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As an importer, you should determine the exporter's price and which elements of the transport cost are included in that price. This is usually indicated by the trading term that the exporter quotes immediately after the selling price. It's important to know which trading term is quoted because it represents significant differences in the exporters selling price.
The most common trading terms are:
ex works - the price quoted is for supply of the goods at the seller's warehouse. It doesn't include any element of the cost of transportation and insurance
FOW (Free on Wharf) - the price includes cartage to wharf but excludes wharfage fees
FAS (Free Alongside Ship) - includes cartage and wharfage, but not the cost of loading on board the vessel (i.e. crane hire, heavy lift charges, etc.)
FCA (Free Carrier) - the seller delivers the goods to the carrier at a place nominated by the buyer
FOB (Free on Board) - one of the most common trading terms, includes all charges incurred in cartage and loading the goods on board the vessel
CFR (Cost and Freight) - includes all FOB charges plus freight up to the port of discharge
CIF (Cost Insurance and Freight) - all charges including freight and insurance up to the port of discharge
CIFC (Cost Insurance Freight and Commission) - a CIF price that also includes a commission payable to the Exporter's agent
FIS (Free Into Store) - the exporter pays all charges incurred in delivering the goods to the importers premises including wharfage duty and inland cartage
There will be significant differences in price for the same product order depending on which trading term the quote includes, for example, ex works or FIS.
It's only by identifying all of the following costs and knowing whether or not they're a part of the exporter's selling price, that you can determine the 'Free Into Store' price of the goods, and if they can be re-sold at a profitable price.
With the exception of an ex works price, this will be included in the exporter's price. Cost may be determined from either the exporter or importers forwarding agent.
Charges can be ascertained from exporter, forwarding agent, shipping company or airline.
Freight rates can be obtained from forwarding agent, shipping company or airline.
These can be ascertained from forwarding agent, shipping company, airline or customs broker. Note that very often, port charges at both loading and discharge points are included in freight rate or quoted as a basic service rate (BSRA) additional to the freight rate.
Importers should obtain a quotation from a licensed customs broker for the work involved in clearing the goods from customs control.
Importers should seek advice from their customs broker or from the Australian Customs Service, Tariff Advice Section as to the rate of duty that would apply to the goods they wish to import. They should also enquire if there are any restrictions, quotas or special requirements that would affect importation. The value of the goods for the purposes of assessing customs duty is their value at the point of exportation, which approximately equals the FOB value.
Consult a customs broker or your tax accountant about GST and imported goods. Typically GST is levied at 10 percent of the total order price, including transport costs.
Can be obtained (if applicable) from a customs broker.
Cost can be obtained from cartage company, forwarding agent or customs broker.
Can be arranged by most forwarding agents or through insurance underwriters or brokers.
In addition to the above, the payment terms agreed between you and your exporter may involve bank charges that must also be taken into account when fixing the re-sale price of the goods. If the transaction has been covered by a forward exchange contract then the cost of forward cover should also be taken into account.
These will always be the subject of negotiation between you and the exporter. You should consult your bank manager or accountant for assistance in determining the most appropriate method of payment. The most commonly used methods of payment are:
Cash in Advance - remittance by the importer prior to shipment
Letter of Credit - an undertaking given by a bank on behalf of the importer to pay an exporter, through the agency of a correspondent bank overseas, an amount of money at sight (documentation being presented to the bank) or at a determinable future date provided that certain terms and conditions are fulfilled. A confirmed irrevocable Letter of Credit can't be cancelled or amended without the consent of the beneficiary
Sight Draft (D/P) - the shipping documents, under cover of a Bill of Exchange drawn at sight are delivered by the exporter to their bank who transfers them to the importer's bank. The importer's bank will surrender the documents to the importer upon payment of the face value of the Bill of Exchange
Term Draft (D/A) - the shipping documents are transferred in a similar manner to a Sight Draft transaction. However, in this case the Bill of Exchange is drawn at a fixed or determinable future date e.g. 30th November, 30 days/ 60 days/ 90 days after sight, 30 days from date of Bill of Lading, etc. Documents are surrendered to the importer against an undertaking (usually in the form of an endorsement on the reverse of a Bill of Exchange) to pay when the Bill matures
Open Account - the exporter sends the documents directly to the importer who makes payment by means of a bank draft, telegraphic transfer, etc.
It's preferable to obtain import quotations and final invoices in Australian dollars ($A) in order to avoid adverse fluctuations in exchange rates. If this isn't possible, you should discuss with their bank manager the possibility of covering the exchange risk by taking out a forward exchange contract.