bottom”. Countries with low wages are attracting jobs from higher wage-paying nations, thus dragging everyone down to their level. The alleged “exportation of jobs” has surfaced as an important political issue in most industrialized countries. For example, Nike has been raked over the coals for paying Vietnamese 84 cents an hour to make USD 100 sneakers.
Globalization creates more jobs that it actually destroys, but they are in different sectors and in different geographic regions. It takes more skills, education and mobility to be employable. The jobs lost in Europe and North America over decades have generally been those requiring relatively uneducated workers. Indeed, wage differentials between the skilled and unskilled will likely increase. Both sides can point to ample examples to support their cases. But in the end, both are probably exaggerating to some extent. What is irrefutable is that the world economic pie is indeed bigger because of globalization and it is being sliced differently than before. Questions
1. What does globalization mean by IMF?
2. How does technology help push the globalization of business according to the passage? 3. What are the benefits of globalization according to the passage?
FOB and CIF under Incoterms 2000
FOB
FOB means that the seller fulfills his obligation to deliver when the goods have passed over the ship’s rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss or damage to the goods from that point. However, this term also requires the seller to “deliver the goods on board the vessel”. Clearly, it is hard to use ship’s rail as a point to divide responsibilities and costs because the loading of the goods is a continuous performance. As the stipulations in Incoterms are not imperative, the seller and the buyer can negotiate the division point of responsibilities and costs. There are several derived terms available to serve this purpose. *FOB Under Tackle
It means that the seller will deliver the goods beside the carrying vessel within the reach of the vessel’s tackle. The buyer shall bear the loading expense.*FOB Liner Terms The ship will be responsible for loading.
With these two terms, the buyer bears the loading cost since he is responsible for contracting and paying for carriage. *FOB Stowed
The seller is responsible for loading the goods on board the vessel and packing the goods carefully and closely in the vessel’s hold. *FOB Trimmed
Besides loading the goods on board the vessel, the seller should also trim the goods to make the vessel evenly balance. *FOB Free In
This is a combination of a sales term and a transport term. Free In means the carrying vessel is not responsible for loading the goods.
The seller pays the loading cost under the above three terms.
FOB term requires the seller to clear the goods for export. This term can only be used for sea or inland waterway transport. It is inappropriate when the seller is called upon to hand over the goods to a cargo terminal before the ship arrives, since he should then have to bear the risks and the costs before the goods have passed over the ship’s rail when he is no longer able to control the goods or to give instructions with respect to their custody. When the ship’s rail serves no practical purpose, such as in the case of roll-on/roll-off or container traffic, the FCA is more appropriate to use. CIF
CIF means that the seller must pay the costs and freight necessary to bring the goods to the named port of destination, and he has to procure marine insurance against the buyer’s risk of loss or damage to the goods during the carriage. The seller contracts for insurance and pays the insurance premium. But the seller should note that under the CIF term the seller is only required to obtain
insurance on the minimum coverage.
This term requires the seller to clear the goods for export.
CIF can only used for sea and inland waterway transport. When the ship’s rail serves no practical purposes such as in the case or roll-on/roll-off or container traffic, the CIP term is more appropriate to use. To stipulate clearly the responsibility and the cost of unloading, some derived terms can be used.
* CIF Liner Terms
The ship is responsible for the unloading of goods. *CIF Landed
The goods must be unloaded onto the dock.
Under these two terms, the seller is responsible for unloading and pays the cost, including lighterage and wharfage charges, since he contracts for carriage. *CIF FO
FO means that the ship is not responsible for unloading the goods carried. *CIF Ex-ship’s hold
The seller fulfils his responsibilities when he has made the goods ready for unloading.
The buyer pays the unloading cost under the above two terms as the cost is not included in the freight paid by the seller.
However, CIF Free Out does not necessarily mean that the risk and cost for the discharging operations would fall upon the buyer under the contract of sale, since it might follow the stipulations of the sales contract or the customs of the port that the contract or the customs of the port that the contract of the carriage procured by the seller should have included the discharging operation. Questions
1. What are the derived terms of FOB to help dividing the point of responsibilities and costs according to the passage?
2. What are the responsibilities of the seller under FOB?
3. What are the derived terms of CIF to stipulate clearly the responsibility and the cost of unloading according to the passage?
Packaging for Exporting
Packaging for exporting requires a different focus from packaging for domestic use. Often domestic packaging is primarily designed to display the product for sale, save weight, or advertise the shipper’s company. Export packaging is primarily designed to protect the product from hazards of international shipment and to comply with legal requirements.
What packaging is best for exported products depends on the nature and value of the goods, the type of transportation involved and the legal requirements. As we have already learned, different modes of transport present different dangers to the cargo. Delicate, high-value goods merit better protection than cheap bulk cargoes. Fresh fruits and vegetables present particularly difficult problems.
The first rule to be observed when packaging for export is to consider the entire journey, including the short hauls to and from the primary carriers. Pack the goods so that they will survive each leg of the trip intact. Special considerations must be taken when loading containers. Some types of cargoes do not mix with others. For example, drugs of a noxious chemical are clearly not compatible with food stuffs, and the two should not be stowed in the same container.
Many nations have requirements that imports be marked with the country of origin, that is, the country where the material was grown, manufactured, or produced. These requirements are often very specific. And entry will be refused if delayed, or extra charges will be levied on goods that do not conform to the requirements.
Some cargo requires special handling. A number of international markings are available to advise handlers that a certain crate must, for instance, be protected from heat or freezing or not handled with hooks. These markings should be made on the package indelibly because damage could be
done if they are rubbed off. Stenciling with good ink is often preferred method. There are special requirements for dangerous goods such as explosive and radioactive materials. Compliance with all regulations in all countries of passage will minimize problems and delays with these types of cargoes.
Finally, it is a temptation to proudly advertise the contents of the container on the side and place one’s company logo prominently on the shipment. Often this practice is good advertising domestically, but internationally it only notifies pilferers what booty is to be had inside. Smart shippers use blind marks that usually consist of coded strings of letters and numbers to identify the shipment. Blind marks are meaningless to those who are not privy to the encryption method. Questions
1. What are the focus on domestic packaging and export packaging respectively? 2. What factors will influence the export packaging according to the passage?
3. What do blind marks mean according to the passage? And why are they used sometimes?
Modes of Transport
Transport is very important in foreign trade because goods sold by seller have to be delivered to the buyer abroad, and the delivery of goods is made possible by shipping services. The business of foreign trade shipping is complicated. Though most of the arrangements are often effected by shipping or forwarding agents, a foreign trade worker will find it useful to have a fairly good knowledge of the details regarding to the procedures of shipment, the shipping documents, etc. in order to fulfill an export transaction and effect shipment in a safe, speedy, accurate and economical way.
As, basically, most world trade is conveyed by sea transport, exporters and importers are more concerned with transport by sea than in other ways. Transport by sea is, however, increasing in scope and is best method for certain types of export and import and under emergency or urgent circumstances, though its limitations are obvious.
The new type of transport of goods by rail and then steamers has had the effect of greatly encouraging the use of the “container”. Railway containers of various types are available for shipment by steamer services too, and transport by containers is sometimes a “door-to-door” service.
Cargo transported by container ships is a modern way of transportation. Goods are packed into standard containers at the factory or the premises of the exporter and transported by rail or truck to the wharf on to the container ship which has been transported to destination.
According to ISO, there are several standard sizes of the containers, the most common are 8feetX8.5feetX40feet, or 8feetX8feetX40feet, or 8feetX8feetX20feet,
These containers, being of strong metal and of standard size, facilitate loading and unloading by machinery, expedite the shipping procedures, the time of shipment, reduce the loss of goods in transit, save packing material, and are with other facilities and benefits.
Cargo may be placed in special containers that can be transported by ship, train, truck, or a mixture of the three to complete a journey. It is important to select the right type of container for the protection of the specific cargo to be shipped, and there are many types to choose from. Almost all containers have a document holder on them so that documents can safely accompany the shipment. Aside from this, there is much similarity between types of containers. The basic design is an enclosed metal box with doors on the ends. This is called an end-loading, fully enclosed container. It is suitable for general cargo that is not particularly susceptible to damage from the outside environment. If the container is to be loaded while on a rail car, a side loading, fully enclosed container with doors on the sides is preferred so that access will not be blocked by the rail car in front or behind.
A fully endorsed container has an advantage in that it is often inspected by customs of the destination country at the factory or other place where it is loaded and then closed and a seal placed
on the door. At the border such a container need not be reinspected, saving time and money. This operation is called a through shipment. Questions
1. What are the functions of containers according to the passage? 2. What is an end-loading, fully enclosed container? 3. What is called a through shipment?
Ocean Marine Insurance
Ocean Marine Insurance is the oldest form of insurance, probably dating to the Middle Ages. The organization of Marine Insurance took great steps forward with the formation and development of an insurance market on Lombard Street in London, English and subsequently---since 1769---Lloyds of London. Today Lloyds still plays a prominent role in Marine Insurance. The first American insurer was Insurance Company of North America, formed in 1794. CNA has operated continuously since that time, and remains an important market for marine as well as other forms of property and casualty insurance.
Because of its long tradition, marine policies tend to be the most traditionally worded policies in the insurance industry, and to have the longest tradition of case law legal decisions covering the various terms and clauses of the policies. While care should be taken with any insurance to clarify any definitions provided in the policies, this is especially true in marine coverage, where the defined terms may have long histories.
Ocean marine insurance is designed to cover various hazards related to the movement of goods. The first and obvious protection that can be provided is for the cargoes themselves. This protection can be provided to the seller or the buyer. Where ownership of and responsibility for the cargo are assumed crucial in determining what coverage is needed. This used to be a simpler exercise than at present---as a limited number of shipping terms existed, e.g., FOB, CIF, etc.
In 1990 the international shipping agency agreed on an expanded set of terms, which allow transfer of ownership and responsibility at various points along the transit route, including at customs borders. Various terms are set out in graphical format in Incoterms.
Risks are unavoidable in the shipment of goods. Goods are loaded and transshipped. Travel on the ocean provides its own set of perils. These risks require that the shipper take reasonable steps to ensure the safety of his goods while in transit, for instance, with proper packaging and/or containerizing, and shipping on a vessel appropriate for the goods in question.
Goods are generally handled many times during shipment, and marine insurance is designed to provide coverage throughout this process. They are first loaded at the origination point onto a land vehicle. They are held in a port prior to loading onto a ship. They may be unloaded at an intermediate port, and held for transshipment on a second vessel. Upon arrival in the destination country, they must be cleared through customs, then loaded onto land carriers for transfer to the buyer’s premises.(They may also be transferred between land transports on either the buyer’s or seller’s end---during which time the goods are under the control of warehouse depot operators, and additional trucking or rail companies).
The marine policy may be scripted to meet a variety of situations and desired coverage. Generally, the policy covers perils of the sea, fire, jettison, explosion, defects in the ship that cause damage, and other perils.
Exclusions in the policy are important, and should be reviewed with a qualified risk manager, such as your insurance agent. These typically include damage due to dampness, breakage, delay or loss of market, acts of war, strikes, etc. Questions
1. Please give a brief discount of the historical evolution of insurance.
2. What are some of the hazards that a breakbulk shipment might be subject to during transit? 3. What considerations should be kept in mind by the exporter regarding cargo packing when the importer has not specified packing requirements according to the passage?
Currency Choice in Invoicing