ICC Guide

Export/
to

Import
Global Standards for International Trade

Fourth edition
by Guillermo C. Jimenez
ICC Guide to
Export/Import
Global Standards for International Trade

Fourth edition
by Guillermo C. Jimenez
Copyright © 2012

International Chamber of Commerce

All rights reserved. This work was initiated by ICC which holds all rights as defined
by the French Code of Intellectual Property. No part of this work may be
reproduced or copied in any form or by any means – graphic, electronic, or
mechanical, including photocopying, scanning, recording, taping, or information
retrieval systems – without written permission of ICC SERVICES, Publications
Department.

ICC Services
Publications
Department 38
Cours Albert 1er
75008 Paris
France

ICC Publication No. 686E

ISBN: 978-92-842-0133-4
 FOREWORD

By Jean-Guy Carrier
Secretary General, ICC

Following a period of worldwide financial stress, the appearance of this

fourth edition of ICC Guide to Export-Import (formerly called Export-Import
Basics) is particularly timely. International trade, which has consistently
been one of the primary engines of increasing global prosperity for
decades, slowed in some nations and even declined in others. The
challenges of economic turbulence, however, underscored the importance of
professional knowledge in the field of international trade. In this economic
environment, when export earnings and import efficiency are so important to
a nation’s economy, it is vital that traders have the tools enabling them to
more effectively do their jobs.

For individuals and for companies large and small wishing to profit from
global trade, exporting and importing can be an intimidating process. While
risk is a factor in all business transactions, international trade involves
additional risks - transport risks, legal risks, risks of non–payment, of
receiving poor quality goods and of exchange rate fluctuations. ICC Guide
to Export-Import provides basic guidance for beginning traders as well as a
detailed, informed overview of international trade practice that can benefit
sophisticated traders wishing to improve the way they sell and receive
goods from abroad.

This widely acclaimed book has helped a generation of exporters and

importers learn the tools of their trade. This, the fourth edition, has been
completely updated with an extended analysis of new rules, such as Incoterms®
2010, ICC’s internationally recognized trade terms, and with chapters on
customs and intellectual property, included here for the first time.

At the International Chamber of Commerce (ICC), which was established

almost a century ago to fight for freer trade, we have a keen appreciation of the
content found in these pages and the lucidity with which it is presented.
Whether by the creation of contractual rules - such as Incoterms and the
Uniform Customs and Practice for Documentary Credits (UCP)
- or by advocating the cause of more open trade before governments and
international organizations, ICC has fulfilled that mission consistently through
the years. The publication of this fourth edition of ICC Guide to Export-Import
is yet another of the practical tools for trade that ICC provides to the world
business community.

February 2012

3
 ACKNOWLEDGEMENTS

As a policy executive at the International Chamber of Commerce I was fortunate to

participate in exciting work on Incoterms, the Uniform Customs and
Practice for Documentary Credits and the ICC Model Contracts. I
developed a deep appreciation and respect for the central role played by
ICC in global commerce. Having spent the rest of my career either working
directly with the many invaluable and indispensable ICC tools for
international trade, or traveling the world to discuss and teach ICC materials
to eager trade students and professionals, I have become even more grateful
to this unique organization and to all the men and women who have
contributed to its growth over the years.

I would especially like to acknowledge the efforts of ICC Publishing’s Philip

Kucharski and Ron Katz in launching, guiding and supporting the 4th edition
of this Guide. Many thanks also to ICC Publishing’s excellent creative and
production staff, in particular Anouk Leibig van Huffel.

One of ICC’s remarkable services to world trade is to serve as a

professional forum and think tank for many of the world’s top experts in
international trade and commercial law. I was fortunate to obtain the
assistance of several of these noted authorities in the revision of this volume.
In particular, I would like to thank Anthony Barone, Fabio Bortolotti, Charles
Debattista, Donald Smith, Dan Taylor and Koen Vanheusden.

ICC Secretariat policy executives and managers have also been

extraordinarily helpful in editing and checking the text, and I would
especially like to thank Stefano Bertasi, Ayesha Hassan, Emily O’Connor,
Camilla Pagnetti, Viviane Schiavi, Thierry Sénéchal and Daphne Yong d’Hervé.

Guillermo C.
Jimenez New York,
2012

4
 TABLE OF CONTENTS
FOREWORD.................................................................................................................................... 3

ACKNOWLEDGEMENTS.................................................................................................................. 4

A NOTE ON TERMINOLOGY................................................................................................................. 11

CHAPTER ONE: INTRODUCTION TO EXPORT-IMPORT PRACTICE.................................................................13

1.1 Scope of book...................................................................................................................... 13

1.2 Commercial sales and the law................................................................................................. 13
1.3 The risks of exporting and importing......................................................................................... 13
1.4 Standard documents and systems: understanding “documentary sales”.............................................15
1.5 Cultural and language differences............................................................................................ 16
1.6 Solutions: examples of risk management for export-import..........................................................17
1.7 International organizations and chambers of commerce...............................................................18
1.7.1 Chambers of commerce.......................................................................................... 18
1.7.2 ICC, supplier of global standards for international trade................................................18
1.7.3 International organizations involved in international trade.............................................20
1.8 The multilateral framework for world trade: the World Trade Organization (WTO).............................21

CHAPTER TWO: OVERVIEW OF AN EXPORT/IMPORT TRANSACTION: THE DOCUMENTS...................................23

2.1 Documents and sequence of events in an export transactions......................................................23
2.2 Transport: the freight forwarder............................................................................................... 26
2.3 Examination of the documents by the bank: the problem of discrepancies.....................................27
2.4 Liability of carriers and coverage of insurance............................................................................28

CHAPTER THREE: FOCUS ON INCOTERMS® 2010: STANDARD TRADE TERMS..............................................43

3.1 Introductory........................................................................................................................ 43
3.2 Changes in Incoterms® 2010.................................................................................................. 51
3.3 Summary of Incoterms® 2010................................................................................................ 53
3.4 Division of costs, risks and responsibilities.................................................................................58
3.5 Miscellaneous points............................................................................................................ 58

CHAPTER FOUR: INTERNATIONAL TRADE LAW.......................................................................................63

4.1 The legal environment of the export/import transaction................................................................63

4.2 Managing legal risk by drafting complete and precise international contracts..................................64
4.3 Major legal systems: civil law, common law and Shari’a..............................................................66
4.4 Jurisdiction and choice of law................................................................................................. 67
4.5 International trade and the U.N. Convention on Contracts for the International Sale of Goods (“CISG”)......68

5
ICC Guide to Export-Import 4th edition

4.6 Performance, breach of contract and remedies for breach of contract.............................................70

4.7 Contract negotiations and pre-contractual liability.......................................................................72
4.8 Model or standard contracts in international trade......................................................................74

CHAPTER FIVE: FOCUS ON INTERNATIONAL SALES: THE ICC MODEL INTERNATIONAL SALE CONTRACT*.........75

5.1 Export/import transactions and the ICC Model International Sale Contract.......................................75
5.2 Commercial practice: transactions based on pro forma invoice, purchase order and/or standard contracts. 77
5.3 Distinguishing sale contracts from other international business transactions....................................78
5.4 How to use the ICC Model International Sale Contract..................................................................79
5.5 Who should use the ICC Model International Contract of Sale?......................................................80
5.6 Key clauses and provisions in the ICC Model International Contract of Sale....................................80

CHAPTER SIX: INTERNATIONAL DISPUTE RESOLUTION: INTERNATIONAL LITIGATION, ARBITRATION AND ADR....89

6.1 Preparing an international dispute resolution strategy..................................................................89

6.1.1 Why dispute resolution is vital..................................................................................89
6.1.2 Discuss dispute resolution during contract negotiation and drafting.................................90
6.2 After a dispute arises............................................................................................................. 90
6.2.1 Working it out - contractual foresight and adaptation clauses........................................90
6.2.2 Talking it over - waiver, re-negotiation, assistance of an expert......................................91
6.3 International litigation........................................................................................................... 92
6.3.1 Litigation............................................................................................................. 92
6.3.2 Where to bring suit: jurisdiction and choice of forum....................................................93
6.3.3 Choice of law and applicable law..............................................................................94
6.3.4 Enforcement of judgements.....................................................................................94
6.4 International commercial arbitration..........................................................................................94
6.4.1 Benefits of international commercial arbitration...........................................................94
6.4.2 Potential disadvantages.........................................................................................96

CHAPTER SEVEN: ICC ARBITRATION AND DISPUTE RESOLUTION SERVICES................................................97

7.1 ICC Arbitration...................................................................................................................... 97

7.2 ICC arbitration clause............................................................................................................. 98
7.3 ICC Court and Secretariat......................................................................................................... 98
7.4 The arbitrator(s).................................................................................................................... 99
7.5 ICC arbitration procedures..................................................................................................... 100
7.6 The 2012 revision of the ICC Rules.........................................................................................102
7.7 DOCDEX........................................................................................................................... 104
7.8 ICC ADR (Alternative Dispute Resolution)...................................................................................104
7.8.1 ICC ADR Rules...................................................................................................... 105

6
 Table of Contents

7.8.2 Commencing ICC ADR proceedings..........................................................................105

7.8.3 The procedure in ICC ADR proceedings.....................................................................105
7.8.4 Result of ICC ADR proceedings................................................................................106
7.9. The ICC Dispute Board Rules.................................................................................................. 106
7.10 Appointment of an expert...................................................................................................... 107

CHAPTER EIGHT: INTRODUCTION TO INTERNATIONAL PAYMENTS............................................................109

8.1 Overview.......................................................................................................................... 109

8.2 Payment methods in practice................................................................................................. 112
8.3 Managing currency and exchange rate risks............................................................................115
8.4 Documents required for trade payments..................................................................................117

CHAPTER NINE: FOCUS ON DOCUMENTARY CREDITS AND THE UCP........................................................121

9.1 Introduction....................................................................................................................... 121
9.2 Rules for letters of credit: the UCP 600...................................................................................125
9.3 Basic concepts and terminology............................................................................................. 126
9.4 Example: procedure for an irrevocable confirmed credit.............................................................129
9.5 Independence and strict compliance: the basic principles of D/C practice......................................133
9.6 Checklist: recommendations for letter of credit practice..............................................................136
9.7 The electronic supplement to UCP 600 (eUCP).........................................................................137

CHAPTER TEN: SHORT-TERM TRADE FINANCE: FACTORING AND FORFAITING............................................141

10.1 Financing export receivables: factoring and forfaiting.................................................................141
10.2 Factoring: major features...................................................................................................... 142
10.2.1 Definition........................................................................................................... 142
10.2.2 Market scope..................................................................................................... 142
10.3 Factoring in practice............................................................................................................. 143
10.4 Advantages and disadvantages.............................................................................................. 145
10.5 Forfaiting: an in-depth look................................................................................................... 145
10.5 Definition........................................................................................................... 145
10.6 Forfaiting in practice............................................................................................................ 147
10.7 Advantages of forfaiting........................................................................................................ 150
10.8 Forfaiting rules and guidelines............................................................................................... 150
10.9 The risk of money laundering................................................................................................ 151

CHAPTER ELEVEN: SECURING INTERNATIONAL TRANSACTIONS: GUARANTEES, BONDS, AND STANDBY CREDITS....153
11.1 A note on terminology........................................................................................................... 153
11.2 Main uses of guarantees, bonds and standby credits.................................................................155

7
ICC Guide to Export-Import 4th edition

11.3 Difference between “demand” and “surety” instruments.............................................................156

11.4 ICC uniform rules for guarantees and bonds............................................................................158
11.5 ICC rules for standby credits: International Standby Practices (ISP98)..........................................160
11.6 Demand guarantee operation and procedure - direct vs. indirect..................................................162

CHAPTER TWELVE: INTERNATIONAL BUSINESS TRANSACTIONS: THE ICC MODEL CONTRACTS.....................163

12.1 International business expansion: paths to globalization.............................................................163
12.2 Using model contracts.......................................................................................................... 163
12.3 Organizations producing model contracts.................................................................................164
12.4 The ICC Model Contracts........................................................................................................ 164
12.4.1 ICC Model Sale Contract 164
12.4.2 ICC Model Commercial Agency Contract 164
12.4.3 ICC Model Distributorship Contract 165
12.4.4 ICC Model Short-Forms Contracts 165
12.4.5 ICC Model Selective Distributorship Contract 165
12.4.6 ICC Model Franchising Contract 165
12.4.7 ICC Model contract for Turnkey Supply of an Industrial Plant 165
12.4.8 ICC Model Turnkey Contract for Major Projects 166
12.4.9 ICC Model Occasional Intermediary Contract 166
12.4.10 ICC Model Transfer of Technology Contract 166
12.4.11 ICC Model Mergers and Acquisitions Contract 1 166
12.4.12 ICC Model Trademark License Contract 166
12.4.13 ICC Model Confidentiality Agreement 167
12.4.14 ICC ModelContracts in Development 167
12.5 Focus on agency and distributorship........................................................................................ 167
12.5.1 Choosing between agency and distributorship............................................................167
12.5.2 Drafting agency and distributorship contracts............................................................167
12.6 Law of agency contracts....................................................................................................... 170
12.7 Fundamental duties of agent and principal...............................................................................170
12.8 Agency and law/regulation: the case of the European Agency Directive 86/653 of 18 December 1986.. 171
12.9 Focus on: ICC Model Commercial Agency Contract.....................................................................171
12.9.1 Scope of application.............................................................................................. 171
12.9.2 Agents as employees............................................................................................ 172
12.9.3 Key clauses in agency contracts.............................................................................172
12.10 Focus on: ICC Model Distributorship Contract...........................................................................178
12.10.1 Characteristics of exclusive distributorship contracts..................................................178
12.10.2 Key clauses in distributorship agreements................................................................179
12.11 Focus on ICC International Franchising Contract........................................................................180

8
 Table of Contents

12.11.1 Introduction....................................................................................................... 180

12.11.2 Different types of franchises and franchising structures..............................................181
12.11.3 The ICC Model International Franchising Contract......................................................182
12.12 ICC Model Occasional Intermediary Contract (non-circumvention and non-disclosure agreement).....183

CHAPTER THIRTEEN: INTERNATIONAL TRANSPORT...............................................................................185

13.1 Introduction....................................................................................................................... 185
13.2 Transport management....................................................................................................... 185
13.3 International treaties and conventions.....................................................................................187
13.4 Carrier’s liability................................................................................................................. 188
13.5 Charter parties................................................................................................................... 189
13.6 Freight forwarders............................................................................................................... 191
13.6.1 Introductory....................................................................................................... 191
13.6.2 Different functions and types of forwarders...............................................................191
13.7 Shipping documents........................................................................................................... 192
13.7.1 Miscellaneous documents....................................................................................192
13.8 The bill of lading.................................................................................................................. 193
13.9 Sea transport..................................................................................................................... 196
13.9.1 Overview of basic commercial practice....................................................................196
13.9.2Sea freight......................................................................................................................... 197
13.10 Containerized and multimodal transport...................................................................................199
13.10.1 Containers and Incoterms......................................................................................200
13.10.2 Overview of basic commercial procedure.................................................................200
13.11 Air transport..................................................................................................................... 201
13.11.1 Introductory....................................................................................................... 201
13.11.2 Overview of air transport procedures.......................................................................202
13.12 Road and rail transport......................................................................................................... 203
13.12.1 Road haulage..................................................................................................... 203
13.13 Rail transport..................................................................................................................... 204
13.14 Cargo insurance................................................................................................................. 204

CHAPTER FOURTEEN:E-COMMERCE AND INTERNATIONAL TRADE: PRACTICE AND POLICY..........................209

14.1 Global e-commerce: practical considerations............................................................................209
14.2 Customs classification and Incoterms for e-commerce...............................................................209
14.3 Payment options for international online sales..........................................................................210
14.4 Customs classification information for global e-commerce.........................................................211
14.5 Legal rules and self-regulation in global e-commerce................................................................211
14.6 Data protection, privacy and e-commerce................................................................................214

9
ICC Guide to Export-Import 4th edition

14.7 Multilateral trade negotiations: world business objectives...........................................................215

14.7.1 Policy shaping forums, initiatives and approaches......................................................216

CHAPTER FIFTEEN: INTERNATIONAL BUSINESS AND INTELLECTUAL PROPERTY.........................................219

15.1 Overview of intellectual property (IP) issues in international business...........................................219
15.2 Trademark protection........................................................................................................... 220
15.2.1 International trademark protection should be cost-effective..........................................221
15.2.2 Domestic trademarks are not always eligible for foreign protection................................221
15.2.3 Madrid System for the international registration of trademarks.....................................222
15.2.4 Paris Convention for the Protection of Industrial Property (1883)...................................222
15.3 Patent protection................................................................................................................ 222
15.3.1 Patents under the Paris Convention.........................................................................222
15.3.2 Patent Cooperation Treaty or PCT............................................................................222
15.4 Copyright protection............................................................................................................. 223
15.4.1 The Berne Convention for the Protection of Literary and Artistic Works..........................223
15.5 Trade secrets...................................................................................................................... 223
15.6 Design protection............................................................................................................... 224
15.7 IP and the Internet: domain names and dispute resolution..........................................................224
15.7.1 Uniform Domain-Name Dispute-Resolution Policy (“UDRP”).........................................224
15.8 Counterfeiting.................................................................................................................... 225
15.8.1 Anti-Counterfeiting Trade Agreement (ACTA).............................................................225
15.9 ICC and intellectual property.................................................................................................. 225
15.9.1 BASCAP: ICC’s anti-counterfeiting initiative.................................................................225
15.9.2 Global IP Updates: The ICC Intellectual Property Roadmap for Business and Policy-makers....226

CHAPTER SIXTEEN: CUSTOMS AND ATA CARNETS................................................................................227

16.1 Customs clearance and import duties......................................................................................227
16.2 World Customs Organization and the Harmonized Tariff System...................................................227
16.3 Customs brokers and agents................................................................................................. 229
16.4 Export clearance: licences and quotas.....................................................................................229
16.5 Import customs clearance: duties and taxes.............................................................................229
16.6 Temporary imports and ATA Carnets........................................................................................ 231

EXPORT-IMPORT GLOSSARY............................................................................................................ 233

INDEX......................................................................................................................................... 259
ICC AT A GLANCE........................................................................................................................... 271
SOME ICC SPECIALIZED DIVISIONS.................................................................................................... 272
ICC PUBLICATION FOR GLOBAL BUSINESS..........................................................................................273