THE BILL OF LADING - B/L: Core instrument in Export Transactions
likes to pay for something until it's received. To avoid an L/C (see a
previous blog on LC's), ship & collect on basis of a draft. A draft is a
payment demand through the bank that has connected to it a B/L. The B/L has the
delivery of the goods tied to the phrase "Order of Shipper". The draft is
presented to the buyer who authorizes the payment and the goods are then
reclaimed from the carrier. The B/L is signed as "Paid" by the bank. Without
this B/L the buyer cannot get the goods.
Do you see how the mdse. remans
in your control until your customer pays? The "Order of Shipper" (that's you)
controls the ownership. This cannot be done with Air Frt. In effect you have
extended credit to your customer under the belief they will pay when the draft
is presented to them by the bank. This is called a Sight Draft - payment when
your buyer sees it.
The Order of Shipper uses the carrier to hold the
goods in your behalf. No charge except storage. To avoid problems, make sure
you do due diligence on the credit of your customer. (see a previous blog on
credit & collection).
ALTERNATE DRAFT COLLECTIONS
collection method tied to the B/L is a "time draft". Here the draft
stipulates payment at some future date. It can be any arrangement up to 1 yr.
The draft is appended to the Order of Shipper B/L. The bank is instructed to
obtain an I O U for a specific time in the future and hands over the B/L. When
the I O U matures up to date the bank requests the buyer to transfer the payment
to you. These type of drafts can be for one single payment or several
remittances known as "Split Drafts"
NOTE: Obviously here extremely
careful credit research is indicated as the buyer has absolutely no obligation
to pay and the bank cannot make them.
AIR FREIGHT DRAFT
Because air shipments are time sensitive, the airlines will not
hold mdse. pending collection. There is no Order of Shipper B/lL available.
You can still use the draft system but your goods must be consigned directly to
some destination that will accept to hold them until a draft is paid or accepted
for future payment. You will need the services of a freight agent in the
destination country who will hold the goods just like the steamship line. They
are given instruction to hand the goods over upon proof of payment or acceptance
of payment by your buyer.
To learn more about "How to Export"; contact
Hank Samuel Certified
visit us at: www.scoresouthflorida.net