Export Management Task - Article Example

1 The Export Management Task Good evening Ladies and Gentlemen, I would like to extend my heart felt thanks to the members of the Plymouth Chamber of Commerce, and especially to those members of the Export Network, for extending to me the invitation to present to you, my impressions of the Export Management Task. For all of you who are involved in the industry and to those of you who have had the occasion to become involved on a personal level, You will no doubt agree with me when I say that it is an industry which is predicated on logistics, scheduling, and documents. Moreover, all of the logistics must be arranged far in advance, the scheduling must all come together into one unit at a specific time, and at a specific place, and all of the documentation must be accomplished accurately, and on time, in accordance with previously stipulated agreements. Having said that, I will now present the various components and aspects which comprise the Export Management Task. Contract of Sale Export sales contracts can be formal or informal, depending on the foreign buyer. One should be cautioned that any contract which is made quickly and informally when some of the conditions are assumed or left to be clarified later, is a dangerous, ill advised, and not a good practice standard. Of course, most of us are aware of offers to sell which are presented over the phone, which covers the product to be sold, the quantity, the price per unit, outlining delivery, the terms, and the medium of payment, which is often accepted by the foreign buyer. Also, we are familiar with a call from the buyer, with an offer to buy. 2 This type of contract may be preceded by a series of offers and counter offers before the final offer and acceptance. This type of contract remains informal if it is not confirmed in writing. This type of contractural practice is most common and acceptable between branches of the same company, or between long standing trade partners, or between very reputable companies who trade in commodities which are prone to rapid changes in prices. It is my caution to you, that unless one of the three above-mentioned conditions are characteristic of your transaction, then this informal mode, should not be your practice. The most assured way to a void any and all misunderstandings, is to get the buyer to agree to the use of what is commonly referred to as General Standard Conditions. "These are standardized contract terms that permit the parties to refer to a pre- established set of rules that can be incorporated into the contract"(SIT). If you elect to choose this standardized proforma, then you must by all means, become keenly familiar with the contents, because once the generalized Standard Conditions have been adopted, they are legally binding whether or not both parties are aware of and understand every provision"(SIT) According to the Secrets in International Trade, an offer to sell may also be made via telex, courier, air mail, cable, facsimile and today even via e-mail. The exporter confirms the terms and stipulations of the sale via a proforma invoice: the proforma invoice will detail the entire order, The type of shipment ( i.e., f.o.b. Plymouth) quantity, type of item, unit cost, and total cost. As an addendum one might also include certain terms such as the name and address of the preferred bank, and the preferred shipping 3 date. Upon receipt of the proforma invoice, the buyer will confirm his acceptance by initiating the process for the execution of an irrevocable letter of credit. Transportation The next important Export Management Task which I will address is the transportation process. There are three particularly important ingredients which should be your hallmark, when making your transportation choice(s). It should be quick, because the delivery time is always important to the importer. The sooner he receives it, the sooner he can sell it. You must be careful, the buyer obviously wants to receive the goods in a good quality state, and on the plus side the exporter receives high marks for a timely and safe delivery, which fosters customer satisfaction, in so far as the importers efforts and stresses are minimized. Lastly, but not least, a shipment which is economical. This entity can speak volumes towards making you more competitive. Because the better the price you can receive on freight cost, the lower or more competitive your export price quotation. . When a letter of credit is involved, and it usually is, we must meticulously scan it to ensure that all conditions of shipping which the importer has previously stipulate ( i.e., no partial shipments, discharge port, transshipments, shipping dates, etc.,) are adhered too, and if that if we find it impossible to meet any of the stipulations or conditions, that we contact the importer and request for an amendment. In requesting the amendment, one must request a new shipping date, which often exceeds the original expiry date of the letter of credit. The amendment request is directly to the buyer, who in turn notifies his bank, and the amendment is channeled to the exporter's negotiating bank. Subsequent to in-house synchronization, we can now invite quotations from freight forwarders. once we locate an agent who can accommodate all of our required stipulations, we then select a line and the agent names the vessel. In some situations, the importer may or under certain circumstances be compelled to arrange the transportation. In some countries, there is a move afoot to conserve foreign exchange. In these countries they offer the importer lower rates on consulate fees and also a lower rate on export duty as an incentive for compliance of choosing a national flag ship. This is of course a win, win situation, especially for the exporter, because now your only responsibility for transportation is to get the port on time. You must provide the agent with the full details of the shipment i.e., weight, contents, size, ports of departure, destination and the value involved. This presentation should be recorded by you on a "shipping note" which will be forwarded to the steamship office. After the shipping agent receives all of this information, he will in turn forward to you a contract number and an engagement note, which will highlight the full details of your shipment, eg., ships name, port of loading, port of call, arrival date, date of loading and the rate for the shipping. If your order does not push through, you may cancel the space which has been reserved for you. However, you must inform the agent ASAP. If the shipping agent is not provided ample notification by you, and he is unable to reallocate your reserved space, they will invoice you for the space. You must wait for the agent to issue you a "calling forward" notice which will provide you with the specifics for delivery to the assigned location for loading. The shipment will then be delivered to the port of loading with a consignment note. Once your product is loaded on board, the shipping agent will issue you a bill of lading and you will subsequently pay the freight charges. There is a little lee-way in this step of the process, depending on your relationship with the forwarder, you may or may not be required to issue a check on the date you receive the bill of lading. Some agents will delay this payment until the exporter has had final negotiations with the bank, holding the letter of credit. Before turning your shipment over to the freight forwarder, you must be sure that your goods are appropriately packed and marked. Your marks must appear on the export declaration and the commercial invoice. Documents After you have satisfied all of the logistics, you must now take care of the all important documentation process. Customs forms for the country where the products are being shipped must be prepared by you. Whenever an export company markets its products abroad, you must make arrangements for your shipment to be accompanied by numerous documents. Depending on the country of destination where your goods are being shipped, the documents you will be required to accomplish and forward to the buyer will include some or all of the following: certificate of origin, commercial invoice, bill of lading, consular invoice, packing list, import license, insurance certificate, and health certificate. The general purpose of the aforementioned documents are at least three fold; so that the in bound customs authority has a total detailed description of the items, which will enable them to make a correct duty assessment. Also, there are instances where certain countries may have import quotas on various items and with the documents reflecting actual numbers the authorities are enabled in maintaining an accurate accounting.The drawback for the exporter is that if the documents are not accomplished correctly and completely, it can result in either a delay in customs clearance, or the worst case scenario can manifest itself under these circumstances because perhaps the customs agent might not view the error or omission, as an inadvertent mistake, but he might view it as a false statement. In this event, one would be subjected to heavy fines, and the goods might even be confiscated. You 'must", and I can not emphasize this too much, you must check and recheck your documents to ensure that they are all properly and correctly accomplished. Along with all of the documents previously mentioned the exporter must also accomplish and submit an Export Declaration, which you can avail of from your bank of record or your negotiating bank. Packing According to A Basic Guide to Exporting, Shipping Your Product, "There are four potential problems which the exporter must bear in mind when you are designing a crate for international shipping.; breakage, moisture, pilferage and excess weight. A prevalent constant to be considered in packing is moisture. You should always pack in strong containers, adequately sealed and completely filled when possible. Always make sure the weight is evenly distributed. Goods should be palletized and when possible containerized. Packages and packing filler should be made of moisture-resistant material. To avoid pilferage, avoid writing the contents and brand names on packages. Other safeguards include using straps, seals and shrink wrapping. Observe any product specific hazards materials packing requirements"(SYP). It goes on to describe an export packing list as being, "considerably more detailed an informative than a standard domestic packing list. It itemizes the material in each individual package and indicates the type of package, such as a box, crate, drum, or carton. It also shows the individual net weight, legal tare, and gross weights and measurements for each package. Package markings should be shown along with shippers and buyers references. The list is used by the shipper or forwarder to determine the total shipment weight and volume whether the correct cargo is being shipped"(SYC) . Credit Once the exporter has received his letter of credit from the receiving bank. He can then sit with the banks loan department and negotiate an advance from the bank, based on the stated total of the letter of credit. Depending on the exporters credit rating, two positive things can happen in his favor; he may not be required to offer any collateral, and the bank may sometimes be amenable to extend a line of credit of up 80 percent of the value of the letter of credit. Payment "For export payments there are several acceptable methods of payment. I have listed them in accord with there respective prefer ability: (1) cash advance, (2) letter of credit, (3) documentary collection or draft, (4) open account, and (5) other payment mechanisms, such as consignment sales"(IT). Protection Against Risk 8 Official export insurance protects exporters and banks against the risk of non- payment involved in export transactions. It is possible as early as the during the production period a loss occurs due to commercial or political reasons, which may then lead to the production being discontinued. As a consequence the exporter will generally not be able to recover the production costs already incurred. Furthermore, the risk of confiscation of the goods or unfair calling of a contract bond should also be taken into account when dealing with export transactions"(FECG) In all these cases the official export credit insurance steps into the breach offering tailor-made underwriting tools for safe guarding the basic trade risks, they are as follows: (1) The Whole turnover policy (2) The whole turnover policy light, (3) constructional works cover, (4) Manufacturing works cover, (5) Finance credit cover, (6) leasing cover, (7) supplier credit cover,(8) revolving special policy (9)securitization guarantee and (10) contract Bond cover"(EFCG) Making claims When Things Wrong For situations arising out of torts, such as breaches of contracts, and negligence, it is customary to file a case against the tort feaser, with the jurisdictional court. Works Cited A Basic Guide To Exporting, Shipping your Product Export Credit Guarantee, Customer Charter, Accessed on line on March 17, 2007, from www.ecd.gov.uk Methods of Payment in Export Secrets of International Trading, Documentation for Export, How to Get Paid for Export Various Export Packing, Accessed on line on March 17, 2007, from www.malaysiaexports.com Read More