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Semester final
Date Learned @October 29, 2024

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Subject IB-408

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 CUSTOMS VALUATION

*Transaction value concept*

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 Customs valuation practice has been made uniform across the world through the
adoption of article seven of the general agreement on tariffs and trade gatt 1994,
more commonly known as the wto agreement on customs valuation or the gatt
valuation code.

The agreement makes transaction value as the basis for customs valuation
According to gatt valuation code, transaction value of the imported goods is the
price actually paid or payable for the goods when sold for export to the country
of importation with certain adjustments.

The essence of transaction value is that, except in specified circumstances,

customs value will be based on the actual price of the goods, which will generally
be shown on the commercial invoice.

💡 Customs valuation - determination of value for imported goods

Meaning of Transaction Value

Article 1 defines transaction value as price actually paid or payable for the goods
when sold for export to the country of importation (for example, invoice price).
This price is used for customs valuation, even if the sale is between related
parties, as long as the relationship didn’t affect the price.

Additional costs added to the transaction value include:

1. Costs paid by the buyer not included in the sale price, like: (এটাও কিন্তু এড
হবে)

Commissions and broker fees (excluding buying commissions),

Container and packing costs.

2. Goods or services provided by the buyer at no or reduced cost, such as:

Materials, parts, or tools used in production,

Design or development work done outside the importing country.

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 These are added because they contribute to the production cost of the
imported goods but aren’t included in the direct purchase price.

3. Royalties and license fees that are paid as a condition of the sale.

4. Proceeds from resale of the goods that go back to the seller.

5. Certain additional charges (in some countries like India), including

transport, insurance, and handling/landing costs at the port of import.

This approach ensures all relevant costs are included in the customs value.

Methods of Valuation
কখন এই পাঁচ টা মেথড ব্যবহার হবে সিকু য়েন্সিয়ালি

In situations where customs value cannot be determined on the basis of the

transaction value or

where the transaction value is not acceptable as the customs value because
the price has been distorted as a result of certain conditions, custom value
will be determined using one of the following methods in hierarchical order:

1. Transaction value of identical goods

2. Transaction value of similar goods

3. Deductive value

4. Computed value

5. Fall-back method

1. Transaction value of identical goods

Value should be determined on the basis of already determined

transaction value
for identical goods. Identical goods are similar in all
respects including physical characteristics, quality and reputation.

2. Transaction value of similar goods

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 Where the test of value of identical goods fails, value should be determined on
the basis of transaction value of similar goods. Similar goods are those which,
although not alike in all respects, have like characteristics and like component
materials. They perform the same

functions and are commercially interchangeable.

Here are some basic guidelines for valuing goods using the identical or similar
goods method:

1. Time Factor: The comparison should be with goods sold at the same time
or close to the time the goods being valued were sold.

2. Same Commercial and Quantity Level: The goods should be at a similar

level of trade (like wholesale or retail) and in similar quantities.
Adjustments can be made if there are differences in commercial level or
quantity.

3. Lowest Value: If there is more than one transaction value available, use
the lowest one.

4. Same Country and Producer: The goods should be made in the same
country and, ideally, by the same manufacturer as the goods being
valued.

3. Deductive Value

This is to be applied where the test of value of identical or similar goods fails.

This value is to be determined on the basis of the unit sales price of goods of
same class or kind in the domestic market of the imported goods. These sales
should be to unrelated buyers and in the largest total quantity. Adjustments are
made for costs like commissions, profits, duties, taxes, transport, insurance,
and other selling expenses related to the imported goods

4. Computed Value

This is to be applied where the earlier stated methods of valuation fail.

This value is determined by taking into account
cost of production plus

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 usual amount of profit and general expenses incurred in sale of goods
of same class or kind.
Other elements of cost as required in Article 8
(transport, insurance, loading/unloading charges)Normally to be used
for related party transactions.

5. Fall-back Method

Value can be determined by using any of the four methods described

above in a
flexible manner consistent with provisions of this Agreement
and GATT Article VII.
Prohibitions-value cannot be determined on the basis of selling price of
domestically produced goods in country of import; price of goods in domestic
market of country of export; price of goods for export to a country other than
country of importation;
minimum customs values; arbitrary or fictitious values.

World Customs Organization

what is the wco

The wco represents 179 customs administrations across the globe that collectively
process 98 percent of world trade

3 main strengths of wto

standard setting: capability and responsibility for global standard setting for
customs

capacity building/ technical assistance delivery to the developing countries

cooperation: network of accredited experts from customs administration and

cooperation with other international org. and other agencies.

Intro to wco

The wco established in nineteen fifty two as customs cooperation council is an

independent intergovernmental body whose mission is to enhance the
effectiveness and efficiency of customs administration.

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 as the global centre of customs expertise the wco is the only international
organization with competence in customs matters and rightly call itself the voice
of the international customs community.

the wco’s governing body - the council - relies on the competence and skills of a
Secretariat and a range of technical and advisory committees to accomplish its
mission. The secretariat, comprising over hundred international officials, technical
experts and support staff of some nationalities.

Function of WCO
as a forum for dialogue and exchange of experiences between national customs
delegates, the wco offers its member a range of Conventions and other
international instruments as well as technical assistance and training services
provided directly by secretariat or with its participation. The secretariat also
supports its members in modernizing and building capacity within their national
customs administrations.
Its efforts to combat fraudulent activities are also recognized internationally. The
partnership approach championed by the wco is one of the keys to building
bridges between customs admin and their partners. By promoting the emergence
of an honest, transparent and predictable customs environment, the wco directly
contributes to the economic and social well being of its members.

History
The History of World Customs Organization (WCO) began in 1947 when 13
European governments formed a Study Group under the Committee for European
Economic Co-operation to explore creating inter-European Customs Unions
aligned with GATT principles.
In 1948, the Study Group established two committees: the Economic Committee,
which evolved into the OECD, and the Customs Committee, which became the
Customs Co-operation Council (CCC).
The CCC was formally established by convention in 1952, and its inaugural
Council session took place in Brussels on January 26, 1953, with representatives
from 17 European nations.
Membership expanded significantly, and in 1994, the CCC adopted the name
"World Customs Organization" to better reflect its global role. Today, the WCO has

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 179 member administrations worldwide, overseeing over 98% of international
trade.

WCO 9 Goals
1. International Cooperation and Information Sharing : It provides a forum for
dialogue and exchange of experiences between national delegates to promote
greater connectivity and more harmonious interaction

2. Harmonization and Simplification of Customs Systems and Procedures: The

wco develops, maintains and promotes a series of internationally agreed
conventions, other instruments and best-practice approaches to achieve
harmonization and simplification of Customs systems and procedures.

3. Compliance and Enforcement: the wco supports members through activities

in the areas of commercial fraud, drug trafficking, money laundering and other
related offenses, through the development of compliance and enforcement
tools and intelligence sharing via cen customs enforcement networks.

4. Trade Facilitation : The wco promotes the KYOTO convention to assist

members on trade facilitation matters.

5. Supply Chain Security and Facilitation The wco enhance customs to customs
networks and customs to business partnerships in a meaningful and mutually
benefitted way through continued dialogue with its members and its business
partners to secure and facilitate the international trade supply chain.

6. Capacity Building The wco provides a range of capacity building, training and
technical assistance and integrity programmes to increase capacity of
member customs admin to effectively contribute to national dev. goals.

7. Promotion and Marketing the wco promotes the strategic interests and
market the role and contribution of wco through co operation communication
and partnership with gov. other regional org. donor agencies and the private
sec.

8. Research and Analysis the wco conducts research and analysis into new
issues, trends in co operation with research institutions.

9. Good Governance and Use of Resources. the wco manages and administers
it human and financial resources in a cost effective transparent and

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 responsible manner, based on a long term vision for customs admin.

Joint Exporting
Joint Exporting is when two or more companies work together to sell their
products in a foreign market. Instead of entering the market alone, they combine
their resources, share costs, and use each other’s strengths to make exporting
easier and more effective. This approach helps them reach new customers,
reduce risks, and save money.

Example of Joint Exporting

Imagine two small wine producers from Italy—Company A and Company B. Each
company wants to export their wine to Japan but faces high shipping costs and
local competition. By joining forces, they can:

1. Share Shipping Costs: They pool their products into one shipment, making it
cheaper than each company shipping separately.

2. Combine Marketing Efforts: They create a joint brand or campaign,

showcasing a variety of Italian wines rather than promoting just one.

3. Leverage Each Other’s Network: If Company A already has some contacts in

Japan, Company B benefits, and vice versa.

Together, they make a stronger impact in the Japanese market than they would
alone. This is a practical example of joint exporting—combining resources to
overcome challenges and reach new markets more effectively.

Categories of exporters
The exporter can choose from any one of the following modes of operations

1. Merchant exporter: buying the goods from the market or from a manufacturer
and selling them to foreign buyers

2. Manufacturer exporter: manufacturing the goods needed for export

3. Sales agent commission agent indenting agent: acting on behalf of the seller
and charging commission

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 4. Buying agent: acting on behalf of the buyer and charging commission

FBCCI
The Federation of Bangladesh Chambers of Commerce and Industry

it is the apex trade org of bangladesh playing a pivotal role in consultative and
advisory capacity and safeguarding the interest of the private sector.
types and number of members

1. chamber of commerce and industry: a class member 49 b class member 24

2. trade and industrial association: a class member 329 b class member 5

3. Joint chamber with foreign countries 19

FBCCI’s Main Goals and Activities

Support its Member Organizations: Works to promote the interests of its
members, including Chambers of Commerce, Trade, and Industrial
Associations.

Encourage Investment and Development: Aims to boost trade, industry,

agriculture, tourism, human resources, and communication sectors in
Bangladesh.

Represent the Private Sector: Engages with the government and consultative
committees to represent and protect the interests of private businesses.

Support Trade Fairs: Helps organize trade and industry fairs across
Bangladesh.

Share Information: Gathers and shares data to help grow trade and industry.

Promote Education: Encourages commercial, technical, industrial, and

scientific knowledge and education across the country.

Conduct Research: Carries out studies to support the growth of trade and
industry.

Build International Connections: Develops partnerships with organizations in

other countries to promote commercial and economic cooperation, including
Foreign Direct Investment (FDI) and joint ventures.

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 Maintain Global Relations: Stays connected with international Chambers of
Commerce and other trade and industrial organizations.

Advise on National Policies: Plays a key role in shaping commercial,

industrial, and fiscal policies by advising the government and economic
development bodies on matters that affect the national economy.

Represent the Private Sector in Committees: Serves on government and

independent committees, representing the private sector in various task forces
created for specific issues.

Classification and HS code Basic

discussion
The HS code (Harmonized System Code) is a standardized numerical system used
internationally to classify traded goods. Developed by the WCO, it helps customs
authorities identify products for import and export, apply tariffs and gather trade
statistics.
An HS Code typically consists of 8 to 16 digits. The first 6 digits are standardized
worldwide and define the product category.
Bangladesh used 8 digits, Japan used 16 digits
first 2 digit chapter - there are 97 chapters in hs code

first 4 digit including chapter and heading

first 6 digit chapter, heading and subheading
The six digit classification is a universal code

Heading classifies the chapter in more detail

Sub heading categorizes what has been classified in first four digit.

Example
Chapter 10: Cereal
Heading 10.06 : Rice

Sub-Heading 1006.20 - Brown Rice

Brown rice hs code 1006.20

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 what is classification

The act of placing goods into the correct category

what is customs classification
a particular category in Nomenclature in which a product is classified and
categorized.
tariff
a system of duties imposed by a govt of any country upon imported or exported
goods.
Uses of HS codes

1. Uniform identification of goods.

2. for purposes of duty and tax collection

3. proper statistics of import and export

4. monitoring of controlled goods such as narcotics

5. enforcement of national laws and international treaties

The HS comprises

1. sections

2. chapters

3. headings

4. sub headings

5. general rules for the interpretations

6. legal notes (section notes, chapter notes)

Sections
there are 21 sections in hs code which refers to broad range of goods
Chapters

An HS Code typically consists of 8 to 16 digits. The first 6 digits are standardized

worldwide and define the product category.
there are 99 chapters in hs code system which refers to narrow range of goods

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 The first 2 digit in hs code refers to chapter.

Chapter 77 is reserved for future use

chapter 98 and 99 is reserved for international use

Heading
there are 1244 headings in hs code system
Heading classifies the chapter in more detail

first 4 digit indicates heading

Sub-Heading

there are 5212 in hs code system. Subheading categorizes what has been
classified in first 4 digit. The first six digit indicates subheading
Country specific digits

It ranges from 7 to 16 digits, for example japan use 16 digit hs code bangladesh
use 8 digit hs code

Punctuation
Understanding the use of punctuation in the Custom Tariff is essential for
determining the correct classification of goods

1. Comma

2. Colon

3. Semi Colon

4. And

5. Or

6. Other

Comma
comma is used to denote a series or list of commodities that are classified under
the same tariff provision. example
“Dates, figs, pineapples, avocados, guavas, mangoes and mangosteens,” are all
classified under heading 08.04.

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 Colon
The colon indicates that there is additional information to follow that is part of
the description of the goods classified under the tariff provision
Product described at one level is further divided at the next level down by some
characteristics such as material capacity functions
suits:
of wool or fine animal hair
of synthetic fibes
of other textile materials
Semi colon

a semi colon in a tariff item indicates a full stop

the portion of the tariff item divided by a semicolon are separate and distinct from
each other
for example,
Centrifuges, including centrifugal dryers; filtering or purifying machinery

And
The and is used in the same way as a comma to connect items in a list which are
all to be included together
for example apple , pears and quinces
Or
The word or is used to show that alternatives exist

for example iron or steal

Other
at each level of tariff, the product is divided into groups

The first few groups are for specific products.

Any products that don’t fit into these specific categories are placed in a
category called "Other."

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 General Interpretative Rules - Six Rules
Classify good under hs system for tariffs
and trade
The General Interpretative Rules (GIRs) are a set of six rules used to classify
goods under the Harmonized System (HS) for tariffs and trade. These rules help
ensure that all countries classify goods in a consistent way for customs
purposes.

there are six general rules

The first 5 rules relate to the 4 digit headings

The rule 6 relates to classification in sub-headings

The rules set out the principles for classification in the HS

They are an integral part of the Nomenclature

They provide for uniform application(apply theke) of the nomenclature.

💡 Nomenclature in the context of the General Interpretative Rules (GIR)

refers to the systematic naming and classification structure of the
Harmonized System (HS). This system is used internationally to
categorize goods for customs and trade purposes.

Rule 1 Legal basis for classification

The titles of sections, chapters, and sub-chapters are there just for easy reference
(no legal value)

For legal purposes, classification must be based on the terms of the headings
and any relevant section or chapter notes unless those headings or notes give
different instructions.
GIR 1 fully resolves the heading classification when:
❖there is only

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 one heading whose terms encompass the whole
good
; or
❖
The terms or Notes direct the classification to a specific
heading
; or
❖
the terms or Notes direct the method of classification

Rule 2 Incomplete and Unassembled goods

GIR 2 is different in that is does NOT direct the classification
of goods.

GIR 2 (a) and GIR 2 (b) only extend the scope of

classifications to allow incomplete, unfinished, unassembled,
disassembled, mixed, combined and multi-material goods
coverage.

Rule 3: Classification When Goods Fit Multiple Headings

If a product fits under more than one heading:

3a: Choose the heading that best describes the product.

3b: If no single heading clearly fits, classify it based on the material or

component that gives it its main characteristic.

3c: If the first two don’t work, choose the heading that comes last
numerically.

Rule 4
It provides for completely unforeseen goods that are not otherwise covered

Rule 5
It covers the treatment of packaging materials and containers
Packaging and containers that are intended to be reused, or are integral to the
product, should be classified with the product itself. For example, a camera case

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 is classified with the camera.

Rule 6
It provides that the same process is independently followed at each subheading
level

The customs Act, 1969 Important Definition

💡 Agent: it means any person, including a shipping agent, clearing and

forwarding agent, cargo agent and freight forwarding agent, licensed
under section 207 or any person permitted to transact any business
under section 208

💡 "Bangladesh Customs waters" refers to the area of sea that stretches 12

nautical miles from the coastline of Bangladesh.

💡 Customs port means any place declared under section 9 to be a port for
shipment and landing of goods

💡 land customs station means any place including an inland river port
declared under section 9 to be a land customs station

💡 Customs station means any custom port, customs airport or any land
customs station

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 💡 Smuggling" means bringing goods into or taking them out of
Bangladesh illegally, either by breaking restrictions or avoiding payment
of customs duties or taxes.

💡 A "Special bonded warehouse" is a private warehouse licensed under

section 13, used exclusively by fully export-oriented industries, as
designated by the Board.

Bond License
For hundred percent export oriented industry, bond license in essential for duty
free import of raw materials
The main condition for obtaining a bond license is that the products or goods
produced must be exported 100 percent
Bond license is required for opening a back to back lc

Benefits of bond license

One will get a duty draw back or cash benefit after completion of export

Duty free import of raw materials for the production and that consequently
helps exporters to set competitive export price in foreign markets.

Letter of Credit
The lc is a commitment by the buyer’s bank on behalf of the buyer (importer) to
effect payment to the seller exporter beneficiary subject to fulfillment of certain
conditions

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 Types of LC
1. Red Clause LC:

A Red Clause Letter of Credit is a special type of letter of credit (LC) that lets the
seller receive an advance payment from the advising or paying bank before
shipping goods or submitting the required documents. This advance feature is
traditionally marked in red ink, which is why it’s called a "Red Clause" LC. It’s also
known as an advance payment letter of credit.
This type of LC is usually only used when the buyer and seller have a close
business relationship because the buyer is essentially giving the seller an
unsecured loan, taking on financial and currency risks.
Advantages:
Seller receives advance payment, helping with production or procurement costs
before shipping the goods
Seller receives interest fee unsecure loan

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 The buyer can build a trusting relationship with the seller by providing advance
funds.
Disadvantages
Beneficiary may not use advance for right purpose
Buyers have to take financial and currency cost.

2. Green Clause LC:

Green Clause lc is an extension of red clause lc. it allows additional advances to

the seller against security (such as a payment guarantee from a third party) for
pre shipment warehousing at port of origin and insurance expenses apart from
covered in Red clause.

green clause letter of credit is called green because originally these were written
in green ink.

3. Standby Lc:

A Standby Letter of Credit (SBLC) is mainly a backup payment method, activated

if there’s a failure to perform or a default. It acts similarly to a guarantee but
operates independently from the main contract. SBLCs support various
commercial and financial transactions. The International Standby Practices
(ISP98) are the rules that set the procedures for handling standby letters of credit.

4. Revocable LC:

A Revocable Letter of Credit (LC) is a type of LC that can be changed or canceled

at any time, without informing the beneficiary (the seller or service provider). This
means the beneficiary has no guarantee of payment, making it a less reliable
option in exchange for goods, services, or work performed. Reasons of R. Lc -
political tensions, insufficient funds

5. Irrevocable LC:

An Irrevocable Letter of Credit (LC) is a type of LC that cannot be canceled or

changed without written consent from all involved parties. This gives the
beneficiary (seller) confidence, as the issuing bank is firmly committed to
payment. According to UCP 600 rules, all LCs are considered irrevocable unless
stated otherwise.

6. Back to Back LC:

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 A Back-to-Back Letter of Credit (LC) is a financial instrument used in international
trade, specifically in a situation called triangle trade, where there is an
intermediary (middleman) between the buyer (importer) and the seller (exporter).
In this setup, two independent letters of credit are issued:

First LC: The buyer issues a letter of credit in favor of the middleman.

Second LC: The middleman then uses the first LC to obtain a second LC in
favor of the actual supplier or exporter.

In this arrangement, the middleman does not need to have upfront capital to pay
the supplier. Instead, they rely on the first LC from the buyer to secure the second
LC. Once the goods are shipped, the middleman receives payment under the first
LC and can use it to pay the supplier.

7. Revolving LC

A Revolving Letter of Credit is a type of LC that automatically renews after each

transaction, providing an ongoing line of credit. This allows the beneficiary (seller)
to draw funds multiple times, while the customer (buyer) periodically repays. It's
particularly useful for situations where the buyer and seller have regular, repeated
transactions, like in the shipping industry. Instead of issuing a new LC for each
shipment, a revolving LC allows them to use one LC for multiple shipments,
saving time and costs.

8. Deferred Lc

A Deferred Letter of Credit (LC), also known as a Usance LC or Time LC, is an LC

that allows payment to be made at a set time after the presentation of the required
documents. Unlike Sight LCs, where payment is made immediately upon
document verification, Deferred LCs specify a delay in payment, which could
range from 30, 60, 90 days, or any agreed-upon period. This allows the buyer
some time to arrange funds, making it beneficial for managing cash flow in
international trade.

Incoterms 2010
EXW (Ex-Works)

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 It means that the seller's responsibility ends when the buyer arrives to collect the
goods.
FCA (Free Carrier)
"Free Carrier" means the seller hands over the goods to the buyer’s chosen
carrier at a specified location, and from that point, the buyer is responsible.

CPT (Carriage Paid to)

"Carriage Paid To" means the seller delivers the goods to a carrier and pays for
the transportation costs to the agreed destination, but the buyer takes on the risk
once the goods are with the carrier.
CIP(Carriage and Insurance Paid to)
"Carriage and Insurance Paid To" means the seller delivers the goods to a carrier,
pays for transport and insurance to the agreed destination, but the buyer takes on
the risk once the goods are with the carrier.
FAS ( Free Alongside Ship)
"Free Alongside Ship" means the seller's responsibility ends when the goods are
placed next to the buyer’s ship at the agreed port. From there, the buyer takes on
all risks and costs.

FOB (Free on Board)

"Free On Board" means the seller’s responsibility ends once the goods are loaded
onto the buyer’s ship at the agreed port. From that point, the buyer takes on all
risks and costs.
CFR (Cost and Freight)
"Cost and Freight" means the seller delivers the goods onto the ship and pays for
the shipping costs to the destination port. However, the buyer takes on the risk of
loss or damage as soon as the goods are loaded onto the vessel.
CIF(Cost, Insurance and Freight)
"Cost, Insurance and Freight" means the seller delivers the goods onto the ship
and pays for both the shipping costs and minimum insurance coverage to protect
against loss or damage during transit. The buyer assumes the risk once the goods
are loaded onto the vessel. If the buyer wants more insurance than the minimum

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 required, they must either negotiate this with the seller or arrange for additional
coverage themselves.

Customs Clearance Process

It comprises 11 steps

1. Warehousing of Goods

When carriers (Ships/airlines) arrived at port, imported goods are off-loaded and
stored into warehouse of port. Port authority is the custodian of imported goods
before released

2. Submission of B/E

Once the Import General Manifest (IGM) is submitted online, the nominated C&F
Agent (or the importer himself) completes the goods declaration (popularly
known as Bill of Entry or B/E) from their own premises and submits the goods
declaration to
Customs systems through ASYCUDA World. The declaration or B/E has to be
made in a specific format, known as Single Administrative Document (SAD

3. Doc list

For release of goods from Customs, following documents need to be submitted

along with the declaration (B/E) for all types of imports:
Letter of Credit (L/C).
Invoice
Bill of Lading/AWB/Truck Receipt/Railway Receipt
Packing List
“Country of Origin” Certificate (except coal and export oriented garments
industries)
Insurance policy/cover note
VAT/BIN Certificate

4. Docs and BE copy checking

Getting documents from C&F Agents, Customs Officers (Assistant Revenue

officer/Revenue officers) check and verify all documents

5. Physical Examination of Goods

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 Physical examination is performed to protect revenue from illegal declarations or
to find out goods which were not declared in documents

6. Check value of imported goods

Some times importer may declared lower value of goods to evasion of taxes.
Therefore, average value of same imported goods are checked from Asycuda
Database System.

7. Classification of HS Codes

Each imported good is identified by a Hscode. There are different tax rates for
different goods. To protect proper revenue , actual hscode of imported good is
important. Otherwise, there is a chance to evasion of taxes.

8. Tax Calculation

At present, all taxes for imported goods are calculated by Asycuda System against
submitted BE

9. Payment of Taxes

When taxes are finalized, then concern C&F agents/importer will collect the
assessment notice (assessment copy) of BE and go to Bank. Then he deposit
taxes against this imported goods. At present, payment of taxes are online.
Importer can pay their taxes from online banking option.

10. Released of Goods

When payment is done, then C&F agent/importer will go to

port authority to release goods. Port authority will check BE
and payment on Asycuda system through user credentials
collected from Asycuda Team previously.

11. Deliver goods to importer door

When delivery note is issued by port authority, C&F

agent/importer collect goods from port warehouse and loaded
into transports to carry goods

IGM

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 An Import General Manifest (IGM) is a document required by customs authorities
that provides detailed information about the cargo being imported into a country.

Bill of entry
A Bill of Entry is a legal document submitted to customs authorities when goods
are imported into a country. It provides details about the imported goods,
including their classification, value, and origin, and is used for assessing customs
duties and taxes.

Bill of Export
A Bill of Export is a document required for exporting goods from a country. It
contains information about the goods being shipped, the exporter, and the
destination. This document is essential for customs clearance and ensures
compliance with export regulations.

Factors Determining Terms of Payment

1. Nature of Goods: The type of goods being traded (e.g., perishable items,
high-value machinery) can influence payment terms due to the risk associated
with the goods.

2. Buyer and Seller Relationship: A long-standing relationship may lead to more

favorable payment terms, such as extended credit, while new relationships
might require more secure payment methods.

3. Market Conditions: Economic conditions, currency fluctuations, and political

stability can impact payment terms, as buyers and sellers assess risks in the
market.

4. Risk Assessment: The perceived creditworthiness of the buyer plays a

significant role. Sellers may require upfront payment or more secure payment
methods for buyers with lower credit ratings.

5. Payment Methods: The chosen method of payment can also affect terms. For
example, letters of credit often come with strict requirements that can
influence payment timing.

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 6. Legal and Regulatory Requirements: Different countries have varying
regulations regarding international payments, which can affect the terms
agreed upon.

7. Negotiation: Ultimately, terms of payment can be negotiated between the

parties involved, considering all the above factors.

Methods of Receiving Payment in International Trade

1. Advance Payment: The buyer pays for the goods before they are shipped.
This method carries the least risk for the seller but may be less attractive to
buyers.

2. Letters of Credit (L/C): A financial institution guarantees payment to the seller

once certain conditions are met. This method offers security to both parties.

3. Documentary Collection: The seller’s bank collects payment from the buyer’s
bank in exchange for shipping documents. This method is less secure than a
letter of credit.

4. Open Account: The seller ships the goods and sends an invoice, allowing the
buyer to pay at a later date. This method poses higher risk for the seller.

5. Cash Against Documents (CAD): The buyer pays for the goods upon receipt
of shipping documents, allowing them to take possession of the goods only
after payment.

6. Trade Credit Insurance: While not a payment method per se, this can provide
protection to the seller against buyer default, thus influencing payment terms.

7. Electronic Payment Systems: Online platforms (like PayPal or Stripe) can

facilitate quick payments, often used for smaller transactions.

Each method has its own advantages and disadvantages, and the choice often
depends on the level of trust between the trading parties, the nature of the goods,
and the associated risks.

When exporting to Ukraine, several risk factors should be

considered, as they can affect the success and safety of the
transaction. Here are some key risk factors:

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 1. Political Risk
Instability: Ongoing political tensions or conflicts, particularly in light of recent
events, can impact trade stability and safety.

Regulatory Changes: Changes in trade policies or regulations may occur

rapidly, affecting export procedures and costs.

2. Economic Risk
Currency Fluctuations: Volatility in the Ukrainian hryvnia can impact pricing
and profit margins.

Inflation: High inflation rates can reduce purchasing power and impact
demand for imported goods.

3. Legal and Regulatory Risk

Customs Regulations: Understanding and complying with Ukrainian customs
laws, tariffs, and duties is crucial; non-compliance can lead to fines or delays.

Intellectual Property Protection: Risks of IP theft or inadequate protection

may be higher in certain sectors.

4. Logistical Risks
Supply Chain Disruptions: Geographical challenges and infrastructure issues
can affect transportation and delivery timelines.

Customs Delays: Unexpected delays at customs can lead to increased costs

and dissatisfied customers.

5. Market Risks
Demand Uncertainty: Changes in consumer preferences or economic
conditions can impact demand for certain products.

Competition: Understanding local competition and market dynamics is

essential for pricing and positioning.

6. Payment Risks

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 Credit Risk: The risk of non-payment by buyers can be higher, especially with
new or unverified customers.

Payment Methods: Choosing the right payment terms and methods is crucial
to mitigate risks of non-payment.

7. Cultural and Communication Risks

Cultural Differences: Understanding local business practices and cultural
norms is vital for building successful relationships.

Language Barriers: Miscommunication can lead to misunderstandings

regarding contracts, specifications, and expectations.

8. Environmental Risks
Natural Disasters: Ukraine is susceptible to various natural disasters, which
can disrupt operations and logistics.

Conclusion
To mitigate these risks, exporters should conduct thorough market research,
establish strong local partnerships, and consider using trade insurance or secure
payment methods. Understanding the local context and maintaining flexibility in
business operations can also help manage these risks effectively.

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