abc When to notify receivables to HIF for export facilities Services The invoice may be notified when the service has been performed and the customer is expecting to receive an invoice. Goods The timing of notification of exports is determined by whether goods have been delivered in accordance with the order and the customer is expecting to be invoiced. The definition of delivery is normally arrival at the buyer s premises or the premises the buyer has specified. There are, however, circumstances where the invoice may be notified after dispatch but before final delivery. The Incoterms are the clearest guide to this. Below are the most common Incoterms that HIF come across. Incoterms Meaning Point of delivery Supporting Evidence Required Ex-works The seller makes the goods Named place of collection. Third party carrier s receipt available to the buyer at pick up note from source. The buyer arranges customer s carriers. Full transportation and insurance, description of the goods. pays customs charges and Signed and dated by them bears all risks. note vehicle registration number, signature of driver, printed name and company name. Notification To HIF * (UK Exports) Upon despatch and possession of a signed collection note. FCA Free Carrier Used where several different types of transport are involved. The seller delivers the goods to the carrier nominated by the buyer at a named place. Named port / place of Third party carrier s receipt / CMR full description of goods signed and dated by them vehicle registration number/signature of driver/printed name and company name. (Bill of lading or airway bill if transport via sea or air.) Upon receipt by the carrier. Robust carrier s receipt required. 1
FAS Free alongside ship FOB Free on Board CFR Cost and Freight to CIF Cost, insurance and freight to CPT Carriage paid to CIP Carriage and insurance paid to DAT Delivered at Terminal The seller delivers the goods alongside the ship in his own country. From this point all responsibility and risk transfers to the buyer. As FAS, but the seller s responsibilities end once the goods are safely on board the ship. The seller is responsible for the goods as far as the country of destination. The buyer arranges insurance and assumes responsibility for the transport and costs once the goods have left the ship. As CFR, but the seller assumes responsibility for purchasing insurance. The seller is responsible for the goods until they are in the custody of the final carrier. The term is used where there are several modes of transport involved. As CPT, but the seller is also responsible for arranging insurance to cover the carriage of goods. Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named place of destination. Terminal includes quays, warehouses, container yard or road, rail or Named port of shipment maritime transport only. Named port of shipment maritime transport only. Named port of destination maritime transport only. Named Port of destination maritime transport only. Named port/place of Named port/place of Named port/place of Shipping agents receipt of goods from carrier. Bill of Bill of Bill of Bill of lading / airway bill / CMR. Delivery note signed and dated by carrier, vehicle registration number, signature of driver, printed Bill of lading / airway bill / CMR. Delivery note signed and dated by carrier, vehicle registration number, signature of driver, printed Bill of lading / airway bill / CMR. Delivery note signed and dated by carrier, vehicle registration number, signature of driver, printed lading/airway bill/cmr or delivery note. lading/airway bill/cmr or delivery note. Upon delivery to the named destination. 2
DAP Delivered at Place DDP Delivered Duly Paid air terminal. Both parties should agree the terminal and if possible a point within the terminal at which point the risks will transfer from the seller to the buyer of the goods. If it is intended that the seller is to bear all the costs and responsibilities from terminal to another point DAP or DDP may apply. The seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. Parties are advised to specify as clearly as possible the point within the agreed place of destination, because risks transfer at this point from seller to buyer. If the seller is responsible for clearing the goods, paying duties etc consideration should be given to DDP term. The seller bears the maximum responsibility for the goods, paying for transportation, duty, insurance and gets the goods cleared for import. Named port / place of Named port / place of destination Any mode of * If funding is required earlier please discuss with your Invoice Finance Manager. Delivery note signed and dated by carrier vehicle registration number / signature of driver / printed Delivery note signed and dated by carrier vehicle registration number / signature of driver / printed Upon delivery to the named destination. Only once goods have been delivered and received. You should build your notification process to ensure it complies with your agreement with HIF. Notification before the point agreed is a serious breach of the agreement. In the summary above we give examples of the type of supporting evidence for invoicing that you will want to have for your own business. We will also ask to see this as part of our verification processes and in case we are asked to provide our credit control service. 3
Below is a more detailed and comprehensive guide: Documenting the order It is vital that your order is recorded in writing and the key details are spelled out, this is so both parties know what is expected. In international business it is obviously especially important. For example, people who do not speak English as a first language, find it much easier to understand written English than, say, a phone conversation and so confirming what is agreed in writing is especially helpful to flush out any potential misunderstandings. Terms of sale It is vital that you have comprehensive and clear terms of sale. These should be confirmed in writing to the buyer before undertaking the service or dispatching the goods. Terms of sale on invoices are useful reminders but are not contractually binding as they are normally sent after dispatch. Terms of sale should be developed with your legal advisor and of course will depend on whether you supply goods or services or a mixture of the two. We do like to see the following features in addition to the basics: 1. Subject to English Law 2. Include reservation of title 3. Specify use of Incoterms 2010 4. Specify your standard Incoterms 5. Specify the period of credit and due date 6. Limit liability 7. Confirm outright sale 8. Allow divisibility of contract 9. Specify the method of remittance - SWIFT for example 10. Specify currency. Terms of Purchase Your buyer may have their own terms of purchase. Large and dominant buyers will be in a strong position to impose their conditions. It is vital that you seek out such conditions and check them for any potential conflicts with what you intend and can deliver. You must also check for any conflict with our agreement. Potential areas of conflict to identify: 1. Ban on assignment of debts 2. Consequential damages clause 3. Right of offset across group companies 4. Rights upon termination of contract for financial penalties or return of goods 4
Purchase orders and contracts You should search out all the contractual terms with your customers. With larger buyers these are often spread over several different documents but it is vital you see the whole picture and share it with HIF. There may be a Purchase Order and separate contract. There may also be letters or emails addressing specific details. Watch for instructions on the payment process. For example they may require that purchase order details and full goods descriptions are included on invoices. If you fail to do as required your payments are likely to be delayed. Invoices They are a useful reminder of the terms and contain vital information on which payment will be processed. HIF requires certain information to be included on the invoice: On Finance only or Finance and protection facilities: The trust account bank details On Finance with management facilities: The notice of assignment, international version with the appropriate currency account All invoices should contain: Applicable Incoterms Credit period and due date Reservation of title reminder if applicable Currency Evidence of dispatch You should take care to ensure that as you release goods from your premises there is good written evidence that would support you should there ever be a dispute and need for legal action to obtain payment. The following should be included Description of goods and preferably keep a photographic record of goods before packing Number of containers Weight Consider having this checked independently if values are very high. If goods are collected by a third party or the customer you need to record Full name of the person collecting, print the name legibly and have it signed so you could trace and call as a witness that person if needed. Also, make a note of the vehicle description and registration number, again a photograph is useful. This should help avoid someone collecting goods under false pretences; equally some carriers do lose goods. 5
Modern carriers offer sophisticated evidence of collection, progress and delivery. They have on-line tracking. Such services are in our experience good value and HIF will welcome on line access to support our requirements. Goods made abroad and dispatched direct to end customers This is often described as direct delivery. It has many commercial advantages but equally creates additional risk of deliberate or unintended error and so we should all be especially careful and build in extra checks. HIF would normally accept notification from the bill of lading date or supported by an airway bill. Note that the bill of lading should be a signed original or copy. Notification from dispatch at an earlier point may be possible if there is sufficient third party evidence. You will need to be satisfied that you can satisfy the terms of the agreement if notifying invoices in these supply arrangements. In particular, there must be no conflict with the original supplier s terms of supply including, for example, reservation of title. The ways to avoid any conflict include 1. Paying the supplier before notifying the invoice to HIF. This can be done from cash resources or a specific HSBC facility called a loan against import or export loan. That loan to be repaid from the HIF advance. 2. Obtaining a reservation of title waiver. In all cases of direct deliveries you must ensure that the sale is documented to the highest standards as detailed above. Look particularly to ensure that the buyer has accepted responsibility from the point that you are expecting. Using standard Incoterms will help this. DAT / DAP / DDP Incoterms You will note that if Incoterms are D then invoices can only normally be notified after delivery. The exception is when there are very short delivery times such as from the UK to Western Europe (ie arriving within 7 days of dispatch). You must study the impact of this on your cash flow. If there is a potential gap talk to your Invoice Finance Manager as there are options. These include: Changing from D terms to a different Incoterm which gives equivalent benefits. Remember that some buyers do not think through the implications of their Incoterms and may be willing to change Arrange an export loan facility that can be repaid from the HIF advance when the invoices are eligible for finance Services It is vital that you can evidence completion of the service before notifying invoicing. This will help prevent disputes or resolve them quickly if they arise. You should include at least the following: Full name of the individual giving approval, printed legibly 6
Signature Role and confirmation they have the authority Date and preferably time Whilst there are differences between tangible goods and services most of the points made above apply equally to services and goods. In all cases the purpose of thorough documentation is to ensure each party understands what is expected and there is evidence of that agreement and subsequent performance. All this helps the relationship go smoothly and prevents disputes. Where disputes or problems in obtaining payment do arise then good quality documentation can speed resolution and significantly reduce the potential cost. For more information The internet has many good sources of information. These include the International Chamber of Commerce (ICC) site http://www.iccwbo.org/incoterms/ The above is designed as a helpful guide to most situations. If it does not relate to your own situation or requirements please speak to your IFM. 7