AE5 - International Business and Trade

Export Order
Process
GROUP 2
ABELLA - CASAPAO - ESPINO - MACABALI - PETCHALIN - SICAT
 THE EXPORT ORDER PROCESS

Functions an Export Department:

Sales - getting order
Shipping - order filling
 THE EXPORT ORDER PROCESS
1. Enquiry
2. Quotation
3. Order
4. Order acknowledgement
5. Order process and progress
6. Packing and marking
7. Space booking
8. Documents prepared: Transport, Customs, Insurance, Payment
9. Goods dispatched
10. Payment received
ENQUIRY:
It is pretty obvious that the beginning of the process is
the enquiry from a potential overseas buyer.

THE EXPORT QUOTATION:

The quotation in response to an export enquiry may be
just as informal as an original verbal enquiry, or could be
an extremely formalized completion of tender
documents.
GOODS:
As the description of the goods is directly relevant to the
range of tariff and non-tariff barriers that they might
attract at destination then we should carefully consider
the wording even at this early stage of the process.

PRICE:
Perhaps the most important element of the quotation
and one which many exporters actually get wrong.
 Delivery

Exporters often make the mistake of being overly

optimistic about delivery times to attract customers. This
can lead to late deliveries and negative consequences. It's
better to promise a longer lead time and deliver earlier
than to promise a shorter lead time and deliver late.
Terms and Methods of Payment

Exporters need to carefully consider the risks involved

when dealing with different customers and markets,
which helps them make smart decisions about how
customers pay and what credit terms are given.
Order acknowledgment (acceptance)

In English law, when a UK exporter gives a price estimate,

it's considered an invitation for the buyer to make an
offer to purchase. The actual order from the buyer is the
offer to buy, which the seller can choose to accept or
decline. When the seller accepts the order, they can
define the terms and conditions of the contract, which
become the seller's terms and conditions.
 Forms of export quotation

Verbal - price and delivery information may be given

during personal meetings or over the telephone.

Standard letter/e-mail - most common form of

quotation which requires no specific format as long as it
contains the relevant information.
 Tender Documents

These are documents that are submitted by

companies who wish to be considered for a
project.
 Tender Bond

This must be provided by the seller along with

the completed tender document.
 Performance Bond

Guarantees an amount of monetary compensation

should they not perform according to the
contract’s conditions.
 On Demand

This means that the buyer simply

has to call on the bond and the bank will pay,
there being no requirement for any explicit proof
of the seller’s breach.
 Pro-forma invoice

The primary function for this document is as a

form of quotation and it is intended to
demonstrate what the final invoice will look like
should the order be placed.
 Risk Assessment

In order to decide what is the most appropriate

method (how) and term (when ) of payment we
should carry out some informed risk assessment.
 Country Risk

Certain methods of payment are clearly more

common in particular markets than are others; so
the exporter invariably has a ‘rule of thumb’ as to
the usual method for a particular market.
 Buyer Risk

Irrespective of the traditional and accepted

method of payment in a particular country, the
seller’s perception of the particular buyer risk, or
lack of it, can override any ‘rule of thumb’.
For newer buyers we need other
sources of information:

Trade references
Bank report
Credit report
Credit risk insurers
INTERNATIONAL DELIVERY TERMS

In international delivery terms, "delivery" refers to the

process of transporting goods from one location to
another across international borders.
INTERNATIONAL DELIVERY TERMS
The listed terms all identify a very specific point, on the journey
from the seller to the buyer, for the passing of costs, delivery
and risk.
Costs - the export price quoted makes very little sense
without some reference to what is included in the price
and what is excluded.
Delivery - This defines the seller's and buyer's
responsibilities for the transport and documentary
arrangements for delivery of the goods.
Risk - One of the most contentious issues in international
trade is the relative responsibilities of the parties
involved when the goods are damaged or lost during
transit.
 EX WORKS (EXW)

Is an international trade term that defines the seller's

responsibilities and the buyer's responsibilities in a
transaction.
 Free On Board (FOB)

FOB means that the seller delivers the goods, suitably

packaged and cleared for export, once they are safely
loaded on the ship at the agreed upon shipping port The
seller is responsible for the goods until they ‘ have passed
the ship’s rail at the named port of shipment.
 Free Carrier (FCA)

FCA means that the seller fulfils their obligation to

deliver when the goods are handed, suitably packaged
and cleared for export, to the carrier, an approved
person selected by the buyer, or the buyer at a place
named by the buyer. Responsibility for the goods passes
from seller to buyer at this named place.
 Free Alongside Ship (FAS)

FAS stands for when the seller delivers the goods,

packaged suitably and cleared for export, by placing
them beside the vessel at the agreed upon port of
shipment.
Cost Insurance & Freight (CIF)

CIF means that the seller delivers when the suitably

packaged goods, cleared for export, are safely stowed on
board the ship at the selected port of shipment. The
seller must prepay the freight contract and insurance.
Therefore, the costs and arrangements for the seller end
when the goods effectively arrive at the port of
destination.
Carriage & Insurance Paid to (CIP)

CIP means that the seller delivers the goods to a carrier

or another approved person (selected by the seller) at an
agreed location. The seller is responsible for paying the
freight and insurance charges, which are required to
transport the goods to the selected destination.
 Carriage Paid to (CPT)
CPT stands for when the seller delivers the goods to a
carrier, or a person nominated by the seller, at a
destination jointly agreed upon by the seller and buyer.
The seller is responsible for paying the freight charges to
transport the goods to the named location.
 Delivered Ex Ship (DES)

The seller arranges, and pays for, the carriage to the

named port of destination and must place the goods at
the disposal of the buyer on board the vessel at the
unloading point. This term tend to be used for bulk goods
only.
 Delivered Ex Quay (DEQ)

The seller arranges, and pays for, carriage to the port of

destination and must place the goods at the disposal of
the buyer on the quay (wharf) at that point. This term
also tends to be used for bulk goods only.
 Delivered At Frontier (DAF)

is a term used in international shipping contracts that

requires a seller to deliver goods to a border location.
The seller is usually responsible for all costs of
transporting the goods to the drop-off point for the
buyer. The party picking up the goods will usually be
importing them and traveling across customs
 Delivered Duty Unpaid/Paid
(DDU/DDP)
The opposite of EXW is DDP. The most onerous term for
the seller in terms. of costs, risks, and responsibilities.
The seller must place the goods at the disposal of the
buyer... not unloaded at the named place of destination,
which is usually the buyers' premises in the country of
import.
 Price calculation

The calculation of accurate export selling prices is clearly

dependent on the relevant trade term but, at the risk of
stating the obvious, depends on the starting point of an
accurate EXW price.