INCOTERMS, Trade Documents and International Payment Rules

INCOTERMS

INCOTERMS:

• E (EXW): Seller makes goods available at their own premises.
• F (FCA, FAS, FOB): Seller delivers goods to a transport chosen by buyer.
• C (CFR, CIF, CPT, CIP): Seller contracts transport and risk transfers.
• D (DAP, DAT, DDP): Seller bears all costs and risks until delivery.

ICC Rules

ICC rules: UCP 600 (documentary credits); URDG (demand guarantees); URBPO (bank payment obligations); ISBP (international standard banking practice); URF (forfaiting); URR (bank-to-bank reimbursement under documentary credits); URC 522 (collections).

UNCITRAL: UN commission that harmonises international trade law through agreements, model laws, guides and recommendations. Conventions unify law on a subject and enter into force when enough countries ratify or adhere.

Types of Documents

1. Financial: Bills of exchange, cheques, promissory notes.

2. Commercial (invoice): Sale and amount charged.

Commercial (transport and insurance): Bill of Lading, CIM, Air waybill, CMR.

3. Commercial (admin and customs): Certificate of origin, EUR-1, EUR-2, SAD, DV1.

Others: Health, Veterinary, Phytosanitary, Licences.

Endorsements, Avals and Bills of Exchange

Endorsement: Transfers the rights in a bill to another party (Blank = signature only; Full = names the new holder). It must be written on a bill or an allonge.

Aval: Guarantee of payment provided by a third party.

Bill of exchange: Drawer orders drawee to pay a specific amount to a third party (issued by creditor).

Foreign Bank Accounts

Foreign bank accounts: Report to the Bank of Spain and present form DD1-ETE within 30 days when opening; and DD2 & DD2bis-ETE monthly and annually for transactions.

Report to the tax agency with Form 720: accounts in foreign institutions, securities, rights, insurance policies and income held abroad, and real estate or rights abroad (usufruct).

Cash Pooling

Cash pooling: links accounts in Spain with those abroad. Satellite cash pooling: same with multinational group's accounts.

SEPA

SEPA = Single Euro Payments Area.

• 2008: Credit transfers began.
• 2009: Direct debits.
• 2014: Migration completed.

ERBP replaces SEPA in 2013.

Causes of Defaulting

Commercial risk, country risk, extraordinary risk. CAGE is used to prevent problems; levels: Financial, Administrative, Legal, Other.

Sales Contract

• 1. Consensual: Contract is formed when the parties agree.
• 2. Bilateral: Both have obligations.
• 3. Onerous: Both exchange something of economic value.
• 4. Commutative: Obligations and receivables are known.