REVIEW OF LITERATURE

Review of literature shows the previous studies carried out by the researcher in this field in order to gain insight into extent of research. The research problem can be more understood and made specific referring to theories, reports, records and other information made in similar studies. This will provide the researcher with the knowledge on what lines the study should proceed and serves to narrow the problem. Thomas A. Cook (1994)1 says, One of the major pitfalls in an international sale is the quality of the documentation supporting the transaction. A mistake in spelling, execution, language or number of copies will cause substantial delays in obtaining clearance and require additional expenditures to complete the process. Many potential exporters shy away from exporting due to the fear of the potential headaches caused by export documentation. In reality, while the process is complicated and has a steep learning curve, with the right approach and support from several resources the process can be simplified and the inherent obstacles lifted. Most of the necessary documents required for an export transaction are the invoice, packing list, export declaration and the bill of lading. Other documents that may be required include: payment instruments (letters of credit, sight drafts), health/sanitary certificates, certificates of origin, export/import licenses, SGS inspection certificates, carnets (customs passes), certificates of insurance and required import documents. In addition to knowing the specific documents, the exporter will need to know language, the number of copies, required signatories, format, notarization, consularization, and the shipping instructions.

Laurel Delaney (2006), describes AES Direct, a free online process for filing Shipper's Export Declarations. AES stands for Automated Export System. Here are some highlights: 1. Ensures export compliance - It returns a confirmation number to verify that you successfully filed

your export documentation. 2. Corrects errors - Get immediate feedback when data is omitted or incorrect, and correct errors at

any time. 3. 4. Eliminates paper review - Eliminates time delays of handling paper. Stays up-to-date with trade agreements - AES conforms to NAFTA and GATT, making it easier

to do business in multiple countries. 5. Evaluates and measures potential markets - Provides accurate and timely export statistics.

Koch and John (2007) say the subsequent need is to reduce the risk of loss to the small business exporter

if and when their foreign customer does not pay the exporter's sales invoice. Again, there are solutions to mitigate these risks of loss, which result from two sets of risk of loss event perils: 1. Foreign "Commercial" Risk of Loss Events This event occurs in the foreign client's inability or failure to pay invoices due to Bankruptcy/Insolvency, Slow-Pay Behavior (Protracted Default) , Devaluation of Foreign Currency 2. Foreign 'Political' Risk of Loss Events This event occurs when a foreign country's regulations and statutes allow Confiscation of Goods, Suspension of Import Licenses, War, Civil Strife, Rebellion, Currency Inconvertibility Sales made under irrevocable letters of credit (LCs) are a traditional tool used to mitigate risk of loss. An LC places the U.S. exporter's bank and their foreign customer's bank inside the trade transaction,

reducing the risk of loss to both parties for failure of either one to live up to the export sales/purchase contract. The exporter's commercial bank will assist with the LCs if the bank provides international banking services, or if the bank uses another correspondent bank that maintains an international banking department. There are some drawbacks to LCs. Not all foreign buyers can pay under an LC because of the high fees, often 2-3% of shipment value. An LC requires a credit relationship between the foreign importer and its bank, which might divert precious working capital from the foreign buyer's other local credit needs. Corinne Campbell (2009): says, The True Cost of Exporting is the cost of export documentation, a necessary expense that can be eased by knowing whats required. Here are some ways to tighten up on export documentation. Organizing the right documentation and paperwork makes the export process simpler, smoother and cheaper. When it comes to a paper trail in export, it doesnt matter if you are shipping large volumes or just sending a few samples: the goods have to get there and the exporter has to get paid. Not having the right paperwork can result in an importer not being able to accept the goods and the exporter not being paid, which is costly in terms of time and money. Export documentation covers the spectrum of: shipping documents, commercial documents, inspections, permits and consular stamps. Each requires preparation time, courier costs and fees with its associated risks of mistakes adding to delays and considerable costs. Documentation must be precise because slight discrepancies or omissions may prevent merchandise from being exported, result in non-payment, or even result in the seizure of the exporters goods by customs. Most documentation is routine for freight forwarders and customs brokers, but the exporter is ultimately responsible for the accuracy of its documents. The number and kind of documents the exporter must deal with varies depending on the destination of the shipment. Because each country has different import regulations, the exporter must be careful to provide all proper documentation. It is

important to do your research with customs, your industry association, government departments, freight forwarders and the overseas buyer to be fully aware of the procedures per product and per country of export. It would be a waste of time and money to go through researching the specific needs of your export and not having the internal knowledge to implement a process. Training yourself and your staff in the intricacies of export including documentation, logistics, finance as well as cultural issues can make the difference between being successful for years to come or failing after the first shipment. International trade carries high levels of risk. Knowing how to avoid the pitfalls is the key to success.
Posner and Martin (2000) in his study found that it is surprising that many traders do not use Inco terms

to help them draft their export documentation. The International Chamber of Commerce's (which has an international membership from over 130 countries) Guide to Inco terms 2000 is a superb helpline to the companion Inco terms 2000, which came into force on 1 January 2000. A definition of EXW EX Works says there is not only a color chart showing the seller's primary duty but it also describes the documents required, the optional documents that may be required and the buyer's primary duty.