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“delivery”

It is particularly important to note that the term “delivery” is used in two different senses in Incoterms. First, it is used to determine when the seller has fulfiled his delivery obligation which is specified in the Incoterms. Second, the term “delivery” is also used in the context of the buyer's obligation to take or accept delivery of the goods, an obligation which appears in the the Incoterms. Used in this second context, the word “delivery” means first that the buyer “accepts” the very nature of the “C”-terms, namely that the seller fulfils his obligations upon the shipment of the goods and, second that the buyer is obliged to receive the goods. This latter obligation is important so as to avoid unnecessary charges for storage of the goods until they have been collected by the buyer. Thus, for example under CFR and CIF contracts, the buyer is bound to accept delivery of the goods and to receive them from the carrier and if the buyer fails to do so, he may become liable to pay damages to the seller who has made the contract of carriage with the carrier or, alternatively, the buyer might have to pay demurrage charges resting upon the goods in order to obtain the carrier's release of the goods to him. When it is said in this context that the buyer must “accept delivery”, this does not mean that the buyer has accepted the goods as conforming with the contract of sale, but only that he has accepted that the seller has performed his obligation to hand the goods over for carriage in accordance with the contract of carriage which he has to make under the “C”-terms. So, if the buyer upon receipt of the goods at destination were to find that the goods did not conform to the stipulations in the contract of sale, he would be able to use any remedies which the contract of sale and the applicable law gave him against the seller, matters which, as has already been mentioned, lie entirely outside the scope of Incoterms.

Where appropriate, Incoterms 2000, have used the expression “placing the goods at the disposal of the buyer when the goods are made available to the buyer at a particular place”. This expression is intended to bear the same meaning as that of the phrase “handing over the goods” used in the 1980 United Nations Convention on Contracts for the International Sale of Goods.

“usual”

The word “usual” appears in several terms, for example in EXW with respect to the time of delivery and in the “C”- terms with respect to the documents which the seller is obliged to provide and the contract of carriage which the seller must procure. It can, of course, be difficult to tell precisely what the word “usual” means, however, in many cases, it is possible to identify what persons in the trade usually do and this practice will then be the guiding light. In this sense, the word “usual” is rather more helpful than the word “reasonable”, which requires an assessment not against the world of practice but against the more difficult principle of good faith and fair dealing. In some circumstances it may well be necessary to decide what is “reasonable”. However, for the reasons given, in Incoterms the word “usual” has been generally preferred to the word “reasonable”.

“charges”

With respect to the obligation to clear the goods for import it is important to determine what is meant by “charges” which must be paid upon import of the goods. In Incoterms 1990 the expression “official charges payable upon exportation and importation of the goods” was used in DDP. In Incoterms 2000 in DDP the word “official” has been deleted, the reason being that this word gave rise to some uncertainty when determining whether the charge was “official” or not. No change of substantive meaning was intended through this deletion. The “charges” which must be paid only concern such charges as are a necessary consequence of the import as such and which thus have to be paid according to the applicable import regulations. Any additional charges levied by private parties in connection with the import are not to be included in these charges, such as charges for storage unrelated to the clearance obligation. However, the performance of that obligation may well result in some costs to customs brokers or freight forwarders if the party bearing the obligation does not do the work himself.

“ports”, “places”, “points” and “premises”

So far as concerns the place at which the goods are to be delivered, different expressions are used in Incoterms. In the terms intended to be used exclusively for carriage of goods by sea – such as FAS, FOB, CFR, CIF, DES and DEQ – the expressions “port of shipment” and “port of destination” have been used. In all other cases the word “place” has been used. In some cases, it has been deemed necessary also to indicate a “point” within the port or place as it may be important for the seller to know not only that the goods should be delivered in a particular area like a city but also where within

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that area the goods should be placed at the disposal of the buyer. Contracts of sale would frequently lack information in this respect and Incoterms therefore stipulate that if no specific point has been agreed within the named place, and if there are several points available, the seller may select the point which best suits his purpose (as an example see FCA). Where the delivery point is the seller’s “place” the expression “the seller’s premises” (FCA) has been used.

“ship” and “vessel”

In the terms intended to be used for carriage of goods by sea, the expressions “ship” and “vessel” are used as synonyms. Needless to say, the term “ship” would have to be used when it is an ingredient in the trade term itself such as in “free alongside ship” (FAS) and “delivery ex ship” (DES). Also, in view of the traditional use of the expression “passed the ship’s rail” in FOB, the word “ship” has had to be used in that connection.

“checking” and “inspection”

In some clauses of Incoterms the headings “checking – packaging and marking” and “inspection of the goods” respectively have been used. Although the words “checking” and “inspection” are synonyms, it has been deemed appropriate to use the former word with respect to the seller’s delivery obligation and to reserve the latter for the particular case when a “pre-shipment inspection” is performed, since such inspection normally is only required when the buyer or the authorities of the export or import country want to ensure that the goods conform with contractual or official stipulations before they are shipped.

PACKING AND MARKING FOR INTERNATIONAL SHIPMENT

The real revolution in export packing came with containerisation. In shipping language, a container is a large metal box that can be loaded with cargo. There are various sizes, ranging from 20 to 53 feet long. A typical 40-foot container can hold about 2,347 cubic feet or 42,000 pounds of cargo.

The size of container used is determined largely by the weight/ cubic measurement of the cargo; the availability of equipment, over-the-road maximum weight limitations at the origin and destination points; and the ship’s configuration. Containers are taken off the truck’s chassis by cranes at the port of origin and fitted like Legos below and on the deck of the containership. At the port of disembarkation, trucks pull up alongside the ship and the containers are lifted by crane and fitted directly onto the chassis. This process is called lift-on, lift-off or LOLO. With a roll-on, roll-off or RORO vessel, the trailers are rolled on-board the ship together with the chassis and both units are transported from origin to destination.

Export shippers can own or rent containers or can use ‘boxes’ (as they are often called) that belong to steamship companies. Typically, a container is cleaned and checked for soundness (no water leaks, etc.), packed, locked and sealed, and sent to its destination. It may move by road or rail and then by ocean and is usually not opened until it reaches the importing country or sometimes even the importer's warehouse. When sealed by the exporter, the cargo is said to move under ‘shipper-load-and-count’, meaning the shipper (not the carrier) takes all responsibility for declaring the true cargo (products), and the respective weights and piece counts. Any misrepresentation of this information is considered to be fraudulent. The numbers of the seals are recorded, so that it is nearly impossible for a thief to break into a container without leaving evidence of having done so.

There are specialised types of containers, the most common of which is the reefer, or refrigerated container. Systems have been developed, known as controlled atmosphere (CA) and modified atmosphere (MA), for containers to retard ripening of produce. There are usually temperature recorders placed in reefers so that, if produce arrives in poor condition, it will be easy to tell whether a mistake or equipment failure let it become too warm. Other types of containers have been designed to transport export commodities including tanks for frozen orange juice or other liquids, flatbeds for large pieces of equipment, hanging-garment vans to carry clothing on hangers, and ventilated vans for cocoa and similar products.

Containers are used also for airfreight. There are several standard sizes because of the large variation in the inside dimensions of aircraft. Exporters should check with their carrier about available container sizes and whether palletized cargo can be accepted. For fast turnaround, airlines will try to have a string of containers waiting when a plane arrives. Essentially, they will push out one string of metal boxes and push in another.

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Many carriers have joint agreements to carry each other’s freight, which lets them issue ‘through’ airway bills when cargo must be transshipped. The two most pressing air cago issues for new and experienced exporters are availability of cargo space and frequency of service. There may not be enough regularly scheduled flights to meet an exporter’s needs, or the connecting flights to the cargo’s final destination may not be ideal, for example, leaving cargo sitting on the tarmac in the heat or missing a connection because of a delayed flight.

If your shipments are small, they will probably be sent break bulk, or LCL, which gives you a higher unit cost than that of larger volume shippers. Also, your packages will be subject to the potential risks of being dropped by handlers or handling equipment, crushed by heavy cargo, or soaked in seawater. Even cargo inside waterproof boxes can get wet if the ship sails through cold areas and moisture in the air inside the box condenses. That’s why, in the old war movies, we used to see shipments of firearms coated with grease and wrapped in waxed paper. Now shippers can shrink wrap cargo and/or add materials to the packages that absorb moisture.

Logic tells us that heavier boxes should be loaded on the bottom and lighter ones on the top, but most steamships call at several ports. What goes in first, or what will come out last, usually ends up on the bottom. That means there may be a bulldozer resting on your Ping-Pong balls.

Finally, some kinds of packing materials may get you in trouble with regulatory authorities. One importer wanted to bring wooden bowls packed in straw to the United States from Grenada but was prohibited from doing so because straw can harbor insect pests that might harm U.S. agriculture. Even wooden pallets can harbor insects and snails. For example, a South American exporter was packing fresh garlic in mahogany boxes and was fined by his country's authorities for illegally exporting precious wood.

There is a noticeable trend toward the development and use of packaging materials that are friendlier to the environment. Many countries are adopting practices pioneered by Germany, which has strict regulations with respect to use of recyclable and reusable materials from pallets to corrugated cartons, packaging foams, and plastic crates. Shippers may even have to re-export certain materials, which of course adds to the cost of a transaction. Thus, it is important to know the regulations before you finalise a price.

Companies that frequently pack goods for export should know how to mark them, but new exporters may have to be taught. Moreover, there is an even more extensive set of symbols and more requirements for marking boxes that contain hazardous materials. If you plan to deal in any product that is (1) explosive, (2) flammable, (3) spontaneously combustible, (4) water-reactive, (5) oxidizing,

(6) poisonous, (7) radioactive, or (8) corrosive, you need to be sure your packing and marking are as required by the corresponding legislation and regulations. The captain of a vessel is the final authority with regard to carrying hazardous materials. If he thinks a shipment is unsafe, he can reject it, even though it may be in compliance with all regulations. Port authorities are also concerned about hazardous materials, and some ports prohibit loading or unloading the most dangerous kinds.

The risk of carrying hazardous materials may translate into higher rates for shippers. For instance, one drop of mercury in a container can cause that whole 40-foot box to be considered hazardous and thus increase the shipping rate. Shippers may wish to consult with carriers regarding the carriage of hazardous materials, often referred to as ‘hazmats’.

NEW FORMATS OF LETTERS OF CREDIT

LCS Issued Subject to the eUCP are not a Day to Day Business Process yet

International trade is a complex business not least because of the (over) reliance on the creation and distribution of paper documents whose data elements play such an intrinsic role in the successful conclusion of the sales contract.

If we take the time to consider a basic contract between a seller and a buyer – settled by a straightforward ‘sight payment’ documentary credit – we will find that there may be 20 actors in addition to the buyer and seller who have some role of varying importance to complete this international trade jigsaw.

Each actor’s interest may include the goods themselves, exit export formalities, export exchange controls, licensing, logistics, transport, warehousing, inspection, insurance, import customs and

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clearance. The list goes on. And each actor will have a document to produce to evidence the role they play.

Exporters and importers need reliable actors to perform specific services, especially in terms of payments and finance – which must operate within a regulated, reliable framework with the capacity to support significant volumes of verifiable international trade transactions.

Advances in technology create opportunities to ‘re-engineer' operational processes to gain greater efficiency, control and more efficient risk management. International trade has greatly benefited from the advances in internet-based technology. Communication between exporters, importers and their agents has been facilitated and communications costs have plummeted. Indeed, all the parties in the trade chain electronically exchange data elements and yet they continue to create paper documents from electronically generated data to evidence certain acts or actions proprietary to their role; a clear duplication of resources.

The Changing International Trade Banking Environment

The International Trade Banking environment is changing rapidly. We are witnessing consolidation of the banking industry with fewer and larger trade banks controlling more and more of the business. Global reach in terms of trade processing, across borders with seamless integration between the actors in the international trade chain is now in sight.

Outsourcing

We are now beginning to witness the application of browser independent, secure internet-based platforms which in practice means that for the first time leaders in the field can provide both ‘front office’ and ‘back office’ internet based trade solutions. This can work to the benefit of both small and large players, depending on their role and positioning in the marketplace. The larger players are facilitated in having a global reach for trade processing. Whereas the smaller banks — who have traditionally built their trade business around client trading knowledge — can maintain their customer relationship while outsourcing expensive trade and documentary processing.

This can be done offshore in low cost but high volume managed trade processing centers. We are already seeing the examination of electronic records for compliance with direct feedback to the presenter and in some cases to the beneficiary when documents have been processed directly by the beneficiary.

The next step is the use of electronic records that facilitate the exchange of common data across interoperable platforms. The United Nations electronic Trade Documents (UNeDocs) Project is gaining pace. The concept is based on the provision of a technologically neutral data retention and management solution. The result is that UNeDocs documents can be formatted in paper, XML, PDF and EDI. The data can be read or visually examined through industry standard browser-technology and the format supports electronic signatures and authentication of electronic records where required. The exchange of data is also facilitated thus removing many of the costs associated with traditional paper documents.

The further expansion of the UNeDocs model will facilitate the evolution from paper to paper-less environment. As UNeDocs always have the paper option they are consistent with the 12 Articles of the eUCP (which are intended to work in tandem with UCP 500 where electronic or part-electronic presentation of documents may form a presentation under a Letter of Credit).

Straight through Processing of Trade Documents

There have been many trade related internet-based solutions that have promised ‘straight through trade processing’, but what does this phrase actually mean? This phrase appears to intimate the ‘non-involvement’ of professional trade bankers in, for example, the issuance of Letters of Credit. From the time a customer remotely authorises an LC application over the Internet it would result in an automatic issuance of a SWIFT MT700 message (or some other such result) with the advice and possible confirmation of same without human intervention.

Trade finance can be automated using proven industry standards. However, knowledge and judgment based human intervention is required in the evaluation of trade risk, trade applications and examination for compliance. This kind of human intervention is unavoidable. This should not be viewed as a limitation but rather an opportunity for banks to provide valued added services to their customers.

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Electronic Presentation of Documents

Many trade services providers, even those without a fully integrated internet-based solution, will testify that their trade services solution is eUCP compliant. However, what does this ‘eUCP compliance’ really mean in terms of business processes and functionality? This is a key question. The eUCP compliance as it is being marketed means an internet-based system with the capacity to accept presentation of electronic documents on a secure platform.

The actual processing of presentations of electronic documents (or mixed presentations of electronic and paper based documents) under documentary credits is not a business reality today, but as already stated the process of evolution from paper to electronic is well underway. Many legal commentators maintain that the key barrier to the presentation of electronic records is the absence of legislation in countries recognising electronic documents, electronic signatures and electronic authentication methodologies.

From the practical experience, in banks and organisations around the world the main obstacle to the widespread use of electronic records under Documentary Credits is ‘custom and practice’. People are used to dealing with physical, printed documents. So, even though we have the technology, the evolution to the processing of electronic records will be slow, but we can expect significant progress within the next five years.

The existence of rules such as the Uniform Customs and Practice for Documentary Credits greatly facilitates the operation of trade products, in fact with the advancement of globalisation and trade flows UCP is a critical component within the international trade chain. However, we had Documentary Credits before we had UCP. So there were customs and practices before the International Chamber of Commerce drafted the first version of the UCP. The eUCP were drafted before we had seen any tangible/widespread use or application of electronic records in the day-to-day trade business process of Documentary Credits. The drafting of the eUCP was a valuable exercise and will in time yield tangible benefits but could there have been an element here of ‘putting the cart before the horse’?

Progress towards Presentation of Electronic Documents

It is the exporters who are gaining familiarity with the use of technology for the generation of ‘electronic records’ and who will ultimately be responsible for ‘creating the environment’ necessary for the paperless letter of credit. Advances in technology, such as the already mentioned XML Standards and J2EE secure technology, allow exporters to work through thin client applications in real-time, the benefits of which, in terms of cost and time efficiencies, are evident. However, a critical mass is required to affect the evolution from paper documents to electronic documents on a global level. But attaining that critical mass is now within reach.

Trade Processing Investment and Legacy System Costs

There was a time when many bankers considered that fee based trade finance products provided a line of repeating, low risk business which could be referred to as ‘easy money’. There was a (similar) time when banking technology providers could also provide processing systems that in essence ring fenced the client through purchase of an expensive system with the resulting expensive support and consulting services. Also, at times referred to as ‘easy money’. This has now changed fundamentally for both the banking industry and indeed the trade finance solution providers. With advances in technology banks are correctly very prudent when deciding whether or not to invest in expensive systems that possibly require significant modification and support costs. This has been a major challenge to the trade finance systems providers who in recent years have experienced aggressive competition in what can now be considered a mature marketplace.

However, developments in the last year or so have seen the market take on a new dimension with players that can offer scalable inter-net-based solutions taking the lead. This innovation has also facilitated the development of new financial models for banks, which can be modified to match the changing needs of the trade-banking sector. The need for heavy up-front capital expenditure has been reduced and banks can opt for a structure, which may include a variable pay per transaction element. Some of the trade finance systems providers have failed to rise to this challenge but the few that have made the necessary investment in terms of capital, research and development and modeling structures are now beginning to see the benefits.

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Conclusion

The provision of trade finance services by banks is directly dependents on the amount and direction of trade conducted globally. The good news is world trade is increasing. We can see it in both mature markets and in the instances of double digit growth in emerging and developing markets such as the Asian markets and the countries in transition.

International trade is inexorably moving towards the ‘universal’ use of electronic records. The banking and trade community cannot afford to ignore the advantages that electronic records provide. The United Nations estimates that paper-based documentation adds a margin of 5 % and 10 % to the cost of internationally traded goods. The eUCP has played a role in the promotion of electronic records in the trade/letter of credit process. However, the practice that develops around the widespread use of electronic records will evolve based on commercial reality rather than a set of Rules – however well conceived.

(Peter Tseng, Chairman of China Systems, the largest trade finance systems vendor in the World with offices throughout, «Международные банковские операции», 2/2006 (12))

MARINE INSURANCE

In the early days of international trade, it was common for cargo to be lost when vessels ran into trouble with sand bars, storms at sea, or pirates. Shippers would demand compensation from the steamship companies, who often lacked the resources to make restitution in full.

Thus it was that ships’ captains began sitting in Lloyd’s coffee house in London, asking wealthy patrons to accept (for a small fee) the responsibility of repaying shippers when losses occurred. Finally a patron, whom others respected, would write at the bottom of a manifest the percentage of the risk he would accept and the fee he would charge. He was the lead underwriter. Other patrons, or underwriters, would add their percentages of risk and their signatures until finally the entire value of the cargo had been underwritten. From this small beginning, Lloyd’s of London and the gigantic industry of marine insurance were developed.

Nearly all international shipments are insured against loss and damage. A general cost guideline is 1 % of the insured value, but this varies enormously with the type of goods, the mode of transportation, and other factors. There are several types of limited coverage that major shippers use to save money on premiums, but most small-scale importers and exporters purchase ‘all risk’ coverage. This covers nearly all risks. It does not cover loss or damage caused by war, strikes, riots, civil disobedience, or ‘inherent vice in the cargo’. This means something in the cargo that destroys it, such as moth larvae in wool sweaters or deadly bacteria in shrimp. One can pay extra for riders or clauses that protect against these risks. No standard cargo insurance covers late arrival or rejection of goods by buyers or government agencies. These are insurable risks, but the rates are high and many insurance companies refuse to insure.

It is vital that your marine insurance policy contain a general average clause. This means that, for example, if the ship is in a bad storm and some heavy cargo is jettisoned to save the rest, every shipper who was using that vessel is responsible for a portion of the value of the jettisoned cargo. Even though your cargo may be safe and sound, you cannot get it until the steamship line has been assured of payment for your share of the loss. Also, insurance can be port to port, warehouse to warehouse, or some combination of the two forms. Warehouse-to-warehouse policies cover the goods from the time they leave the exporter’s premises until they are in the importer’s premises. They are becoming increasingly common.

What determines who must buy the insurance? The answer is the shipping term that is agreed upon. The definition of each INCOTERM says who is responsible for insuring the cargo. Many problems can arise. Suppose, for example, that you are exporting, CFR, on open account, and the cargo is lost. The foreign importer is obligated to pay you but may not do so until he collects from his insurance company. To speed up payment, you may get involved in helping your importer settle the claim. Or suppose you are importing CIF on a letter of credit and the cargo is lost. You will have to file a claim on the insurance company from which the exporter purchased coverage. This will be much easier if the exporter has used a sound, reliable company that has offices in the United States.

Whenever the other party to a transaction buys insurance to protect you, and you have doubts about the adequacy of coverage, you should consider purchasing contingent insurance. These costs

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about half as much as regular insurance and pays only if there is covered loss or damage and for some reason the primary insurer does not pay.

Small-scale importers and exporters usually buy insurance supplied by freight forwarders under their blanket policies, or directly from airlines, whereas medium-sized shippers buy through insurance brokers. Large importers and exporters have open policies that automatically cover all shipments of their normal merchandise in their normal trading areas. The importer or exporter simply reports each shipment to his insurance company.

It is customary to insure for the CIF value of a shipment, plus 10 percent of CIF. This means, for example, that if your goods are worth $9,000, the shipping cost is $900, and the insurance cost is $100, you should insure for $1,100 ($9,000 + $900 + 100 x 1.1). The extra 10 percent is to repay you for time and trouble, lost profit, and perhaps lost customers because you did not fulfil your obligations.

You may trade for a lifetime and never have an insured loss. If you do have to file a claim, however, you will have to present the bill of lading, the insurance certificate, and a survey report with an invoice showing the amount of damage or loss. When a marine insurance company agrees that it has an obligation to pay, it usually makes payment from one to six months after a claim is filed.

Insurance Services: Lloyd’s of London

London is a leading centre for international insurance. The insurance industry in the UK is broadly made up of three groups – insurance companies, Lloyd’s of London and insurance brokers. The insurance companies and Lloyd’s combined provide a major reinsurance market. London’s importance as an insurance centre, as well as its comparative freedom from excessive regulation, has attracted many foreign reinsurance companies and brokers.

There are around 850 insurance companies authorised in the UK but approximately one half of them handle more than 90 % of company market business. They provide the full range of insurance contracts including life, pensions, permanent health insurance, marine, aviation, fire, accident, motor, travel and household insurance. The insurance companies have a combined premium income of more than £50 billion per year.

Brokers or intermediaries look for the best cover for their clients and offer advice on insurance. Their size can range from a simple one-man operation to a City-based international broker with a turnover running into millions. Brokers place their business with the insurance companies and – if they are accredited – with Lloyd’s. Brokers handle approximately 70 % of the general United Kingdom insurance business.

Lloyd’s is a unique international insurance market. Lloyd’s is an association of London underwriters, set up in the late 17th century. Originally concerned exclusively with marine insurance and a shipping information service, it now subscribes a variety of insurance policies and publishes a daily list (Lloyd’s List) of shipping data and news. It is a society of underwriters made up of more than 26,000 members or ‘names’ who as private individuals accept insurance risks and are liable for claims to the full extent of their personal wealth. The business is introduced by Lloyd’s broking firms – there are some 240 of them – which look for the best quotation on behalf of their clients. Although its origins lie with marine insurance, Lloyd’s now covers almost any risk from oil refineries, aircraft, road vehicles and satellites – even to a wine taster’s palate. More than three-quarters of this business originates from overseas and its premium income is approximately £24 million every day. It is important to realize that Lloyd’s is not a company, but a market place where individuals transact business.

Lloyd’s began in the 17th century in a coffee-house owned by Mr. Edward Lloyd. At that time coffee-houses were popular meeting-places for business people, and Mr. Lloyd’s coffee-house soon became a place where marine insurance could be readily obtained from wealthy merchants who would underwrite risks to the full extent of their personal wealth. They would write their names on a slip of paper under the description of the risk, and this is why they were called ‘underwriters’. By the end of the 18th century, Lloyd’s had its own premises and in 1986 it moved into a new purpose-constructed building in the City of London.

Wealthy people who became members of Lloyd’s expose their wealth to huge risks because there no limits to the liability of members if losses occur. Members can lose their money. However, normally premium income is in excess of the money paid out to meet claims and the profits are shared by the members. The members are grouped in some 400 syndicates of various sizes. Most of the

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members, or underwriters, do not actually work at Lloyd’s. Each syndicate has an underwriting agent, who does work there and accepts risks on behalf of the other members of the syndicate. To become a ‘name’, it is necessary to show that you have at least 100, 000 pounds sterling of readily available assets, half of which must be deposited with Lloyd’s. A member with this money would be allowed to accept premiums of up to 200,000 pounds. This means that for each syndicate there is a maximum amount of premiums that it can accept. For this reason, the insurance risk of, say, a very expensive oil tanker is shared by several syndicates, each one taking a percentage of the risk. In the late seventies and early eighties, a few underwriting agents stole large amounts of money from members of their syndicates. They were expelled from Lloyd’s and changes were made in the regulations and working practices.

Nowadays, shipowners arrange insurance with the underwriters. The broker has a slip pf paper which the underwriter signs, indicating the percentage of risk they are exposed to. The broker may have to approach many underwriters before the risk is covered. Some underwriters may refuse the risk entirely, but a broker with the knowledge of the market knows the most suitable ones to approach.

In order to assess risk, it is necessary to obtain accurate information from various sources like the daily newspaper, Lloyd’s List, which gives news about shipping, and reference books. In addition, there are hundreds of Lloyd’s agents all over the world, who provide information about shipping movements and damaged vessels.

At Lloyd’s there is a bell, salvaged from HMS (His/Her Majesty’s Ship) Lutine in the 19th century. Before modern communications were introduced, the bell was rung twice for good news and once for bad news. Now it is mainly used on ceremonial occasions.

The main competitive advantage of Lloyd’s is its national and international reputation. Lloyd’s has never failed to pay claims. Besides, Lloyd’s do not have branch organisation consequently its operating expenses are relatively lower than in insurance companies.

ARBITRATION COURTS IN THE RUSSIAN FEDERATION

International Jurisdiction and Cooperation

The jurisdiction of the arbitration courts in Russia extends to the disputes between national and foreign legal entities as well as individual businessmen in the sphere of entrepreneurial and other economic activity. Such cases are examined by arbitration courts through all procedural stages from filing claims with courts to resolving issues related to the enforcement of judicial decisions including appeals against bailiffs’ executive actions.

While hearing the above cases, the arbitration courts may forward to the competent authorities of foreign countries letters of request on performance of individual procedural acts including the service of judicial documents and obtaining evidence abroad. They should execute in their turn similar letters of request, which have been transmitted to them from judicial authorities of foreign states. The manner in which such requests should be made is defined by the appropriate international conventions or bilateral treaties on mutual legal assistance, concluded by the ex-Soviet Union and the Russian Federation with foreign states.

In accordance with the international treaties of our state, the arbitration courts have the right, on the application of any interested party, to recognise as binding and to authorise on the territory of the Russian Federation the enforcement of foreign judicial decisions and arbitral awards in commercial cases or, when the decision does not comply with the terms of the appropriate international treaty, to refuse the application.

The Supreme Arbitration Court of the Russian Federation has established and maintains international relationship and cooperation with supreme courts and specialised courts of various foreign countries. Among them there are the Federal Supreme Court, the Federal Patent Court, administrative and financial courts of Germany; the State Council, the Court of Cassation and the Commercial tribunal of the city Paris in France, commercial courts of High Royal Courts in Great Britain; supreme courts and specialised courts in Finland, Denmark, Belgium, USA, Canada, China and other countries.

It has been developing active cooperation with many international organisation and their judiciary bodies such as the Council of Europe and the European Court of Human Rights, the European Union and the Court of Justice of the European Communities, the Hague Conference on

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private international law, the Organisation for Economic Cooperation and Development (OECD), the German Foundation for international legal cooperation and others.

Upon the presentation by the Supreme Arbitration Court, the Federal Assembly of the Russian Federation passed the laws on the accession of the Russian Federation to the Hague conventions “On the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters” of 15 November 1965 and “On the Taking of Evidence Abroad in Civil or Commercial Matters” of 18 march 1970 thus improving the conditions for mutual legal assistance between the courts of Russia and of foreign states.

Close ties, mutual assistance and exchange of legal information are developing between Russian arbitration courts and the arbitration courts, economic courts and other courts dealing with economic disputes in the CIS countries as well as between the Supreme Arbitration Court of Russia and the Economic Court of the CIS.

At the initiative of the Supreme Arbitration Court, a Council of chairmen of the superior courts dealing with economic disputes in the area of entrepreneurial and other economic activities has been formed on the basis of the agreement concluded by the presidents of eight CIS states. The Council started working in 2004 with the purpose of improving legal cooperation in the field of regulation of economic relations.

The judges of the Supreme Arbitration Court and of regional arbitration courts of Russia participate in many international conferences, seminars and meetings with foreign experts on such matters as actual issues of economy and law, implementation of principles of rule of law in judicial activity, application of commercial law, tax legislation, bankruptcy procedures, reform of arbitration procedural legislation, legal protection of investors, shareholders, small entrepreneurs, intellectual property subjects etc. The active participation in the international legal forums and discussions promotes the improvement of their professional qualifications and skills raising the level of administration of justice.

The specialised official edition – “Vestnik of the Supreme Arbitration Court of the Russian Federation” – publishes international treaties and agreements on matters relating to the activities of arbitration courts, comments and explanations on their application as well as materials concerning protection of national and foreign participants in the international economic turnover.

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Appendix 2

CONTRACT 1

(Import of Goods from Russia by Rail)

CONTRACT No. ___	КОНТРАКТ № ___
____________________ 20___, Moscow _____	____________________ 20___, Москва ______
______________________, hereinafter referred	______________________,	именуемым далее
to as the “Buyer”, represented by	«Покупатель», в лице _______________, с
_______________________, on the one part,	одной стороны, и ______________________,
and _________________________, hereinafter	______________________,	именуемой далее
referred to as the “Seller”, represented by	«Продавец», в лице ______________________,
___________________, on the other part, have	с другой стороны, заключили контракт о ни-
concluded the Contract as follows:	жеследующем:

1. SUBJECT OF THE CONTRACT

The Seller has sold and the Buyer has bought on the basis of CIP ________________ as per INCOTERMS 2000 the Equipment indicated in Attachment No. l. The scope of work to be performed by the Seller consists of supply of the equipment and fulfillment of the services specified in Appendix No. l.

2. CONTRACT PRICE

The total value of the Contract is ____ USD (write out figures by words) including:

1)the equipment price __________ USD

2)the service price __________ USD

and is understood CIP ____________ , the cost of packing and marking included.

The total contract value and prices for each Contract item of the equipment and the service are specified in Appendix No. l.

3. TERMS OF PAYMENT

3.1.All payments under this contract are made in US Dollars by cable remittance.

3.2.Advance payment in the amount of one hundred percent (100 %) of the total value of the Contract _____________ USD (in writing) shall be paid by the Buyer to the Seller against

the Seller's invoice within ______________

(in writing) days from the date when the Seller make out an invoice to the Buyer.

1. ПРЕДМЕТ КОНТРАКТА

Продавец продал, а Покупатель купил на условиях CIP ______________ (географический пункт) в соответствии с ИНКОТЕРМС 2000 оборудование, перечисленное в Приложении № 1. Объем работ, выполняемых Продавцом, состоит из поставки оборудования и выполнения услуг, указанных также в Приложении № 1.

2. ЦЕНА КОНТРАКТА

Общая цена настоящего контракта составляет ____________ долл. США (сумма прописью), включая:

1) цену за оборудование _________ дол. США

2) цену за услуги _________ дол. США и понимается CIP _____________, включая стоимость тары, упаковки и маркировки.

Общая цена контракта и цены по каждой контрактной позиции оборудования и услуг указаны в Приложении № 1.

3. УСЛОВИЯ ОПЛАТЫ

3.1.Все платежи по настоящему контракту осуществляются в долларах США телеграфным переводом.

3.2.Авансовый платеж в размере ста процентов (100 %) общей суммы контракта в сумме _____________ USD (прописью) перечисляется Покупателем Продавцу по счету Продавца в течение ______________

(прописью) дней с даты выставления

Продавцом фактуры-инвойса Покупателю.

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