7. F. a. s. vessel (named port) (free alongside).—(a) Seller transports goods to seaboard; stores goods in warehouse until arrival of vessel; and places goods alongside vessel either in lighter or on the wharf and provides the usual dock or ship's receipt-unless buyer's obligation includes provision of shipping facilities. (b) Buyer pays cost of hoisting goods into the vessel where weight is too great for ship's tackle and assumes all further expense of transportation to destination thereafter, including maritime insurance.

8. F. o. b. vessel (named port).—(a) Seller meets all charges incurred in placing goods actually aboard the vessel, and provides the usual dock or ship's receipt. (b) Buyer bears all subsequent transportation costs.

9. C. & f. (named foreign port) (cost and freight).—(a) Seller makes freight contract and pays transportation charges to destination named. Also delivers to buyer or his agent clean ocean bills of lading. (b) Buyer takes out and pays necessary marine insurance and pays for transportation beyond foreign port named.

10. C. i. f. (named foreign port) (cost, insurance, and freight).—(a) Seller assumes above expenses and, in addition, takes out and pays necessary marine insurance. (b) Buyer assumes only cost of transportation beyond foreign port named. He also pays foreign import duties and consular fees.

WHERE THE RESPONSIBILITY ENDS

In each of the above contingencies, the responsibility of the exporter for loss or damage does not necessarily terminate at the point where the obligation for transportation charges ends. The following indicates where the responsibility of the seller, for loss or damage, ends and that of the buyer begins in each case:

1. F. o. b. (named point).-Seller is responsible for loss or damage until goods have been placed in cars, or other means of conveyance at point named, and clean bill of lading or other receipt from carrier obtained.

2. F. o. b. (named point). Same as No. 1.

3. F. o. b. (named point).

Same as No. 1.

Freight prepaid to (named point on seaboard).—

Freight allowed to (named point on seaboard).—

4. F. o. b. cars (named point on seaboard).—Seller is responsible for loss or damage until goods have arrived in or on cars at the named port.

5. F. o. b. cars (named point on seaboard). 1. c. l.-Same as No. 4. 6. F. o. b. cars (named port). Lighterage free.-Same as No. 4.

7. F. a. s. vessel (named port).—Seller responsible for loss or damage until goods have been delivered alongside the ship or on the wharf within reach of the ship's loading tackle.

8. F. o. b. vessel (named port).-Seller responsible until goods have been placed on vessel.

9. C. & f. (named foreign port).—Seller is responsible until goods have been delivered within reach of the ship's tackle and ocean bill of lading obtained. Buyer is responsible for loss thereafter, even though seller prepays the ocean freight.

10. C. i. f. (named foreign port).—In addition to above, seller is responsible until marine insurance policy or negotiable insurance certificate has been delivered to the buyer or his agent. Buyer is responsible for loss thereafter, and must make all claims against marine insurance underwriters or steamship company.

TERMS OF SALE: DELIVERY DATE

One of the most important points to be clearly determined in any sales contract is the date of delivery of the goods by the seller into the custody of the buyer. In export sales this factor becomes of relatively greater moment than in domestic sales, because of the infrequency of ocean sailings to many export destinations. It is desirable, therefore, for the seller to designate, within as narrow a margin as possible, the exact date on which the goods will be delivered to the buyer or his agent, either at the factory or the port on f. o. b. ship

ments, or to stipulate ocean shipment within certain definite periods in c. & f. or c. i. f. shipments. The buyer then knows when to expect the goods abroad and may make his financial and selling arrangements accordingly. (See fig. 11.)

We trust that the merchandise and documents reach you promptly and in good order.

Very truly yours,

FOREIGN DIVISION - NEW YORK

BY:

Figure 11.-Advice of draft.

QUALITY DESCRIPTIONS AND INSPECTION

Another cause of misunderstanding between buyer and seller in export trade arises from the designated quality of the goods. Many exporters often feel that they can, with impunity, substitute goods for those that are specifically designated in a foreign order. When this is done, such action should receive the definite authorization of the buyer in advance of shipment, to avoid difficulties. In other cases, descriptions and classifications of the goods in the quotation may be so vague as to cause misunderstanding. In regard to many staple commodities sold against letter of credit, on grade designation entirely, such as raw cotton, the buyer provides for inspection or warehouse

certification of the goods before shipment, to avoid loss due to deviation from standard grade. Inspection before shipment is also provided in many sales contracts on expensive machinery or equipment. Inspection certificates are sometimes stipulated as necessary documentary evidence to be furnished a bank before an exporter may present his drafts against a letter of credit and have them honored. A complete understanding on quality is highly essential in any export quotation, and the goods should be described in any offer with the greatest clarity to avoid future complications. Goods sold against sample should also measure up fully to the sample submitted to the foreign customer to avoid dispute.

QUOTING THE PRICE

The currency in which the price is quoted is usually the currency in which the draft is payable. A price quoted in pounds sterling should not be followed by a draft in dollars, unless the quotation specifically states that such action will be taken. This factor is most important today, with "blocked" currencies the rule rather than the exception. A dollar quotation places the burden on the buyer, to provide the necessary dollars when the draft is presented in exchange for his local currency. Any adverse fluctuation in the rate of exchange is consequently his loss and not that of the exporter. Interest charges are always for account of the buyer, unless otherwise stated. Where dollars are difficult to obtain abroad and delayed remittance is expected, exporters may arrange, therefore, that interest charges for the amount of the dollar draft from date or sight until proceeds are returned to them, shall be for the account of the buyer, by quoting the price simply as c. i. f., for example. Where the exporter wishes to assume the interest he may quote c. i. f. & i. (cost, insurance, freight, and interest). Some misunderstanding may also arise as to the unit for which the price is quoted. This can be avoided by stating specifically the unit-for example, "Per case of 24 1-pound cans"in the original quotation.

FORM OF PAYMENT

It is well to designate definitely in the quotation the form of payment. This may be part or all cash with order, draft, letter of credit, or acceptance. The buyer then knows what to expect when he accepts the quotation, or he may make a counter proposal as to the form of payment. Part cash with order is usually stipulated where shipments of goods not readily resalable are ordered from markets remote from the centers of trade. It is a form of guaranty that the draft will not be refused, or, if it is refused, that the cash paid will compensate the exporter for his loss in disposing of the goods abroad or shipping them back home. In some countries, however, part payment in advance constitutes an interest in the goods regardless of the buyer's refusal to pay the draft. Straight drafts are commonly used for small shipments of readily resalable goods to important trade centers abroad. Letters of credit are stipulated where absolute assurance of payment is desired, as in the case of large shipments of staples or of expensive machinery or equipment, specially manufactured to order. Acceptance financing may be desirable in the case of similar shipments where the

exporter (with or without the guaranty of a letter of credit) believes he can finance the shipment to better advantage in his own money Inarket.

METHOD OF PAYMENT: SIGHT AND DATE DRAFTS

Further refinement of the form of payment is often desirable in making a quotation. The seller may indicate that he will draw either at sight, so many days after sight (of the draft by the drawee) or so many days after the date of the draft. Sight drafts are desirable where the time consumed by the goods and documents en route to destination is uncertain and likely to vary to a considerable extent. On the other hand, shipments made to nearby destinations can be time or date drafts with reasonable assurance that the goods will arrive some time in advance of the date the draft must be met. As transportation facilities improve and the time required in shipment becomes more certain, date drafts have come into preference because of the fixed maturity. (See fig. 12.)

The terms to be included in an export letter of credit to be opened by the buyer in favor of the seller may be included in the seller's quotation. He may designate "October shipment," which means that a letter of credit opened in his favor should stipulate shipment any time during October, after which it would have to be extended by the buyer before drafts drawn against it would be honored by the bank. The seller may stipulate the currency in which the letter of credit is to be opened, by quoting in that currency. He may indicate the various documents that can be furnished, such as inspection certificate, or official health certificates (on cattle shipments), and may stipulate in the quotation whether the letter of credit is to be revocable or irrevocable and its duration. Whether or not he has the letter confirmed upon receipt by the notifying bank is no concern of the buyer.

DESIGNATION AND HANDLING OF DOCUMENTS

The seller may stipulate in the quotation not only what documents he will furnish but also how they are to be handled. He may wish to

quote "cash against documents"-which means that he will ask his bank not to surrender the documents, including the ocean bill of lading drawn "to order" and carrying title to the goods, until the draft has been paid. Another way of specifying this method of payment is to use the letters D/P (documents against payment). If he wishes to extend credit on the shipment he may offer D/A terms (documents against acceptance). Many firms specify the kind and amount of marine insurance they will furnish under a c. i. f. quotation.

CODES, THEIR USE AND MISUSE

A great deal of our export selling involves the use of cables and radio, and messages are coded for reasons of both economy and secrecy. There are many excellent code books put out by private publishers, containing many of the phrases in common use in quoting. Some of them specialize in certain groups of commodities. Some exporters designate each item of merchandise in their export catalog by a code word, so that it can be referred to specifically in quoting and in receiving orders from abroad. Others arrange special phrases to meet the peculiar circumstances surrounding their business and, by using the code words that are listed without phrases in most commercial code books, send copies of these private or special codes to their customers for their use in special circumstances. A clear and concise quotation, however, can save both the exporter and his customer abroad thousands of dollars a year in unnecessary cabling. If every necessary item in the quotation is set forth, if the obligations, and responsibilities assumed by each are definitely understood, if the terms of sale are defined with care and thoroughness, and if the form and method of payment are so described as to leave nothing to the imagination, not only will cable expense be cut down but countless misunderstandings between the two parties will be largely eliminated.