Wednesday, August 29, 2007

Merchandising-3

Fashion is
- Ambivalent
- Something that is ludicruous to begin with
- There are hidden persuaders to fashion- why women wear fur
- Fashion is news
- excites
- culture of the times
- has its own gatekeepers of information
- is a battle between utility vs. psychological obsolescence.

Uniqueness of Fashion Industry
  • Psychological Obsolescence
  • Faster turnover- 65% of new garment should get sold within 10-15 days
  • seasonal nature of business- characterised by higher markdowns
  • cyclical
  • Dramatic and gigantic sales promotion

First Merchandising has to be done. Then sales takes place finally marketing is to happen

Merchandising Process

  • Sample to
  • Prototype to
  • Product Specification to
  • Production to
  • Costing to
  • Shipment to
  • Reaches the shelf
  • to sales man
  • to customer

Merchandiser is the engine between design process and consumer

Tuesday, August 28, 2007

Quality Lectures

Iso- 9001

  • It has four processes, Management Responsibility(top management process), resource management, Product realisation(Enabling section) and Management Analysis(feed back)Section.
  • Section 4 deals with documentation- 1,2 are reference sections, 4- documenting section which contains quality policy, quality manual , procedure and work instructions.
  • Section 5 deals with management responsibility which deals with management commitment, customer focus, quality policy(values driven document), planning ( quality objectives, measurable), responsibility and authority and internal communication ( policy, customer, product, administrative), management review ( agenda, minutes, actions taken to improve)
  • Resource Management include provision of resources, human resource ( competence, awareness, training), infrastructure, work environment( ergonomics)
  • Product realisation include Designing, Purchasing and production
  • Measurement analysis and improvement include internal audit, process benchmarking and non conforming product policy.

Quality has the following costs: prevention, appraisal, internal and external.

  • Prevention costs include setting standards, quality planning, quality assurance, inspecition equipment, training and miscellaneous costs
  • Appraisal costs include inspection, quality audit.
  • Internal costs include that of scrap, rework, downgrading, failure analysis
  • External costs include that of repair, warranty claims, complaints, returns and liability.

Four Point Defect System:

  • Length wise defects
  • Maximum 40 points/100 sq. yards
  • upto 3 in. - 1
  • 3-6 in. - 2
  • 6-9 in. - 3
  • above 9- 4
  • Holes 1 in. or less- 2 pt. , above 1 in. - 4 pt.
  • Points/100 sq. yards = (total pts *3600)/(fabric width in inches*total yards expected)

Quality Lectures-1

  • Prototype Sample: When- preseason, reason- fit and construction, sketch to garment;size- med; fabric-substitute;time-1-5 days; remarks-resubmissions, more than 1 sample, cost borne by factory, have a counter sample
  • Salesman sample: When-after approval of prototype sample; Reason- for different retail formats; size- all sizes; fabric- no exact color/ print or accessories; remarks- asked by buyer for salesmen, should be charged to buyer if no ordes.
  • Fit sample: after approval of salesman sample; size-med; remarks- ready to orderfabric , reason- to incorporate feedback
  • Size set Sample: One for each size, or jump size set sample; color- any one color; remarks- after this approval for production, can start cutting after this.
  • Sealers sample: for getting fit of all sizes correct; fabric- actual fabric; remarks- approval for production
  • Reproduction Sample or Photoshoot Sample: reason- used for ad. Size: one size, fabric: all colors, actual fabric, for buyer reference only
  • Top of Production Sample: For buyer's reference, medium, randomly picked for production.
  • Shipment Sample: with price ticket, bar code etc.

Remember: All sampling creates a quality history.

- Factors that contribute to variation: Material, equipment, operators, processes, environmentn and inspection systems.

- Variability can be between garments or between garments

- Defects can be critical, major or minor

- Critical Defects are those that affect saleability, usability or performance

- Major Defects are those that affect saleability and may affect performance

- Minor Defects will not affect usability or saleability

  • Critical Zones are defined : For example in A zone, there should not be any critical defect.
  • Inspection loop starts with inspection, detection of defects, feedback of these defects to the personnal concerned, determination of causes of defects, correction of defects and the cycle completes with again inspection.
  • Inspection is defined as the sound judgement on disposition of the product, whether to accept or reject it.
  • Aspects of inspection are purpose, stages, selection of inspectors and how much to inspect
  • Purpose of inspection is to meet specifications, to meet standards and to meet acceptance
  • Stages of inspection are fabric inspection, trim inspection, inline inspection, inprocess inspection and final inspection
  • In trim inspection we inspect sewing threads, zippers and buttons
  • Under sewing threads we inspect construction, sewability, imperfection, finish, color, package density, winding and yardage. Under zippers we inspect dimensions, color, slides, pull tab, slides lock. Under buttons we inspect holes, thickness and color.
  • Under inline inspection we inspect sewing, seam and assembly.
  • Under sewing we inspect needle damage, feed damage, skipped stictches, thread breaks, broken stitches, pucker and pleated seams. Under seam we inspect shape of the sew line, mismatch check, reverse garment part, wrong shade of threads, wrong seam type. Under assemblt we inspect the correct size, parts omitted or incorrectly positioned parts.
  • Under inprocess inspection we inspect spreading, cutting and pressing
  • Under spreading we inspect ply alignment, bowing and splicing.
  • Under cutting we inspect freyed edges, fuzzy edges, ply-to-ply fusion or single edge fusion.
  • Under pressing we inspect burn, water spots, gloss, broken zipper, crease not correct or pocket not smooth.
  • Under Final inspection we inspect collars ( both point, same length) , Button and button holes ( no puckering, even space) Pocket (horizontal top), Hem, yoke, side seam , cuff, finished appearance ( no shade difference). Disadvantage of final inspection is that it is very late, could delay delivery, unsatisfactory products and we need an altogether a complete organisation for alteration. There is also a prefinal inspection when some percentage is left for delivery.
  • Inspection can be done according to place i.e. randomly or after a critical operation eg. front pocket top stitch. Under the latter, not all the pieces are checked, but if there is a bad piece, then all the pieces are checked.
  • Inspection can be pilot run ( After pre production approval, 5 pcs of color, objective is to fine tune the line), Initial ( when x% of pcs. stitched) mid ( when 50% of shipement is stitched)( IN INITIAL AND MID PIECES ARE NOT CHECKED FOR MEASUREMENT) and End of Line ( after 100% production, pcs. checked for measurement)
  • Considerations for selection of inspectors- unbiased, color distinction, communication skills, empathy, ethical)
  • How much to inspect- the options can be no inspection, 100% inspection (never 100% fool proof), Arbitrary sampling ( A certain % of shipment is inspected) or statistical sampling ( Also called acceptance sampling, called AQL ( Acceptable Quality Level) e.g to check for a shipment of 5000 pcs., we see from 3201 to 1000 pieces, we see L, L at 2.5% is 10, means accept till 10 samples are defective in a sample size of 200 pieces, and reject if you get 11. At AQL accept till 14 and reject at 15.

Elements of Cost

Cost

It is the amount of expenditure ( actual or notional) incurred on, or attributed to a given thing.

  • Elements of Costs are Direct material ( r/m, packaging) , Direct Labour ( to produce a material), Direct Expenses ( Hire of special machine, cost of rework), and overheads.
  • Over heads can be factory overheads, office and administration overheads or selling and distribution overheads.
  • Factory overheads consist of indirect material ( oil and waste) , indirect labour ( store keeper, time keeper) or indirect expenses ( factory rent, insurance and lightning)
  • Office and Admin. Overheads consist of Indirect Material ( printer and stationary, broom, duster), Indirect Labour (office maintenance, office account, clerk) , Indirect Expenses include (rent, insurance and lightening of office )
  • Selling and Distribution Overheads include indirct material ( packing material, printing and stationary), indirect labour( salary of salesman, manager) and indirect expense ( rent, insurance, ad expenses etc.)
  • Components of total Cost

Direct material + direct labour + direct expenses = prime cost

prime cost + factory overheads= factory cost

factory cost + office overheads= office cost of total cost of production

office cost + selling and distribution overheads = total cost.

merchandising-2

Range Planning

  • Components of fashion are time, people and acceptance while color is the binding element
  • Range means collections linked themetically
  • Forecast Interpretation for Range Development

1. Look for Cues for colors- are related to theme, as in a picture. Write the strikingly important colors. Write the color pallet.

2. Select silhouettes. eg beachwear, sports wear and partywear require different silhouettes.

3. Select fabric according to the silhouettes.

  • Three r's of fashion forecasting are research, report and recommend

1. Research: First there is textile stylist which selects threads/ fabric. After that there is fashion forecaster which has his own feel. Then there is a fashion designer who has his own feel and then with the help of fashion director selects the material which can cater to the design and has appeal to the customer. He also consults several fabric manufactureres to judge main themes. There is also a meeting with the retailers to get their opinions about the fabrics etc. At that time certain elements begin to emerge.

Travels various fashion shows and fairs in Europe/ USA and other parts of the world are also made to get the feel of what is new. A look of various fashion magazines and sites is also done.

Other influences are demographic, climatic and geographical , life style and lifestyle of people in the news/music and entertainment etc.

2. Report: One should consider the following points

- Distinguish what is truely new

- Never forget the classics

3. Recommendation:

- Careful analysis of trends

- Identifying and pinpointing specific fashion which is guided by - experience and stores sense of clientele

-Instinct for new ( we cannot be 100% accurate, but 80% accuracy should be our target.)

Remember: Primary part of forecast is supply driven rather than customer driven

Some terminologies:

1. Free on Board Price: Exfactory+ Transport charges from factory to the port +Handling and Loading from the factory to the nearest port on a ship.

2. FOA: Free on Air: ex-factory+transportation charges from factory to airport+handling at port.

2. CIF price: Cost(FOB)+Insurance+Freight: Here freight means freight of transportation from the port of shipping to the port of destination. Remember here buyer is not paying for insurance but seller does, but risk of goods is always buyers.

3. DDP : Delivered Duty Paid- CIF+ on your doorstep. The risk is always of buyers.

  • Remember : Till FOB, risk is seller's , after that it is that of buyers

4. OTB: Open to Buy: It is a quantity that is bought in a month. It depends upon how much I already have and how much I expect that should be sold.

OTB= End of Month ( that I intend to hold)-Beginning of Month (That I already have)+ Planned sales (as forecast)

When it is in terms of Rupee, it is called Rupee Plan. When it is in terms of Dollars, it is called Dollar Plan.

Thursday, August 23, 2007

Merchandising-1

Merchandising

Meeting the needs and wants of the customer who is usually not the end customer at the right time, at the right place, at the right price with the right merchandise.

It is risky- because it is a critical activity and he has to take responsibility for the others like production, logistics etc.

Value addition in the fashion chain
- fashion can rise above any price level
- It can find its own outlest and level
- fastest is the bestest

Value Addition process in the garment manufacturing

Price, Fashion and value of timeliness trickles down in the following manner: fantasy( haute couture), fashion pret-e-porter (diffusion lines), Style Wear (marketing brand: contemporary classics), basic updated, basic budget

haute Couture:

It is not like a garment, it is sold as a work of art or painting. It is sensory. Sold for special occasion like wedding ceremonies etc. No designer make money by selling haute couture, except perhaps YSL.

Pret-e Porter

Like Donna Carren- designer ready to wear garments. Adopted/ changed from the haute couture. Cut down funky things and make it more pragmatic. Something like modern version of painting. It is where designer make a lot of money. It is signature brand of designers.

Marketing Brands

Brands created by marketing companies. Prices are lower than Pret and very much lower than Huate couture. Like Allen Solly. They do get influenced by designers. These are designer oriented but not designer owned. Contemporary classics : something, that does'nt change in class/cut, only colours etc. get changed. e.g. Italian Collars, Chambray

Fashion normally trickles down from Haute to basics, in case of jeans it has tricked up.

A day in the life of an export house merchandiser

- Product range development activities
- Update enquiry status
- Make Offers
- Conduct Costings
- Check Order specifications and order status
- Merchandising calendar and order planning

A day in the life of a retail merchandiser

- Collection of daily, weekly sales report
- analysis of sales report
- demand forecasting
-planning otb
- range planning for store private labels.
- vendor management and order management
- planning activities.

Types of Buyers
1. Wholeseller Importer
2. Retailer Importer
3. Manufacturer Importer

1. Wholeseller Importer

- keeps a track of fashion best sellers
- buys in bulk
- low margin selling
- buys close to season
- low risk low returns
- do not have professional skills
- very good at sourcing /quality many nto be paramount to him.

2. Retailer Importer

- buys a theme
- she comes well in advance
- Make dollars and pounds
- Factory evaluation and quality is a question
- much risk/ return
- more rewarding
- lot of research involved / developed forecasting techniques
- assortment depth is more as compared to importer wholeseller
- carries a full product line

3. Manufacturer Importer

- Supply to top end brands. Why, He makes damn good jackets
- very finicky in quality, understands quality, fabric, manufacturing process
- Why he imports- not many people with him left/ issue of workforce/ expensive to manufacture jackets/ still some people come to him
- Detailed technically oriented person.
- to you he is tough guy to handle/ harp on the technical prowess of the machine.
- margins are goods
- buys close but not as close to the season as importer wholeseller

Role of a merchandiser working for a brand

- sales analysis, store format wise
- Demand forecasting
- calculate OTBs
- settles prices for strores other than his own- Multibrand Store
- Track Inventories
- Create orders for sourcing
- negotiate the prices with vendors
- Management and development of vendors

Role of a merchandiser working for a buying office

- market information from the principal Buyer's office
- Market intelligence
- Interpreting forecasts and company directions
- vendor selection
- According approvals to vendors
- Arrange meetings of the buyers with vendors

Merchandise Planning
  1. Calendar plan is an important part of merchandise planning
  2. It is about time and activity that happen in all the departments all the time
  3. As merchandisers, we need to understand the activities into sequential and concurrent activities.
  4. While implementing time and activity chart it is important to put data into the diary and also write the variances allowed.
  5. The benefit of following a calender is to increase efficiency of the process, you can get time commitment from other functionaries, for delivery schedule adherance and therefore improve profitability of the process.
  6. Merchandise planning has the following modules: buyer handling module, order handling module, sample development and costing module, PPC module and stores and inventory system module.

Merchandising Costing

Cost Plus Approach- To under stand our cost.

Buyer Backward Approach- It is needed to

  • To confirm whether something is right or wrong
  • To negotiate
  • to look at feasibility and infeasibility of garment: The buffer between the target price quoted by buyer and my cost plus will help me negotiate.
  • It also helps in understanding the customer better
  • It helps us focus on new product portfolios: If I do buyer backward of shirts and find it not profitable for me, or if I do buyer backward of knits and find it profitable then I can shift from shirts to knits.

Wednesday, August 22, 2007

Marketing Research


  • A clearly defined search for answers to some questions, which, if answered, would lead a company to make critical marketing decisions on a strategic of tactical level.

  • Marketing Intelligence Vs. Marketing Research : Ongoing, Inhouse, Not meant for immediate action, general purpose, focus on competition/ environment

  • Typical Application: Concept Research, product, pricing, distribution, advertising ( copy- awareness, recall, copy recall)

  • Limitations: Not the only input for decision making, should combine with judgement, intuition, difference in methodology, other inputs.
  • Ethical Considerations: Should not be misused, dont force respondent to answer, protect confidentiality, personal nature questions, no favourable research reports
  • Emerging Issues: Internet, Data Mining, Warehousing

Marketing Research Process

  1. Information Need Felt
  2. Define Research Objectives
  3. Design Research Methodology (continued)
  4. Secondary Research
  5. Primary Research
  6. Tabulation and Analysis
  7. Report Writing
  8. Presentation
  9. Action

Design Reseach Methodology

  1. Research Design
    It can be exploratory ( to clarify thoughts, to provide insights: methods: survey, focus group, consultation) or descriptive ( longitudinal: A panel, selection bias, Cross sectional: flexibility, simple, understandable: affected by poor quality of supervisors) or causal( whether a particular X affects Y, also called Experimental Design)
  2. Research Method
    Can be secondary ( TV, internet, newspaper) or primary ( survey- mail, telephone, person(preferred) observation ( video camera. adv: actual consumer behaviou, disadv: no representative sample) qualitative techniques ('expectation from refr. , word associations'- need expert) specialised Techniques ( A panel, retail audit: what brands bougt or sold(marg)
  3. Sampling Plan
    Sample elements
    ( Population: predefined set of potential respondent in a geographical area, " all teenagers watching MTV in a country"), Sampling Frame(: subset " ...college..") Unit ( Multistage: 1st- city, 2nd- area, 3rd- individual) Sample Size ( Depends on: Variable- continuous, proportion, confidence Level, error( Types of error: Sampling Error- Due to selection of some units and non selection of others, Non-sampling Errors: Wrong errors during study. , budget constraint, multitype) Sampling Techniques

    Probability Sampling :
    Each sampling unit has a known probability of being selected. It can be Simple Random (max time, high cost, accurate) Systemic (First unit is chosen at random, others at regular interval depends upon the size of the frame : clear definition required, less time) Stratefied (Homogeneous Strata, SRS from each: clear definition is required, med time, high cost of sample) Cluster (Area- SRS, or SRS from each cluster) Area (city)

    Non Probability Sampling:
    Chance that a sampling unit is selected is not known in advance. It can be Convenience Sampling (Depends on researcher, low time/cost/ small sample size) Judgement Sampling (Judgement of expert. more time/ less cost/ bias is less) Quota Sampling (Population is divided into classes . A quota is predetermined and that quota is completed)
  4. Questionnare Design
    Considerations
    ( Language, difficulty level, cooperation with the researcher, social desirability bias, ease of recording, coding, purpose of questions, sequencing ( neutral to personal) , biased and leading questions, monotony, analysis required, reliability and validity) types ( open ended, dichotomous, multiple choice, ranking, paired comparison, sementic differential)
  5. Field Work Plan
  6. Analysis Plan

Advanced Export Merchandising

All these notes were taken from a Lecture given by revered Dr. D.K. Batra.

Prophesies

  • Increased Regionalisation- Manufacturing and sourcing shift will take place
  • Will enter Free Trade- Traditional Categories will get killed
  • Retail industry will consolidate and speed sourcing will happen- faster fashion
  • Cost cutting will take place. Emerging Partnerships in sourcing will happen
  • Mass customisation will happen- cost cutting/ cost productivity considerations
  • Faster and more effective supply chains will result
  1. Regionalisation: Formation of trade blocks between the large consuming markets and contiguous manufacturing nations.

- Hegemony of Uncle Sam/ Statue of Liberty: Out of E 360 b neeed of European Nations- exports and supply- 61% of it comes from within trade blocks i.e. MFN.It means entering EU now is getting more difficult than earlier.

- Economic and Commercial: Though it is not cheaper manufacturing wise, but it is cheaper export wise- least lead time and fashion risk is minimised.

It leads to regions like the EU becoming virtual fortresses- Approximately 49% of the clothing needs of the EU are being met by sources within the enlarged EU or preferential treatment areas.

Implications: India can be a secondary buying hub and manufacturing can be done in either of the countries ( e.g. Pearl has moved to China, TCNS to Japan).

Impact of Trade Blocks:

- Trading within a trade block can impact a far off nation which is not part of trade block.

- A trade block can sign a pact with a far off nation ( EU with SL)

How to Counter

- Open an office in Dubai

- Acquire a trade brand in Germany- can be a PAN European Company (Hindaloco- Novalis)

- Route it through a partner/ become a partner/ become a transnational corporation

- Go fro least resistant path- provide all the products.

Retail Consolidation Happening

Imapact:

- Exporters have to go for large scale manufacturing as companies wont go for smaller exporters

- Product development costs will reduce

- price pressures

- social clause- ethical trading supply chain

- restructuring of the product lines

- brand identity can be lost for a small exporter

- merger will impact supplies

Shift of Customers towards discounters- Cost Cutting

How to cut cost

- compress supply chain

- increase productivity

- bring efficiency in operations

- Inventory management

- improve scale of operations

Vendor Selection Criteria

Sourcing requires a regionwise, country specific, company specific and product specific( i.e. whether basic, value added or fast fashion) , vendor selection criteria vary with each of the approaches.

The selection criteria can be one or more of:

- Product quality advantage

- efficiency of CMT/ Cutting operationss

- Financial Flexibility

- Capacity Utilisation

- Capacity Availability

- ERP system usage/ automation

- Supply chain/ merchandising system management

- Delivery Schedule Adherence

- Post Production Logistics

Why there is a need to develop vendor

  • You want them to pick up a new category
  • Standard vendors may have financial problems, you go to a vendor who is flush with funds.

Buying Offices

1. Store Owned Offices

GAP, Nike- also called liasion office. People on rolls of the office are in the rolls of the company.

Why your own office: I have classified information, to have a good control on quality and compliance, to increase in offtake, to help them develop more vendors, can use it to enter into the market, improves pricing.

2. Associated offices

Profits can be distributed. eg. AMC., eg. ATKINS in New York

3. Syndicate Offices

They are independent offices, are not associated with a retailer. Why: A companies core competency is branding not sourcing, they dont want to lock up money, they only focus on the product category to keep. e.g. Li and Fung.

4. independent Offices

Within a syndicated office. Here I can keep two or my people on the rolls within syndicated offices,

Merchandising Services

  • Market Information
  • Buyer Clinics- training to buyers
  • Sales Promotion, services
  • Cataloguing
  • Operations and Research.

Wednesday, August 15, 2007

Exim Notes-3


  • Payment terms can be of four types: advance cash payment, documentary collection, Open account, or sale on consignment.

  • Advance cash payment involve payment in advance through checks, Bank A/c transfer, bank draft, banker's cheques, VPP or credit cards. This mode of payment is fraught with obvious risks.

  • The most used method is through documentary collection in which a bank delivers shipping documents to importer and collects payment from him.

  • Documentary collection can be documents against payment and document against acceptance. How it happens. For example if I am an exporter I send the goods to the importer and in the process shipping documents and Bill of Exchange is generated. I submit the SD and BE to my bank. My bank will present the document to importer. He can either a. Makes the Payment (Documents against the payment) b. promises to pay (document against acceptance- credit is extended). The improter bank then hands over the SD to importer and collects payment. the payment then comes back from the exporter bank to the exporter. Now what happens if buyer does'nt honor. Importer bank will appoint an attorney. He gives a report called PROTESTING. Or the exporter can go for litigation or arbitration.
  • Documentary collection can also be through an L/C, which is the most frequently used method. In this the importer makes an application to his bank to open an L/C for a certain amount in favour of exporter. Importer is called applicant and exporter is called beneficiary. The bank which agrees to do so is called an opening bank. The L/C then goes to exporter's bank. it checks the genuineness of L/C and gives to exporter. This bank is called Advising Bank. Sometimes the bank also ensure the process of securing payment from bank. It is called Negotiating Bank. Now beneficiary sends goods to applicant. In the process shipping documents are generated. This SD and L/C is then presented to the negotiating bank. The negotiating bank then presents them to opening bank. The bank examines it for discrepencies called confirmation.If no discrepency is found, it makes payment to the negotiating bank and keeps SD and L/C. the opening bank debits the importer's account and gives the document to the importer. On the basis of documents , the importer gets the goods.
  • This payment can be with recourse called unconfirmed , which says that as an importer, if there is any dicrepency found later, I get my money back, whereas without recourse is called confirmed L/C in which no recourse is available.
  • The l/c can be revocable, which is always uncofirmed which means it can be amended or withdrawn by the issuing bank at any time before submission of the documents, or it can be irrovocable which can neither be withdrawn or amended withoout concurrence of all the parties involved. Only irrovacable l/c is confirmed or unconfirmed
  • l/c can be transferable .Where credit amount can be transferred from 1st beneficiary to the other beneficiary. It is used when l/c is opened in favour of an agent, buying house, merchant exporter or manufacturer exporter, when you want raw material and use l/c as a collateral. It can be Back to Back L/c which means you can open an L/c on back of previous one. It can be RED CLAUSE L/C i.e. an l/c where a certain proportion of the credit advance is given to the beneficary, which is adjusted later to the total amount. It can be Revolving L/C , Where a credit amount revolves a number of times over a specified time period. This is done for large orders. It (revolving L/C) can be cumulative L/C where a credit amount not used in one shipment get added to the next or it can be Non Cumulative L/C where credit amount lapses and does'nt get added.

Exim Notes-2

Insurance: It is needed to cover the risk or damage of goods in transit (i.e. when the cargo has left consigner and not reached consignee.). The loss can be due to accident/ unforseen event/ peril ( perils are of two types- maritime perils (i.e if there is any damage to the goods while the goods are on board in sea) or extraneous perils (strikes, pilfirage).


  • Insurance has got many categories: best cover- that covers maritime perils as well as extrenaeous perils, Medium cover- Covers maritime perils and some of extraneous perils and Minimum cover- that covers only maritime peril.

  • Loss can be Total or Partial. Partial loss can be of two types that is particular average (i.e. when it is cover extraneously for such perils as strikes and lockouts) or general average( when their is a cover to save the voyage- in such cases the loss is shared by all the parties whose cargo is on board). Total Loss can be actual or constucted. Actual loss involves physical loss or change in specifics of the material. Constructed loss is said to take place when cost of repairing is more than the value of the goods left.
  • In insurance there is something called as warehouse to warehouse cover, which involves cover from leaving of cargo from consigner and ends when cargo reaches consignee.
  • maximum time period by sea in which the cover is valid- 90 days
  • maximum time period by air in which the cover is valid - 30 days

EXIM NOTES-1

  • International trade operations involve risk. The risk can be of exporter or importer.
  • The risk for exporter is that of non-payment, delayed payment and exchange risk.
  • The risk for importer is that of Non delivery or defective delivery
  • The exporter cover the risk of non payment and delayed payement by asking payment in advance, by making payment through bank and getting insurance cover through ECGC (Export Credit Guarantee Corporation) Schemes
  • The importer covers the risk of non delevery by asking for delivery before payment. He ccovers the risk of defective delivery by getting an appropriate marine insurance.
  • Documents are important in Exim operations because of commercial requirement, cover the risk of buyers and sellers, intermediaries are involved, to comply with certain laws and to claim some incentives by exporters.
  • A contract is an agreement with the force of a law
  • Which law- that is agreed, if not then we go by 'rule of conflict of law'- which say that the law should be followed of the place where it is concluded, or that of a place where it was performed or that is followed by prevailing practices
  • Basic principles of conclusion of a contract- Principle of consensus Ad idem- It says that same things should be understood in the same manner. Thus in an agreement the essential thing is form of a proposal which state the three most important things: Specifications, terms of delivery and price. The other desirable things include packing conditions, Quality manual and payment terms.
  • Proposal to buy or sell is called an offer, for a proposal to buy it is called purchase order and proposal to sell is called proforma invoice
  • Formal contract has the following features: it if formed by mutual consent, it involves legal considerations which means it creates rights in rem( fundamental) and rights in personan (rights of a person against a group), there is a clause of non performance : if reasons for non performance are within control, the guilty has to pay damage, if reasons for non performance are beyond control- 'force majure' clause is applied, and there is a mechanism to settle disputes; normally dispute is settled by arbitration, or court of law.
  • Documents are needed for three purpose, commercial requirement, legal or regulatory requirement and export assistance
  • Essential commercial documents are Commercial Invoice, Transport document, Insurance policy and Bill of Exchange. Other documents required are Packing list, inspection certificate, certificate of origin , GSP for developing countries (issued by textile commissioner), consular invoice (it is generated by consular office), Hazardous chemical certificate.
  • Commercial Invoice has the following characteristics: It is document of contract which means Description of the goods, quantity and make etc. should be mentioned in it; it is a seller bill which means it must contain name of the parties, value and consignee name.; It must incorporate all the details i.e. order number/date/ L/c source and destination etc.
  • Transport Document is also called Bill of Lading, Multimodal Document ( for multiple modes of transport) or AirWay Bill (for airlifting of goods). It has the following features: It is the carrier receipt that states that goods are received for shipment (for FAS) or shipped on Board (For FOB). It can be clean or claused, clean means the transporter states that goods are received in clean state i.e. without damage. Also it acts as a contract of carrier. It can also acts as document of title (means anyone having these can receive goods; remember AWB is not a document of title) Therefore it is negotiable and can be transferred, called 'by order'