International Trade: Shipping Business Contracts and Laws

This report discusses the shipping options available to a company, requirements to meet and contracts to enter while exporting its goods and services in other countries. It covers trade law and other shipping business laws and contracts, shipping companies overview, elements of international trade in real world, contracts of carriage, cost insurance and freight, terms of delivery, bill of landing, bill of exchange, letter of credit and more.

Running Head: international Trade P a g e | 0
Name of the student
Topic
University Name-

International Trade P a g e | 1
Table of Contents
Introduction.................................................................................................................................................1
Business summary of international shipping business.............................................................................1
Shipping details...........................................................................................................................................1
Shipping companies Overview....................................................................................................................2
Delivery of the Steamer to the clients..........................................................................................................3
Elements of International Trade in Real World...........................................................................................4
Contracts of carriage...................................................................................................................................5
Hauges rules............................................................................................................................................5
Hague Visby rules....................................................................................................................................5
Custom rules and regulation...................................................................................................................5
Cost insurance and freight (CIF)..................................................................................................................7
Marin insurance...........................................................................................................................................7
Terms of Delivery.......................................................................................................................................8
Bill of landing..............................................................................................................................................8
Bill of exchange...........................................................................................................................................9
Letter of credit.............................................................................................................................................9
Recommendation.......................................................................................................................................11
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13
Appendix...................................................................................................................................................15
References.................................................................................................................................................17

International Trade P a g e | 2
Introduction
In this report, shipping company indulged in exporter, or importer, of goods the different
contracts brought together under the term ‘law of international trade has been taken into
consideration. In this assignment Trade Law and other shipping business laws and contracts have
been taken into consideration. This document will discuss the shipping options available to
company, requirements to meet and contracts to enter while exporting its goods and services in
other countries
Business summary of international shipping business
A company from Spain is business organization selling kitchen equipment to North
America and Asian countries is specialized in manufacturing of boilers and steamers
(Ashmarina, et al. 2017. The name of the company is Kitchen Kiwi Import and export Company.
The company is sourcing components to be fixed in the boilers from Italy, and Finland. It
customizes all of its kitchen customizers as per the customer requirement in different countries.
The component import and export pricing fluctuates often. Price and lead time to supply
depends on the complexity of the customer requirement. Since the product is not standardized,
the exporting requirement and procedures for the company varies on case to case basis. The
product characteristics compliance to international standards, delivery procedures of the various
sizes of steamers, packing requirements, documentation procedures are kept different for each
consignment. Hence, the export documentation is a specialized activity in the steamer
manufacturing company (Anderson, and Neary, 2015).
Shipping details
 Kitchen apparels and other necessary equipment’s to USA
 Entering into the strategic contract with the shipping company for the shipping purpose
of its goods and services from one country to another (Wasser, et al. 2015).

International Trade P a g e | 3
Shipping companies Overview
There are several shipping companies which could be undertaken by the Kitchen Kiwi Import
and export Company to for the shipping purpose of its goods and services from one country to
another (Chan, et al. 2015).
 Nippon Yusen
 Maersek Line
 Evergreen Marin Corporatio
All of three companies will be analyzed in terms of benefits offered and amount of fees charged
by company ( Foley, and Manova, 2015).
Criteria Nippon Yusen Maersek Line Evergreen Marin
Corporation
Balance of trade
through this shipping
Positive Negative -
Destination number of
p0rts
15 13 12
Final destination port 7 destination port 5 destination port 8 destination port
Freight rates Based on the contract Standard charges As per the carriage
and wages determined
Trade Governance
requirement
Shipping and
international trade law
Compliance with the
corporate law,
shipping law and
assistance in double
taxation avoidance
and shipping charges.
Arrangement of
LMAA arbitration
Hague rules and
regulations.

International Trade P a g e | 4
Payment mode Cash/ Card Cash / Card Cash/ card
Shipping charges Based on contains and
shipments (García,
2015).
Shipping cargoes and
strategic alliance
On the basis of agreed
price and shipping
consignments (Chan,
et al. 2015).
Shipping process Direct shipping from
the port to assigned
country
Indirect shipping and
use of different ports
and carriers
Shipping areas and
import and export
through the mid ports
Delivery of the Steamer to the clients
All the Kitchen apparels and other necessary equipment will be exported to USA through
the shipping ports through different shipping carriers. Supply and delivery of the steamers is
divided into three sections. One is choosing the Inco term type, i.e. related to choosing the mode
of delivery, time and place, second is determining the clearance procedures such as nomenclature
code, customs tariffs and export documentation, and the third is arranging transport and logistical
risk management (Foley, and Manova, 2015).
The delivery of the streamer to clients also includes info terms which reflect the key
details. If Kitchen Kiwi Company quotes as FOB price, the seller is responsible for customer’s
clearance until the goods are loaded on a vessel (Bridge, 2017).
Elements of International Trade in Real World
There are different types of trade modes in the International commerce which could be
used by Kitchen Kiwi Import and export Company. I.e. free trade and protectionist. In free trade
scheme, the governments of the countries (US, UK, Europe) involved in trade do not regulate the
market; However, governments of related countries impose several rules and tariff on the
shipping companies to control the flow of goods and to ensure the safety of the transactions. The

International Trade P a g e | 5
free trade agreements among countries help the exporters to expand the markets for their
products and become interdependent on the world economic systems. In international trade,
export, import and transit activities are regulated and coordinated by the governments of the
respective countries which need to be undertaken by Kitchen Kiwi Import and export Company.
The customs authorities control the border movements of the commercial goods and levy taxes
and duties as per the policies of the governments. The customs also prevents the illegal trade
practices and work for the security of the country by preventing illegal arms and explosives
trade. The steamer manufacturer Kitchen Kiwi Company should identify the valid codes for
their products and always includes the right codes in their invoices so that customs officer can
refer the product quickly and clear the goods (Low, 2013).
There are several shipping methods which could be undertaken by Kitchen Kiwi Import and
export Company while shipping the goods from one country to another. As the steamer is an
industrial product and do not have any safety issues associated with the product, the company
enjoys lesser complications in customs procedures. However, the company should obtain
certificate from authorities to demonstrate that the steamers are not linked to defense
equipment’s (Klein, 2018).
Shipping Description
Direct shipping Kitchen Kiwi Import and export Company
undertake direct shipping for its kitchen
equipment’s by preparing the direct
consignment to clients in US and US.
Indirect shipping In this shipping third party contracts is
undertaken due to the legal governance
compliance to sell shipment to clients (Brack,
2017).

International Trade P a g e | 6
Forward shipping- This shipping process is covered under the International logistics which
covers all the acts details and activities such as movement of goods that include raw materials,
work in progress inventory, finished goods inventory, and the accompanying information related
to origin of the good up to consumption point (Brodie, 2013).
Contracts of carriage
It is described under the Contracts of carriage The Kitchen Kiwi Company will accept the
contracts by carriage goods by Sea Act 1992(Howse, Eliason, and Trebilcock, 2005).
Hauges rules
It is applied to the contract of carriages undertaken by Kitchen Kiwi Company with the shipping
companies. When goods are transported to other countries, the customs authorities check for the
authenticity of the international trade and compliance of Hauges rules. Hence, it is essential to
appear for custom clearance from customs authorities and pay the applicable duties related to
import or export. The different documents that involved in international trade as we have seen it
include documents that assure that goods are sold by a party to another, the goods are shipped in
right order, the goods have reached in right condition, the buyers agents have produced the
appropriate documents, the insurance documents are in order, and the product literature is
available to the customs authorities (Brodie, 2013).
Hague Visby rules
All the documents ready for the customs officers will be checked under the bill of landing and
will approved by the custom authority. Often the goods sent by the company are cleared in a day
or two as the documents produced proved the legitimacy of the business deal.
Custom rules and regulation
 Lack of appropriate documents can result in unnecessary delays in clearing of the goods.

International Trade P a g e | 7
 Customs procedures vary in different countries as the laws and regulations are different
for each country. It is critical for the buyers and sellers to understand the customs
procedures beforehand (Murrayand., Cleave, 2015).
 The customs may seize the goods if they are not convinced about the legality and
intentions of the transacting parties.
 Customs procedure for export and import are different. Since the steamer manufacturer
do not deal in any prohibited items, special certificates are not required for customs
clearance (Akerman, 2018).
Source:

International Trade P a g e | 8
Cost insurance and freight (CIF)
The seller whosoever will sell the goods will be responsible for cost and insurance of the fright
to the named port (Akerman, 2018).
The buyer will be responsible for unloading charges for the shipment
The contracts could be viable on the mutual understanding of the buyer and seller (Altman, and
Sabato, 2005).
Cost and fright
 Shipping cost will be borne by Kitchen Kiwi Company
 Seller is required to take the minimum coverage of insurance
Marin insurance
This is the insurance covered required to be taken under 600 documentary credits. It has been
to done by either by buyer or seller. All the material will be exported to USA therefore; the
insurance covers will be taken from the insurance companies in USA (Antras, and Foley,
2015).
Underwriter and insurance Fed.ex Marin Insurance corp

International Trade P a g e | 9
cover
Years in Services 140 80
Online dashboard and
portal
Yes Yes
Procedure to claim
insurance cover
Sing the form and submit
in the authorized
department with fees
Online and offline both
procedure are available
Claim After the events, value will
examine the goods and
will pass the claim
Depends on the
circumstance and
procedure followed
(Brodie, 2013).
Terms of Delivery
In order to facilitate international trade, simplify and integrate the responsibilities of the
buyers and sellers with respect to delivery of the goods International chamber of Commerce has
devised a set of rules called Inco terms. The Inco terms help the parties involved in international
trade to interpret, use and express the trade related standard terms (Carr, and Sundaram, 2016).
Bill of landing
It is accompanied by the list work program which shows the detailed list of ship cargo in
form of receipts is given to the person consigning the goods by the master of the ship. The
transaction is called the bill of lending which is given as promise and assigning authority to
Cargo Company for shipping the cargo goods to the clients (Hummels, and Skiba, 2014).

International Trade P a g e | 10
Bill of exchange
The bill of Exchange is the written order used primary in international trade that bids the
one party to pay fix amount of money to another at stipulated future date. In international trade
the money is received as part of the services of goods exchanged. Since time and amount of
payment is very critical in international trade, terms of payment are managed separately in a
legal framework. Terms of payment have various components which include the time allowed to
make payment, the credit period allowed, such as 30, 60, 90, 180, days (Foley, and Manova,
2015). Another term for payment is sight payment, i.e. when the goods are received at the buyers
destination, the buyer is required to pay the amount immediately, without delay. Each mode of
payment has different risks associated with it. In technical terms, payment methods in
international trade include open account, documentary collections (bills of exchange), and
documentary letters of credit and cash in advance (Jensen et al. 2018).
An advance payment is considered as the most secure mode of payment, as the seller has
realized the payment even before the goods are delivered. However, for competitive reasons, this
mode of payment is very rare. In the bill of exchange and letter of credit modes of payment,
banks are involved. Kitchen Kiwi Import and export Company could use the bill of exchange as
payment mode to encounter the foreign risk exposure. In the bill of exchange payment mode, all
the legal documents are collected by the bank, and are not released to the buyer until the bank
realizes the agreed amount from the buyer. The buyer can take charge of the goods only when it
produces the documents to the shipper (McGovern, 2018).
Letter of credit
It is another payment mode which could be taken by Kitchen Kiwi Import and export
Company for the payment receipt from the clients. The letter of credit is a service provided by
the bank to facilitate a specific international transaction. When the buyer’s bank receives the
documents from the seller, the bank pays to the seller on behalf of the buyer and realizes the
amount in ninety days or 180 days from the buyer. Both the systems i.e. bill of exchange and
letter of credit payments are secure as the valid banks are involved. However, there is a risk of
exchange rate of currencies. Since the buyer pays only after 180 days, the exchange rates of the
international currencies may vary (Cass, 2005). The letter of credit requires opening accounts in

International Trade P a g e | 11
separate bank. Open account is another mode of payment in export-import operations. In open
account, the seller sends the goods to the buyer on faith and expects to receive the payment once
goods are delivered to the buyer (Pauwelyn, Guzman, and Hillman, 2016). For the buyer, open
account is very convenient as risk of non delivery of goods is small. In countries of EU and
North American countries of USA and Canada, open payments are in practice. The company that
produces steamers often enters into deals that have letter of credit payments. As the supply cycle
is long and various responsibilities are to be completed before the goods can be delivered, the
company practices letter of credit payments (Singer, 2007).
Transportation refers to movement of products/goods/consignment from one location (exporting
country) to another (importing country). Transportation involves the movement of goods from
origin until it reaches to the customer’s hand. In international trade transportation is considered
as most expensive component. Several risks are involved in transportation, as the movement of
goods can be delayed due to umpteen reasons. Often the transportation is accompanied by
insurance services till the goods are delivered to the customer. Documents are crucial in
international trade, and the critical documents that are generated along with transportation of
goods include, bill of lading, payment documents, and insurance policies (Viner, J., 2016).
Most often the steamer manufacturing company from Spain use sea transport to deliver their
goods. And in some cases where emergency delivery has to be completed, it uses air freight. Sea
delivery is the appropriate mode of transport used by Kitchen Kiwi Import and export Company
for intercontinental transportation of goods, especially when it exports its goods and services to
Europe and North America. Since the size of the steamers is large, the company uses sea
transport often. Though, sea transport is not expensive as air freight or road transport, it is very
slow in transporting the goods. There are various pricing options available to reduce the cost of
sea transport. The steamer manufacturer contains cost of the delivery by negotiating special
prices from the shippers (Yeats, 2014).
It is observed that Kitchen Kiwi Import and export Company will be facing several problems
exporting excessive plastic material to Canada and USA. Containerization is also part of
packing which needs to be complied primary protection from weather conditions and pilferage
(Limao, and Venables, 2011).

International Trade P a g e | 12
Recommendation
 All the procedure an rules given by World Customs Organization (WCO) needs to be
followed by Kitchen Kiwi Company. WCO simplifies and harmonizes customs
procedures among the member countries (Grainger 2016). As the countries are expecting
to have a mutual trading relationships having common rules, modes of communication
and types of behavior,
 The exporting and importing goods by the Kitchen Kiwi Company must classify their
products appropriately based on the coding system and present documents to prove the
nature of the goods (Haberler, 2016).
 Kitchen Kiwi Company will use the letter of credit approach to accept the payment from
the clients in USA.
 The letter of credit will save the Kitchen Kiwi Company from the possible foreign
exchange risk exposure such as transaction risk, translation risk and economic exposure.
(Marvel, and Ray, 2013).

International Trade P a g e | 13
Conclusion
As we have seen that International trade involves compliance to various laws and
regulations, goods and services transactions between countries is complex. There are different
stages to the procedures of international trade such as invoicing, packing, and transportation,
generation of payment documents, gathering of certifications, collecting shipping documents,
payment of insurance, customs clearance, and finally transporting to the destination country.
North America and Asia is a good place for selling the kitchen equipment of Spanish company.
With respect to practicality of the international trade, two main parts should be cleared in the
business i.e. finding customers and satisfying the customs regulations and prompt delivery of the
goods.

International Trade P a g e | 14
References
Akerman, A., 2018. A theory on the role of wholesalers in international trade based on
economies of scope. Canadian Journal of Economics/Revue canadienne d'économique, 51(1),
pp.156-185.
Altman, E.I. and Sabato, G., 2005. Effects of the new Basel capital accord on bank capital
requirements for SMEs. Journal of financial services research, 28(1-3), pp.15-42.
Anderson, J. and Neary, P., 2015. Restrictiveness of International Trade Policy.
Antras, P. and Foley, C.F., 2015. Poultry in motion: a study of international trade finance
practices. Journal of Political Economy, 123(4), pp.853-901.
Brodie, P., 2013. Commercial shipping handbook. Informa Law from Routledge.
Carr, I. and Sundaram, J., 2016. International Trade Law Statutes and Conventions 2016-2018.
Routledge.
Foley, C.F. and Manova, K., 2015. International trade, multinational activity, and corporate
finance. economics, 7(1), pp.119-146.
Haberler, G., 2016. International trade and economic development (No. 1).
Hummels, D. and Skiba, A., 2014. Shipping the good apples out? An empirical confirmation of
the Alchian-Allen conjecture. Journal of political Economy, 112(6), pp.1384-1402.
Ics Pr.Low, P., 2013. Trading free: The GATT and US trade policy. Twentieth Century Fund.
Jensen, T., Vatrapu, R. and Bjørn‐Andersen, N., 2018. Avocados crossing borders: The problem
of runaway objects and the solution of a shipping information pipeline for improving
international trade. Information Systems Journal, 28(2), pp.408-438.
Limao, N. and Venables, A.J., 2011. Infrastructure, geographical disadvantage, transport costs,
and trade. The World Bank Economic Review, 15(3), pp.451-479.
McGovern, E., 2018. International trade regulation (Vol. 2). Globefield Press.
Pauwelyn, J.H., Guzman, A. and Hillman, J.A., 2016. International trade law. Wolters Kluwer
Law & Business.
Singer, D.A., 2007. Regulating capital: Setting standards for the international financial system.
Cornell University Press.
Viner, J., 2016. Studies in the theory of international trade. Routledge.

International Trade P a g e | 15
Yeats, A.J., 2014 Shipping and development policy: An integrated assessment. Praeger
Publishers.
Chan, H.K., Zhang, H., Yang, F. and Fischer, G., 2015. Improve customs systems to monitor
global wildlife trade. Science, 348(6232), pp.291-292.
García, M., 2015. The European Union and Latin America:‘Transformative power Europe’versus
the realities of economic interests. Cambridge Review of International Affairs, 28(4), pp.621-
640.
Wasser, S.K., Brown, L., Mailand, C., Mondol, S., Clark, W., Laurie, C. and Weir, B.S., 2015.
Genetic assignment of large seizures of elephant ivory reveals Africa’s major poaching
hotspots. Science, 349(6243), pp.84-87.
Chan, H.K., Zhang, H., Yang, F. and Fischer, G., 2015. Improve customs systems to monitor
global wildlife trade. Science, 348(6232), pp.291-292.
Bridge, M.G., 2017. The International Sale of Goods. Oxford University Press.
Klein, M., 2018. When Economists Agree, but (Many) Others Do Not: Dueling Narratives on
International Trade. Fletcher F. World Aff., 42, p.5.
Brack, D., 2017. International trade and the Montreal Protocol. Routledge.
Howse, R., Eliason, A. and Trebilcock, M., 2005. The regulation of international trade.
Routledge.
Murray, C. and Cleave, B., 2005. Schmitthoff's export trade. Sweet & Maxwell.
Cass, D.Z., 2005. The constitutionalization of the World Trade Organization: legitimacy,
democracy, and community in the international trading system. OUP Catalogue.
Marvel, H.P. and Ray, E.J., 2013. The Kennedy Round: Evidence on the regulation of
international trade in the United States. The American Economic Review, 73(1), pp.190-197.

International Trade P a g e | 16
Appendix

International Trade P a g e | 17
https://transporteca.co.uk/shipping-process/

International Trade P a g e | 18
References
.
.