Archive for March, 2012

China to Adjust the Import Tariff on Liquid-Crystal Display Panel Since April 1st

Posted on March 28, 2012  by Xixi  in Import Tax, Tariff   1 Comment »

According to the Ministry of Finance, the eighth plenary session of the Customs Tariff Commission of the State Council examined and approved the decision that China is to adjust the provisional tax rates of import tariff on 4 tax items since April 1st, 2012, and report to the State Council for approval.

It is understood that after the adjustment, the imports of 32 inches and above without backlight LCD display panels will no longer perform the original 3 % provisional tax rates , but to restore the 5% of the MFN import tariff rates .  

Besides, in order to encourage the import of key components, China will perform a provisional import tax rate of 10% on camera with eyepiece with diopter adjustment device and other eyepiece with diopter adjustment device to perform 10% of the provisional import tax rate, which is lower than the MFN rate of 15%; while imports cutting machine with crosscut knife’s provisional import tax rate will be adjusted to 3%, lower than the MFN rate of 8% .

During this adjustment, most attention has been paid to the increase in the LCD board tax. In recent years, China’s color TV industry has developed rapidly, but the production of the core components of LCD TVs – LCD board is heavily dependent on imports. As a result, the perpetual lack of screen shortage also restricts the development of color TV industry. Before, China has implemented a provisional tax rate of 3% on the imports of 32 inches and above without backlight LCD display panel in order to support the development of the domestic color TV and other electronic information industry and reduce the cost of imported liquid crystal display panel. However, industry insiders pointed out that China’s import tariff of 3% on the LCD panel was significantly lower than that of India, Brazil, Russia and other similar emerging market countries. As a number of LCD panel production lines opened to operation, the LCD panel market supply and demand conditions has been changed, hence the need for a modest rise in import tariffs, which will generate a positive impact on domestic LCD panel industry as well as the of color TV industry, and further enhance the domestic LCD panel products’ competitive edge in the international market.

Case study: Letter of Credit Risk Management

Posted on March 04, 2012  by Xixi  in Case Study, Payment Term   8 Comments »
Case study: Letter of Credit Risk Management
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Case 1
Before the outbreak of the Second Gulf War, a Naijing Company sold 2000 tons ethotic plastics (worth 2.18 million USD) to a Singapore company. After the contract was sealed, the seller received the letter of credit from the buyer and then made the delivery according to the article of the contract. What is unexpected is that the Gulf War did not set the price of the oil products soaring, instead, the price plummeted. After receiving the goods, the buyers claimed that the goods are defective; therefore, it asked for a 200 dollar price cut. Otherwise, they would refuse to pay. However, when the buyer submitted the letter to the bank, there is no consistency within the letter of the credit. And the bank did not reject the documents or refuse to pay until 11 days later. And according to above situations, buyers choose to sue the bank, and as a result, the Supreme Court of the Singapore rules in favor of the seller

Case Study
In this case, the contract stipulated that the payment shall be made according to the irrevocable sight letter of credit. In accordance with the provisions of the Uniform Customs and Practice for Documentary Credits “, in the letter of credit business , the bank processes only documents , not related goods and documents. Therefore, so as long as the documents are consistent, the bank should make payment according to vouchers. In this case, when the seller submitting the documents to the bank, there is no discrepancy at all, therefore, the banks have no reason to refuse to pay the purchase price.

According to general practice, when the documents are inconsistent with each other, the bank should notify the customer as soon as possible. According to the Singapore jurisprudenc, the bank should reject the documents in 3-4 days notice to customers. In this case, the bank refused to accept the documents and pay the purchase price 11 days after it received the documents, which is clearly inconsistent with the general practice and local precedents.

It should be noted that in this case the buyer demanded for lower prices on the grounds the quality of the goods are inferior, and asserted that it would refuse to make the payment if the seller would not lower the price, under this circumstances, the seller has not bring a lawsuit with the buyer, instead it choose to prosecute the bank. And as its claim is well justified, the results is in favor of the seller. It is the proof that its decision is wise and its approach effective.

Case 2
In October, a French company (seller) and a Shanghai company (buyer) have set up a contract of selling 200 sets of electronic computers (1000 USD each), and the payment shall be made according to the irrecoverable letter of credit. And the delivery should be made on December at Port de Marseille. On November 15, Bank of China Shanghai Branch (issuing bank) made a $ 200,000 irrevocable letter of credit according to the instruction of the buyer and commissioned a French bank in Marseille to notify and negotiate this letter of credit. On December 20, the seller loaded the 200 computers on board and got the bill of lading, insurance policies, invoices and other documents as required by the letter of credit. And then it went to the Marseille bank for negotiation. Upon review, the documents are consistent; therefore the bank had paid $ 200,000 immediately to the seller. At the same time, 10 days the cargo ship left the harbor of Marseilles, the cargo, along with all the goods, sank into the sea in a heavy storm. By that time the issuing bank had received the whole set of the documents and the buyer had already known the total loss of the goods. Bank of China Shanghai Branch intends to reimburse the negotiating bank to pay the purchase price of $ 200,000 on the grounds that its customers can not expect the goods. In accordance with international trade practices, the following questions are asked:
When would the risk of the consignment be transferred from the seller to the buyer ?
Whether Issuing bank would exempted from the payment obligations due to the total loss of the goods, If so, on what basis?
How to compensate the loss of the buyer?

Case Study
1. The Risk shall be transferred from the seller to the buyer since the goods were loaded on board at the port of shipment.
2. The issuing bank has no right to refuse payment. According to the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits, the letter of credit transactions are independent from the sales contract. And the Bank is only responsible for document examination. As long as the documents are in line with the terms of the credit, the banks are required to assume its payment obligations.
3. The buyer could claim compensation from the Seller’s insurance company with other relevant insurance documents and proof of the sinkage of the cargo ship.

Case 3
On July 10, a foreign trade company has signed a sales contract (CIF) worth 150,000 USD with foreign investors, and the payment shall be made through irrevocable letter of credit. The contract provided for our goods should be shipped out in August. On July 28, Bank of China informed the company that it had received letters of credit from the other parties issued by foreign banks. And the audition found that the letter of credit terms and the terms of the contract are consistent with each other. However, before shipment, the company received a modification of the letter of the credit, asking the seller to make the shipment before August 15. As the trade company has booked a liner to sail on August 25 and temporary change procedures are cumbersome, the modification of the letter has been ignored. And it had made the shipment and negotiation for the payment according to the original letters of credit, and then submitted the full set of documents to the issuing bank. But the issuing bank refused to pay on the grounds that the Shipping documents are inconsistent with the modification of the letter of the credit. Please analyze whether the issuing bank has the reason to refuse payment.

Case Study
The issuing bank has no just reason. In this case, the letters of credit is irrevocable, without the consent of the parties concerned, the issuing bank has no right to unilaterally amend or revoke it. As the modified notification arrived after our booking of the liner and we did not agree to modify the letter of credit, the issuing bank has no right to refuse to pay.

International Exhibition in China Continue to Grow: Behind the Scene

Posted on March 01, 2012  by Xixi  in Comprehensive Trade Shows, Exhibition   No Comments »
International Exhibition in China Continue to Grow: Behind the Scene

This year’s China International Industry Exhibition in Shanghai shows that, Hannover Fairs China Ltd, the international exhibition industry giant emerged again on the platform with the industrial exhibition as a professional exhibition holder. As with previous years, three major exhibitions this year has grown in size, to no one’s surprise.

As Europe’s most prestigious exhibition giant, Hannover Fairs Ltd, has fully “transplanted” its well-known exhibitions China, including CNC Machine Tool and Metalworking Exhibition, Industrial Automation Exhibition, and New Energy and Electricity Exhibition—all three of them are ranking among Shanghai International Industry Fair. According to Fu Yu, general manager of Hannover Exhibition (China) Co., Ltd, this year the three major industrial exhibitions attracted more than one thousand enterprises from all over the world to bring their latest products and technologies.

Among them, CNC Machine Tool and Metalworking Exhibition occupy four pavilions of the Shanghai New International Expo Centre. The scale of the exhibition has experienced a significant increase. Besides, it has newly set up section of Major Projects CNC Machine Tool for nuclear power, high-speed rail, new energy vehicles, aircraft, shipbuilding and other industries

To enhance the degree of internationalization is also an expression of the growth of the above-mentioned exhibitions in China. Up to 65% of the 2011 Industrial Automation Exhibition is occupied by overseas exhibitors. International industry giants Siemens, ABB, KUKA, Bosch, Omron, and other industry giants have all present at this fair. Even for the CNC Machine Tool and Metalworking Exhibition has also increased its proportion of overseas exhibitors over the previous year.

A number of overseas exhibitors have deliberately chosen this occasion to release its new products, or to announce its new investment plans. AMADA, a joint-stock Japanese corporation, released a new generation of fiber laser oscillation, Full – axis magnetic levitation flight optical fiber laser processing machine have also made its debut in Asia.

At the same time, AMADA announced that, as an important step to develop the China market, a head office in China will be held in December in Shanghai with a registered capital of 2.5 billion yen, and The Shanghai Technology Center was officially opened in 2013. In addition, in 2013 , AMADA will invest 10 billion yen in construction in Shanghai, to set up new factories that can produce 120 units of new equipment . With these investment plans, the 2013 AMADA sales in China is expected to reach 35 billion yen .

“As the factory of the world, a China with sustained economic development is the locomotive of the world economy.” said Okamoto, the managing director of AMADA, AMADA will put its own technical capabilities to flexible use, so as to make a contribution to the world and Chinese customers as a Metal Processing Machinery Manufacturer.

It is worth noting that the pace of the international exhibition has accelerated, the International exhibition has also grow compatible with the economic transformation. During the same period of the Industry Fair, The Second China International Material Industry Exhibition, namely, The 8th China Glass Fiber Composite Material Exhibition has on display engineering / modified plastics, fiberglass, composites, wood products, and fluorosilicate materials, high-performance membrane materials, industrial and specialty ceramics and other new materials.

“Along with the promulgation of Twelfth Five Year plan as well as the emerging industries of strategic development plan, China’s endeavor to promote the economic growth is to offer the world a great business opportunity.” said Wolfgang Pech, Senior vice president of Deutsche Messe AG. Messe hopes to provide a platform for major equipment manufacturers in Chinese market and wish its exhibitions could provide the new starting point and opportunities for various industries.

The rapid growth in size, intensified degree of internationalization, as well as a constantly adjusting theme and exhibition structure—the expand of internationally renowned exhibition has concentrated and at the same time enlarged the huge market demand and attractive development prospects in world’s second largest economy.