M3.2 Bills of Lading and Letters of Credit

Question 1

What is a bill of lading?

Answer 1

document issued by a carrier to the exporter of shipper
receipt and contract - legal document
contains details of the shipment
who has *Title to the goods

Question 2

What is included on the billing of lading?

Answer 2

the name of the shipper or consignor;
the name of the consignee;
the name of the party that is to be notified when the goods arrive at their destination;
the name of the carrier;
a fulsome description of the goods; and
the weight of the goods.

Question 3

What are the 4 principle parties to a bill of lading

Answer 3

1. Carrier
2. Shipper or Consignor
3. Consignee
4. Notify Party

Question 4

What could the bill of lading be used for.

Answer 4

1. carrier receipt for goods received and describe the condition the goods were loaded on board the conveyance;
2. support a claim against the carrier for loss or damage; and
3. support a specific tariff treatment, since the bill of lading indicates where the goods originated and any transhipment** that takes place.
   This document supports a specific tariff treatment, but in itself
   it is not sufficient to claim a tariff treatment with the CBSA.

Question 5

What does Transhipment mean?

Answer 5

transhipment is the shipment of goods to an intermediate destination , and then from that desination to another destination.

Question 6

Who is the Notify Party?

Answer 6

The notify party who is to be informed when the goods arrive at the named destination on the bill of lading. Can be more than one notify party.

Question 7

What are the 3 types of bills of lading?

Answer 7

Straight Bill of Lading
Order Bill of Lading
Clean Bill of Lading

Question 8

What is a straight bill of lading?

Answer 8

goods have been paid for in advance
non negotiable and non transferable
goods may not be sold or ownership transferred
goods canonly released to the consinee named

Question 9

What is an Order bill of lading?

Answer 9

consinded to a third party ie Bank.
negotiable and title may be transferred on route
commonly found in ocean shipping

Question 10

What is a clean bill of lading?

Answer 10

doesn’t contain any notation or comments
goods being carried are in good condition with no obvious defects

Question 11

What is a letter of credit

Answer 11

commitment by a financial institution to pay an agreed amount to a vendor under precise terms and conditions.

Question 12

Why conditions are documented on a letter of credit?

Answer 12

goods must arrive with in a specific time frame
proper documentation/certs necessary for customs clearance will be provided by the supplier
goods ordered are the goods shipped.( not subs)

Question 13

What parties issue letter of credits?

Answer 13

Banks; requested by buyer, bank agrees to pay the beneficiary (vendor) once terms are met.
advising bank is the bank in the seller’s country

Question 14

What are the typical10 events that involve a letter of credit?

Answer 14

1. price agreed on
2. vendor asks buy for a LOC guarantee payment
3. buyer applies to his bank
4. bank approves tjhe LOC application
5. advising bank authenticates the LOC and advises the vendor
6. vendor/exporte ships goods
7. vendor sends bill of lading to the advising bank; in order payment to be processed
8. advising bank will claim the funds
9. advising bank will forward documents to the issuing bank
10. issuing bank will debit buyers account

Question 15

What is the requiremetn to obtain release of the goods at the port of arrivals?

Answer 15

Orignial endorsed biling of lading must be presented.

Question 16

What are the risks with involving a letter of credit for the buyer?

Answer 16

foregin currency/ exchange rates
vendors political climate
shipping goods as described
increase costs to the goods ; banks charge for LOCs

Question 17

What are incoterms?

Answer 17

International Commerical Terms
- list of commercial trading terms of rules, used in the carriage of goods between the buyer and the seller;
defines the responsibilities of each party. Who and when!

Question 18

What 2 important issues does incoterms address?

Answer 18

1. determine the point in time when the risk of ownership passes to the buyer from the seller
2. determine the point in time when the payment for freight and the other charges passes from the seller to the buyer

Question 19

What are the incoterms for ANY mode of Tranportation?

Answer 19

EXW - EXworks - Named place of Delivery
FCA - Free Carrier - Named place of Delivery
CPT - Carriage Paid To - Name place of Destination
CPT - Carriage Paid To - Name place of Destination
CIP - Carriage and Insurance Paid To - Name place of Destination
DPU - Delivered at Place Unloaded - Named place of Destination unloaded
DAP - Delivered At Place - Name place of Destination
DDP - Delivered Duty Paid - Name AT place of Destination

Question 20

What does incoterms EXW - ExWorks - Named place of Delivery mean?

Answer 20

Seller makes the goods available at their premises
does not need to lood the goods on conveynce, clear goods for export or clearance

Question 21

What does incoterms FCA - Free Carrier - Named place of Delivery mean?

Answer 21

Seller hands ov er the goods, cleared for export to first carrier named by the buyer, risk passed to the buyer at that point.

Question 22

What does incoterms CPT- Carriage Paid To - Named place of Destination mean?

Answer 22

Seller delivers the goods to the carrier nominated by seller at the agreed place, contract and pay for carriage necessary to place of the named destination.

Question 23

What does incoterms CIP- Carriage and Insurance PaidTo - Named place of Destination mean?

Answer 23

Seller delivers goods to carrier nominated by seller at the agreed place, contract and pay for carriage to named place of desitination to inlcude the contract for insurance to cover the buyers risk of loss/damage

Question 24

What does incoterms DPU- Delivered at Place Unloaded - Named place of Destination Unloaded mean?

Answer 24

Seller delivers goods and transfers the risk to the buyer when goods are unloaded at the place of destination. Seller is responsible for the export clearance, delivery and all transport cost to the named destination of unloading. - * no insurance obilgation to either party.

Question 25

What does incoterms DAP- Delivered at Place - Named place of Destination mean?

Answer 25

Seller delivers goods and transfers the risk to the buyer when goods are placed at the diposal of the buyer. Seller is reponsible for export, delivery to the destination and pay all transport costs. Buyer is responsible for unloading, import costs and freight beyone unloading. No insurance obligation to either party.

Question 26

What does incoterms DDP- Delivered Duty Paid - Named place of Destination mean?

Answer 26

Seller delivers goods when all transportation costs, bearing all risk and pays any duty for both export and import to include all customs formalities DDP = Maximum obligation for the seller.

Question 27

What are the incoterms for Sea and Inlad Waterway Transport?

Answer 27

FAS - Free Alongside Ship - named port of shipment
FOB - Free On Board - named port of shipment)
CFR - Cost and Freigh- named port of destination
CIF - Cost, Insurance, and Freight - named port of destination

Question 28

What does incoterms FAS - Free Alongside Ship - named port of shipment mean?

Answer 28

Seller delivers when the goods are placed alonside the vessel ( quay or barged) Buyer bears risk at the name port of shipment.

Question 29

What does incoterms FOB - Free On Board - named port of shipment mean?

Answer 29

Seller delivers when the goods are on the vessel. Buyer bears risk at the named port of shipment

Question 30

What does incoterms CFR - Cost and Freight- named port of destination mean?

Answer 30

Sellers delivers the goods on board the vessel and pay for the cost and freight necessary to bring goods to the port of destination

Question 31

What does incoterms CIF - Cost, Insurance, and Freight - named port of destination mean?

Answer 31

Seller delivers the goods on board the vessel and pay for contract costs of insurance and freight necessary to bring the goods to the port of destination.

Question 32

Why is it vital to how the Named Place in the incoterms

Answer 32

wtih out specific named destinations or place the parties invovled will be uncertain to where or when cost and risk transfer.

Question 33

What are the 2 components of the Incoterms 2020?

Answer 33

3 letter abbreviation
exact place or point risk transfer takes place.