Maria's Blog

Supplying Computer Software under Documentary Credits

2014-03-23T16:27:00.000-07:00

Introduction
A Documentary Credit is a financial instrument where payment is guaranteed by the buyer as long as the seller ships the goods and this is verified by a third party (usually a shipping company) through the issuance of a transport document of some sort.

What happens, however, if the goods being shipped are not physically present to be shipped?

The growing paradox of supplying computer software
Computer software packages are a classic case in point. In the past it was possible (and with some types of software it still is) to physically ship the software in the form of CD discs. But this meant that the software could be easily stolen and used by other parties and a faulty CD could lead to a very frustrating situation for the buyer. In addition, the transmission of software data through a CD left a lot of software companies exposed to licensing fraud, even when customers signed licensing agreements, and recent developments in communications infrastructures globally has meant that software companies can control all purchases, local and international, through the concept of an electronic key.

In most cases this is a very fast and secure method of purchasing the software and has benefits, not only for the software companies, but for their customers as well.

However, what happens if the software is being purchased on behalf of an end user by an agent based in a different country, and is being paid for under a Documentary Credit? With the concept of an electronic key, where the goods are shipped direct from the software company to the end user electronically using e-mail addresses, how does the Seller prove shipment that will satisfy conditions on the Documentary Credit? Also, due to licensing agreements imposed by the software companies, can the Seller in one country even legally purchase the software on behalf of a Buyer in a different country? Sometimes not. Such questions need to be asked at the time of enquiry and double checked with the software company concerned. But even if it is legally possible, how can the Seller provide the right documents that would be both valid and acceptable to all parties concerned in the Documentary Credit supply chain?

The answer is that there are difficulties. The wording on the Documentary Credit would need to be such that somehow proof that a licence has been issued is clearly identifiable by the banks concerned and that the payment will be forthcoming even in the absence of a shipping document.

Alternatives to Documentary Credits
There are alternatives. The Applicant can issue a Standby Letter of Credit and if they don't pay in the time periods concerned, then the Seller has a guaranteed form of payment that can be called upon, but again the wording of the Standby and the documentation to be submitted as proof of a breach of contract, would need to clearly indicate that the goods were shipped as agreed. Or, in this case, transmitted as agreed. The question remains however, how does the Seller provide proof of transmission (issued by a third party) that will satisfy the bank and be easily identifiable as the real thing?

In my experience these are not easy questions to answer and although I would hesitate to state categorically that it is not possible to supply certain types of software under a Documentary Credit payment, I would have to say that it is complicated. That more often than not, the end result is an inability to supply the software, which can cause contractual problems and accusations of non-compliance with contractual terms.

Summary
The supply of computer software as part of an international transaction by a third party is becoming problematic, and due to the growing use of electronic keys as the preferred method of supply, sometimes virtually impossible to supply under Documentary Credit terms. I strongly advise that questions, such as those posed above, are asked prior to any contracts being signed, and, if the answers indicate that software can be supplied legally and without any confusion, that nevertheless constant checks are made during the lifetime of the contract that nothing has changed in the meantime.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the matters mentioned above, please do contact us by e-mail on info@point-point.com

Incoterms 2010 - C-terms - Incorrect usage and Terminal Handling Charges

2014-02-18T15:19:00.001-08:00

Introduction
The following advice is being supplied in response to a number of e-mail enquires recently received by Point to Point Export Services. There appears to be some misunderstanding about the correct usage of CFR and CIF under Incoterms 2010 and also a number of arguments about who pays for the terminal handling charges at the port of import under C-terms.

To summarise, there are 4 C-terms in Incoterms 2010. Under the new rules dated 2010 the International Chamber of Commerce (ICC) state that CFR/CIF should only be used with bulk sea shipment consignments and CPT/CIP should be used with all other types of shipment, including containerised sea shipments. Although this has been the case since January 2010, it is surprising how many contracts still specify CFR or CIF for all types of shipments and how many parties still argue strenuously against using CPT or CIP when asked to.

The importance of using the right Incoterm
Does this really matter? Essentially the difference between CFR and CPT is quite a fine one and if everyone is happy with CFR why bother changing it? Well there is no problem, as long as no-one has taken out a goods-in-transit insurance policy for the consignment. But if either party has (and if that party is the seller then the correct incoterm to use is either CIF or CIP) then the use of the 'wrong' incoterm could potentially provide an insurance company with a reason to refuse to honour any claim.

Deciding not to state which version of Incoterms is being used, in order to mitigate the above action, could be counter-productive. Information coming from legal circles on this matter indicate that, in the absence of any statement regarding the version used, the default position is that the parties intended to use the most recent version at the time, which, presently, is the 2010 version.

My suggestion would be that if you really need to continue using CFR and/or CIF in shipments other than bulk sea shipments, then state that you are using the Incoterms 2000 version. There is no law, anywhere, where you have to use Incoterms in your international trade contracts, and even if you do, that you must use the most recent version. However, please note that the workability of this suggestion is dependent on all parties involved in the contract agreeing to this at the time that the International Trade contract is finalised.

Who pays for the import Terminal Handling Charges?
In theory, the risk to the shipper under any C-term passes to the buyer at the port of export, but the costs to the shipper includes the freight to the port of export. In addition, when CIF and CIP are used, goods in transit insurance premium costs are also for the account of the shipper. For a number of years now, Incoterms have also stated that as well as the freight and other relevant freight costs such as fuel surcharge and war risk, the terminal handling charges at the port of import may also be for the account of the shipper.

This is clearly indicated in Incoterms 2010 under Section A6 b) - Allocation of Costs (for all the C-terms) which states that the costs to the shipper can include "any charges for unloading at the agreed port of discharge that were for the seller's account under the contract of carriage." However, in most contracts, there is an implicit agreement that these costs are actually paid by the buyer. However, this is dependent, not only on there being such an agreement, but that the local laws of the importing country allow this.

This is one of those potential 'grey' areas which might cause long arguments that could be costly in both time and funds for all parties concerned. Any delay in moving the goods off the ship and into the terminal could result in demurrage and storage charges being applied by the shipping company whilst a decision is made between the buyer and seller. This really does need to be avoided at all costs.

My suggestion is that the seller and buyer decide at the time of contract who is responsible for these charges and this is stated in writing in the sales contract. If it is the seller, then the shipping costs to the buyer should include the terminal handling charges at the port of import. This information must be relayed to the shipping company at the time of booking the freight, so that the shipping company is aware that these costs are for the account of the seller. Otherwise the buyer could end up paying twice for the same service.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the matters mentioned above, please do contact us by e-mail on info@point-point.com

The problem with Article 14d, UCP 600 for Documentary Credits

2014-02-14T02:58:00.000-08:00

When the Uniform Terms and Conditions for Documentary Credits were revised in 2006 under Publication No. 600, one of the objectives of the International Chamber of Commerce's (ICC) Commission on Banking Technique and Practice was to make Documentary Credits more "user-friendly" by allowing a degree of leeway with regards to minor differences in wording across documentation. They devised a number of articles, such as Article 14 d, to address this problem.

The background to this intention was that a number of world wide surveys, before 2006, indicated that nearly 70% of all Documentary Credit presentations were rejected on first presentation due to errors, a problem compounded by the fact that all banks now charge a fee for discrepancy presentations. This became a serious problem when a number of underlying discrepancies were found to be dubious or unsound. So the Board revising the terms and conditions came up with a series of agreements.

In Article 14 d, for example, it states that the data in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the credit.

At the time I was rather dubious about this article. Since then I have become convinced that, as far as the documentary checking departments of banks are concerned, Article 14 d may as well not exist, since every single bank I deal with are insisting that data in all documents must be identical to all other documents as well as the credit itself. If not, then they will see it as a discrepancy and will treat it as such.

So it is now as important as it was before 2006, that every full stop is in the right place, that a semi-colon is not replaced with a comma, that mis-spellings are adhered to and that all documents are in exact conformity with each other.

In a way I do actually find this rather comforting, since this was the system I had been taught when I first started completing documents for Documentary Credit presentations. But, it still makes Documentary Credit presentations as complicated and intricate as before the inception of UCP 600, and I do wonder if this system will ever change, or ever be allowed to change, regardless of the intentions of the ICC.

The new Panama Canal?

2014-02-02T01:35:00.000-08:00

Introduction
An increase in global shipping from Asia to Europe and the east coast of the USA, as well as the established use of larger and bulkier ships, is putting huge pressures on the only sea route through central America - the Panama Canal.

Panama Canal Developments
The Panama Canal is 100 years old this year and is a vital link in the global shipping infrastructure, enabling ships to travel from Colon to Panama City. It has only been closed twice. Once on 20th December 1989 when US troops invaded Panama to topple President Manuel Noriega and on 9th December 2010 when it was badly flooded.

However, the Canal was never originally designed to take the huge vessels which are presently used in a lot of international shipping, especially the colossal supertankers. Consequently, Panama has instigated an expansion programme to develop and build a third set of wider locks to handle the larger vessels. The overall cost was estimated at US$5.2 billion and the contract was awarded to Grupo Unidos pork el Canal in 2009. It appears, to date, that 72% of the overall expansion work has been finished and 65% of the work needed on the locks. The work was originally expected to be completed in June 2015. However, the work keeps being delayed and there is a present dispute (January 2014) about an additional US$1.6 billion of added costs.

New Canal through Nicaragua
A private enterprise has recently unveiled a plan to build a 170 mile shipping route through Nicaragua linking the Pacific Ocean and the Caribbean, 500 miles north of the Panama Canal. The new canal is not only designed to take the massive shipping, but to include in addition an oil pipeline, a railroad and 2 airports. The intended route will go from Bluefields to Morrito and Brito transversing Lake Nicaragua (which has added to environmental concerns about an already heavily sewage polluted waterway) and is estimated to take 5 years to complete. The costs are extensive, believed to be in the region of US$24 - US$40 billion. The engineering challenge is even greater with the tides on the two coasts differing in height by 20 ft.

Form M shipments to Nigeria

2014-02-02T01:05:00.001-08:00

Introduction
Shipments to Nigeria, especially those being shipped by sea freight, must be shipped under a Form M. The Form M is instigated by the Nigerian importer and issued through their government, and is essentially a form of permission. This means that the import has been established with the Nigerian Government, that finances for the import have been established through the correct channels and the Nigerian importer is not liable to any additional fines or registration problems once the goods arrive at a Nigerian port.

Form M and shipments
Previously it was possible to ship goods from different Form M permissions together, to save on shipment costs. However, there has been a recent change to this practice, and it appears that this system is no longer acceptable to the Nigerian authorities, and they are insisting on individual shipments for each Form M contract.

This has both cost and time implications and so anyone exporting to Nigeria must take into consideration that they cannot consolidate shipments any more and so contracts under different Form M's must be packed, shipped and invoiced as separate consignments.

Customer service expectations from Omnichannel organisations.

2014-01-07T23:21:00.001-08:00

Loudhouse (an integrated marketing and research agency) recently surveyed 1000 consumers in the United Kingdom (UK) regarding their expectations of customer service from organisations offering an omnichannel marketing approach. The results were interesting, especially when compared to global trends.

Omnichannel retailing is the next evolutionary stage of multi-channel retailing. The difference between omnichannel and multi-channel is that with the later an organisation may market through different channels, but there is no unified approach between these channels. So, for example, deals that are available on websites may not be available in bricks-and-mortar shops. Omnichannel marketing organisations, on the other hand, offer a seamless approach to their customers through all available shopping channels, from mobile internet devices, web sites, physical stores, TV, Radio, Direct mail and catalogues.

This might seem to be a common sense approach, to have merchandise and promotions consistent across all retail channels, but it is slightly more difficult to achieve. Mainly because in many cases it does require organisations to reformulate their supply chain strategies to match consumer demands. The access to more information has created a more knowledgeable consumer and this carries its own challenges. It also carries a heavy investment in time and money developing an effective omnichannel strategy which has a clear and through understanding of the customer and/or target market.

The rewards, however, are encouraging. Research has shown that omnichannel shoppers spend 15-30% more than multi-channel shoppers and they exhibit strong brand loyalty, often encouraging others to purchase a brand. Recently, John Lewis (who have made serious efforts to develop an effective omnichannel approach) reported their on-line sales in week 16 for 2013-14 was £101.45 million against £91.68 million for the same week in 2012-13.

However, this only works if customer service expectations are met. Today's customer expects and demands equal service across all touch points and channels and this can be difficult enough to achieve with national markets. When dealing internationally there are even more factors to consider, such as consumer multiple languages, currencies and differing taxation standards. There are also cultural differences, which brings us back to the Loudhouse survey.

The conclusion reached in this survey was that UK shoppers were less likely to use multiple channels for purchases than other European countries surveyed. Globally, an average of 67% of the population use multiple channels, which is a fascinating statistic on its own right, since it means that on average 67% of the global population have access to different marketing channels. But this figure does vary when considered country by country. In the USA, for example, only 51% of the population use multiple channels, against 59% in the UK, 65% in France, 75% in Germany and 86% (the highest) in Brazil.

One of the factors that may play a part in the UK is the belief that the reality of customer services falls short of expectations. When surveyed, 92% of the 1000 consumers rated speed of response to queries and 91% rated the speed of resolution of the problem, as important to them. The perception, however, was that only 35% believed that the response times were good or excellent and only 36% believed that resolution times were also good or excellent.

However, UK consumers are more likely to reward exceptional service with more business or personal recommendations. 82% of the 1000 surveyed said they would use the organisation again (against a global average of 71%) and 62% of the 1000 surveyed said they would recommend the organisation to friends and family (against a global average of 56%).

Although these figures revolve around UK research figures (and British expectations) they do give an indication that a very important part of successful omnichannel marketing is the management of customer service expectations anywhere in the world. Visibility is essential and requires a seamless alignment of inventory, Customer Relationship Management (CRM) and order management. Brandon Jenkins, who wrote an interesting article on this subject on 6th September 2013 for "Integrated Solutions for Retailers" points out that successful brands are those that adopt business practices around a single, unified business solution.

This is important enough when looking at a national model. When considering an international approach, it is probably even more important. Concentrating on consistently meeting customer service expectations (whoever and where-ever they are in the world) should be an essential aspect of any international strategy.

Heads up on IFB2014

2013-12-15T13:39:00.001-08:00

The International Festival for Business 2014 (IFB2014) is a 50 day UK Government backed festival that will run in Liverpool during the months of June and July 2014. The objective of the festival is to bring together representatives from every industry and to provide a one-stop advice-shop for UK Business looking to trade internationally. It is estimated that 250,000 visitors will attend the various events which will include, amongst other things:

Global Leaders Summit
Accelerate 2014
Made in the UK
Sony World Photographic Exhibition
International Trade Expo (on 10th and 11th June)
All our Futures (education)
UK Business Angel Awards

Another objective is to showcase UK cities and regions looking to attract overseas investment (hopefully up to £100 million).

For more information, please check out the website on www.internationaltradeexpo.co.uk

Recent (WTO) World Trade Organisation decisions

2013-12-14T03:47:00.000-08:00

Introduction
Every two years the Member states of the World Trade Organisation (WTO) meet to vote on continuing and new measures to achieve their goals of promoting open trade, and assisting producers of goods and services and importers and exporters conduct their international business.

Although the administration of the WTO is conducted by the WTO Secretariat, whose brief is to ensure that negotiations progress smoothly and any rules agreed are correctly applied and enforced, the WTO is actually run by its member governments. All major decisions are made by these members as a whole, either in the two yearly meetings (the last of which was based in Bali in December 2013), or through ambassadors and delegates who meet regularly in Geneva.

As such, the WTO is the only global international organisation dealing with the rules of trade between nations. WTO agreements are negotiated and signed off by the bulk of the world's trading nations and ratified in their parliaments. At the moment, 160 countries are members of the WTO, the most recent country to join in December 2013 being Yemen.

Although a number of decisions were made at the Bali conference, I would like to mention two in this article.

Import duties on electronic transmissions
Generally speaking, most goods being imported into a country will be liable to import duty and other taxes. There is one major exception. Software which is transmitted electronically is presently not liable to duty in the WTO member states. However, there are continuing discussions on whether this should remain the case, particularly in view of the growing value of software sales globally. However, one of the decisions made at Bali 2013 was that members continue to agree not to charge import duties on electronic transmissions. If they had decided otherwise, the cost to the end-user could have increased dramatically. Please note, however, that this only applies to members of the WTO.

The continuing problem of 'Red Tape'
The UN Conference on Trade and Development (UNCTAD) estimates that the average Customs transaction involves 20-30 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the re-keying of 60-70% of all data at least once. With the lowering of tariffs around the world, the cost of complying with these Customs formalities is often much greater than the cost of duties to be paid.

Analysts believe that the reason most SME's are not active players in International Trade has more to do with red tape than tariff barriers. The administrative barriers for organisations who do not regularly ship out product are often simply too high to make foreign markets appear attractive.

According to the Organisation for Economic Co-operation and Development (OECD), the measures that would make the biggest impact in terms of reducing costs are:

- harmonisation of documents
- streamlining customs procedures (such as pre-arrival clearance)
- predictability in customs regulations

One of the WTO's objectives is to try and reduce the red tape inherent in so many international trade transactions. However, this is not a simple matter. For example, one of the challenges faced is to ensure that all countries are able to establish a workable and reliable electronic clearance facility. In many cases this requires that both the physical communication infrastructure and the legal framework in the countries concerned is able to cope with this requirement. In a lot of countries, setting this up is both a lengthy and expensive procedure. However, at least there is a willingness today to commit resources to trying to achieve this goal.

Important information regarding Certificates of Origin for the UAE

2013-12-05T08:55:00.002-08:00

Although it is still possible to issue European Certificates of Origin for shipments to the UAE, exporters are taking a risk doing so, and should consider issuing Arab/British certificates only.

The following information comes courtesy of the Chamber of Commerce.

In the past there was the option for companies based in the United Kingdom to issue an EC Certificate of Origin for goods being shipped to the United Arab Emirates (UAE) as long as a letter of indemnity on the relevant certifying authority was issued.

However, as of today this is no longer be acceptable to the UAE authorities. All shipments from the United Kingdom to the UAE will require an Arab/British Certificate of Origin, and both this certificate and the invoice (and sometimes other documents) will need to be legalised by the Arab-British Chamber of Commerce.

The UAE authorities have also confirmed that under their rules and regulations all verification and attestation of documents must be done through the Arab-British Chamber of Commerce via Agent Chambers.

It is therefore rather important that anyone wishing to do business with the UAE will need to understand what the costs are of obtaining this documentation and to ensure that these costs are covered in the contract negotiations.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance on the subject matter above, please do contact us by e-mail on info@point-point.com

The importance of Pro-forma invoices

2013-12-04T14:49:00.000-08:00

Introduction
There are certain documents which play a vital, but often understated and misunderstood role in international trade contracts. In my opinion, one of these is the pro-forma invoice. More often than not, the submission of a pro-forma invoice is the prelude to shaking hands on a successful international trade contract agreement and is often pivotal to the smooth running and completion of that contract. The problem seems to be that this aspect of pro-forma invoices is not well known. Consequently, pro-forma invoices are sometimes issued in a format which can be counter intuitive to fulfilling their function.

What is a pro-forma invoice?
There are three main types of invoices that are used in international trade. The first is the commercial invoice. This is a document issued by one organisation and addressed to another, detailing out the goods and/or services provided, the quantities, costs and any other pertinent information required under the laws of the countries concerned. For example, in the United Kingdom, if VAT (value added tax) is included, the VAT number of the organisation issuing the invoice must be detailed in full on the invoice.

The commercial invoice is also issued in accordance with local accounting laws and is the major instrument by which a company details their sales and purchases in their Accounts. A commercial invoice can also be issued to accompany goods in transit and is the document used by Customs in all countries to verify values and assist in the correct application of tax collection, such as Duty and Excise.

There are some circumstances, however, when a shipment is sent free of charge. This can include warranty shipments, samples, or any shipment where the formal declaration of value is not included in the accounting practices. However, since all goods must have a value, an invoice is required for all international shipments. In the circumstances detailed above, a Customs invoice may be issued. This is an invoice which can still be used by Customs in all countries to verify values, but is not included in the exporting organisations' account procedures. Unless, of course, the local country laws require this to be the case.

With contracts where the payment is required before the goods and/or services are sent, then a pro-forma invoice is issued. A pro-forma invoice gives all the details that would be found on a commercial invoice, but it is not part of the accounting procedure. It is a request for payment for a contract which may, or may not, be accepted. Once the funds have been paid, then a commercial invoice needs to be issued to complete the accounting trail.

Additional function of a Pro-Forma Invoice
Over the decades the pro-forma invoice has developed an additional function.

A lot of countries operate exchange control mechanisms. The United Kingdom is not one of them, having abolished exchange controls in 1979, but a lot of our trading partners outside the European Community do have these procedures in place. What this means is that if an organisation in one of these countries wishes to pay for their purchases in one of the "hard" currencies (or even their own currency in some circumstances), they must apply to their Government to do so, since one of the objectives of exchange control is to ensure that any hard currency held by the Government is used for legal reasons. The application to utilise any hard currency must prove that the money is being used to purchase goods and/or services which will be imported into the country. The usual proof is a signed copy of the supplier's pro-forma invoice.

In the circumstance that a Documentary Credit is issued, then the pro-forma invoice will be mentioned by number and date in the Credit. However, it is very rare that a copy of the pro-forma is actually required as part of the Credit presentation. The terms of the Documentary Credit are often dictated by the information presented in the pro-forma invoice, therefore it follows that the issuance of the pro-forma invoice should be done with some care.

The problem is that most pro-forma invoices are not issued with care.

Information required in a Pro-Forma Invoice
A pro-forma invoice often requires much more information than either a commercial or customs invoice. As a guide only, it is recommended that the following information should be included on a pro-forma invoice, but please note that in some countries, local law practice will take precedent, so for certain countries additional and/or different information may be required. It is the joint responsibility of both the exporter and importer to ensure that this document is correct. In many cases the importer may find out on application to their relevant government department that additional information is required. Consequently, the exporter may have to re-issue the pro-forma invoice. This is normal practice. Patience is recommended.

1. Title
The invoice should be entitled a Pro-Forma invoice and be given a unique number and dated. Most companies keep a record of their pro-forma invoice numbers with details of the customer, date and value.

2. Name and Address
Full name and address of the importer and, if required, the full details of the delivery address, if this is different.

3. Details of the goods and/or services
If a number of different items are being shipped, but they all come under a generic heading, then it is a good idea to head the description of the goods with the generic heading, usually in bold print. This encourages the use of this heading for the description of goods on a Documentary Credit. If there is no heading, then the Issuing bank may be tempted to include the full description of all the goods. Which can sometimes be problematic when completing Documentary Credit documentation.

4. Unit prices, quantities and total price
It is always useful (and in some countries mandatory) to show unit prices and quantities on a pro-forma invoice. The currency used should also always be stated. It is also rather important that all the figures add up.

5. FOB values
By convention, and because a huge number of Import Customs authorities world-wide have their systems set up to note this detail, an FOB value needs to be declared on the invoice. The value of the goods can either have an FOB element built in, or can show the ex-works value of the goods and have the FOB costs shown as a separate line item. For practical purposes the term FOB is used to mean all the costs involved from the goods leaving the warehouse door until they are loaded in the main form of transport. Anyone who has read my blogs on the F-terms in Incoterms 2010 will be aware that FOB as a sales term under the 2010 version now has a very restricted use. Consequently, a more accurate term to use is FCA.

6. Additional freight charges (if required)
This should state the method of shipment i.e. containerised sea-freight, air freight, courier, etc and the final port of destination as well as the cost being charged by the shipper. Where the exporter is also including Goods in Transit insurance (often incorrectly called Marine Insurance), then this needs to be stated as an additional line item.

7. Incoterms as part of the Total Price statement
The total price should be stated with the correct ICC incoterms and version. There is no legal requirement anywhere in the world to use the ICC Incoterm terminology, but if they are being used, please do use the correct ones. To assist, I have written a detailed blog about all 11 of the 2010 incoterms.

8. Origin of Goods
Do state the country of origin of the goods. This is not the country of supply, but the country of manufacture. It is rather important that this information is correct, since in some countries there are various bans on goods from certain other areas, usually for political reasons. Also, if the Documentary Credit asks for a Certificate of Origin, then usually the list of countries specified and allowed on the Credit is complied from the information stated on the pro-forma invoice. Please note that in some countries, regardless whether the method of payment is Documentary Credit or not, Certificates of Origin are always required.

9. Country of Supply
It is also useful to state the country or countries of supply. This will often vary from the countries of origin of the goods, mainly because supply chains today are very global.

10. Incoterm details
I often re-iterate the incoterms used (if any) and clarify exactly what the responsibilities, costs and risks are for each party. The reason for this is that although incoterms are widely used today, there is still a great deal of confusion about who pays for what. By clearly delineating these responsibilities and costs in the pro-forma invoice, it avoids misunderstandings, complaints and arguments at a later stage in the contract.

11. Payment terms
These really do need to be spelt out in detail (especially when the method of payment is a Documentary Credit) and, if required, the bank details of the exporter should also be included.

12. Insurance
This usually refers to Goods in Transit insurance and the reason I always include a statement is to clarify who is responsible for the insurance (again to avoid future arguments) and as a reminder that someone needs to think about the insurance. If the exporter is responsible for the Goods in Transit insurance, then they need to clarify exactly what the insurance covers. Is it Institute Cargo Clauses A with Strikes and War risks, for example? Is warehouse to warehouse cover included? By stating exactly what is covered prevents future aggravation between the various parties.

13. Despatch
This can be either detailed as an actual date or as a period of time from a specific action. For example, if the method of payment is by Documentary Credit, then the despatch can be stated as being, for example, 10 weeks from the date of receipt of a workable Documentary Credit. Always use the word despatch and not the word shipment, since shipment can mean the date that the goods arrive as well as the date that the goods leave.

14. Packing
This is an important detail to verify for insurance purposes. If the exporter states that they are packing the goods suitable for sea shipment or air freight, then the importer knows that the goods must be packed to a standard which is acceptable to their insurance company. If the exporter makes this statement, but fails to deliver, then they will be held responsible for any costs arising from unsuitable packing. It is often useful, on the more complicated shipments, to specify exactly what type of packing will be used e.g. wooden crates, etc. Please note that in many countries now, the use of wood in packing could require that a phytosanitary certificate is issued, to prove that the wood has been treated to the standards required in the country of import.

15. Validity
It is a good idea to always state the period of time that the pro-forma invoice is valid. Since it acts as a form of quotation, ensuring that there is a limit to the time period in which the prices are confirmed for, is good business practice. I often use 60 days from date of invoice, for example.

There are additional items that can be added. Each industry and marketplace will have their own specific requirements. Please do remember that nothing stays the same and that changes in international trade practices will always happen. So the template of an organisation's pro-forma invoice will need to be reviewed on a regular basis.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance regarding the subject matter above, please do contact us by e-mail on info@point-point.com

Hints on mitigating fraud with Documentary Credit transactions

2013-11-28T06:40:00.000-08:00

Although Documentary Credits should and in most cases do guarantee that the right goods are shipped and the shipper will get paid, there are still circumstances when a Documentary Credit can be part of a fraud. This article discusses what happens when the shipper acts in a fraudulent manner and what precautions can be put into place to mitigate this type of risk.

A trade contract between a company in Pakistan and one in Hong Kong was concluded for the supply to Pakistan of Prime Steel Coils worth USD 226,000. A documentary credit was issued by the Pakistan company and the goods were shipped. The documents were presented to the negotiating bank and found to be in order. The payment from the issuing bank was sent out in October 2013.

The goods cleared Pakistan Customs in November 2013 but on delivery the customer found that, instead of steel coils, the containers actually contained cement slabs.

One of the questions asked at the time involved clarification regarding the Issuing and Advising bank's liability in this matter. Essentially, if all the banks had acted in good faith and not been negligent or aware that any fraud may have taken place at the time of advising and negotiating the documentary credit, then no further recourse can be held against any bank in the documentary credit chain. The Pakistan customer must now take the matter to the Hong Kong courts and to try and gain back their funds from the fraudulent beneficiary. Unfortunately, in this particular case, not only has the customer lost their initial outlay for the goods, but they have also been penalised with clearance costs, duty and other taxes on import.

So what precautions can other organisations take to avoid getting involved in similar fraudulent transactions?

The first thing in any contract is to check (if this is possible) the average pricing of similar cargoes. If a deal is being offered that seems to be too good to be true, then additional checks must be undertaken, because this might be a sign of fraud.

One of the best ways to avoid a situation such as the one reported above, is to request that an inspection certificate from pre-inspections agencies (e.g. Bureau Veritas, Intertek or SGS) is issued prior to shipment. If there is a requirement for a pre-shipment inspection that includes certifying that the goods entering the container are those purchased, then the chance of fraud is reduced substantially. Another document that could be requested on shipment is a Certificate of Conformity, again issued by a recognised verification agency. In some countries, these systems are now part of Government initiatives to halt such fraudulent practices, but in parts of the world where such stringent conditions are not a matter of national law, then the buyer can ask for them to be initiated privately.

Secondly, it is always a good idea to take photographs of the containers when they arrive and as they are being unloaded, to have a visual record of the goods that have actually arrived. If possible, obtaining a third party verification, from the importing Customs authority if able, would be of great assistance in any subsequent court case. The objective of this action is to provide evidence that the goods arriving are or/are not those ordered.

Thirdly, if the goods being shipped are Capital equipment, then the importer could request that, as part of the contract, a Standby Letter of Credit is issued as a performance guarantee. Please note that in some countries a Standby Letter of Credit is not acceptable, in which case a Performance Bond could be requested. However, also note that because Performance Bonds are themselves vulnerable to fraud, that the supplier may not agree to issue one even if it means losing the order.

The last point, unfortunately, is one which has to now be considered with all trades. Although the above measures may make a lot of sense when dealing with a contractor for the first time, it seems to be less important when dealing with an established supplier. However, there is a growing body of evidence which seems to suggest that fraudsters are getting much more sophisticated in their operations and actually providing quality and to specification goods on the first few shipments before enacting a big fraud. The only advice that can be given is that once a procedure has been set up, it should be followed on all shipments, even those from established sources.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the subject matter above, please do contact us by e-mail on info@point-point.com

Important changes to Saudi Arabian import procedures

2013-11-25T03:33:00.000-08:00

Compliance, especially in the form of Certificates of Conformity, is becoming one of the more costly aspects of international trade. In part this is to prevent fraudulent practice, which is understandable, but it does place even more emphasis on the exporter to get their documentation correct when shipping to certain countries. Saudi Arabia has recently changed some of their rules and this article explains what they are.

From 5th November 2013, the Kingdom of Saudi Arabia requires that all consignments exported to Saudi Arabia (apart from exempt items), must be accompanied by a SASO (Saudi Arabian Standards Organisation) Certificate of Conformity. Any shipments arriving in Saudi Arabia without this certificate will be sent back to the exported country of origin at the cost of the exporter. Please note that no minimum order value is applicable and all conformity assessment and Certificate of Conformity issuance fees are for the account of the exporter.

Saudi Arabian Flag - courtesy of Canstock Photos

These certificates provide the Saudi Arabian authorities with a basis for conducting post-market surveillance to ensure that products conform to applicable and mandatory standards and technical requirements. These conformity programmes also minimise the opportunities for trade fraud and mitigate the risk of product rejection at Saudi Arabian ports and borders.

Documents required for a Certificate of Conformity issuance includes, but are not limited to, the following:

- Completed request for Certification (RFC)
- Manufacturer's/Seller's declaration
- Test Report
- Inspection Report
- Final Invoice.

When applicable and/or relevant, the following documentation may also be required:

- Statement of Registration (SoR)
- Quality Management System Certificate (e.g. ISO 9001)
- Factory records on tests performed by the manufacturer
- Copies of accreditations from the laboratory where the testing was performed
- Product Technical Data Sheets.

Some exporters are finding that test information may also be required with each shipment as well, although SGS, who are an authorised certification body for the Kingdom of Saudi Arabia, are advising that their certification does not require this additional paperwork.

The verification of products by authorised certification bodies can involve one or a combination of the following activities

- Physical inspection prior to shipment
- Sampling, testing and analysis in accredited laboratories
- Audit of product manufacturing processes
- Documentary check and assessment of conformity within the requirements of applicable technical regulations and standards, particularly SASO.

Test documentation will only be accepted from the following approved entities:

- SGS Laboratories
- Laboratories with valid ISO 17025 accreditation
- Manufacturers' Laboratories if accredited or if the testing is witnessed by an accredited third party inspection body.

Please note that Point to Point Export Services cannot accept any responsibility for errors or omissions in the above information and that it is subject to change.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the subject matter detailed above, please do contact us by e-mail on info@point-point.com

Commodity Trading - Cobalt goes radioactive

2013-11-21T09:50:00.000-08:00

This article on commodity trading concentrates on the very onerous challenges faced when the commodity being shipped is registered as Hazardous Goods. The commodity used as an example in this case is Cobalt 60.

Introduction
There are a variety of factors which can make commodity trading either very lucrative or financially destructive. Finding suitable customers and suppliers and arranging the financing to make the deal happen are key and in their own right complicated matters. However, there are a number of other factors which can impact on the contract and raise the risk profile. Some are identifiable and controllable if the right questions are asked at the right time and procedures put into place to minimise the risk. For example, a lot of commodities are challenging to ship. However, I would argue that one of the most difficult of all commodities to ship internationally is Cobalt-60 (C-60).

In addition there are often uncontrollable factors which make managing the risk very difficult and will add to the contract complexity. It is these unexpected occurrences which make commodity trading so challenging.

Throughout the supply chain, a major cause of problems is a lack of political stability. This can manifest itself in a number of ways and often very quickly, which makes identifying the problem at the contract stage and implementing risk mitigation beforehand difficult. The most successful commodity traders are those who have brilliant intelligence gathering and analysis facilities; an extensive contacts network; are able to keep a very close eye on all aspects of the trade affecting their contract on the ground and in real time, and the financial and administrative flexibility to deal very quickly with whatever is thrown at them.

Cobalt is a commodity where this factor of political stability is particularly sensitive, mainly because one of the main sources of Cobalt is the Democratic Republic of Congo (DRC) which is only now emerging from the chaos caused by nearly four decades of civil war.

Azurite with Cobalt - Photo courtesy of Canstock photos

Cobalt
Cobalt (chemical symbol Co) was identified in 1735 by the Swedish scientist George Brandt, who discovered that the blue element in coloured glass was caused by Cobalt instead of Bismuth as originally believed. Cobalt occurs naturally in various minerals and has been used for centuries to import a blue colour to ceramics and glass.

It is a hard, brittle, grey metal with a bluish tint. It is solid under natural conditions and is similar to iron and nickel in its properties and, like iron, can be magnetised. However, since it is measured at No. 5 on Moh's hardness scale, it is actually harder than iron.

Uses of Cobalt
In 2010 the European Community identified Cobalt as one of 14 strategic and critical metals. Cobalt presently used in many different industries. 54% of annual output is use in the manufacture of batteries and chemicals, 21% in the manufacture of super alloys, 12% in carbides, 6% in magnets, 5% in alloys, High Speed Steel and steel and 2% in other industries.

A major concern of the European Community, however, lies in guaranteeing future supply for up and coming technologies such as lithium-ion batteries and synthetic fuels.

Cobalt is also the only source of Cobalt-60.

Cobalt Mining Operations

Cobalt is obtained primarily as a by-product of the mining and processing of Copper and Nickel ores. The general figures are that 52% of Cobalt is mined in Africa (DRC and Zambia), 24% in Australasia, 17% in the Americas (Canada, Cuba, New Caledonia and Brazil) and 7% in Asia (China) and recently deposits have been found in Russia. The biggest Cobalt mining operation is presently based in the Democratic Republic of Congo (DRC), but Richard Mills in his article "Ahead of the Herd" (14th June 2013) points out that large deposits (82,800 tonnes) have been found in the Altai region of Siberia (Karakul Cobalt Project) and this is potentially the largest known primary Cobalt asset outside Africa.

This might become quite important because a recent World Bank Report of the DRC infrastructure states that "The Democratic Republic of Congo faces what is probably the most daunting infrastructure challenge on the African continent." In which case there is probably a huge potential for development, since the DRC is the richest country in the world in terms of mineral wealth, estimated to be worth US$ 24 trillion. It also has the highest number of people (estimated at 10 million) who have died there because of civil war since the Second World War and there are presently more than 2.6 million internally displaced people in the DRC. It was once announced that the DRC was the hardest place in the world for a mother to bring up children.

Armed conflict with M23 rebels in the eastern part of the Congo intensified during 2012 including a number of clashes at the main Cobalt mine in Katanga. However, on 5th November 2013, the M23 rebels announced a ceasefire which hopefully might bring some much needed stability to DRC. However, stability can bring its own price and development its own problems. There is presently an environmental argument regarding the UK company SOCO's right to utilise their licence to explore for oil in the Virunga National Park, which is home to critically endangered mountain gorillas.

There are other challenges as well.

In April 2013, the DRC Government made the announcement that they wanted all their mines to process all of their mined ore inside the DRC to encourage more value-added production. Therefore, on the 5th April the DRC Government gave companies 90 days to clear stocks and halt exports of unrefined copper and cobalt. Export streams were to be switched from ores and concentrates to refined products. The reason for this action is simple. The DRC Government is overhauling their mining laws with the objective of boosting state revenues by increasing tax rates and raising the Government's minimum stake in managing projects. They now have plans to raise their free stake in new mining projects from 5% to 15%.

However, the DRC had tried to impose such a ban twice before in 2007 and 2010. This failed on both occasions due to a lack of power in the country. DRC suffers from acute electricity shortages (some 5000 MW), which are believed to get worse by 2020-21. Hence a real requirement to improve the country's infrastructure. In addition, on October 14th 2013 the DRC Government announced that they would now tax mining companies in the local currency - DRC Franc - instead of the US Dollar. Hyper inflation in the 1990's, when consumer prices rose 10,000%, prompted the then Government to collect their taxes in US Dollars. However, the recent stability of the DRC Franc has led the DRC Government to attempt to reduce dollarisation (presently calculated at 50%) in their economy.

The present Government is trying hard to bring back the valuable mining concessions under their control. However, part of the problem is that a lot of the licences granted some years back were done so under unusual circumstances which today are being questioned. This has led to a degree of uncertainty in the DRC mining community about who has the correct licences and who needs to obtain new licences.

What is important is that all of these changes affect the way that Cobalt is supplied from the DRC. Because of the percentage of supply that the DRC has in the world wide Cobalt trade, all of these local, national factors have an impact on the global supply of Cobalt and understanding what has happened and accurately analysing what may occur in the future is a key process in a successful commodity trade.

Cobalt-60 (C-60)
In the 1930's, two scientists, Glenn T Seaberg and John Livingood at Berkeley, California, discovered that by exposing Cobalt to radioactivity, a new product was formed, known as Cobalt-60 (C-60). Today, C-60 is produced for commercial use in linear accelerators, but also occurs as a by-product of nuclear reactor operators, when structural materials such as steel is exposed to neutron radiation. C-60 decays to non radioactive nickel and has a half life of 5.27 years.

Unfortunately, C-60 can also be used in non-beneficial ways to effect radioactive attacks on populations. Hence it is a very regulated and monitored resource and this brings its own problems when trading in this commodity.

Industrial Uses
C-60 is used in a large number of industrial applications, such as the sterilisation of spices and certain foods since its powerful gamma rays kill bacteria and other pathogens without damaging the product. After the radiation ceases, the product is not left radioactive. This process is sometimes known as cold pasteurisation. This process is now prevalent in the irradiation of fruit and vegetables for export and is replacing dockside and on-board pest fumigation with Methyl Bromide, which has been identified as a Class 2 cancer agent.

It is used in industrial radiography (a process similar to X-Rays) to detect structural flaws in metal parts. It is heavily in use in medical applications and the sterilisation of hospital waste before disposal. It can be used in medical devises for the precise treatment of otherwise inoperable deformities of blood vessels and brain tumours. In many countries, 45% of single use medical devices are sterilised using C-60 and 80% of all surgical gloves and bottle teats for pre-mature babies. Blood can be irradiated before transfusions to prevent the fatal TA Guft disease and food irradiated to protect immune compromised patients from food-borne diseases.

A lot of items used in households are also irradiated using C-60 such as food packaging, natural ingredients used in cosmetic and pharmaceutical applications, wound dressings, feathers in soft furnishings to prevent the transmission of bird flu and pet chews to prevent the transmission of salmonella. C-60 is also used in the horticultural industry to sterilise growing mats, pots and fleeces so they can be re-used, hence reducing waste and to sterilise seaweed before its use as an organic fertiliser.

It is also used to control mosquito populations since mosquitoes can be made infertile by irradiation and C-60 is now an important part of the fight to gradually eradicate malaria by interrupting the breeding cycle.

More and more uses for C-60 are found each year. The problem is transporting the product, since it is classified as radioactive material (Class 7 Cargo under the Hazardous Goods classification).

Challenges of shipping C-60
C60 is both unstable and radioactive and one of the challenges of shipping C-60 is that it is barred for entry in a number of ports world-wide. For example, there is a denial of transit for Class 7 Cargo through European ports. In addition, the paperwork required to ensure a successful shipment is in its own right a major logistical challenge.

There are presently two manufacturers of C-60 who ship 100-150 containers per year. The usual quantity of C-60 shipped is usually 2-3 kgs per consignment, but because of the Class 7 classification, this small amount needs to be shipped in specially designed and manufactured REVISS flasks which weigh 4000 kgs each. These flasks are certified Type B(U) in compliance with IAEA transport regulations TS-R-1-2005. Type B certification requires the flask to be tested "to withstand transport accident scenarios under extreme environmental conditions." The flasks have been shown to be effective shields since tests on workers handling these flasks on a daily basis show a measured annual dose of 2 units. This is compared to the 2.5 units of background radiation that we all absorb each year from atmospheric emissions when we fly in aircraft, through geological emissions from the natural environment or when we undergo medical x-rays.

The following information comes courtesy of Pete Lambourn of REVISS Services (UK) Ltd in his article "Managing Transport Logistics to maintain a reliable supply of Sealed Cobalt-60 Sources for Radiation Processing."

Essentially, shipping C-60 requires a strict procedural structure to be in place which essentially asks (and answers) a series of questions in four areas of concern.

1. In the initial product enquiry, what basic information is required?
a) Is the importer a new customer or new irradator and are they listed on the supplier's export licence?
b) Is there an established shipping route?
c) Is there product available to ship?
d) For source returns does the customer require an export licence?
e) Have return shipping logistics been reviewed, particularly for sea shipments?

2. On order acceptance, what regulatory requirements need to be addressed?
a) Is it possible to ship Class 7 goods to the customer? Is the transport and transit route that the customer wishes to use capable of accepting Class 7 goods? Please note that air shipments are not possible.

b) Has the customer the following documentation in place?
- Import licence
- Completed turatom 1493/93 form (European)
- Written acceptance of quantity and type of radioactive material at the time of dispatch from the supplier
- Written acceptance of the customer's responsibilities regarding collection of the cargo from the port.

c) Has the customer considered the timing issues of all the relevant parties obtaining the necessary documentation?
- Shipper needs to apply for an export licence for each shipment (usually takes a minimum of 28 weeks)
- Shipper needs an transport licence (min. of 8 weeks)
- Vessel needs to be booked and the shipping company will need a copy of all import and export licences (min of 4 weeks)
- A request for Prior Import Consent must be obtained from the competent Authority (min. of 3 weeks)
- Make notification to the Transport Competent Authority (min. of 2 weeks)
- Load flasks into containers onto shipping vessel (min. 1 week)

3. On shipment, what Dangerous Goods paperwork needs to be issued?
a) The supplier creates a Dangerous Goods Declaration. The details on this declaration must be precise and specify the radioactivity at the time of despatch from the supplier.

b) Sea Carriers may expect to see a copy of the Import and Export licences and the Competent Authority Certificate before accepting the booking

c) Truck shipments must have dose rates in the 'cab', 'daily checks' performed regularly and most importantly, the driver must know what he is carrying and is licensed to do so.

4. With flask returns, are they loaded or empty? What are the regulatory requirements for shipping these flasks back?
The customer must submit shipment details to the supplier before the flask is despatched and they may be required to issued Dangerous Goods documents.

Conclusion
The commodity trade in Cobalt and Cobalt 60 offers a good illustration of some of the challenges and procedures that need to be considered for a successful commodity trade. Both commodities play a vital part in today's global industry and threats to the supply of either could have implications that are widespread and possibly crippling to continuous technical and economic advancements. They are not alone. Many of the technologies that we now rely on and expect to work without fail, are based on the supply of metals such as Cobalt.

However, this supply must go hand in hand with compliance regulations and consideration of other matters such as environmental concerns. Keeping all these different factors in balance and under control is probably akin to successfully juggling Cobalt 60. Drop the ball and it will go radioactive on you.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the subject matter detailed above, please do contact us by e-mail on info@point-point.com

Commodity Trading - Niobium and Tantalum

2013-11-20T06:35:00.000-08:00

Trading commodities can carry great risks, especially in this present climate of ensuring that no part of the trade supply chain is involved in any illegal or unlawful activity. Ensuring this can be more complicated than one thinks, and this article is about the problems of ensuring that commodities such as Niobium and Tantalum are traded in a lawful manner.

Introduction
A major challenge in commodity trading is ensuring with each and every trade that the supply of the commodity is legal. It must not be linked in any way with terrorist, criminal or proceeds of war activities since, in the UK at least, any such dealings can be unlawful under a number of different Acts such as the Money Laundering Act and Proceeds of Crime Act. In addition, it is the responsibility of each party in the supply chain to ensure that they are aware (and can prove), without any doubt whatsoever, that not only is the supply legal, but so is the end-use.

Ensuring that a supply chain is completely legal at all times can be difficult and expensive, not only at the initial set-up stage, but also with each and every following contract. But maintaining close and secure procedures is an absolute must, since commodity trading has traditionally been sensitive to fraudulent practice.

Problems with mined commodities
Commodities that are mined are at particular risk. The provenance of a number of products, such as precious stones and metals is often difficult to authenticate. This problem is most associated with commodities mined through ASM - artisonal and small scale mining. Unlike surface and underground mining activities, which are normally under strict government supervision and licenced, ASM is difficult to police because it is so small scale and dispersed. This is labour intensive mining, but often lacking any real capital outlay or mechanical and technological assistance. Consequently, ASM has poor safety and environmental records, inadequate training regimes and inefficient systems. Yet it is estimated that ASM provides a livelihood for some 100 million people worldwide.

Unfortunately, some of this work is forced under conditions of armed conflict and human rights violations and commodities mined under this type of regime are usually referred to as "conflict" minerals. This type of illicit mining is often organised by armed groups who use the profits for their own ends and to finance further fighting. It was reported, for example, that rebel groups in the Democratic Republic of Congo made in excess of US$ 1 billion in 2009 through conflict trading.

Such mining activities tend to be concentrated in areas which are unstable politically and for commodities where the demand outstrips the supply due to a scarcity value and because they are vitally important to the manufacturing processes in numerous technological industries. For example, Indium is a vital component required in the manufacture of thin layer photovoltaics and without Germanium very few of todays IR optical technologies would be possible.

Consequently, any trading in these commodities can carry serious risks, mainly because they are not so well known and, more importantly, because they are not traded on any metal exchange. This means that there are no official prices for many of these metals and price is usually determined solely by negotiation between buyer and seller.

Two of the most important rare metals in use today are Niobium and Tantalum. They are both used in a wide variety of industries but little information is available about the supply because of the secrecy that usually surrounds such negotiations. This can make it rather difficult to police the origin of these metals with any degree of accuracy. In addition, Niobium and Tantalum ore tends to be processed and smelted in countries other than those in which they are mined. The problem is that once the ore is crushed, milled, screened and processed, it is often impossible to determine the origin of the metal.

Niobium
Niobium (Nb) is a shiny, ductile metal with a white lustre and is sometimes mined with Tantalum (Ta) in a Niobium-Tantalum ore known as Colton. The separation of Niobium from Tantalum does require a number of complicated steps however. Both occur naturally as free metals, but are usually found as essential components in a range of mineral species, generally oxide minerals such as columbite, tantalite, wodginite and pyrocholore groups. These deposits are most commonly associated with igneous rocks. In addition, both Niobium and Tantalum occur as a by-product of tin smelter waste, although generally only 2% of Niobium annual production is obtained in this way compared to 14% of Tantalum annual production.

Both Niobium and Tantalum are rare transition metals which have very similar physical and chemical properties and both play an essential role in the manufacture of certain types of steel and electronic capacitors. They have unique properties including super-conductivity, corrosion resistance, very high melting temperatures, shape memory properties, high co-efficient of capacitance and bio-compatibility. Because they are hard to substitute, rare (Niobium only found in 8 parts/million and Tantalum in 7 parts/million) and are deemed to be critical metals this, unfortunately, means that mining them under any circumstance is a profitable venture.

Niobium resources are mainly located in Brazil (93%) and Canada (7%). There are unverified reports that some resources have also been found in Egypt, Malawi and Greenland. It is estimated that there is about 485 million tonnes of Niobium available to mine.

Uses of Niobium
Presently, 89% of the global niobium production is used to produce ferro-niobium, which is used in high strength low alloy (HSLA) steel. 11% is used in the manufacture of niobium alloys, chemicals and carbides, high-purity ferro-niobium and other niobium metal products. The addition of Niobium to steel increases the strength of the steel and reduces its weight and grain boundary definition. HSLA steel is used in the manufacture of vehicle bodies, jet and rocket engines, ship hulls, railway tracks and oil and gas pipelines. It is also used in large steel structures such as oil platforms.

Smelting metal in a steel mill - Photo courtesy of Can stock photos

It is also a vital element in various superconductivity materials. For example, alloys of Niobium combined with Titanium and Tin are required in the manufacture of superconductivity magnets for MRI scanners

Tantalum
Tantalum is a heavy, hard, grayish-silver metal and because of its high density is one of the heaviest and hardest metals known. It was originally identified in 1802 as a type of Niobium, but not separated into a pure form until 1907. It is mainly mined (40%) in Brazil (Araxa and Catalao mines), with the remaining 60% located in Australia (Greenbushes and Wodgina mines) and Canada, but there are also mines in Russia, Finland, Mozambique, Thailand, Portugal, Nigeria, Zaire, Greenland, South Africa, the Gabon and the Democratic Republic of Congo. It is usually found in tantalite and columbite reserves but, as mentioned above, it is also obtained as a by-product of tin extraction. The main processing centres for Tantalum are based in Rwanda, Brazil and Argentina.

Uses of Tantalum
Tantalum is often crushed into a power and used in the production of electronic parts. It forms an oxidised layer around capacitors and high powered resistors, insulating them from damage due to high operating temperatures. 24% of the global production of Tantalum is used in the manufacture of capacitor grade powders, 17% in the manufacture of metallurgical grade powders and 18% is used to product tantium chemicals.

Since Tantalum is resistant to most acids and all bodily fluids, it is an ideal material for the manufacture of radio transmitters, surgical equipment and instruments and rods which are used to repair broken bones and skull plates. When formed into a wire mesh it can also be used to repair nerves and muscles. Tantalum is often used in joint replacements and prosthetics because of its durability and strength; in addition, its somewhat porous qualities allow it to merge favourably with the bone it replaces. It is also used in hearing aids and pacemakers.

Tantalum has good electrical conductivity and a high melting point - 3017ºC. 41% of the global production is used to produce metal alloys (such as tantalum carbide where it is combined with carbon) that take advantage of these properties and are integrated into structures such as nuclear reactors, jet aircraft engine parts and components, cutting equipment and tools, and equipment to process chemicals.Tantalum is also used to manufacture a special glass which has a high index of refraction which is needed for some of the best camera lenses.

It has a number of military applications such as vehicle armour, explosives and missile construction. Due to its high melting point and density, Tantalum is used in the manufacture of shaped charges and explosive-penetrating devices designed to break vehicle armour. Paradoxically, these characteristics also make it perfect for manufacturing tank armour.

"Critical" Raw Materials
As mentioned above, it is very difficult to obtain trade data for Niobium and Tantalum, partially because it is traded privately but also because these metals are commonly reported under a combined trade code with vanadium and rhenium. The difficulty is then compounded by the fact that Niobium and Tantalum are both traded in a variety of forms including metallurgical products, ores and concentrates and chemicals.

In 2010 the European Community Commission identified both Niobium and Tantalum as "critical" raw materials along with 12 other economically important raw metals (Antimony, Beryllium, Cobalt, Flurospar, Gallium, Germanium, Graphite, Indium, Magnesium, PGM's (Platinum Group Metals), Rare Earths and Tungsten). This label of "critical" was given to any commodity where the European Community considers there to be a potential risk of supply shortage with an associated impact on the European Union economy. This supply risk may be accentuated by the low political-economic stability of the main supplier(s) as well as the low sustainability and low recycling rates of the raw materials in question.

There is also a time element since a very important factor is the need to estimate consumption requirements based on technological change. The estimated increased demand for micro-capacitors will challenge resource requirements for both Niobium and Tantalum, as will the ever-increasing need for ferro alloys (Niobium) and continuing developments in medical technology (Tantalum).

Part of the problem faced by anyone dealing in these metals, as a consequence, is that the demand can be so great, that sometimes commercial decisions might be made about aspects of the supply chain which can contravene various national and international laws. The legal advice in this circumstance is generally both stark and uncompromising - don't put yourself in that situation. Anyone doing so could find themselves charged with various offences, many of which in the UK could come under the Terrorism Act.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the subject matter detailed above, please do contact us by e-mail on info@point-point.com

SONCAP regulations for exporting to Nigeria

2013-11-19T05:37:00.000-08:00

On the 1st March 2013 a new (and rather stringent) set of regulations came into force for anyone wishing to ship goods into Nigeria. There are certain goods which may not fall under this regulation, but it is the responsibility of the Nigerian importer to find out if this is the case at the time they apply for a Form M.

However, if the goods do fall under this regulatory requirement, then please note that the costs are quite high and should be calculated at the time of the contract negotiations so that no unpleasant surprises occur at the time of shipment.

The background to this new system is that it is the Nigerian Government's response to the growing and sometimes dangerous activities of counterfeiters and other fraudulent activities to export sub-standard products to Nigeria. This has always been a problem, particularly in the pharmaceutical industry, but has spread to both IT and telecommunications as well. So much so, that a lot of my Nigerian contacts are constantly asking me to supply them with computers, because they have had serious problems with counterfeit and sub-standard units supplied to them through the Nigerian marketplace.

Basically the SONCAP is a two stage process.

First, traders are required to apply for a Product Report/Registration/Licence Certificate. For this application a test report from an ISO 17025 accredited lab and a photograph of each product in jpeg format, no larger than 10mb, must be supplied. The test report must conform to the appropriate product Compliance Verification Guideline (CVG). The CVG outlines the Nigerian and/or International standard(s) to which the product is to be tested.

Generally speaking, declarations of conformity or EMC test reports are not acceptable.

Once the correct test report has been supplied the trader will be issued with a Product Report/Registration/Licence Certificate. The cost of this Certificate is US$300 for the report and registration but $1300 for an annual licence and needs to be paid for by the exporter. These prices have been set by the Nigerian Government and are valid as of November 2013, but is subject to change. The documents can be obtained from an agency such as SGS or Intertek. If there is more than one model/type to be included on the Product Certificate then the costs for these additional products will be calculated upon receipt of your completed request form. A Report is only valid for one shipment within a 6 month period but a Registration or Licence issued to a manufacturer is valid for one year and covers all the shipments of the products registered within that year.

Once a Report/Registration or Licence has been issued then the Registration number (which will be issued by whichever agency used) needs to be sent to the Nigerian importer since they will require this information in order to obtain the Form M and other necessary licences.

Once the goods are ready for shipment then (or beforehand to avoid delays) the trader must apply for a Certificate of Conformity (CofC). The CofC is required for every consignment exported to Nigeria if the goods shipped so require. The cost of the CofC is US$300 per consignment. Most CofC applicationswill require a PSI to be completed and should be accompanied by a copy of a commercial invoice and packing list.

Please note that these documents come as a set. For example, it is not possible to obtain a Certificate of Conformity without first having purchased a Product Certificate.

More information on this procedure can be obtained from the SGS or Intertek websites.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the subject matter detailed above, please do contact us by e-mail on info@point-point.com

Assistance with imports into the UK from Revenue and Customs

2013-11-18T02:44:00.003-08:00

HM Revenue and Customs now offer a programme of free live and pre-recorded webinars to assist traders on international matters. A list of topics is available at www.hmrc.gov.uk/webinars/ under the International Trade heading. This is part of Revenue and Customs objective to make it as easy as possible for businesses to understand and comply with their obligations, help traders to make the best use of any duty relief schemes and simplify any procedures that are available as well as helping to reduce costs and make the trading process as easy as possible.

The webinars available at the moment consist of the following:-

Choosing a live or pre-recorded webinar
An introduction to International Trade
An introduction to Inward Processing (IP)
An introduction to Outward Processing (OP)
An introduction to Customs Warehousing
An introduction to Export Preference.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance, please do contact us by e-mail on info@point-point.com

The importance of getting the IDF right with Kenyan imports

2013-09-23T03:52:00.001-07:00

Introduction
In the same way that in the UK all imports and exports are lodged electronically on the CHIEF system, in Kenya the same procedure is followed on the Simba 2005 system. To make an electronic submission on Simba 2005 means that the importer needs to be registered with Kenyan Customs to do so. However, very few organisations are prepared to go down this path, which means that the electronic submissions for imports and exports are usually carried out by freight forwarders and clearance agents.

Hence the usual procedure for an import is that the import agent will lodge the import on the Simba 2005 system, pay the required duties and taxes and present all relevant documents to Customs to pass the entry. However, the clearance agent is not normally responsible for obtaining the IDF (Import Declaration Fee) licence.

Import Declaration Fee (IDF)
Although there are some exemptions, most items imported into Kenya will be subject to the IDF tax. The importer needs to identify if their goods are liable to this tax and, if so, are responsible for paying it and obtaining the relevant IDF licence prior to importing any goods into Kenya. The IDF is normally charged at 2.25% of the CIF/CIP value of the goods, with a minimum value of 5,000 Kenyan Shillings payable. This is a tax which is separate from and additional to, any other tax which might also be charged on the import, such as duty, excise and VAT.

The importer must apply for, complete the relevant forms and obtain an IDF before the goods are imported. Forms are issued by the Kenya Revenue Authority Customs and Excise Department and the details that must be completed are the importer, consignee (who is often the same organisation as the importer), exporter and consignor (who is often the same organisation as the exporter) details, all consisting of the name, address and contact details of all these different parties. Please note that if the IDF states Party A as being the exporter, and the goods are shipped from Party B (for whatever reason), then there will be a serious problem on import since the export documentation MUST match the details on the corresponding IDF.

The importer must also complete the Goods value part of the IDF application form, which includes details such as currency, exchange rates with the Kenyan shilling, the FOB value, the CIF/CIP value and the Incoterm that the goods will be shipped under. The form must be signed and dated by someone authorised to do so in the importing organisation. If the shipment is under USD 1,000 in value then no advance IDF needs to be processed.

Once the form is submitted to Kenyan Customs they will assess the duty payable depending on the value of the item(s) and the duty rate applicable and request that the IDF tax is paid. This is a tax which is payable to the Kenyan Government.

Different IDF charges
The IDF chargeable can vary for different items. On cars, for example, it is 2.25%, but the import duty is 25%, the Excise Duty is 20% and the VAT is 16% and the total cost is based on the cumulative value of these taxes charged in that order. Please also note that cars older than 8 years from Date of Manufacture (DOM), if imported into Kenya, will be treated as contraband and seized by the authorities. Also, no left hand drive cars are permitted to be imported into Kenya either.

New computers will have a charge of 2.25% of the CIF value charged, but at the present time there is no additional duty charged. New printers, on the other hand, will have the 2.25% IDF, plus a 10% duty and 16% VAT charge. Used computer equipment, however, has an IDF of 2025% plus a duty charge of 25%.

It is, therefore, very important to check on the IDF as well as the duty and VAT rates when exporting or importing into Kenya.

Some goods also require quality inspection by agencies such as Intertek or SGS before they leave the country of export, since the Kenya Bureau of Standards does require that a number of items have a Conformity Certificate before they can be imported into Kenya. Other departments, such as the Public Health Department, the Department of Agriculture and the Mines and Geology Department can also require specialist certificates for various items.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the subject matter mentioned above, please do contact us by e-mail on info@point-point.com

Documentary Credits - Assignment of Proceeds

2013-09-03T07:27:00.001-07:00

Introduction
There are three main ways that a beneficiary of a Documentary Letter of Credit (DC) can use the original DC to pay suppliers using the DC itself.

The first is to ask a bank to issue a Back to Back DC using the original DC as collateral. This method has in the past, unfortunately, been shown to be vulnerable to fraudulent trading, and so now banks will rarely agree to cover the risk.

The second is to obtain a Transferable DC. If the supplier and all banks involved in the transaction agree, it is possible for the original beneficiary to request that the bank at which the DC is available, to transfer part of the value of that DC to the supplier (always known as the second beneficiary). It is possible for the original beneficiary to transfer to more than one supplier, but the total sum transferred must not exceed the value of the original DC. One of the main problems with this method is that in some countries, their fiscal policies do not allow DC's originating from those countries to be transferable.

Assignment of Proceeds
The third way that a DC beneficiary can use a DC to pay suppliers is through an Assignment of Proceeds. In UCP 600, this is covered by Article 39 which merely states that the beneficiary has the right to assign any proceeds from the DC to which they are entitled.

The procedure is as follows:

1. Beneficiary receives a workable Documentary Credit. They contact the negotiating bank and request that the bank send an irrevocable instruction in letter form to the supplier. This letter will tell the supplier that the bank has received notification from the beneficiary to make the relevant payment to the supplier out of the credit proceeds. The bank will charge the beneficiary a fee for this service.

2. The beneficiary must advise the negotiating bank whether any bank charges should be taken from this payment. The usual instruction is that all bank charges for the transaction should be borne by the beneficiary and that the supplier receives the full value of the agreed reimbursement (less any charges from their own bank, if applicable).

3. Once this letter has been issued it is irrevocable and the funds will be transferred once the DC is successfully negotiated. However, please note that the bank will not undertake any payment or guarantee towards the supplier: the bank is only acting as an agent for the payment of funds received from the negotiation of the DC.

There are a number of factors which need to be taken into consideration with an Assignment of Proceeds. First, national law will determine the extent and legal affect of the assignment. Secondly, any payment made to a supplier using this method is wholly dependent on the beneficiary of the DC submitting conforming documents on presentation. Thirdly, the bank cannot pay the supplier if they don't have free use of the proceeds received from the DC. Fourthly, it is much safer if the DC being negotiated is a confirmed one and this is a question that the supplier will need to ask the beneficiary prior to accepting Assignment of Proceeds.

The benefits to the supplier, however, is that they have no additional costs to pay in either bank charges (unless otherwise agreed) or time and that once the DC is successfully negotiated, they will receive payment within the agreed time limits of the DC itself.

How to complete a C99 for IPR Suspension (Simplified)

2013-08-06T02:36:00.000-07:00

It is possible to import some types of goods into the United Kingdom (UK) and not pay any Duty or VAT (if these taxes normally apply), as long as the exact same goods are to be exported out of the UK within a 6 month period from the date of import. (Occasionally, it is possible to get an extension on this 6 month period, but this must be advised in writing by the National Import Reliefs Unit - NIRU - in advance). The procedure that must be used at the time of import is known as Inward Processing Relief (IPR) Suspension, simplified. This is a useful procedure for organisations (or individuals) who import into the UK needing to use this procedure infrequently.

Please note that when importing into the UK using the IPR Suspension (simplified) that there are two Customs Procedure Codes (CPC) that can be used. 5100001 is used if normally both duty and VAT would be applied to the import. 5100003 is used if normally only VAT would be applied to the import. It is also important to know the Commodity Code for the goods and it is useful if this information is detailed on the commercial invoice accompanying the import.

The customs clearance agent must be instructed at the time of import to send you all copies of the import documentation, namely the E2 and C88. These document will detail out information such as the EPU, the Entry number and date and, in box no. 37, state the correct CPC code.

Once the goods are ready to be exported from the UK, it is really important that whichever freight forwarder is used to complete the export clearance documents is aware that the CPC to be used MUST be 3151000 and that they must provide copies of the export clearance documentation. (There is only 1 export CPC for IPR Suspension simplified) If this CPC is not used and the export goes out on a different CPC then there is no official record that the goods have been exported on the CHIEF system and the National Import Reliefs Unit (NIRU) will request that any duties or VAT that should have been paid at the time of import are paid once the 6 month period has expired. For further information about this please go to www.gov.uk/hmrcs-national-import-reliefs-unit.niru.

It is also possible to dispose of the goods in other ways. They can be transferred to an authorised IPR trader, declared to a Custom Warehouse, declared to a Free Zone, declared to Temporary Importation, declared to Processing under Custom Control, declared to End Use, entered to Community Transit procedure or indeed, released to free circulation. Each of these procedures will be accompanied by the relevant clearance documentation and again copies must be kept so that there is always a clear audit trail of what has happened to the goods.

IMPORTANT NOTE: Don't mis-use this system in any way. If there is any doubt at the time of import that the goods will be exported within the 6 month period, then contact Revenue and Customs first and explain the situation. They will advise the best course of action that would prevent any future unpleasantness.

If the goods are being exported, once this has happened, ensure that you receive copies of the export clearance documentation (DTI-P2). This will provide an Entry number which is required to complete the C99.

The C99 can be downloaded from the NIRU site (detailed above). The Turn refers to either the company's VAT number or EORI number. Complete the company name and address and complete the line of information stating EPU, Entry number and Date. This information refers to the import of the goods.

You then need to advise how the goods were disposed of and there are a number of different options as already detailed above. If the goods were re-exported, then tick box number one and state the export entry number alongside (obtained from the DTI-P2). If any of the other options apply, then tick one of these and enter the relevant information. Sign and date and then return this completed document to

National Import Reliefs Unit
Abbey House, Head Street,
Enniskillen, N. Ireland
BT74 7JL
Tel No: 028 6634 4557.

This document must be completed and returned the NIRU within 1 month of the goods being disposed of under an acceptable regime.

The difference between The British Isles, Great Britain and the United Kingdom

2013-08-03T15:51:00.000-07:00

There is often a lot of confusion about what is actually meant by The British Isles, the United Kingdom, Great Britain, etc. Often these titles are used interchangeably, which can sometimes be problematic since they are actually very different things.

Signpost Lands End Cornwall courtesy of Camstock Photo

The British Isles is a geographical term encompassing 2 large islands, Great Britain and Ireland plus about 5,000 smaller islands including Orkney, the Shetlands, the Hebrides (sub-divided into Inner and Outer Hebrides), the Isle of Man, the Isle of Wight, the Isles of Scilly, Lundy Island and the Channel Islands (Jersey, Guernsey, Alderney and Sark).

Great Britain is the name of the island which lies North West of France and East of Ireland and consists of three autonomous regions (not politically independent countries) of England, Wales and Scotland. Great Britain is not the name of a country, but the name of an island.

The island of Ireland (partitioned in 1921) consists of Northern Ireland and an independent country in the south known as the Republic of Ireland or Eire.

The United Kingdom is a country that consists of Great Britain, Northern Ireland and the rest of the British Isles (with the exception of the Isle of Man and the Channel Islands). Its official name is United Kingdom of Great Britain and Northern Ireland. Please note that the term "British" therefore refers to all people from Great Britain, but not to all people from the United Kingdom.

Politically the United Kingdom is governed by the Parliament of the United Kingdom (who act on the entire nations behalf), but both the Scottish Parliament and the National Assembly of Wales were granted partial ruling powers in 1999. The Scottish Parliament is presently organising a referendum of the Scottish electorate on the issue of full independence from the United Kingdom on 18th September 2014. Economically, the Bank of England serves as the central bank for the United Kingdom.

Where things can become slightly complicated is with reference to law and legal procedures. To start with, there is no such thing as the law of the United Kingdom.

The regions of England and Wales, and some of the islands of the British Isles, come under the laws of England and Wales. Other parts of the United Kingdom (Scotland and Northern Ireland) and the Crown Dependencies of the Isle of Man and the Channel Islands, however, come under different legal systems.

In legal terms Scotland is a separate country from the rest of the British Isles. Scotland has its own independent (and in parts) very different judicial system with its own jurisdiction. The main differences between Scottish and English and Welsh law lie in the fields of adult regulations (people can marry at 16 in Scotland; the limit is 18 in England and Wales), elections, and particularly in property and commercial law. Scottish law also applies to the islands of Scotland, such as the Orkney, Shetland and Hebridian Islands.

Since 1921, Northern Ireland current statute law comprises Acts of Parliament of the United Kingdom that apply to Northern Ireland, Acts of the Northern Ireland Assembly and statutory instruments made by departments of the Northern Ireland Executive and the United Kingdom Government.

The Isle of Man (Manx) is a dependency of the British Crown and has its own legislature, called the Tynwald. The Head of State is Queen Elizabeth II who holds the title Lord of Mann, but it has its own autonomous parliament (which is the oldest in the world) and is not technically part of the United Kingdom, even though the United Kingdom does handle foreign and defence matters for the Island. Although the Manx legal system is based on the principles of English common law, the principle sources of Manx laws are Acts of Tynwald and orders and regulations made under these acts. Many Acts of the United Kingdom Parliament are extended to the Isle of Man by Orders in Council, issued as United Kingdom Statutory Instruments. Acts passed by the Tynwald must receive the Royal Assent.

The Channel Islands also have separate jurisdiction from the United Kingdom and are divided into the 2 Bailiwicks of Jersey and Guernsey. Each Bailiwick has its own legislature, known as the States. Although Alderney and Sark are dependencies of Guernsey, they also have their own legislatures. Neither the Isle of Man nor the Channel Islands are members of the European Community, although they are associate members, and as such European Community law has direct application to these islands for very limited purposes and only in relation to Articles 25-27 and Protocol 3 of the United Kingdom's 1972 Act of Accession (Bay 61C).

Foreign travellers to the United Kingdom (once they have entered the United Kingdom legally through immigration control) can also travel to the Isle of Man and the Channel Islands without needing additional visas or passports. However, because these islands are not part of the European Community, the single market in goods does not exist between the United Kingdom and the islands, so the goods will need to go through Customs control. In addition, anyone wishing to work in either the Channel Islands or the Isle of Man (even if they live in the United Kingdom) need to be aware that these islands have their own system of work permits which must be obtained beforehand. Please note that private health insurance is also required for all visits since there are limits on the medical services offered under the NHS reciprocal agreement between the Isle of Man and the United Kingdom and there are no NHS services in the Channel Islands.

Country Information: Gabon

2013-07-28T15:36:00.000-07:00

General Information
Official language:
English (from 12th October 2012); formally French
Other languages:
Fang, Myene, Bakeke, Bapoonou
Capital City:
Libreville (containing nearly 50% of Gabon's population)
Currency:
Communaute Financiere Africaine (CFA) Franc
Flag:
Green, Yellow and Navy Blue Horizontal stripes. Green symbolises the forest, yellow the equatorial sun and blue the water from the sea and sky
Land Area:
270,000 sq km

Location
Gabon is located in Central Africa, bordering the Atlantic Ocean at the Equator, between Cameroon in the north, the Republic of the Congo to the east and south and Equatorial Guinea to the north west.

Geographical Features
The climate is equatorial tropical with rain forests covering over 85% of the land mass. Geographically Gabon can be described as having a narrow coastal plain, a hilly interior and Savannah in the East and South. The coastal lowlands (which range in width from 18-25 miles) border a rocky escarpment that ranges in height from 600-2000 ft and is more than 60 miles wide. Rivers have carved deep channels through the escarpment. The north coastline is deeply indented with bays, estuaries and deltas, providing natural shelters. South of the Ogome River delta the coastline changes into lagoons and mangrove swamps.

The escarpment develops into a mountainous region with the Cristal mountain range to the North of Libreville and the Chailla Massif in the centre. The highest peak is Mt. Iboundiki (5,165 ft)

There are 9 provinces in Gabon (each named after the river that separates them) and apart from Libreville (on the River Komo) the other main urban centres of Gabon are Port-Gentil (Southern coastline), Oyem (North interior), Mekambo and Makokau (North East interior), Lambarene (Central), Franceville and Mouila (South interior)

Natural Resources
Petroleum, Natural Gas, Diamonds, Niobium, Manganese, Gold, Timber, Iron Ore, Hydro power

Agricultural Products
Rubber, Cocoa, Sugar, Coffee, Palm Oil, Okoume softwood (for making plywood), Cattle
2/3 of working population work in agriculture

Politics
Gabon achieved independence from France in 1960 and since then has been one of the most politically stable countries in Africa. There are 40 ethnic groups in Gabon (Fang largest at 40%), but internal political divides are limited, mainly due to relative prosperity from oil exports and partially due to the presence of French troops. France still has a military base in Gabon. However, Gabon's dependence on oil has made its economy and political stability hostage to oil price fluctuations. When oil prices fell in the late 1980s opposition to the then President, Omar Bongo, increased, culminating in demonstrations in 1990.

These demonstrations ushered in political liberalisation and a multi-party system was introduced in 1991 with a Presidential term of 7 years. Nevertheless, President Omar Bongo remained in power until he died on 8th June 2009 of a cardiac arrest in Barcelona. He had maintained power for over 40 years and was succeeded by his son, President Ali Bongo Ondimba on 16th October 2009. Presently opposition parties remain fragmented and argumentative.

However, President Ali Bongo is under attack from another area - namely France. In 2012 extensive investigations started in Paris on allegedly "ill-gotten gains" where 3 serving African leaders and their families are under investigation over whether they embezzled state funds to acquire vast assets in France. The Bongo clan supposedly has the biggest property portfolio with preliminary French police reports indicating 39 properties in France and 90 French bank accounts.

Perhaps not surprisingly President Ali Bongo has reacted with a degree of anger at these accusations and one of his actions has been to replace French as the official language of Gabon, with English.

Economics
Gabon joined the world bank in 1963 and since 1985 it has had both a trade surplus and balance of payments surplus. This is mainly due to the country having a small population (just under 1.5 million), but extensive natural resources, especially oil. The oil is a mixed blessing. Oil revenues consist of 46% of the Government's budget, 43% of GDP and 80% of its exports.

The long term trend for Gabon's oil production is for decline as production falls from mature fields and fails to be offset by new volumes. Output is predicted to average 243,000 barrels per day in 2013, falling to 235,000 barrels per day in 2017. However, a series of recent discoveries in Gabon's deepwater and sub salt acreage underscore the untapped potential. (This information comes from Gabon's Oil and Gas Report, Q3, 2013)

Gabon does have other resources such as Manganese, Niobium, Gold and Phosphate. All mining operations are the property of the State. Exclusive rights to mine can only be provided by the Ministry of Mines, Energy and Petroleum. Manganese is presently mined by Comilog (Compagnie Miniere de l'Ogooue SA) in the Moanda region (near Franceville in SE Gabon) from the bedded oxide deposits in the early Proterozoic Francevilliam Basin. It is estimated these mines have reserves of 250 million tonnes with a metal content of 48%-52%. The US Geological Survey estimates that 1.5 million tonnes of Manganese was mined in 2011. However, in 2011 a Damages complaint was issued against Comilog by people in the region due to health issues allegedly caused by water sources being polluted by mud and waste from Manganese mining. In addition, a lot of fishing grounds have also had to be abandoned.

These environmental concerns continue to grow, especially since Manganese mining is being promoted in other parts of Gabon as well. For example, Huazhou Mining signed an agreement in 2010 to operate a mine in Central Gabon at M'Bembele (200 km SE of Libreville).

There are also infrastructure problems. The building of the Transgabonais Railway has provided a cost effective shipping route from Moanda to Owendo port. But the exploitation of the Mekambo and Belinga iron fields in NW Gabon (believed to be some of the world's richest iron deposits) has been put on hold until the Transgabonais Railway can be extended 225 kg from Booue to Belinga. It is estimated that these fields could have reserves of 1 billion tonnes of ore with 60%-65% iron content. There is also potential to develop a Niobium field near Mabounie, which could produce 15% of global niobium requirements. However, all of these potentialities are on hold until the infrastructure can be developed. It might also be a good idea to withhold development plans until environmental and civil factors can also be properly developed, to ensure that any such mining brings profit to the country and is properly regulated with regards to environmental health concerns.

Gabon also produced 350,000 metric tonnes each of clinker and hydraulic cement. As a building material, cement is seen as a sign of wealth in Gabon. All government buildings are made of cement and most urban centres. This is in direct contrast to housing in the countryside which is made of anything from wood, bark, brick and sometimes mud with palm frond roofs.

There are present moves to improve infrastructure and housing around Gabon's forestry and agricultural industries. However, there are growing concerns about the danger that the logging industry is having on Gabon's forests and eco-structure, due to lack of oversight by Gabon's Government over international logging companies (who reputedly don't respect technical standards), lack of management and research into the real environmental impact of logging and the reported waste.

Gabon also has a small manufacturing sector, but growth in this arena is presently limited by a shortage of skilled labour, high costs and an inadequate infrastructure.

As oil reserves diminish, eco-tourism could grow in economic importance. Gabon's rain forests have lowland gorillas and most of Africa's remaining forest elephants. In 2002 in an unprecedented move, President Bongo designated 10% of Gabon's land mass into National parks (13 in total) in order to protect the wildlife and flora from attack. They have a zero tolerance policy towards poaching and their reaction to constant attacks on their elephant population has been unremitting. On 27th June 2012, to send a message to the rest of the world about their intolerance, they burnt 4,825 kgs of seized ivory. However, these national parks were established without any consultation with the indigenous population and conflicts have been brewing for some time since the local communities were not offered any alternatives to their traditional hunting, fishing and religious activities.

Although Gabon has one of the highest per capita incomes in the Sub Saharan Africa region, there is unequal income distribution, with a big wealth gap difference between the urban rich and rural poor (richest 20% have 90% of income) and so Gabon does have three major challenges at the moment. The first is to combat poverty (presently 1 in 3 of the population is on the breadline), the second to decrease the high unemployment rate (presently standing at 27% of the working population) and the third is to try and equalise the unequal distribution of income.

Gabon, in comparison to a number of other countries, is experiencing a period of growth. In 2012 the GDP growth was 5.7% and it is estimated that the figure for 2013 will be 6.2%. Prices for commodities such as oil, manganese and timber are presently increasing and this helped produce robust growth in 2012. But there were also internal investments undertaken for the Africa Cup of Nations in 2012 and there continues to be increasing public investment and upturns in areas other than oil, such as mining. Gabon has plans to be an emerging economy by 2025 based on three pillars of Green Gabon, Industrial Gabon and Service-Industry Gabon.

Transport Infrastructure
Airports - 14 paved, 31 unpaved (internal air flights vary dramatically in quality)
Railway - 649 km Transgabonais Railway runs from Franceville to Owendo port (Libreville)
Roads - 937 kg paved, 8,233 km unpaved (during rainy season Oct-Dec & Feb-May roads only passable with a 4-wheel vehicle and sometimes not even then)
Waterways - 1600 km (310 km on Ogooue River and on its tributaries Ivindo and N'Govnie)
Sea Ports - Gamba, Libreville, Lucinda, Owendo, Port-Gentil

Main Exports
In 2012, Gabon's exports were an estimated US$ 10.2 billion
The main export items are crude petroleum, forest products, Manganese, Uranium Ores and Cocoa

Main Export Partners
Japan (23.9%), USA (16.9%), Australia (11.2%), India (7.3%), China (5.4%), Spain (4.1%)

Main Imports
In 2012, Gabon's imports were an estimated US$ 3.638 billion.
The main import items are Machinery and equipments, Chemicals, foodstuffs, Construction Materials and Capital goods.

Main Import Partners
France (28.1%), China (12.8%), USA (9.4%), Belgium (5.8%) and Cameroon (4.7%)

Doing Business in Gabon
It can be a challenge working in Gabon, although there are changes afoot to try and change certain bureaucratic and legal barriers. The advice given by experienced traders is to (where possible) invest in the training of locals; be very patient - things do move slowly in Gabon; be prepared for bureaucratic hurdles; know the right people - get introductions to the Chamber of Commerce for example, and please note that credit cards are presently not widely accepted and credit card fraud is rife. Gabon is a cash based economy, so travel out there prepared to deal in cash.

Certain types of behaviour are not tolerated. Personal use of any type of narcotic drug (if caught) carries severe penalties and possible prison sentences. Dealing in drugs, on the other hand, carries a mandatory death penalty. Homosexuality is not widely accepted in Central Africa and in certain circumstances is deemed illegal. It is forbidden to take photos of military and government buildings.

As with all international travel, take care not to visibly demonstrate great wealth or to travel alone in isolated areas or during the nighttime. Crime (robbery, armed attacks and rape) is increasing in Libreville and Port Gentil and car jacking is a problem, as is piracy along the coast. When driving police checkpoints are common and drivers are often asked to show their passport, driving licence and vehicle registration documents. Medical facilities are limited, particularly in rural areas, so extensive travel insurance is recommended. Please note that there is no British Embassy in Gabon. If required, assistance can be given by the British Honorary Consulate in Libreville.

Basic Business Etiquette
The Gabonese are a very spiritual and dynamic people. Although there is a degree of unity in their behaviour, there are small but significant differences between the various ethnic groups with regards to the ceremonies for births, deaths, initiation, healing rituals and the casting out of evil spirits. The Gabonese are a very communal people and can form close relationships relatively quickly. Personal space is neither needed nor respected. When they are interested in something they will stare and they are very straightforward and direct in their speech. For example, they have no problem with calling things as they are, identifying someone by his or her race and asking for something if it is wanted.

Socialising is the main form of entertaining and doing business and so meetings are generally held during lunch or dinner. Urban Gabonese often dine western style, the main meal of the day being in the evening. Meetings and business talk will consist of a long 'social' talk and the real business is only done at the end. It is a good idea to study facts about Gabon, such as their history, and to show a keen interest in someone's cultural background. However, don't bring up the topic of ethnic relations in Gabon or the political system. These are both sensitive subjects.

When meeting someone for the first time, a firm handshake and a 'hello' are suitable as a greeting. Muslims bring their hand to their chest after shaking hands and you should follow suit. It is best to greet people using their title and last names. French is the principle business language in Gabon (even with the recent declaration concerning English) but translators are available to assist.

For men, a lightweight suit and tie are suitable business attire and it is acceptable for jackets to be removed on warm days. For women a suit, or a blouse and skirt are best for daytime appointments. The Gabonese do tend to be slightly late for meetings, but expect others to be on time. Meetings are usually held at the hotel or their offices, depending on the circumstances.

After greetings, business cards are always exchanged and should be given and received with both hands at all times. The card should be studied for a few minutes and then kept in sight - either on the table or in a card case. It should not be put straight into a pocket. Never write on a business card given to you by someone else.

Gift giving can be complicated, but the safest kind of gift is a pen or similar object with a company logo or a picture book of the visitor's home country.

Special Economic Zones
Gabon has introduced a number of attractive fiscal benefits to encourage inward investment through the development of their Special Economic Zones (SEZ). For example, Nikok SEZ is geared towards forest activity and adding value to raw materials exported from Gabon. The fiscal advantages include:

Full exemption from tax for the first 10 years
Concessional Tax of 10% for the following 5 years
Full exemption from Customs Fees and Duties on imported materials such as machinery and the export of manufactured products.
Exemption from VAT
Relaxed labour laws and 50% reduction in the price of power.

Development Sectors
Petroleum and Oil Extraction Services
Green Technology
Internet Services and Applications
Airport Management and Flight operations
Power Generation
Agricultural Services
Health Care and Education

Political Disputes
There is a present dispute with Equatorial Guinea over sovereign rights to three islands, Mbanie, Cocotiers and Congas in Corisco Bay, which hold the key to potentially oil-rich offshore waters. This dispute has been ongoing since 1972, but gained emphasis in February 2003 when the then President's son, Ali Bongo, visited Mbanie and declared that this 30 hectare island, inhabited by a handful of fishermen, was part of Gabon. The underlying problem is that Africa's present boundaries were drawn up by European Colonizers 100 years previously, but without any real degree of accuracy, especially in maritime waters. It does appear that Spanish colonial authorities in Equatorial Guinea did remove a French presence from the islands in the mid 1950's without any protest from Paris. However, with the belief that rich oil fields now lie in this area, combined with the independence of both Gabon and Equatorial Guinea in the meantime, that this long past action is no longer deemed to be a determining factor in the decision on who owns what. Until the matter has been decided and legally accepted by both countries, any oil exploration of the area will need to wait. I am guessing that a 50/50 equal split is not going to be an acceptable solution to the problem.

Export Documentation
As with most countries, documents such as a commercial invoice and full packing list is required for all shipments, and in many cases a Certificate of Origin is also required. Please note that Goods in Transit insurance can only be obtained in Gabon, so CIP and CIF shipments are not possible. There are also specific documents required especially for Gabon. These are as follows:

BIC Certificate
BIC (Borderau D'Identification des Cargaisons) Certificate is required for all shipments. This document can only be obtained from the Gabonese Transport Agency and any shipments arriving in Gabon without this certificate can be heavily fined, anything from 70%-110% of the CIF/CIP value of the cargo. Since 75% of this fine is charged to the transport company and 25% to the consignee, most transport companies will refuse to load any cargo destined for Gabon without this certificate. It is not possible to obtain this certificate in Gabon once the goods have been shipped: the BIC must be obtained in the country of export. It is also possible to obtain an Electronic Cargo Tracking Note (BIETC) which has the same function as a BIC.

Certificate of Conformity
The Gabonese authorities require that imports must meet their quality standards. The department which has been mandated to undertake measures for quality control of products and to promote the standardisation of products in industry and commerce is the Agence Gabonaise de Normalisation (AGANOR). Their objective is to ensure that all imports comply with approved Gabonese technical requirements.

To this end a Gabonese Conformity Assessment Programme is being set up known as Programme Gabonais d'Evaluation de Conformite (PROGEC). This programme verifies that a mandatory Certificate of Conformity is required for Gabonese Customs clearance. The Certificate will confirm that the products being shipped comply with the agreed technical requirements and any shipments arriving in Gabon without this certificate can be liable to severe delays in clearance, as well as penalties. In some circumstances, the goods can be returned to the exporter. The required Certificate of Conformity can be obtained from local Intertek offices once the programme is up and running. PROGEC was due to commence on 1st October 2013, but has been postponed presently. New commencement dates to be advised.

Limiting the effects of Jet Lag

2013-07-26T10:02:00.000-07:00

This great article comes courtesy of Precision Nutrition (www.precisionnutrition.com) and Ultimate City Fitness (www.ultimatecityfitness.com). Do check out their websites - they both offer a huge amount of information about nutrition and physical fitness and its all free. Highly recommended.

How to limit the effects of Jet Lag

Nobody enjoys feeling disoriented, nauseated, tired, and unable to concentrate or sleep. But with a few simple precautions, you can vastly reduce your jet lag symptoms and enjoy a smoother transition.

What is jet lag?

Have you ever taken a long flight and arrived at your destination feeling weak, tired, or generally awful? That’s jet lag – and it’s not just your imagination. It’s a genuine physiological phenomenon. Symptoms of jet lag may include:

fatigue
insomnia
loss of appetite
disorientation
reduced concentration
reduced aerobic fitness
reduced anaerobic fitness
nausea
GI distress
joint swelling and stiffness
muscle pain and stiffness

Jet lag originates in the nerve cells of the hypothalamus, the region of our brain that regulates temperature, sleep, circadian rhythms, appetite, and hunger.

This part of the brain evolved long before air travel and it responds slowly to changes in external time and light levels. This conflict between “inner time” and “outer time” is jet lag.

In fact, scientists estimate that it’ll take you one full day to recover for every hour of time difference. So, if you travel from London, UK to New York, USA, expect about five days until you feel right.

Interestingly, the direction you travel can affect the severity of your jet lag symptoms. Traveling east is more difficult on the body than traveling west. It seems to be easier for our bodies to delay our internal clocks than to speed them up.

And yes, even experienced travelers suffer from jet lag.

A 1994 New Zealand survey of international flight attendants found that while they were used to long-haul travel

90 percent suffered from tiredness over the first five days of arrival;
94 percent experienced a lack of energy and motivation;
93 percent reported broken sleep; and
70 percent had ear, nose or throat problems.

Jet lag’s no fun, but luckily, taking a few simple precautions before, during and after you travel can make an enormous difference, helping you recover much more quickly

How to manage jet lag

SET YOUR EXPECTATIONS

If you’re a frequent traveler, you may enjoy an ultra-modern jet-set life, but in terms of your body, you’re still working with old hardware.

Accept the fact that if you’re crossing several time zones, it will play a role in your travel no matter what you do, so plan accordingly.

Realize that you may not be at your best for a few days following a long trip, especially if you flew east. Set your expectations appropriately.

For instance, if you have a big business meeting on Wednesday morning in Barcelona, consider arriving a day or two in advance rather than grabbing the red-eye from Atlanta on Tuesday night.

(Besides, that gives you extra time to find an espresso and enjoy strolling Las Ramblas.)

Along with smart planning, you can dramatically reduce your symptoms with a few adjustments to your nutrition, exercise, and supplements.

NUTRITION

Good news: Appropriate fasting protocols can radically reduce jet lag symptoms.

In 2002, researchers put fasting to the test with 186 National Guard personnel deployed across nine time zones. In particular, they tested the Argonne diet protocol (see below) for its effects on jet lag symptoms.

95 participants used the diet in preparation for their deployment, and 39 used it in preparation for their return. The rest just followed their regular routine.

Upon deployment, those who followed the Argonne fasting diet were 7.5 times less likely to experience jet lag upon arrival. Of the 39 who followed the protocol upon their return, they were 16.2 times less likely to experience jet lag symptoms!

The protocol adopted by this study is a little intense, and can require alternate feasting and fasting for up to four days before travel, which isn’t necessarily feasible for everyone.

But Dr. Clifford Saper created a simplified version, which PN’s own Dr. John Berardi has followed several times when he has to fly across multiple time zones in order to give presentations.

Modified Argonne Diet Protocol

On your day of travel, eat a normal breakfast and normal lunch. Then fast immediately before and especially during the flight, while drinking plenty of water to stay hydrated.

Upon arrival, eat soon after landing, as close to local meal time as possible. Then initiate a normal meal schedule based on local time. Fasting should last at least 14 hours but can last as long as 24 hours. You may need to adjust actual meal times based on your flight time.

EXERCISE

If you’re the kind of person who likes an outdoor morning workout, you know that exercise — especially combined with light exposure — can dramatically improve your mood and energy levels at a time of day when many people feel sluggish.

Along with carefully timed food intake, exercise can also affect our circadian rhythms. And when used appropriately, exercise can help to alleviate the symptoms of jet lag.

The best kind of exercise is any kind that you can do outdoors during daylight hours.

Light is the most powerful regulator of our internal biological clocks, so we can use light cues to help minimize jet lag. Bright light tells the body it’s time to be awake, especially when combined with movement.

Another helpful trick is to train at the same time you’d train at home. In other words, if you normally train at 8 a.m. in LA and you have traveled to London, do your best to train at 8 a.m. London time, and preferably outside.

Interestingly, training at the same time every day may have little effect on the brain’s biological clock. The main benefit seems to be that it helps our muscles and peripheral tissues synchronize with the new time zone.

Regardless, training at our usual time does seem to affect various body systems, and it certainly seems to help with jet lag.

So far, there’s not much research on the best type of exercise to reduce jet lag. But listen to your body and do what feels best.

High intensity cardio may be out of the question when you’re exhausted and every limb seems to weigh twice as much as it normally does. If that’s the case, try a light body weight workout, a walk, or some stretching exercises. Any kind of movement is probably helpful.

Do what you can, at approximately the same time as your usual routine, and preferably outside.

SUPPLEMENTATION

Melatonin

Melatonin is a hormone secreted by the pineal gland in the brain. One of melatonin’s key jobs is controlling the body’s circadian rhythm — the internal clock that plays an important role in when we fall asleep and when we wake up.

Melatonin release is tied to the amount of light you experience. Light suppresses its release. When it gets dark at night and we turn out the lights, melatonin release is stimulated.

Crossing time zones, we may suddenly find ourselves exposed to excessive light when ordinarily, it would be our bedtime. Even a three-hour time difference can be significant.

When this happens, our melatonin cycles become disrupted and we experience jet lag until our circadian rhythms adjust to the new environment.

That’s why melatonin supplements may help.

But dose timing is critical. Research suggests that taking melatonin before leaving for a trip makes jet lag symptoms even worse.

So wait until you land in the new time zone to supplement; this will significantly reduce jet lag symptoms, improve sleep quality, and increase alertness and recovery.

Since we know that both light exposure and melatonin supplementation can be used to shift the human circadian clock, you might wonder what happens when the two techniques are used together.

One study combined:

a gradually advancing sleep schedule (where each participant was wakened one hour earlier each morning for three days),
with light exposure upon waking (to simulate morning light in a new time zone),
along with afternoon melatonin (or a placebo, for those in a control group).

The result? A gradually advancing sleep schedule, morning light exposure, and placebo caused a 1.7 hour per day shift in participants’ circadian rhythms.

But when melatonin was added to the regime, participants gained a full hour per day in circadian adjustment, up to ~2.6 hours per day.

Of note, 3 mg of melatonin was no more effective than 0.5 mg of melatonin. In other words, a very small amount of melatonin could have powerful effects.

That study and others suggest that if you want to supplement with melatonin to combat jet lag:

take from 0.5 mg up to 5 mg of melatonin for three nights (or until adjusted);
one hour before a normal bedtime; and
only after you’ve reached your travel destination.

Pycnogenol

Pycnogenol is another supplement that has been studied for its ability to decrease jet lag symptoms.

When participants took 50 mg of pycnogenol three times per day for seven days, starting two days prior to travel, the average duration of jet lag symptoms decreased significantly.

A control group suffered for 39.8 hours, while those who supplemented with pycnogenol endured their symptoms for only 18.2 hours.

Why? Perhaps because pycogenol significantly reduced cerebral edema or swelling, as well as edema of the limbs.

As a result, those who supplemented with pycnogenol had fewer short- term memory problems, fewer problems with cardiac function and blood pressure, and also reported far less fatigue

Interestingly, pycnogenol supplementation has also been shown to decrease deep vein thrombosis and superficial vein thrombosis – common side effects of long flights.

In fact, in one study of people who were at moderate to high risk for such events, pycnogenol decreased the incidence of thrombosis from 5.15% to 0%.

Conclusion

As long as humans continue to travel long distances by air, jet lag’s probably a fact of life. But luckily, there’s a lot you can do to prevent and reduce it.

BEFORE YOU GO

To begin with, try adjusting your wake and sleep cycle as close as possible to your destination’s time zone. This involves waking up and going to bed one hour progressively earlier or later (depending on which way you’re traveling) each day for three days.

If you’re travelling east, wake up an hour earlier each day for three days. If you’re travelling west, do the reverse. You can visit JetLagRooster to help you determine your schedule.

Get bright light during your day. You can use an artificial light box if you own one, or better yet, you can get outdoors. At minimum, you can sit near a window.

If you choose to fast, start about 14-24 hours before your next planned meal in your new time zone.

Consider supplementing with 50 mg of pycnogenol three times a day, starting two days before your trip.

While you’re still fresh and full of energy, try a higher intensity workout before your flight to burn some calories and prevent travel stress. If possible, do this at your usual workout time.

Of course, if you have a very early flight, you may not have time for a full workout, but a few brisk laps around the airport before boarding will work just fine.

WHILE TRAVELING

Stay well hydrated and continue your fast.

If possible, get up and move about the cabin often, at least once every hour to promote blood flow and inhibit swelling.

(Tip! The little space by the bathrooms has enough space for some squats. Just don’t kick the drink cart.)

Avoid alcohol and caffeine because alcohol can dehydrate you and caffeine may affect your circadian rhythms.

UPON LANDING

Expose yourself to sunlight and social interaction. The worst thing you can do is go into a dimly lit hotel room and watch TV.

Consider taking a nap if you need to, but only if you can limit it to 30 or 40 minutes. The worst thing you can do is hop into bed the minute you arrive and stay there for hours.

Expose yourself to light as quickly as possible upon waking each morning in your new location.

Consider taking 0.5 (or up to 5mg) of melatonin for three nights or until adjusted, one hour before normal bedtime in your new location.

Continue taking 50 mg of pycnogenol three times per day for up to five days after landing (up to a total of seven days).

Try to exercise outdoors at your usual workout time. If you prefer to lift weights, you can always lift weights at your usual time, but try to follow up with a walk outside to get the best of both worlds.

And enjoy the benefits of travel without as much jet lag.

Why credit terms don't mean credit terms when importing from Pakistan

2013-07-23T12:49:00.000-07:00

Introduction
It is common to pay taxes when importing into a country. Some countries, however, apply taxes when exporting from their country, and one such country that applies an "Export" tax is Pakistan. This tax is known as the Export Development Surcharge (EDS). Before the 6th January 2003 Pakistani exporters used to have to pay the EDS (which is charged at 0.25% of the total FOB value of the goods) before shipment. However, in January 2003 the law was changed to allow for this tax to be deducted from the proceeds of the export.

New Procedures for collection
The State Bank of Pakistan is responsible for ensuring that this tax is collected and the way they do this is by controlling who is allowed to export from Pakistan (all exporters must be registered with the Export Promotion Bureau and be a member of at least one trade organisation) and by ensuring that a necessary document required in the export customs clearance procedure is a Form E.

The Form E is only issued when the exporter "guarantees" to the State Bank of Pakistan that they will collect the funds due to them. The only way they can guarantee this is to either receive 100% of the funds upfront, or have a guaranteed method of payment, such as a Documentary Credit. The problem arises when the Pakistani seller offers credit terms to the overseas buyer. In these circumstances the State Bank of Pakistan insists the payment terms be Cash against Documents because credit terms are inherently unsafe for the seller. The buyer, for whatever reason, can default at any time. Hence the State Bank of Pakistan's insistence on the Cash against Documents system. If the Pakistani seller sends the documents direct to the overseas buyer without first obtaining funds or a guaranteed method of payment, they can have heavy penalties levied against them by the bank.

In order to obtain the Form E the seller must show the State Bank of Pakistan proof that they will obtain the funds within a short period of time in order to pay the tax. This can cause a lot of inconvenience to the buyer if they are unaware that this system exists and they have not arranged for a Cash against Document facility to be made available to them by their own bank. It can take time to set up such a system and its not good practice to ship the goods before the export documents are available to arrange the import customs clearance. Otherwise demurrage and/or storage costs may apply.

Conclusion
Therefore, credit terms as such don't exist in sales contracts when importing from Pakistan. The best deal that an importer can obtain is Cash against Documents, regardless what the sales contract states.

Incoterms 2010 - DDP - Delivered Duty Paid

2013-07-19T01:55:00.000-07:00

Introduction
The DDP (Delivered Duty Paid) incoterm is one where the seller's price to the buyer should include all costs required to deliver the goods to the buyer's door, up to and including customs clearance all duties and taxes payable on import. All risks and all responsibilities for the shipment should also be for the account of the seller.

The importance of considering Customs Clearance
Hence the difference between DAP (Delivered at Place) and DDP is the additional cost of the customs clearance in the country of import. However, this does not just include the actual cost of the customs clearance and the payment of any duties and taxes, but also, if there are any delays on import, all storage and demurrage costs as well. Sometimes it can be difficult to predict if there will be any delays, so in this scenario how does the seller cover any shortfall if the worse should happen?

Since the seller is controlling the whole shipment (and the supply of all documents) then, as long as there is a good relationship between the shipper and the customs clearance agent and the documentation is correct, the import should go through smoothly. Please note that in some countries (the USA for example) it is not allowed for the freight forwarder to complete any customs clearance entries. Legally the two functions of transport and customs clearance must be completed by different organisations. The seller must check whether this condition applies in the country of import and to make the relevant agreements before the customs clearance procedure has to be completed. Its usually not a good idea to arrange such matters when the goods have physically arrived, although in the majority of cases the freight forwarder will have facilities or relationships in hand to assist.

Generally speaking, the customs clearance can go one of three ways. The Customs Authority concerned can accept the face value of the customs entry (and the assumption that the entry matches the documentation and that the documentation accurately reflects the physical characteristics of the shipment) and will allow the clearance agent to present the entry (either electronically or manually) without any further checks. Alternatively, the Customs Authority may decide to check the information on the customs entry against the supporting import documentation. Such checks are often done randomly. However, sometimes they are done because the Customs Authority have received information that the entry is flawed in some way. In this later case, the Customs Authority is more likely to not only check the information on the customs entry against the supporting import documents, but also to check that the documentation matches what has been physically shipped. Again, such detailed checks can be done randomly.

It can take extra days for these checks to be made and, unfortunately, this can usually lead to the goods not physically moving within the accepted demurrage/storage period, so these charges can and will be added to the cost of the import. There is nothing that can be done about random checks - they just have to be accepted as one of the risks when shipping goods internationally.

The problem arises if the Customs Authority finds any discrepancies. It could be that the discrepancy is due to a typing error made by the clearance agent, which does happen, or because the documentation is not properly prepared so that the clearance agent is unable to complete their documentation correctly. If the discrepancy is due to any deliberate action and this is discovered to be the case, then the penalties can be rather severe, depending on the Customs Authority in question, the type of goods being imported and the circumstances of the discrepancy.

If the mistake is due to the clearance agent, then the seller should ensure that part of the contact they have with this agent agrees that if any errors are made and costs are levied against the seller as a consequence, then these 'consequential' losses should be for the account of the clearance agent. However, the seller must supply good quality information on their export documentation, otherwise the agent could, quite legitimately, argue that it was the lack of such information which resulted in the incorrect entry.

It should go without saying that the seller must make sure that the export documentation accurately reflects what has been physically shipped and that this information is clearly detailed to allow the Customs clearance agent to do their job correctly. Declaring 3 items when 6 have been shipped is technically smuggling, even if the extra 3 items are free of charge warranty replacements. Not stating an HS Commodity code on the invoice could mean that the clearance agent has to make a judgement call about which code is actually correct, which could lead to extra duty and taxes being paid if the wrong code is used.

In all circumstances, the legal responsibility for an incorrect entry under DDP terms belongs to the seller, unless the local law in the country of import determines otherwise. In my experience, it is rather rare for the local law to do so.

Consequently, this is why the seller (under DDP terms) must always ask the clearance agent to provide a copy of the entry documentation to them so that this can be checked by the seller. If there are any errors then the clearance agent has a period of time (usually) in which they can amend the entry and ensure it is correct. Please note, however, that in most countries, trying to claim back any overpaid duties or taxes due to entry mistakes, can be a complicated process with no guarantee of success. However, it is still important that the seller ensures that the entry has been completed correctly.

This is where additional problems can arise, because, naturally enough, such documentation will be in the language and script of the importing country. It is part of the responsibility of the seller under the DDP term that they can read the entry documentation supplied by the local clearance agent. Not being able to make any sense of what has been sent to you is not an excuse for allowing mistakes to go unresolved. Surprisingly enough, very few companies actually ask their clearance agent to supply this documentation, if it is not supplied automatically, and even when it is supplied, a lot of importers don't bother checking the entries. Sometimes, they have no idea what they are checking anyway. Its not a legal requirement to check the entries, but bearing in mind that all entries are legally the responsibility of the importer (be it the buyer or seller) then it seems strange that some organisations accept the responsibility without having checking procedures in place.

It can be complicated setting up effective communication channels with an import facility in a different country, but it is not impossible. However, communication is not usually the most problematic factor. More and more countries globally are now requesting that anyone importing into that country must be registered in that country to do so. In the United Kingdom, for example, anyone wishing to import must have an EORI registration number.

Different countries have different registration requirements and sometimes the requirement for registration to import can carry other legal and financial responsibilities as well. In some cases it may not be possible, or it may be economically unviable, for the seller to register themselves in the country of import. In which case under these circumstances, can the seller still sell on DDP terms?

If the ICC wording on the DDP term (2010 edition) is carefully read, it does not actually state that the seller must undertake the import customs clearance. The implication (and tradition) is that the seller should have the responsibility and cost of the clearance. This lack of explicit wording does leave the interpretation of the DDP term with regards to the customs clearance rather open. In some circumstances, therefore, the seller could ask the buyer if the buyer can complete the customs clearance on the understanding that all the costs relating to this action is paid by the seller.

Sometimes this may be the buyer's preferred course of action anyway. In some countries, obtaining foreign exchange sometimes requires the presentation of the import clearance documentation. If this documentation is not in the name of the buyer then they potentially have no proof that they imported the goods into the country, even if they argue they purchased the goods under DDP terms. Therefore, if the payment terms between buyer and seller is on credit, the buyer may find, even if they themselves have both the funds and the determination to pay, that they cannot obtain the necessary currency to do so. This can be avoided if the payment is made against a Documentary Credit, for example, since the funds are already in place. However, Documentary Credits are not always the best or most effective method of payment, so it is rather important that the buyer and seller determine at the contract stage whether the DDP term can work for them, and if so, how.

If the buyer allows the seller to use their import registration, then it is good practice for the seller to maintain control over the shipment by ensuring that the organisation completing the customs entry is separate from the buyer. I give this advice based on something that happened to one of my clients some years ago. They shipped goods on DDP by airfreight and accepted the buyer's offer to use the buyer's clearance registration. However, the buyer also insisted that their customs clearance company complete the entry. The goods arrived in the country of import and then "disappeared." Since these were two large wooden crates their disappearance was a bit suspect. The customs clearance agent nominated by the buyer stated that they could not locate the crates in the Customs warehouse and that, consequently, both demurrage and storage would be due until the goods were located. On behalf of my client representatives from the shipping company managed to access the warehouse and found the crates without any problem. They took pictures which were presented to the customs clearance agent, who had no choice but to agree the goods had been found. They then completed the customs clearance, but my client was presented with an additional bill of nearly GBP 3,000 for the storage and demurrage charges. They were actually lucky. Someone else, shipping to the same client under the same terms and using the same clearance agent, were reportedly hit with a bill for storage and demurrage which dramatically exceeded this amount.

Conclusion
In theory, DDP seems like a useful term to use for certain types of shipments. A lot of buyers like the DDP term because it means they can use the DDP price to compare the costs of purchasing the goods from overseas with domestic suppliers and not worry about any additional costs. However, for a number of reasons, as detailed above, the seller might find that the DDP term is much more problematic. However, as long as there is a clear written agreement between buyer and seller and between the seller and their transport agent and a customs clearance agent, any additional costs should be kept to a minimum.

Tips on saving money at the petrol pump

2013-07-13T15:13:00.002-07:00

Introduction
Only pay for petrol you receive. Well, yes, of course we should only pay for what we buy. However, due to the physical nature of refined petrol/gasoline, when we fill up our cars we sometimes end up paying for petrol that is legally never delivered.

The following information comes courtesy of NC Engineering based in Berkshire, England.

Recently I came across some very useful tips. I was surprised to know it but had a doubt so I talked to one of the pump technicians and he too accepted it as a fact. I think, apart from providing space for the gas generated inside the petrol tank, here is yet another reason why we shouldn't fill the tank to the brim. Many of us are unaware that the petrol kiosk pump has a return pipeline (in pink). When the petrol tank (in the car) reaches full level, there is a mechanism to trigger off the pump latch and at the same time a return valve is opened (at the top of the pump station) to allow excess petrol to flow back into the pump; but the return petrol has already passed through the meter, meaning you are donating the petrol back to the Oil Dealer.
Only fill up your car or truck in the early morning when the ground temperature is still cold. Remember that all service stations have their storage tanks buried below ground. The colder the ground, the more dense the petrol. When it gets warmer petrol expands, so buying in the afternoon or in the evening, your litre is not exactly a litre. In the petroleum business, the specific gravity and temperature of the petrol diesel and jet fuel, ethanol and other petroleum products plays an important role. A 1 degree rise in temperature is a big deal for this business, but the service stations do not have temperature compensation at the pumps.
When you are filling up, do not squeeze the trigger of the nozzle to a fast mode. If you look you will see that the trigger has three stages: low, middle and high. You should be pumping on low mode, thereby minimising the vapours that are created while you are pumping. All hoses at the pump have a vapour return. If you are pumping on the fast rate, some of the liquid that goes to your tank becomes vapour. Those vapours are being sucked up and back into the underground storage tank, so you are getting less value for your money.
One of the most important tips is to fill up when your petrol tank is HALF FULL. The reason for this is the more petrol you have in your tank, the less air occupying its empty space. Petrol evaporates faster than you can imagine. Petrol storage tanks have an internal floating roof. This roof serves as zero clearance between the petrol and the atmosphere, so it minimises the evaporation. Unlike service stations, here where I work, every truck that we load is temperature compensated so that every litre is actually the exact amount.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the matters mentioned above, please do contact us by e-mail on info@point-point.com