Shipping Solutions Newsletter

By Sue Senger email | bio

The Central American-Dominican Republic Free Trade Agreement (CAFTA-DR) is an historic and comprehensive Free Trade Agreement that will remove barriers to trade, eliminate tariffs, open markets and promote investment. By promoting economic growth in the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, as well as in the Dominican Republic, this cutting edge pact will expand U.S. opportunities in important regional markets.

The CAFTA-DR is not yet in effect. The U.S. Congress approved the CAFTA-DR in July 2005 and President Bush signed it into law on August 2, 2005. The CAFTA-DR has been approved by the legislatures in El Salvador, Guatemala, Nicaragua, Dominican Republic and Honduras. Approval is pending in Costa Rica. The agreement shall enter into force on a date to be agreed upon among the parties.

Once implemented, U.S. manufacturers, workers, farmers and ranchers will benefit from its market opening provisions. Here are a few of CAFTA-DR’s objectives:

The CAFTA-DR is a state-of-the-art free trade agreement. It will not only reduce barriers to U.S. trade, but also require important reforms of the domestic legal and business environment that encourage business development and investment.
It will promote economic growth in the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, as well as in the Dominican Republic, and will thereby expand U.S. opportunities in important regional markets.
The Agreement will provide new opportunities for U.S. workers and manufacturers. More than 80% of U.S. exports of consumer and industrial goods will become duty-free in Central America (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) immediately, with remaining tariffs phased out over 10 years. Key U.S. export sectors will benefit, such as information technology products, agricultural and construction equipment, paper products, chemicals, and medical and scientific equipment.

The CAFTA-DR countries and many other developing countries already enjoy duty-free access to the U.S. market for the majority of their exports through trade preference programs provided by the U.S. Congress to promote economic development.

For 20 years, most Dominican Republic and Central American exports to the United States have benefited from duty-free treatment, primarily as a result of the Caribbean Basin Initiative (CBI). With the expansion of the CBI program in 2000 (under the Caribbean Basin Trade Partnership Act, or "CBTPA"), about 80% of the region's exports now enter the United States duty-free. Yet these countries often have high tariff and non-tariff barriers for U.S. exports and impose restrictions on U.S. businesses. This trade agreement will provide greater transparency for government actions and rule making, strengthening the rule of law, and improving the protection and enforcement of intellectual property rights.

Again, the CAFTA-DR is not yet in effect. Costa Rican president Abel Pacheco has postponed the debate on CAFTA until the Legislative Assembly approves a series of bills related to the country’s fiscal system.

Nonetheless, U.S. businesses are engaged in significant business with the Dominican Republic and Central America. U.S. exports to these markets are on the rise:

U.S. merchandise exports to CAFTA-DR countries totaled almost $16 billion in 2004.
U.S. export growth to CAFTA-DR countries has outperformed overall U.S. exports. From 2000 to 2004 export shipments to CAFTA-DR countries expanded by 16%, compared with five percent for overall U.S. exports.

Now is a great time to find new buyers to take advantage of these markets and position your company to take advantage of the price and market access benefits offered by the CAFTA-DR.

Once the Agreement has been ratified by Costa Rica, information on how to determine product-specific benefits, how to apply the rules of origin, and how to declare eligibility for lower duty rates will be discussed in an upcoming article.

Top of Page

U.S. Domestic Terms of Sale and Incoterms 2000

By Catherine J. Petersen email | bio

Incoterms 2000 provide a common reference that parties in different countries use in determining their contractual obligations and, in particular, the price at which merchandise will be exchanged and the responsibilities of each party to assure its transportation. A contract should reflect an Incoterm consistent with the transportation mode most suitable for the transaction at hand. The calculation of your sales price should take account of the costs that your company is contractually bound to bear under the option chosen.

Be careful that, if the contract is being formed through an exchange of correspondence, both parties have agreed to the same Incoterm provision for the transaction. Inconsistent terms in the offer and acceptance can easily be overlooked, leaving ambiguity in place of certainty. Although such crossed signals do not happen very often, they do happen often enough to require careful attention on the part of the persons negotiating the contract as well as those charged with fulfilling its terms.

The terms of transportation in the bill of lading should be the same as those in the underlying contract for sale of the goods and subject to Incoterms 2000. If the terms of the underlying contract were not the same as the actions your firm took or the contract subject to Incoterms 2000, your firm may encounter some difficulties. Incoterms indicates that the buyer will select the carrier and pay the freight charges when it is an Ex Works or “F” term, and under “C” and “D” terms that the seller will select the carrier and pay the freight charges.

If the contract calls for your company to sell goods FOB New York, you are responsible for transportation to and loading on board the vessel.

As a courtesy to your buyer, your company arranged and paid for ocean transport to the foreign port of unlading. Your firm paid for an additional cost beyond that specified in the agreement and the TRADE TERM FOB. The buyer now views this transaction as a CFR shipment to their country and contends that the freight charges are the seller’s responsibility and not the buyer’s as was obligated under FOB New York. The seller also found that the offer or quote, purchase order, and commercial invoice did not support the seller’s intention of prepaying the freight and billing to the buyer through a written explanation of the now modified FOB New York.

The seller’s mistake is compounded if the goods were lost by the carrier and not delivered to the buyer. This could give rise to two disputes that you could have avoided being involved in or associated with altogether. One between you and the buyer regarding payment of ocean freight charges, and the other between the carrier you selected and the buyer.

Such incidents are rare, but the harmful consequences when they do occur warrant vigilance on your company's part to be sure that the transportation terms of the contract of sale are fulfilled.

As reflected in the previous discussion, you should also make certain that the terms of transport provided in the bill of lading for the merchandise reflects the terms of the contract. A bill of lading is a contract between a shipper (typically, the seller) and a transportation company under which freight is to be moved between specified points for a specified charge. The shipper or freight forwarder submits the information for the bill of lading in formats acceptable to the carrier. The carrier or their representative then issues the bill of lading. It may serve as a document of title (for example, an original ocean bill of lading), and a receipt for goods. It is also considered to be a “contract for carriage” unless superseded by a separate agreement with the carrier.

For the original text of The Uniform Commercial Code, Article 2, visit the Cornell University Law School website. For definitions of the INCOTERMS 2000, visit the International Chamber of Commerce website.

This article was adapted from U.S. Domestic Terms of Sale and Incoterms 2000 by Catherine J. Petersen of CJ Petersen & Associates and Brent WM. Primus, J.D., Primus Law Office, P.A. The book is available in both a printed format and in an Adobe Acrobat PDF format in either English or Spanish.

Top of Page

Thousands of successful exporters are using Shipping Solutions to complete their export documents faster, easier and less expensively than ever before. Why aren't you?

If you're too busy trying to complete your export documents by hand to spend some time reviewing the Shipping Solutions Professional export documentation and compliance software yourself, let us do it for you! Sign up for one of our free online demos and let us give you a one-hour overview of the software.

We'll take you step-by-step through the process of completing your export forms, filing your SEDs electronically through AES, and checking your exports against the various government restricted parties lists and export regulations to make sure your shipments are in compliance, and you—and your company—stay out of trouble.

These free online demos are available on Tuesday's at 1:00 Central Time. All you need is an Internet connection to watch the demo and a phone to listen in and ask questions about the software. It's the perfect opportunity to get your first view of Shipping Solutions or to convince your coworkers and your boss that Shipping Solutions is the perfect solution for your company.

See why Shipping Solutions is America's #1 export software. Sign up for the free online demo today!

Top of Page