International Sell- Purchase Contract – Procedure & Comments 10/05/2006

Procedure - 1 Seller and Buyer conclude a sales contract, with method of payment usually by letter of credit (documentary credit).

Essential Clauses of the Contract Description of GOODS Specification + Quality & Quantity Price Terms of payment Terms of delivery

Quality Identification by inspection by types/specifications numbers referenced to catalogues, leaf-lets, web-sites, and other official corporative sources by personal testing – auctions by detailed descriptions plans, manuals, drawings, agendas, etc. by useful outputs ETC (agreed by the both Parties)

Methods of Payment in International Trade - Risk Spectrum HIGH EXPORTER RISK LOW LOW IMPORTER RISK LOW HIGH TRADE TERMS Open Account Documents Against Acceptance Documents Against Payment Time Letters of Credit Sight Letters of Credit Payment in Advance

Procedure - 2 Buyer applies to his issuing bank, usually in Buyer's country, for letter of credit in favor of Seller (beneficiary).

Procedure Issuing bank requests another bank, usually a correspondent bank in Seller's country, to advise, and usually to confirm, the credit.

Procedure - 4 Advising bank, usually in Seller's country, forwards letter of credit to Seller informing about the terms and conditions of credit.

Procedure - 5 If credit terms and conditions conform to sales contract, Seller prepares goods and documentation, and arranges delivery of goods to carrier.

Procedure - 6 Seller presents documents evidencing the shipment and draft (bill of exchange) to paying, accepting or negotiating bank named in the credit (the advising bank usually), or any bank willing to negotiate under the terms of credit.

Procedure - 7 Bank examines the documents and draft for compliance with credit terms. If complied with, bank will pay, accept or negotiate.- GASTRONOM Case

Procedure - 8 Bank, if other than the issuing bank, sends the documents and draft to the issuing bank.

Procedure - 9 Bank examines the documents and draft for compliance with credit terms. If complied with, Seller's draft is honored.

Procedure - 10 Documents release to Buyer after payment, or on other terms agreed between the bank and Buyer.

Procedure - 11 Buyer surrenders bill of lading to carrier (in case of ocean freight) in exchange for the goods or the delivery order.

Delivery Order A document from the consignee, shipper, or owner of freight ordering the release of freight to another party. Bank Delivery Order to an Airline -- A letter addressed to an air carrier from a bank who is shown as consignee on an airwaybill instructing the carrier to release a shipment. Often airlines will accept as a delivery order a bank's endorsement on the airwaybill, although an airwaybill is a non-negotiable document.

Delivered Ex Ship (named port of destination) " DES" means that the seller delivers when the goods are placed at the disposal of the buyer on board of the ship not cleared for import at the named port of destination.

Delivered Ex Ship - 2 The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination before discharging. If the parties wish the seller to bear the costs and risks of discharging the goods, then the DEQ term should be used.

SELLER’S RESPONSIBILITY BUYER’S RESPONSIBILITY GOODS HANDLING SELLER’S RISK SELLER’S COST GOODS HANDLING BUYER’S RISK BUYER’S COST PORT OF DESTINATION EXPORTATION CUSTOMS CLEARENCE IMPORTATION CUSTOMS CLEARENCE POINT OF DESTINATION

Checklist: The following points should be kept in mind when choosing an Incoterm. What method of transport is to be used? What are the terms currently used? Are there any company policies on which terms should be used and how much responsibility should be taken?

Checklist: Are there any restrictions on the term to be used imposed by the country of importation? Are there any commercial norms in the country with which you are dealing? Discuss the terms to be used with your trading partner - it is important to take their point of view into account.

Checklist: Ensure that both parties understand and can carry out their obligations. Ensure that you are able to obtain enough information to give a quote for a certain Incoterm. Read Incoterms The introduction gives good advice and can clarify certain issues and the individual terms themselves are accurately described.

Checklist: Ensure all staff (especially those involved in sales and marketing) are properly trained in order to understand the basic principles of Incoterms and in particular the details of the individual Incoterms. Incorporate the terms decided into all relevant commercial paperwork such as invoices, quotations, terms and conditions of sale. Review the terms periodically and change them if necessary.

INCOTERMS REGULATE: distributions of documents, delivery conditions, distrubution of operation costs and distributions of operation risks. INCOTERMS DOES NOT REGULATE: legislation applicable to points not reflected in Incoterms, payment method of the operation.

Goods Seller Provide the goods, commercial invoice or electronic message, and other documentation as required by the sales contract. Buyer Accepting GOODS delivered

Payment Pay for the goods as provided in the sales contract.

Licenses and Customs Formalities Obtain at own risk and cost any export licenses and authorizations and carry out all export formalities and procedures, including those associated with transshipment to the named port of destination. Obtain and pay costs of all import licenses and authorizations and carry out all import formalities.

Carriage and Insurance Contract for and pay all costs of carriage and transshipment (if necessary) to the named place and port of destination. No obligation to provide insurance. No obligation to the seller for either carriage or insurance.

Delivery Make the goods available to the buyer uncleared for import on board the vessel at the named place and port on the date or within the time period specified in the sales contract. Take delivery of the goods once they are made available at the port.

Risk Transfer Assume all risks of loss or damage to the goods until they have been made available to the buyer at the named place and port. Assume all risk of loss or damage from the time the goods have been made available at the port.

Costs Pay all costs until the goods have been delivered, including all export formalities, carriage and transshipment (if necessary) to the named place and port. Pay all costs for the goods once they have been made available at the port including unloading. Pay all costs relating to import formalities including duties, taxes and other charges.

Notices Provide sufficient notice of dispatch and projected arrival that the buyer can take appropriate action to arrange pick-up of the goods. If, according to the sales contract, the buyer is able to specify a time for and/or a place of delivery, to give the seller sufficient notice.

Proof of Delivery, Transport Documents Provide the buyer with the delivery order and/or a transport document enabling the buyer to take delivery of the goods at the port of destination. Accept the seller's transport document so long as it is in conformity with the sales contract.

Proof of delivery is a method to establish the fact that the recipient received the contents sent by the sendor.

Checking, Packing, Marking SELLER ___Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide appropriate packing (unless the goods are traditionally delivered unpackaged) as required for the transport of the goods, to the extent that the buyer has made transport circumstances known to the seller prior to the execution of the sales contract. Provide marking appropriate to the packaging.

Inspection(s)- BUYER ___ Pay for the costs of pre- shipment inspection(s) except inspections required by the country of export.

Other Provide the buyer at the buyer's request, risk and expense any and all assistance in securing documentation originating in the country of export or of origin required for import. Provide the buyer with information necessary to obtain insurance. Provide the buyer with information necessary to obtain insurance. Pay all costs associated with securing documentation from the country of origin or export required for import. Reimburse seller for costs in providing such documentation or assistance.

STRUCTURE of CONTRACT CONTRACT No 200_, Moscow ABC, hereinafter referred to as the «Buyer», represented by abc, on the one part, and XYZ, hereinafter referred to as the «Seller», represented by xyz, on the other part, have concluded the Contract on the following:

1. SUBJECT OF THE CONTRACT The Seller has sold and the Buyer has bought on the basis of CIP as per INCOTERMS 2000 the Equipment indicated in the Attachment No l. The scope of work to be performed by the Seller consists of supply of the equipment and fulfillment of the service, specified in Attachment No l.

2.CONTRACT PRICE The total value of the contract amounts to XXX,XXX.YY USD (write out figures by words) including: the equipment price YYY,YYY.yyUSD the service price ZZ,ZZZ.zz USD and is understood CIP (POD), the cost of packing and marking included. The total contract value and prices for each contract item of the equipment and the service are specified in Attachment No 1.

3. TERMS OF PAYMENT 3.1. All payments under this contract are made in US Dollars by T/T remittance. 3.2 Advance payment in the amount of one hundred percent (100%) of the total value of the contract USD XXX ( in writing ) shall be paid by the Buyer to the Seller against the Seller's invoice within YY (in writing ) days from the date when the Seller make out an invoice to the Buyer

4. TERMS OF DELIVERY 4.2.The delivery date of the equipment shall be considered the date of air waybill and/or multimodal transportation, to be issued by the first Seller's forwarder or carrier. The arrival date of the equipment is the date of arrival of the equipment at the customs warehouse in POD 4.3. The Consignee under the contract is as follows: Consignee: DATA

4.4. The name of Sellers forwarder or carrier and transportation route are to be confirmed by the Seller to the Buyer by fax message not later than XX days before the shipment date Prior delivery of the equipment is allowed after the Buyer's consent only. 4.6.Shipping documents of each shipment (lot) of the equipment shall include: invoice; packing List; waybill; insurance policy.

4.7.The Seller shall send by fax to the Buyer a shipping advice on shipment with attached invoice and packing list not later than XX before the shipment date. The following data shall be specified in the shipping advice: contract No; invoice No; invoice amount; description of the equipment; port of loading; port of destination; consignee name; shipping date; AWB No; Flight No; B/L No; Vessel name; Number of packages; Gross weight; Measurements/volume.

Summary: Doing Business in ANYWHERE… Remember…… “Experience is the name every one gives to their mistakes…” (Oscar Wilde)