often some of the conditions are either assumed or clarified later

• This situation may lead to dispute or misunderstanding. This can be avoided by using the General Standard Conditions

• These are standardized contract terms that permit the parties to refer to a pre established set of rules that can be incorporated into their contract

• Once such General Standard Conditions have been adopted, they are legally binding whether or not both parties are aware of and understand every provision

Written vs. Construed Contract• All large export/import orders are

usually written and signed between the buyer & the seller to avoid ambiguity• There are sometimes situations when

the agreement takes place in piece meal by e-mail, fax, etc but it is not developed into an agreement putting all terms & conditions in a single document

A case model In the case of Raffles Vs. Wichelhaus (1864) 159 Eng.Rep.

375, the seller agreed to sell cotton to the buyer. Shipment was to made from Bombay on the ship named Peerless. However, there were two ships named "Peerless." One was to sail in October and the other in December. Defendants intended to accept the cotton on the ship that sailed in October and refused to accept the cotton on the ship that sailed in December. It was held by the court that there was no binding or enforceable contract. The rule of the Peerless case is that no contract arises unless both parties have the same meaning in mind. I.e., there must be agreement on the same thing.

–In such a case, the exporter/importer can establish existence of a contract by stitching together various pieces of documents–The Indian Evidence Act recognizes

commercial & regulatory documents, provided exporter can prove through various communications he has exchanged with the importer–Such unwritten contract is referred to as

‘construed contract’

Broad Terms & Conditions in an Export Contract

• The name & address of buyer & seller

• Description of the product/s

• Quality & specifications• Quantity• Price per unit with

Specified incoterm & total value

• Packing, marking & labeling

• Payment terms• Shipment• Insurance• Inspection• Documentation• Claims• Force Majeure• Arbitration• Jurisdiction

contd.

Contd….• Some other issues, terms & conditions may be

included in the international sales contract, like:– Requirement of import/export license in cases of

restricted items and provision to export/import through canalizing agency in case of canalized products

– Any amendments and supplements should become an integral part of the contract from the date these have been finalized

– The export order should fully comply with RBI norms related to permitted currencies and methods of payment

The Conflict of Laws• In export transactions two nations are involved.

Important to define which country’s law will apply• Usually buyer/seller should agree on this at the time

of finalization of the contract• A set of rules are developed by each country’s law.

The courts consider this while deciding the issue. This commonly known as ‘conflict of laws’ situation

• Conflicts can be taken care of in advance by incorporating some specific provisions with respect to jurisdiction & applicability of law in the sales contract

Lodging of ClaimsContract should stipulate the number of

days after the goods are delivered to the Buyer within which any claim relating to the quality or quantity must be lodged by the buyer with the seller.

The date of delivery of the goods will be the one indicated in the transport document

In case of deferred payment agreement, any such claim should not entitle the buyer to reject any payment.

Frustration of Contracts/Force Majeure

• Situations can develop beyond the control of buyer or seller & insurer• Examples are SRCC, Acts of God,

such as floods, tsunami, fire at factory, etc.• Such a situation is called

‘Frustration of contracts’ or ‘Force Majeure’ c

Frustration of Contracts/Force Majeure contd.

• Incorporation of this clause in the contract allows the party concerned to terminate the contract or take other remedial measures provided for in the contract, without any penalty• Notice for invoking the Force Majeure

clause has to be given by the affected party as per prescribed terms agreed between buyer/seller

Case Study #1

The United States District Court of Tennessee’s case “AMERICAN BOOK COMPANY v. CONSOLIDATED GROUP OF COMPANIES, INC. and CHRIS HINN” (2011) provides an illustrative example of how the state of Tennessee’s force majeure law (defined in the previous section) was interpreted and enforced in a case regarding the American Book Company’s (Plaintiff) argument that the Defendant had to pay for delivered goods (books), regardless of the Defendant’s argument that force majeure required them not to pay for the goods.

In the case, the defendant argued that their defense (to not pay for the books) was affirmed by force majeure. They submitted that the defense “was implicated by an act of the United States government when it adopted a regulation requiring that certain items to be used by children, including books, be accompanied by a certificate from an independent party that they are free from lead content”. They argued that the act of government had a direct effect on the agreement entered into by the parties, and because the Plaintiff did not deliver the goods with the necessary certificate, the Defendant was not required to pay for the goods delivered.

The Court ultimately decided that the Defendants’ defense of a government regulation being a force majeure event was unfounded and failed to meet the standard of the State law. The Court contended that a government regulation is not a “force of nature, uncontrolled or uninfluenced by the power of man and without human intervention.” In addition, the Court said that they “[could not] comprehend how the alleged government regulation was not anticipated such that it could support the defense of force majeure.”

Case Study #2The United States Court of Appeals’ case “TRINH v. CITIBANK, NA” (1988) provides another perspective on force majeure applicability, but in a civil unrest case. In the case, Citibank (Defendant) operated a branch bank in Saigon, South Vietnam, in which Trinh (Plaintiff) had a savings account (with a contracted interest rate). The deposit agreement governing the account had a force majeure clause that read as follows:

“Citibank does not accept responsibility for any loss or damage suffered or incurred by any depositor resulting from government orders, laws … or from any other cause beyond its control.”

In April 1975, Saigon’s viability was becoming threatened as the North Vietnamese forces were closing in on the city. On April 24, 1975, on the eve of Saigon’s fall to the North Vietnamese, Citibank closed its Saigon branch, and cash from the branch was turned over to the National Bank of Vietnam. When the Plaintiff realized his interest deposits were not made to his account, he contacted the home office of Citibank who claimed that they were no longer responsible for paying interest on the account. Trinh then pursued recovery charges against Citibank, and Citibank argued a force majeure defense.

The Court ruled that the deposit agreement with Trinh required Citibank to pay ongoing interest to the account, as the force majeure clause did not relieve Citibank of its liability on the deposit. The Court reasoned that Citibank’s decision to close its Saigon branch was a matter of “voluntary choice” – not an act of God, act of government, or a fortuitous cause beyond its control.

In summary, the Court concluded that Citibank’s home office was liable for deposits placed in the foreign branch when the branch was “forced” to close in 1975 as a result of the impending overthrow of Saigon by revolutionary forces.

Case Study #3

Throughout extensive amounts of research, one of the few cases in which the Court upheld force majeure as an affirmative defense was in the United States District Court’s case of “RAW MATERIALS INC vs. MANFRED FORBERICH GMBH & CO” (2004). In the case, Raw Materials Inc. (Plaintiff) sued Forberich (Defendant) on grounds of contract breach, in that the Defendant did not provide goods (railroad rails) to the Plaintiff by the deadline expressed in the contract.

The Defendant argued a force majeure defense, asserting that “… its failure to perform should be excused because it was prevented from shipping the rail by the fact that the … port unexpectedly froze over …” before the goods could be shipped. Since in a typical winter, the port does not freeze over until late January, the Defendant argued that the event could not have been foreseen.

While the contract did not have a specific force majeure clause in it, the parties agreed that their contract was governed under the Convention on Contracts for the International Sale of Goods (CISG), which states:

“A party is not liable for failure to perform any of his obligations if he proves that failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome its consequences”

The Court ruled that the severity of the winter in 2002 and the early onset of the freezing of the port were “far from ordinary circumstances”, and thus the Plaintiff’s request for damages was not entertained.

Methods of Dispute Settlement• Many causes of dispute– Most common clause relates to quality– Other causes could be late shipment, failure

to ship, Refusal to ship because of change in market conditions, Government regulations restricting exports after the finalization of contract, etc.

• Two well recognized methods to settle disputes– Litigation– Arbitration

Arbitration• Arbitration is particularly popular as a means of

dispute resolution in the commercial sphere. • It is generally speedier, less formal and a

greater degree of privacy and confidentiality can be observed and enjoyed by the parties.

• Unlike litigation in open court, arbitrators are, as a rule, forbidden to disclose any information whatsoever about arbitral proceedings and/or results to a third party.

Arbitration contd.

• Unwanted intrusion into the dispute resolution process is generally avoided and unnecessary publicity is much less foreseeable. • In international trade, it is often easier

to enforce an arbitration award in a foreign country than it is to enforce a judgment of the court.

The Arbitration Clause

• An arbitral award is a determination on the merits by an arbitration tribunal in an arbitration, and is analogous to a judgment in a court of law. • Need to be a very non controversial and

acceptable by all parties• The international arbitration can take place

in the exporter or importer’s country or at any third neutral country

The Arbitration Clause contd.

Parties should stipulate in the arbitration clause itself the law governing the contract, the number of arbitrators and the place and language of the arbitration.

For example, The ICC recommends that all parties wishing to make reference to ICC arbitration in their contracts use the following standard clause

"All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules."

Enforcement of Arbitral Award• The Convention on the Recognition and

Enforcement of Foreign Arbitral Awards, also known as the New York Convention, was adopted by a United Nations diplomatic conference on 10 June 1958 and entered into force on 7 June 1959.

• The Convention requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce arbitration awards made in other contracting states.

Enforcement of Arbitral Award contd.

• Though other international conventions apply to the cross-border enforcement of arbitration awards, the New York Convention is by far the most important.

• As of July 23, 2011 there are 146 signatories which have adopted the New York Convention. India is a party to the New York Convention by ratifying it on it on 13th July, 1961.

• For enforceability of foreign award in India, there has to be further notification by the Central Government declaring that country to be a territory to which the New York Convention applies.

• About 40 countries have been notified so far by the Indian government. The USA, UK, France, Germany, Japan and Singapore are among the countries notified by India.

• Australia and Hong Kong are among the countries which have not yet been notified.

Understand INCOTERMS

• Understanding the Incoterms, also called the terms of sale, is the first step in responding to a trade lead or starting to prepare a quote.• An international rule for pricing terms

which represent different levels of financial responsibility for the buyer and seller in an export transaction.

The INCOTERMS establish

–the geographical location where the buyer becomes responsible for the goods–payment of shipping, handling,

insurance, inland freight, etc.–the point where ownership of the

goods or the title for the goods changes ownership

Organizations Involved in Export and Import Transaction

• The exporters• The shipping agents at the port or airport of

loading• The railways(in some cases)in the exporter’s

country• The road hauler(in some cases)in the exporter’s

country• The port authority• The shipping company(or sea freight)• The airline(or air freight)

• The insurance company or brokers• The exporter’s bank• The importer’s bank• The railways(in some cases)in the importer’s

country• The road hauler(in some cases)in the importer’s

country• The shipping agent at the port or airport of

discharge• The importers

Export registration

• IEC with DGFT• PAN• Bank account• Appointment of agents• Export licenses• Customs registration• Registration with export promotion councils

Export inspection

• IPQC– In process quality control• ISI, AGMARK• Fumigation• ISO- 9000 & ISO – 14000• EIA• SA- 8000• Global compact

Customs procedure- export

• Exporter• Person in charge of conveyance• Bill of lading• Export general manifest• Shipping bill, packing list, ARE etc• Stuffing/ examination/ sealing• Self- sealing/ self- certification

Customs procedure……

• Importance of ICD/CFS• Customs bonded warehouse• Green channel for exporters• Assessment• New concept of Transaction

value

Central excise export procedure

• Exports are free of duty• Bond clearances• Rebate clearances• ARE 1• ARE 2• Proof of export• Sealing of container

Export promotion schemes

• Section 65 of customs Act- India.• Advance authorization / DFIAS• Export promotion capital goods • DEPB• Drawback• EOU• SEZ

Direct exporting

• occurs when a manufacturer or exporter sells directly to an importer or buyer located in a foreign market• Export Department• Export Sales Subsidiary• Foreign Sales Branch

Indirect Exporting

involves the use of independent middlemen to market the firm’s products overseas.

• Combination Export Manager (CEM)• Export Merchants• Export Broker• Export Commission House• Trading Companies• Piggyback Exporting

Processing export contract

SELECTION OF A PRODUCT:

You should have intimate knowledge about the product and sources of supply. If you have varied sources of supply, you will have no problem in procurement and shipment. But if you produce the product yourself at effective cost and exercise quality control, then you can become a successful exporter within shortest possible time.

• OPENING OF AN OFFICE: name, print letterheads, install phone and fix a signboard on your business premises.

• REGISTRATION FOR EXPORT:

SELECTION OF MARKET

• i. The economic position of the country• ii. Size of the Market and whether it is

expanding or shrinking.• iii. Market growth in a given product.• iv. Unit price of the product. Whether it is

more or less than other countries.• v. Import regime in the importing country.• vi. Location of the market etc

QUOTING A PRICE• What price to charge to remain competitive

abroad?• ii. While calculating prices one has to think about

all the cost including, packing, insurance, credit, agent’s commission, duties, documentation fee, marking charges, transportation charges, export duties etc.

• iii. For securing good price one has also to check up price of the same product abroad. If there is a good mark up in price in foreign market, one should not loose sight of it.

• EPB can help you get price information further its trade offices posted abroad.

SIGNING OF A CONTRACT

• Name of exporter• ii. Name of importer• iii. Item of sale• iv. Unit price• v. Total quantity• Terms of delivery (FOB, C&F, CIF etc.)• Terms of payment

SIGNING OF A CONTRACT

viii. Mode of shipment (Sea, Air, Road)

ix. Currency in which transaction will be made.

x. Validity period of a contract & delivery period.

xi. Shipping marks if any.

xii. Arbitration clause.

TERMS OF DELIVERY

When the exporter is making an offer, he quotes the price of his product. If the offer is accepted then a contract is signed between the buyer & the seller. The contract includes terms and conditions under which goods are delivered.

The buyer sitting in the overseas market is normally not interested to receive charge of goods at one's factory site but he may be interested to get charge of goods on FOB basis which means free on Board at airport or seaport. It means that charges of the consignment are fully paid up to that point and the rest of the freight is paid by the buyer.

FINANCING FOR EXPORTThe exporter should accept order, which he can

fulfill easily. He should have the necessary finances or access to finances for effecting shipment and the capacity to wait till the sale proceeds are received. In this connection, term of payment plays an important role, as it should be timed to keep you solvent at the time of need. For export pre-shipment and post-shipment credits are available from the Govt. on concessionaire rate. The exporter can make use of it.

•PACKING•TRANSPORT•INSURANCE

Mechanics of Exporting• Terms of Shipment and Sale: – INCOTERMS 2000 (International Commercial

Terms)– Terms of Shipment• Ex-Works (EXW) at the point of origin• Free Alongside Ship (FAS)• Free on Board (FOB)• Cost and Freight (CFR)• Carriage Paid To (CPT)• Cost, Insurance and Freight (CIF)

Payment Terms

–Advanced Payment–Confirmed irrevocable letter of credit–Unconfirmed irrevocable letter of

credit–Documents Against Payment (D/P)–Documents Against Acceptance (D/A)–Open account–Consignment

Currency Hedging

Done through a banker or the firm’s treasury to counter foreign risk in the export transaction

Exim Glossary

Advance Payment:

Advance Payment is a Trading method in which the buyer pays for the goods before they are sent out , method is used when buyer is of unknown credit worthiness. It is applicable in International or domestic trade.

Advising Bank

• Advising Bank is usually in the country of the seller, whose primary function is to authenticate the letter of credit and advise it to the seller, Purchase and collection of Export Bills.

• Air Waybill: A no-negotiable instrument of domestic and international air transport that functions as a bill of lading, all information described about domestic and international trade.

• Anti-Dumping Laws: Laws that are enacted to prevent dumping-offering prices in the overseas market that is lower than that at which a product is sold in its home domestic market.

• Advance Licence: is granted for import of inputs without payment of customs duties. It is issued in accordance with the Policy and procedures in force and subject to fulfillment of time-bound export obligation. Such licenses can be issued.

Alongside

A phrase referring to the side of a ship. Goods to be delivered "alongside" are to be placed on the dock or barge within reach of the transport ship's tackle so that they can be loaded aboard the ship

Banker's Draft: A payment instrument used to make international payments

Bill of Lading (B/L)

A document that establishes the terms and conditions of a contract between a shipper and a shipping company under which freight is to be moved between specified points for a specified charge. The B/L is Negotiable or Non-Negotiable forms.

Bonded Warehouse

A warehouse authorized by customs authorities for storage of goods on which payment of duties is deferred until the goods are removed.

Cash Against Documents (CAD)

• Payment for goods where a commission house or other intermediary transfers title documents to the buyer upon payment in cash.

• Cash in Advance (CIA): Payment for goods in which the price is paid in full before the shipment is made. This type of payment is usually only made for very small shipments or when goods are made in order

Certificate of Acceptance• Term used in leasing. A document whereby the

lessee acknowledges that the equipment to be leased has been delivered, is acceptable, and has been manufactured or constructed according to specifications.

• Certificate of Analysis/certificate of Inspection: Documents that may be asked for by the importer and/or the authorities of the importing country, as evidence of quality or conformity to specifications.

Certificate of Product Origin

• A document required by certain foreign countries for tariff purpose, certifying the country of origin of specified goods.

• CHIPS (Clearing House Interbank Payments System): Financial network through which banks in the United States conduct their financial transactions

Clean Bill of Lading

• A receipt for goods issued by a carrier that indicates that the goods were received in apparently good order and without damage.

• Clearance: The completion of customs entry requirements that results in the release of goods to the importer.

• Collection Order: In a collection, the document in which the seller instructs the banks as to how the collection is to be conducted.

Commercial Document• General term for documents describing various

aspects of a transaction, e.g. commercial invoice, transport document, insurance document, certificate of origin, certificate of inspection etc.

• Consignment: Delivery of merchandise from an exporter (the consignor) to an agent (the consignee) under agreement that the consignee sells the merchandise of the account of the consignor, while the consignor retains title to the goods until the consignee sells them

• Correspondent Bank: A bank that, in its own country, handles the business of a foreign bank.

• Credit Risk Insurance: Insurance that covers the risk of non-payment for delivered goods.

• Consular Statement: A document required by some foreign countries, describing a shipment of goods and showing information such as the consignor, consignee, and value of shipment. Certified by a consular official of the foreign country, it is used by the country's officials

Contingency Insurance:

Contingency insurance protects the exporter in any situation in which exporter responsibility relied on the buyer to insure, but sustained a loss because of inadequate coverage from that source. It will cover situations in which the FOB endorsement.

Contingent Claim: Claim whose value is directly dependent on, or is contingent on, the value of its underlying assets. For example, the debt and equity securities issued by a firm derive their value from the total value of the firm.

• Cost and Freight(C&F): A pricing term that indicates that the cost of the goods and freight charges are included in the quoted price.

• Cover Note: Insurance document evidencing that insurance cover for a consignment has been taken out, but not giving full details

Customhouse Broker

A person or firm obtains the license from the treasury department of its Country when required, and help clients (importers) to enter and declare goods through customs.

• Cost And Freight (C & F):A pricing term indicating that the cost of the goods and freight charges are included in the quoted price.

• Charter Party: Written contract between the owner of a vessel and a "chartered" who rents use of the vessel or a part of its freight space.

• Cost and Insurance (C & I):A pricing term indicating that the cost of the product and insurance are included in the quoted price.

• Cost, Insurance, Freight: A pricing term indicating that the cost of the goods, insurance, and freight are included in the quoted price.

• Dock Receipt: A receipt issued by an ocean carrier to acknowledge receipt of a shipment at the carrier's dock or warehouse.

• Dock Statement: A receipt issued by an ocean carrier to acknowledge the receipt of a shipment at the carrier's dock or warehouse facilities.

• Duty Exemption/scheme Duty Free Import of Inputs: Allows duty-free import of inputs for exports under Advance Licence, Duty Entitlement Pass Book (DEPB) and Duty Free Replenishment Certificate (DFRC) Scheme.

DEPB

the incidence of basic customs duty on the import content of export product. This is provided by way of grant of duty credit against the export product at specified rates. The DEPB Scheme

DFRC

Refers to the Duty Free Replenishment Certificate Scheme which was introduced from 1/4/2000 replacing. Transferable Advance Licensing Scheme. The scheme is available to merchant exporters as well as to manufacturer exporters.

Deemed Exports

Refers to those transactions in which the goods supplied do not leave the country and the payment for the goods is received by the supplier in India.

Documentary Against Acceptance (D/A)

Instructions given by a shipper to a bank indicating that documents transferring title to goods should be delivered to the buyer only upon the buyer's acceptance of the attached draft.

Drawback: Articles manufactured or produced in the India with the use of imported components or raw materials and later exported are entitled to a refund of the duty charged on the imported products or components.

• Export Broker: An individual or firm that helps to locate and introduce buyers and seller in international business for a commission but does not take part in actual sales transaction.

• Export License: A general export license covers the exportation of goods not restricted under the terms of a validated export license. No formal application or written authorization is needed to ship exports under a general export license

EPCG

• EPCG refers to the Export Promotion Capital Goods (EPCG) Scheme, which gives the manufacturer facility for import of capital goods for export production at concessional rate of duty (5 per cent) against certain level of export .

FoB Endorsement

Used with FOB, FAS, C&F, or CFR (but not CIF) quotations, FOB sales endorsement to an open marine policy can cover transit risk from the point of origin until title transfers. In these instances, the exporter relies on the importer to insure.

Forfaiting• A form of factoring in which large,

medium- to long-term receivables are sold to buyers (forfaiters) that are willing and able to bear the costs and risks of credit and collections.• Forward Contract: A commitment to

exchange a specified amount of one currency for a specified amount of another currency on a specified future date.

• Freight Forwarder: An independent business that handles export shipment on behalf of the shipper without vested interest in the products. A freight forwarder is a good source of information and assistance on export regulations and documentation.