International goods_Incoterms

1. International goods procurement,
Domestic Preference,
INCOTERMs, Inventories
Session: M3-4
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 1/51

2. Procurement Process
Public
Procurement
Process
Advertisement
Tender Submission
Contract Award
Tender
Preparation
As far as Procurement
process is concerned
National and International
are similar with few
exceptions
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 2/51

3. Rules 83-88
International goods procurement methods
-Open tendering method
-One stage two envelope method
-Two stage tendering method
- Request for Quotation method
- Limited tendering method
- Direct Procurement method
Procurement within threshold by Embassies
and in Special cases by- National Flag Carriers
For effective international competition
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 3/51

4. Rule 84
Two stage tendering method
Applicable rules:
- Rule 61 OTM and 83 international OTM
- Rule 66 on procedures except the
provision on domestic preference (only for
open tendering)
- Rule 43 for maintaining records of
procurement
- Flow-chart Part D of Schedule III
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 4/51

5. Rule 85
Request for Quotation Method
This method can be used for Procurement of commodities
in bulk in the following cases:
(i) for divisible commodities to meet an urgent need (such as
food, grains, sugar, fertilizer, edible oils, fuel and animal feed) where
its price fluctuate depending upon supply and demand at any particular
time;
(ii) for commodities quoted in established commodity markets;
(iii) for taking advantage of favorable market conditions,
procurement by multiple awards for partial quantities in each case to
ensure long term security of supply.
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 5/51

6. Rule 86
Limited Tendering Method
Applicable rules:
- Rule 64 for national LTM procedures
- Rule 43 for maintaining records of procurement
- Flow-chart Part C of Schedule lll
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 6/51

7. Rule 87
Direct Procurement Method
Applicable rules:
- Rules for national DPM (74-82)
- Rule 43 for maintaining records of
procurement
- Flow-chart Part F of Schedule lll
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 7/51

8. Rule 88
Procurement by Embassies and in special cases by
National Flag Carriers
- High Commissioner/Ambassador/Head of Bangladesh Mission
may follow RFQ method as per rule 69 for procurement of
readily available, standard goods and unforeseen urgent
physical services within Tk. 20 lakh in each case.
- National flag carrier may undertake under Section 35 (2) of
PPA procurement of fuel, spare parts or urgent repairs outside
Bangladesh up to Tk. 50 lakh in each case.
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 8/51

9. Domestic preference shall be a factor in tender evaluation, unless otherwise
specified in the TDS
If domestic preference shall be a tender-evaluation
factor, the Purchaser will grant a margin of fifteen
percent (15%) domestic preference to Goods
manufactured in Bangladesh
Tenders will be classified in one of two groups
Domestic Preference
ITT 51, 54 PG4, Rule 83 (2)
Act 33: Domestic Preference is Mandatory
Any laxity, need recommendation from CCEA
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 9/51

10. Groups in Domestic Preference
B
Tenders
offering Goods
manufactured
outside
Bangladesh
that have been
already
imported
A
Goods manufactured
in Bangladesh, Labour,
raw materials, and
components from
within the Bangladesh
account for more than
thirty (30) percent of
the EXW price
B
Tenders
offering Goods
manufactured
outside
Bangladesh that
will be imported
ITT 51, 54 PG4, Rule 83 (2)
Will get domestic preference
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 10/51

11. Section 1: Instructions to Tenderers (ITT)
Section 2: Tender Data Sheet (TDS)
Section 3: General Conditions of Contract (GCC)
Section 4: Particular Conditions of Contract (PCC)
Section 5: Tender and Contract Forms
Section 6: Schedule of Requirements
Section 7: Technical Specifications
Section 8: Drawings
STD for Procurement of Goods – International - OTM
PG 4 Sections
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 11/51

12. $
$
Domestic
Preference
ITT 51,54
Tender
Currency
ITT 24
Tender and
Performance
Security
ITT 30, 63
Rules 22(2), 27(4)
Conversion to
Single
Currency
ITT 50
Additions to International Procurement
PG4
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13. INCOTERMS
M3-4
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14. Commercial terms used by both
the Buyer and the Supplier in
international trade.
Defines
International Commercial Terms
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15. INCOTERMS
 Set of internationally accepted terms and
rules used globally in trade & commerce,
developed by ICC, Paris 1936
 Specify responsibilities of sellers and
buyers for the delivery of goods under
sales contracts
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16. Structure
 Used to divide transaction costs and
responsibilities between buyer and seller and
reflect state-of-the-art trading practices
 Concern such factors as tasks, costs and risks
involved in the delivery of goods from sellers to
buyers
 Revised and updated 2010
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 16/51

17. Main changes 2010
 Number of terms reduced from 13 to 11
 4 categories replaced by 2 classes
 Applicable to both international and domestic
sale contracts
 Developed for electronic means of
communication
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 17/51

18. Main changes 2010
Number of Incoterms was reduced from 13 to 11
EXW
FAS
FOB
FCA
CFR
CIF
CPT
CIP
DAP
DAT
DDP
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 18/51

19. Classifications
1. Rules for any mode or modes of
transport (7 Incoterms)
2. Rules for sea and inland waterway
transport (4 Incoterms)
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 19/51

20. Classifications
Incoterms Mode of Transport
EXW (named place..) Any Mode or Modes of Transport
FCA (named place..)
CPT (named place of destination..)
CIP (named place of destination..)
DAT (named place..)
DAP (named place..)
DDP (named place of destination..)
FAS (named port of shipment..) Sea and Inland Waterway Transport
FOB (named port of shipment..)
CFR (named port of destination..)
CIF (named port of destination..)
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21.  Rail
 Road
 Sea
 Air
 Inland waterway
 Multi-modal (combination)
 Unnamed
Transport
Methods
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22. Sea-Freight Conventional Cargo
(General Cargo)
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23. Sea-Freight Chartering
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24. Sea-Freight Roll on / Roll off (RO/RO)
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25. Sea-Freight LASH (Lighter Aboard Ship)
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26. Any mode or modes of transport
EXW – Ex Works (named place of delivery)
FCA – Free Carrier (named place of delivery)
CPT – Carriage Paid To (named place of
destination)
CIP – Carriage and Insurance Paid to (named
place of destination)
- to be continued
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27. Any mode or modes of transport
DAT (new) – Delivered At Terminal (named
port or place)
DAP (new) – Delivered At Place (named place
of destination)
DDP – Delivered Duty Paid (named place of
destination)
CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 27/51

28. Sea and Inland Waterway transport
FAS – Free Alongside Ship (named port of
shipment)
FOB – Free On Board (named port of shipment)
CFR – Cost and Freight (named destination port)
CIF – Cost, Insurance and Freight (named
destination port)
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29. Use in Public Procurement
Rule - 83, (1), (f):
Applicable INCOTERMs shall be specified
wherever relevant
PG4-STD-International:
References to Incoterms:
 Place of destination
 Quoted price of goods manufactured outside
Bangladesh (to be imported)
 Transportation
 Insurance against loss or damage to the goods
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30. Delivery
Incoterms:
“Delivery” is point where risk passes
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31. Use of Incoterms
For each individual contract the conditions
related to the delivery of goods from seller to
buyer must be carefully considered and
decided
What is wanted?
What is needed?
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32. SELLER’S RISK
SELLER’S COST
BUYER’S RISK
BUYER’S COST
EX Works (EXW)
Cost: free at works, factory, warehouse
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33. FOB
SELLER’S RISK
SELLER’S COST
BUYER’S RISK
BUYER’S COST
PORT OF
DEPARTURE
Freight Forwarder
Cost: Free on Board (named port)
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34. CIF
SELLER’S RISK
SELLER’S COST
BUYER’S RISK
BUYER’S COST
PORT OF
ARRIVAL
Freight Forwarder
PORT OF
DEPARTURE
Cost, Insurance & Freight (port of destination)
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35. CIP Carriage & Insurance Paid
(point of destination*)
SELLER’S RISK
SELLER’S COST
BUYER’S RISK
Freight Forwarder
Site
Border
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36.  Rail
 Road
 Sea
 Air
 Inland waterway
 Multi-modal (combination)
 Unnamed
Illustrated
Methods
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37.  Rail
 Road
 Sea
 Air
 Inland waterway
 Multi-modal (combination)
 Unnamed
Transport
Methods
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38. CPTU-IMED Three-Week Training on Public Procurement Management M3-4 ESCB 38/51

39. L/C
Session: M3-4
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40. Characteristics
 Documentary Credit
 Issued by buyer’s bank
 Confirmed by seller’s bank
 Payment obligation dependent only on
documents presented by seller –
independent of sales contract
Letter of Credit
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41. Rule 40, 4 - Administration of Goods Contracts
 the project manager shall arrange timely
payments following the contract terms
and irrevocable letter of credit
.... where applicable
Use in Public Procurement
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42. PG4-STD-International: GCC/PCC 27.1
b) On Shipment: Eighty (80) percent
of the Contract Price of the Goods shipped
shall be paid through
irrevocable confirmed letter of credit …
STD
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43. PG4-STD-International: GCC/PCC 27.1
cont’d:
… opened in favour of the seller
in a bank in its country,
upon submission of documents specified
STD
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44. Documents used in Documentary Credits
 Transport Documents
 Buyer Selects Type
 Marine/Ocean Bill of Lading
 Non-negotiable Sea Waybill
 Charter Party Bill of Lading
 Multi-modal Transport
Document
 Air Transport Document
 Road, Rail or Inland Waterway
Transport Documents
Insurance Document
Type of Cover
All Risks Cover
Other Documents
Export License
Inspection Certificate
Certificate of Origin
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45. Letter of Credit
PURCHASER SUPPLIER
1. CONTRACT
2.
CREDIT
10.
DOCUMENTS
11.
MONEY 4. ADVISE
L/C ISSUE
6. DOC.S
7.
3. LETTER OF CREDIT
ISSUING BANK ADVISING /
CONFIRMING BANK
8. DOCUMENTS
9. MONEY
12. Goods
Delivered
5. Goods
On Board
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46. Inventory
Holding stock (inventory policy)
Why holding stock?
What items to stock?
How much to stock?
“Inventory Management”
A planning related area:
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47. Inventory Management
Inventories
(building materials, office supplies, medicines, etc.)
are among the largest non-wage expenses of many PEs
Sound inventory management saves money by purchasing
as inexpensively as possible
the optimal number of needed items
so that they are always readily available,
but in an amount that minimizes
storage & holding costs
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48. Stocking too many items
Stocking items which are seldom needed
Failing to balance purchasing cost and storage costs
Failing to consider the full cost of holding
inventories
The most common mistakes made in inventory
management are:
Inventory Management
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49. Importance
 on the technical/operational aspect for
smooth running of activities
 on the economical/financial aspect for
containing expenses
Inventory management is important:
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50. Inventory Review
 rationalising stock expenses to eliminate
disruptions & wastefulness
 integrating inventory management with
procurement planning & logistics
Review inventory with the aim of:
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51. Inventory Management
More on planning and Inventory
Management later on
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