The head of the marketing department at a Winery, your employer, has asked for y
ID: 361451 • Letter: T
Question
The head of the marketing department at a Winery, your employer, has asked for you to explain and advise on what should be included in a contract to sell a blend of California wines, probably to be shipped to your buyer, California Wine Importers, in Hong Kong in an ocean-worthy container. You do not need to concern yourself with pricing details, but you have been asked to explain how your winery might use legal tools to manage the risks of this sale of goods. Explain:
sources of law that might be specified in a choice of law clause, which you might advise, and why,
how the bill of lading works and what risks it addresses, and
how the trade acceptance (time draft similar to the bill of exchange) works and what risks it addresses.
Omit discussion on letter of credit for this memo.
Explanation / Answer
California Wine Export to Hong Kong:
In order to successfully export California Wine to Hong Kong, one must follow following Commercial Documentation Process.
1. Quotation: An offer to sell goods and should state clearly the price, details of quality, quantity, trade terms, delivery terms and payment terms.
2. Sales Contract: An agreement between the buyer and the seller stipulating every detail of the transaction. It is advisable to seek legal advice before signing the contract.
3. Pro Forma Invoice: Supplier prior to the shipment of merchandise, provides the information like kinds and quantities of goods to be sent, their value, and importation specifications (weight, size and similar characteristics).
4. Paperless Commercial In-voice: It simplifes paperwork by generally eliminating the need to submit, at the time of entry, a hard copy of the actual buyer-seller commercial invoice. It should give details of the goods sold, payment terms and trade terms. It is also used for the customs clearance of goods and sometimes for foreign exchange purpose by the importer. Most of countries around the world charge duties based on the type of wine as well as the alcohol content.
5. Packing List: A list with detailed packing information of the goods shipped.
6. Inspection Certificate: A report issued by an exporter on the specifications of the shipment, including quality, quantity, and price, required.
7. Insurance Policy: An insurance document, with full details of the insurance coverage, evidencing insurance has been taken out on the goods shipped.
8. Insurance Certificate: This certifies that the shipment has been insured under a given open policy and is to cover loss of or damage to the cargo while in transit.
9. Product Testing Certificate: This certifies the products are conformed to a certain international / national technical standard, such as product quality, safety and specifications.
10. Health Certificate: It issued by the competent country when food products are being exported, to certify that they comply with the relevant legislation in the exporter's country and were in good condition at time of inspection, prior to shipment and fit for human consumption.
11. Phytosanitary Certificate: An international legal requirement that any consignment of plants or planting materials importing into a country shall be accompanied by a Phytosanitary Certificate issued by the exporting country. It stats that the consignment is free from diseases and pests and conforms with the current phytosanitary regulations of the importing country.
12. Shipping Order S/O: A document with details of the cargo and the shipper's requirements, and is the basic document for preparing other transport documents such as bill of lading, air waybill, etc.
13. Dock Receipt D/R or Mate's Receipt: A receipt to confirm the receipt of cargo on warehouse pending shipment. The dock receipt is used as documentation to prepare a bill of lading.
14. Bill of Lading (B/L): An evidence of contract between the shipper of the goods and the carrier. The customer usually needs the original as proof of ownership to take possession of the goods.
15. House Bill of Lading: A bill of lading issued by a forwarder. Shippers choosing to use a house bill of lading, should clarify with the bank whether it is acceptable for letter of credit purpose before the credit is opened.
16. Sea Waybill: A receipt for cargo which incorporates the contract of carriage between the shipper and the carrier but is non-negotiable.
17. Air Waybill (AWB): It serves as a receipt of goods for delivery and states the condition of carriage but is not negotiable or non-transferable in nature.
18. Bill of Exchange (B/E) or Draft: An unconditional written order, in which the importer addressed to and required by the exporter to pay on demand or at a future date a certain amount of money to the order of a bearer.
19. Promissory Note: A financial instrument that is negotiable evidencing the obligations of the foreign buyer to pay to the bearer.
20. Certificate of Origin (CO): This certifies the place of manufacture of the exported goods to meet the requirements of the importing authorities.
21. Import / Export Declaration: A statement made to the Director of Customs at port of entry / exit, declaring full particulars of the shipment, eg. the nature and the destination / exporting country of the ship's cargo.
22. Electronic Export Information (EEI): It needs to be filed when the value of the commodity classified under each individual Schedule B number is over $2,500 or if a validated export license is required to export the commodity. The exporter is responsible for preparing the EEI and the carrier files it with U.S. Customs and Border Protection (CBP) through the AES or AES Direct.
23. Labeling Requirements under the Food and Drugs (Composition and Labeling) Regulations: Fruit wine and beverages with alcohol content by volume of 10 percent or more are exempt from labeling requirements specified under the Food and Drugs (Composition and Labeling) Regulations. Beverages with alcohol content by volume of more than 1.2 percent but less than 10 percent must provide the “best before date” on the drink label. Stickers are acceptable. Otherwise, these products are exempt from all other labeling requirements. Alcohol content must be labeled on every container of liquor that is imported to Hong Kong for local consumption. If the liquor is imported into Hong Kong and not removed to a warehouse, the container must bear the alcohol content when the liquor is removed from the ship, on which it is imported.
24. License and Permit: Products with an alcohol content of less than 30 percent by volume do not require a license or permit for import, export, manufacture, storage or distribution. Beverages with an alcohol content of more than 30 percent by volume measured at a temperature of 20 degree Celsius are subject to license and permit control. Only licensed importers are eligible to import these products and an import permit is required for each shipment prior to arrival.
Risks Associated within Wine Export to Hong Kong:
1. Increasing competition from the mainland: Mainland rivals are becoming more competitive and posed a risks in Wine Exporting.
2. The nature of Public Policy: Aggressive industry lobbying is the main driving force behind the radical Wine policy shifts in Hong Kong. The Hong Kong Wine & Spirits Industry Coalition (HKWSIC) which represents the distilled spirits industry continues to pursue further tax reform that will effectively lower the duty.
3. Civil Society Organizations (CSO): They define alcohol as a public health concern that emerged only after the zero alcohol tax was implemented. They are playing key roles in criticising the impact of the Hong Kong Government’s policy decision on the zero beer and wine tax.
4. Strong Opposition (Zero Tax on Alcohols and Tax free) Wine from Non Government Organisations (NGOs): Strong public health alliance and advocacy movement by leading NGOs counteracted the Wine industry’s continuing aggressive lobby and promotion of alcoholic beverages.
5. Legal Risks: Below risks are associated in Wine Exporting. 1. For alcohol with an alcoholic strength of more than 30% by volume measured at a temperature of 20°C. 2. Import license/permit If the alcohol volume is below 30% permit is not required. 3. If the alcohol volume is below 30%, permit not required.
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