Packaging and Labeling of goods with particular reference to international trade

Concept of Packaging and Labeling of goods in the international business perspective with particular reference to its importance in the container shipping

Packaging and Labeling are important terms which have wider implication in the domestic as well as international trade. These two properties of a product determine its acceptability in the trade. When a product is sold in the domestic market, certain standard packaging and labeling language is followed to ensure its availability to the customers under locally applicable rules & regulations. But when the same product is traded in the international market, it has to fulfill different packaging & labeling standards which have been established in the international trade by different countries over a period of time and the development in this field is ever growing. An export of hazardous / dangerous cargo (known as IMDG cargo) of different categories has to follow special rules of international shipping declared by IMO from time to time. Moreover different set of standard packaging & labeling have been created by the shipping companies for each type of cargo to be carried under maritime transportation.

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The role of Bank in the international trade

The role of Bank in the international trade with particular reference to documentary credit

Banks as an intermediary agency play a key role to finance and execute international trade. They extend credit facilities to their clients in different forms i.e. short-term, self liquidating, secured, on the basis of the nature of trade transaction. Sometimes bank recommends the use of letter of credit in some trade negotiation to facilitate trade under low risks. However there are some risk factors involved in the international trade which bank has to assess faithfully to safeguard the interest of the customer. Basically banks do not have any liability to check the authenticity of the quantity, quality and actual shipment status of goods rather they have the responsibility to examine the required documents with due diligence before effecting payment.

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Contributions of various institutions of ICC in formulating UCP 600 & its details

Contributions made by various institutions of ICC in developing the revised version of UCP 600 and the detail description of articles included in the UCP.

UCP 600 is the sixth revision of the Uniform Customs and Practice for Documentary Credits which comes into effect on 01 July 2007. There are 39 articles in UCP 600 which provides necessary guidance to bankers, lawyers, importers, and exporters, transport executives, educators, and everyone involved in the handling of letter of credit transactions.

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Would the revision of UCP 600 make the use of documentary credit more secured for payment settlement to exporters than before?

How far the new rules under UCP 600 can ensure reduction of documentary discrepancy & disputes which UCP 500 failed to solve effectively? How the new rules would resolve this problem?

The new rules under UCP 600 have brought minor adjustments / improvements in the time frame of bank to check documentary compliance which is beneficial to the exporters. The period for documentary check under article 13(b) of the UCP 500, was maximum seven banking days. Under article 14(b) of UCP 600 the period has been reduced to five clear banking days.

The addition of article 2 & 3 in UCP 600 provide clarification about definitions and interpretations of good number of terms which helps clarity and better understanding to the users with regard to formulation of credit.

But the major concerns of UCP 500 were centered around the articles which focus on following important issues.

  • The description of goods on the commercial invoice;
  • Transport documents; and
  • The standards for examination for documents.

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Major amendments under UCP 600 & its impact on documentary credit.

What concerned ICC to revise UCP 500? What are the major areas of amendments brought under new rules of UCP 600 compared to UCP 500? Impact of new rules on the operation of documentary credit.  

The revised version of UCP 500 (Fifth revision) came into force on January 01, 1994 which governed the documentary credit transactions for a consecutive period of twelve years. Its main objective was to facilitate the effective use of letter of credit in order to reduce documentary discrepancy & dispute in commodity trade and thereby enhance international trade. The latest revision is UCP 600 (Sixth revision) of Uniform Customs and Practice for Documentary Credits which has become effective from July 01, 2007. Now the question is why ICC felt the necessity to revise UCP 500?

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Basic documents used in the international trade

What are the basic documents commonly used in the international commodity trade? Explain in details.

In the exporting and importing trade, proper presentation of documents by the seller is not less important than the physical delivery of goods to the buyer in good condition. All the parties involved in the international commodity trade transaction initially deal with the documents that have been mutually agreed before the goods arrive at the destination. As a corollary to this international trade practice, documents also play key role in a letter of credit transaction. Banks as a majo players in the documentary credit, exclusively depend on documents alone to decide whether payment or negotiation/rejection of credit is to be effected. If proper documents are presented, bank will make payment without any hesitation whether or not actual goods shipped do comply with the sales contract. Therefore it is of prime importance for both the seller and the buyer to decide clearly on the documents that are required for the accomplishment of sale transaction before issuance of letter of credit.

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General guidelines for implementation of Letter of Credit

General guidelines to be followed by the Sellers and the Buyers for smooth and successful implementation of Documentary Letter of Credit

Documentary credit discrepancy is considered as the single challenging factor which stands as an obstacle in the implementation of credit transaction. Therefore the issue of documentary compliance need to be focused on top priority basis to overcome the failures in the implementation of commodity transaction under letter of credit. Accordingly the Sellers and the Buyers should take utmost care to study the terms and conditions of Letters of Credit and the governing rules of the current UCP 600 before issuance of L/C so that no discrepancy arises during implementation.

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Define Documentary Credit & highlight its role in the global trade

Details of Documentary Credit – how it works in commodity transaction

‘Sale Contract’ is the prima facie evidence of contract between a Seller and a Buyer to effect an international commodity transaction. A seller primarily starts negotiation with an overseas buyer for sale or export of any particular commodity in order to mutually finalize the undernoted fundamental issues connected with the contract of sale:

  • Description of the commodity to be traded highlighting the quantity, quality and unit price.
  • Details of shipment terms which include place and form of shipment, the place of final destination & delivery terms and other shipping issues like transhipment, partial shipment and the latest shipment date etc.
  • The full & correct description of the documents to be presented for payment including the information whether the payment to be made immediately (at sight) or at some future date ( after one months of acceptance of documents).
  • Detail terms and conditions of the letter of credit including the maximum amount payable, the expiry date, the type of credit to be applicable etc.

Once Sale Contract is finalized, between a Seller and a foreign buyer, it establishes a firm basis and guideline for the construction of any subsequent legal document needed for implementation of such business deal. If any flaws and loopholes exist in the Sale Contract it will have adverse effects on the construction of legal documents such as ‘Letter of Credit document’ which may result in trade disputes for settlement of payment.

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Other Uncommon types and sizes of container & its uses in trade (Part-2)

There are variety of different types and standardized sizes of containers in the trade to suit customer’s requirement but ninety percent of the global container fleet is composed of “dry freight” or “General purpose” containers. The majority of this ninety percent of the global fleet are combination of 20 foot (6m) and 40 foot (12m) standard length. The 20-foot container, referred to as a Twenty-foot Equivalent Unit (TEU) became the industry standard. The 40-foot length container became known as the Forty-foot Equivalent Unit (FEU) and is the most frequently used container today. Although 20 foot & 40 foot container are widely used in the trade, the United States and Canada also use longer units of 45 ft (13.7 m), 48 ft (14.6 m) and 53 ft (16.15 m) to meet their special cargo requirement.

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Container Types and Use of the Equipments in the Trade (Part-1)

The invention of Container during second half of twentieth century is a great achievement. The creative use of container through the process of containerization brought unprecedented growth in the field of international trade and technology. The International Organization for Standardization (ISO) made the journey of containerization easier by removing the initial challenges / bottlenecks through fixing the global standard for all the containers successfully.

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