DOCUMENTS:
Q. What documents do I need?
Answer:
The shipping documents needed for importing or exporting transactions usually depend on the type of goods. In many cases, the required documentation will also vary depending on the country of origin or destination. Thus, documents may have to be prepared in a particular way to comply with the requirements of the letter of credit.
As a rule of thumb, a standard importing or exporting transaction usually requires a commercial invoice, packing list, Bill of Lading and an insurance certificate - depending on your Incoterms. We recommend you speak to one of our Puma Cargo Ltd. forwarding agents for further information.

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HOW TO IMPORT:
Q. What are the Basic steps to Importing ?
Answer
Importing is often thought to be easier than exporting and perhaps in
Some ways it is but there are many traps for the unwary and inexperienced.
It is important that you understand the basic steps
BEFORE thinking about placing an order on your overseas supplier, remember that you don't have to be an expert in all facets of importing. Professional advice is available from your Customs Broker or Forwarding Agent or the Chamber of Commerce and Industry.
A useful way of gaining an insight into the processes involved in importing is to attend the International Trade (Import/Export) Course put on periodically by Govt. Departments.

Why Import ?
There are numerous reasons for importing goods. Perhaps you need to import a piece of capital machinery to be used in your company's operations, or perhaps the imported goods are components or inputs to be used in a manufacturing process.
The most common reason is to import for resale (and this is the side of importing we will concentrate on). Whatever the reason, it is important that you accurately determine the landed cost, i.e. the cost of the goods delivered to your warehouse, before you place an order.
The list price of a product in Taiwan or Argentina for example may seem unbelievably cheap, but with on-costs (e.g. freight, insurance, import duty, tax, bank charges, interest, etc.) the product might not be competitive on the UK market, even before allowing for your profit margin.
It is important that you do your homework first. Having a firm idea that there is a real potential market for the type of products you wish to import

We have listed the basic steps for importing are as follows:
Obtain a catalogue and/or sample plus prices from:
- The supplier
The initial contact with a product may come through personal experience on an overseas trip or by contact with a supplier at a trade fair on a trade mission.
- Other sources
Other sources of assistance include foreign consulates, overseas Chambers of Commerce, banks, shipping agents etc. Before proceeding with an order it may be prudent to obtain Bank or Commercial references as to the integrity and 'bona fides' of the supplier.
Overseas quotations
Having obtained what appears to be a satisfactory source of supply the next step is to get a firm quotation.
Remember to enquire about quantity discounts. Some suppliers may also help to provide assistance with initial marketing expenses, particularly if a new market is being penetrated.
The price should be based on, and include a reference to, Incoterms (ICC publication - available ) e.g. US$100 FOB Hong Kong 1990 Incoterms or US$500 CIF UK 1990 Incoterms.
A reference to Incoterms in the contract price reduces the likelihood of misunderstandings between you and the supplier in transporting the goods to India/Europe. You should familiarise yourself with the technicalities of Incoterms.
If you require a CIF price, make sure you also ask the supplier to provide you with the FOB price, which will be needed to determine import duties & tax that is payable. By having both prices you can compare the freight/insurance rates you are able to obtain against those of the supplier.
The price should be quoted in US Dollars or another major currency. Exchange risks are eliminated if US Dollar quotes are used.

Apply to your Customs broker
Apply to your customs broker for a classification opinion, import duty rates, sales tax rates, import restrictions and tariff concessions (if any) and quarantine requirement (if any): imported food will probably require Indian/European Quarantine certification, wooden items may require fumigation certificates.
Note that import quotas no longer apply when importing goods into India/Europe.
Obtain freight and insurance rates
Obtain a freight rate from a freight forwarder, shipping company or airline. Obtain an insurance rate from a marine cargo insurance company; your freight forwarder may also be able to arrange this for you.
If you have been quoted a CIF or CIP price compare the insurance/freight components with those you have obtained. Remember also, that it may be easier to execute a claim with you marine insurer than with the Indian/European agent of exporter's marine insurer.

Finance
See the international division of your bank to discuss financial considerations, e.g. how will you finance the transaction and what will it cost to finance? What method of payment is to be used? This may be negotiable with the supplier. Whichever method is to be used, what will be the bank charges?

Prepare a cost analysis
Make sure you include all cost elements i.e. all freight costs into your warehouse, insurance, interest and bank charges, customs clearance charges, import duties, sales tax and your profit.
Your customs broker will undertake this exercise for you if you wish.
Ensure you have logistics in place to follow up an order
Is the infrastructure in place to follow up an order?
Where will the product be warehoused?
What inventory control mechanisms do you have in place?
How and who will distribute the product?
What marketing channels/promotion outlets will you use?
How will you give after-sales service and back up to the product?
What quality control procedures are in place?
Do you have the necessary personnel?
Is it commercially viable? - Analyse your target market
Where is your market going to be - local or national?
Who are your customers?
What is your competition?
What market share do you expect?
What is the growth potential in your sector of the market?
What profit margin do you expect in the short/long term?
Have you considered a trial order to test your product on the market?
Many of the principles of research applied in analysing an export market apply just as well to the local market The Indian/European Bureau of Statistics may be able to provide import and consumption statistics for categories of product.
Publications such as the Grocery Industries Marketing Guide provide sales and market share statistics. However the most valuable feedback will come from potential customers when shown the product.
Place an order with the supplier
Place an order with the supplier and request written confirmation of the receipt and acceptance of your order.
Your order could be placed in one of several ways - on a printed purchase order form, which could be faxed or mailed, or by letter, email or facsimile.
Ensure that the terms and conditions of the resultant contract of sale are fully understood by both parties i.e.:
The product/goods
Quality/specifications
Packaging/packing
Price and price basis
Payment terms
Shipping
Special requirements
Documentation
All orders should be typed and include full cost, quantity and shipping procedure details. It is advisable to set up a structured order form as is required under letters of credit, whatever the method of payment.

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Quality
As well as quality control from a marketing and retention of customer's point of view, the importer should be aware of the various State and Federal Consumer standard regulations. The importer should also be aware that, whilst a letter of credit ensures that the exporter has supplied the required documentation, the quality of the goods is not guaranteed.
One way to ensure that the goods are as stated and meet specifications is to make it a condition of the LC or of payment that the goods are inspected prior to shipment by an independent inspection agency. These agents may even inspect the production of goods at the exporters factory, if required. It should be noted however, that each inspection involves a cost, which usually has to be borne by the importer.
Another way of testing the quality and delivery of goods is to place a small trial order with the exporter.

Packaging/packing
Packaging is an important aspect in the promotion of a product. Not only must this be attractive to the UK/European consumer but must comply with Government regulations. For example, most products must display, in English, the country of origin.
For information on packaging regulations and country of origin labelling contact the Trade Measurements Branch of the State Development Department etc. refer to our link section
If you are importing a product investigate whether it is appropriate that you obtain an Indian/European Product Number code (barcode) so that the product can be scanned at checkouts.

Price and price basis
Include reference to Incoterms 1990, i.e. unit price, total price and unit of currency. If the shipment is to be paid for in foreign currency are you going to hedge against currency fluctuations? If you don't the shipment may cost more, in US Dollar terms, than you originally anticipated.

Payment terms
Is payment to be against a letter of credit established by the importer or a documentary collection or some other method? What is the method of payment? i.e. a term or sight bill of exchange or a telegraphic transfer.

Shipping
The method of shipment, air or sea, will depend on a number of factors, namely cost, type of produce and speed of delivery required.
Special Requirements For example, fumigation requirements, time constraints.

Documentation
Documents that should be received by the importer's bank (under LC or collection) or by the importer (under open account) prior to the arrival of goods include:
Order confirmation, Shipping Advice, Commercial Invoice, Customs Invoice, Packing Slip, Insurance Policy, Contract and legal considerations
Selling goods internationally is governed by an international convention -The Sale of Goods (Vienna Convention) Act (1989). Copies of this act are available from State and Other printing offices.
The Convention applies to international sales contracts where both parties' governments are signatories. However, the two parties in the sales contract can mutually agree to ignore or vary any of the convention's provisions.
The rules of the Convention differ little from those applying to contracts made up under Indian/European commercial law. They offer some protection to the buyer regarding the quality of the goods. Under the convention the seller is obliged to provide the goods which: are fit for the purpose that the buyer specified. Possess the same quality of the goods that the seller has held out as a sample to the buyer is packed in a manner sufficient to preserve and protect the goods. If the contract is drawn up using both the provisions of the Convention and Incoterms 1990 then disputes between the parties should be minimal
.
Advise your Customs Broker of shipping details
Advice your customs broker of the shipping details as given by your supplier (unless you intend to clear the goods yourself). Do this as soon as you receive the details to avoid delays in clearing the goods.
In countries such as China, where the banks are responsible for processing documentation, the customs broker may not receive notification of the shipment until after the goods arrive.
Your bank will advise when the shipping have arrived
Ensure the documents are in order before you accept them.
When goods arrive
When the goods arrive ensure that your customs broker is in the process of clearing them through customs and quarantine. To clear the goods your broker (or yourself if you intend clearing the goods) will need the bill of lading/air waybill, commercial invoice and any other relevant documents.
Take delivery and examine consignment immediately for Insurance
Give a clean receipt for the goods only when satisfied as to their quality, quantity and condition.

Insurance
Q. Why should I insure my cargo?
Answer:
We take every care to ensure the safe handling and transportation of your consignment. However, we recommend insurance because there is always a risk of unforseen circumstances damaging your goods (e.g. fire or theft). Our question to you is, "Can you afford not to insure your consignment?"
It is the responsibility of overseas importers to insure consignments when the shipment is on a Free On Board (FOB) or Cost and Freight (CFR) basis. It is the exporter's obligation to arrange insurance in CIF/CIP contracts. Banks providing documentary credit will usually want insurance on at least the CFR value of the goods.

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HOW TO EXPORT:

Q Why Export?
Answer Export can improve growth and profit. It is a complex and demanding field
Which may not suit every company. Following are some of the basic important steps, which companies interested in export should consider.

Are you ready to export?
Developing export markets can be costly in terms of time, money and resources. Does your company have the commitment required to make a success of export? Entering new markets and developing them usually takes considerable time and effort. You must take a long-term view. Consider the time and resources required to break into a new regional market in India/Europe. That time and cost can be multiplied several times when you are looking at an overseas market.

Product
Know your product and its marketing advantages. What is unique about it? What does it compete with? Price, whilst important, may not be the deciding factor. You may need to change product design to suit different markets. You will need to have good product literature available. Consider whether your product or technology is more suited to a licensing agreement. Ensure through AQIS, Customs or a freight forwarder that your goods are not restricted for export or require a permit/license; this usually applies only to primary products.

Marketing
It is useful to have a strong marketing background. Does your company have solid marketing knowledge and experience gained by selling in a number of UK/European States? If your product has limited exposure in India/Europe it might be more cost effective to expand at home before developing export markets. Generally speaking success in export markets is built on a solid domestic base.

Management
A new export thrust will take considerable management time. Does your company have the production capacity to develop export markets or can the existing capacity be expanded if required?

Finance
Breaking into new markets usually requires considerable funds (air fares, accommodation, advertising, sales promotion, new brochures, training of overseas sales agents etc.). Does your company have the financial strength to commit significant funds for the year or two it may take to develop a new overseas market? The amount of money required depends on the nature and size of the export company and of the complexity of the markets they wish to enter. Markets such as the USA and Japan are generally the most costly. It is possible however, if you manage to make the right connections quickly in a market like New Zealand, that the costs of exporting are not significantly greater than for distribution to another Indian/European state.

Export advice and assistance
It is essential that you discuss your plans with experts from the appropriate fields. Check to see if your company will be eligible for financial assistance under Europe's Export Market Development Grants scheme (money is reimbursed after marketing costs have been incurred) or for marketing/logistical assistance under the Export Access scheme, which is administered by Chambers of Commerce. Discuss your place with the international department of your bank to ensure that all financial aspects are covered and viable. Gain an understanding of international trade finance - the major banks' publish an excellent range of guides on the subject.
Discuss costing for export with your accountant and transport/packaging requirements with a customs broker or forwarding agent.VECCI can provide advice on Government assistance schemes as well as conducting overseas market research and business matching.

Alternative approaches
You have the commitment, production capacity and financial resources but not the personnel. Consider using the services of:
Export Merchants - who buy directly from you in UK/Europe and export the goods in their own right.
Export Agents - who, on a commission basis, arrange the export of your goods complete all necessary paperwork and assist in sales promotion.
Export Consultants - who provide market research facilities and specialist advice to exporters on matters such as export management, marketing techniques, export incentives, pricing policies and other services similar to export agents.

Export planning - Preparing a Company profile
If you do not already have a company profile, one should be prepared. Overseas customers may require detailed information about your company before they are willing to place an order. A company profile is the most professional way of presenting this information. A company profile should include: brief company history, recent achievements, a summary page containing all the essential details (i.e. addresses, telephone, fax, key personnel) and information on the product(s)/service(s)) you offer (only a summary is necessary). You should include printed literature if available.
Typically, company profiles are between three to 10 single sided pages. They should be easy to read and well presented. Colloquialisms should be avoided at all costs.

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Selecting a market
When choosing a market, consideration should first be given to your product or service. For instance, who is likely to purchase or use your product or service? If you are producing computer software for the banking industry you may wish to choose a country, which is known as a banking centre like Singapore or Hong Kong.
If you are producing a luxury well, you may want to target a developed country. Programs such as Export Access can help first time exporters select a market.
It is advisable that first time exporters concentrate on only one market to start with, two at the most. Many new exporters start with markets closer to home. If you choose a larger market like the US or Japan it is advisable to select a region or city rather than the whole country to begin your export program.

Market research
Once you have selected a country, market research should be conducted. You should consider:
Size of market (this will help gauge probable demand) Whether the country selected already imports the product, and if so from where? Competitors you encounter in the domestic market could well be the same as those you encounter in the foreign marketImport regulations, tariffs, embargoes, quotas and other local charges
Other barriers to import such as import licensing
Local taxes on the product
Regulations such as quarantine, labelling, packaging requirements, consumer protection rules and products standards
Geography (to help you determine major metropolitan area and port locations) Political and economic stability
The social and business culture. Major accounting firms provide a range of country specific guides.
As an adjunct or alternative to market research it might be worth going on a trade mission to a specific country or attending a trade show pertaining to your product in that country. These activities will help you gauge the business climate and market opportunities in the targeted country. It will also give you the opportunity to make preliminary business contacts.

Finding an overseas customer
After completing the market research you should have a good indication of your product/service potential in that market. Overseas customers must now be found. As there are several ways to distribute your product overseas, consideration should be given to the type of customer you want. Will you sell your product through an agent, distributor or the end user?An agent is usually appointed to handle a region, entire country or group of countries. They normally carry no stock, but handle the exporter's stock, which is forwarded to end users and dealers. As the exporter's representative, the agent is paid on commission. It is the agent's job to find and maintain the outlets in their territory. They are involved with the advertising and promotional programs. Further, they may be needed to prepare documentation for importers where complicated import licences are required by the government.
Distributors buy product directly from the exporter for their own inventory and are responsible for the sale and, in many cases, after-sales service.
Guidelines for drawing up commercial agency and distributorship agreements are available from VECCI. Seek legal advice before entering into commercial partnerships.
Other direct selling options include: to the end user, retail chain stores; government organizations or to users via mail order advertising.
Obviously your method of distribution will depend on your product and how it is distributed in India/Europe. If your product requires assembly or after sales service, a distributor may be the best method. If you produce large, capital equipment, selling to the end user may be more appropriate. The same organization, which can assist you with overseas market research, can help you locate foreign contacts.

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Making a connection
Potential customers should be contacted by letter or fax. If the customer is an agent or distributor, who handles a number of clients other than yourselves, you should ensure that the information you provide is not going to be used purely as market research for your competitors.
The initial contact should include a brief letter, a description of your product(s)/service(s)) and/or a brochure. It is not necessary to send a company profile or price list at this initial stage.
Interested parties will come back to you for this information. At this point you should think about planning a market visit. This is an essential part of every export program. Not only will it give you the opportunity to meet face to face with potential agents and/or distributors, but it will also allow you to see first hand the market opportunities, to investigate local pricing, observe the competition and get a feel for how business is conducted in a new environment.
Being aware of cultural sensitivities, customs and business practices can help in the marketing, sales and the negotiation process. Further, it will provide you with the opportunity to make more contacts in the market.

Preparing a quotation
It is important to be as specific and accurate as possible when preparing a quotation for an overseas customer. Elements to be included in your export quotation are: Product description and specifications, including part and model numbers; quantity; unit price basis; payment terms; point of embarkation and destination; shipment method (air or ocean): packing details (if available); documentation provided and delivery. It must also be made clear in what currency you are quoting.Your research should indicate what the market price for your product is. Remember, it is always easier to lower prices than it is to raise them.
A quotation can be prepared on a letterhead, fax form or as a proforma invoice (formal export quotation), which is often required by the customer to obtain an import licence. To avoid any confusion the prices should be always quoted on the basis of a stated Incoterm. These trade terms are used to specify the division of obligations, costs and risks between the buyer and seller during shipment of the goods, and are accepted worldwide. To ensure that the prices are clear, along with the abbreviated Incoterm, reference should be also made to a named place, port of shipment or port of destination (FOB Melbourne port of CIF San Francisco, California, USA. Incoterms 1990). If you are arranging for shipment of the goods, a freight forwarder can recommend the best and most economical method of shipment, as well as provide a quotation for all transportation costs including documentation. The nature, size and weight of your product will determine if it will be shipped by sea or air. If you do not have your own insurance, the freight forwarder can arrange it. If special packing is required for export, make sure the cost is included in your quotation. The customer, on the other hand, may prefer to arrange the shipment him or herself. If this is the case, you may only have to provide prices ex-works or delivered to a specified warehouse or port (FOB).

Another important element in your quotation is the terms of payment.
After all, you want to make sure the overseas buyer will pay you. The most common methods of payment are:Open account, prepayment, documentary collections, and documentary letter of credit. If the overseas customer insists on open account terms, you will want to run a full credit check.
Further, organizations like the Export Finance and Insurance Corporation can help you manage your credit risks by insuring your receivables. Factoring companies can also help manage your trade debt.

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Receiving and processing an order
When an order is received, it should be checked thoroughly to make sure it is acceptable to you. The order should be checked and acknowledged and any changes required, including payment terms, notified to the customer. Once you have accepted the order there is little you can do to change it. Further, if payment is by documentary letter of credit, this should be checked to ensure that you could comply with its terms and conditions. If you cannot, you need to ask your customer to amend the letter of credit. After you have checked the order to your satisfaction, an order "acknowledgment" should be sent to your customer. This will advise them that the order has been received and is being produced. Further, you should retain the terms of sale.
As the order is processing, you should keep your customer and freight forwarder appraised of delivery so they can plan and schedule its shipment. Once the order has been shipped you should inform your customer of all shipping details.
Certain documents must accompany your shipment to allow the importer to clear the goods through customs at the country of destination. Your freight forwarder can advise you of these. Specific documents may also be requested from your customer or will be specified in the documentary letter of credit. Among the most common documents are:
Commercial Invoice - often these must be prepared in accordance with the buyer's instruction, for example they include details of the number of packages, weight(s) and volume of the goods being shipped. Invoices should be manually signed and dated:
Packing list,
Weight list
Airway Bill (AWB) - issued by the airline as a receipt for your cargo and confirmation of dispatch of your goods.
Certificate of Origin - certifies the country of origin of the goods. Bill of landing (B/L) - is a legal document under which cargo is accepted for carriage on board a vessel. It acts as a receipt for goods and confers ownership of the goods.
Your freight forwarder can take care of all export arrangements with the UK/European/Indian Customs Service. Depending on the method of shipment and payment, original documents must be sent to the customer with the shipment, by air, registered or express mail or through the banks.

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Question: How should I label my goods?
Answer: The labelling of cargo is often overlooked, when preparing the shipment. The labelling process identifies your cargo from other shipper's cargo as being uniquely yours. It also supplies important consignment information to the cargo Handlers.
The labels should clearly state your Consignment address with phone number, fax numbers and contact person, the labels should then be securely attached to each cargo piece.
Your cargo labels should be numbered 1 up.
For example, you have 10 cargo pieces, then each piece should be marked 1 of 10, 2 of 10, 3 of 10 etc. etc. This numbering method identifies to each person involved in the cargo transport chain that there are 10 cartons belonging to this shipment.
When shipping with our service, we take every care of your cargo, however should any cargo be misplaced during the shipment handling process and you have followed the correct labelling procedure it will greatly increase the correct cargo handling process thus ensuring a smoother cargo delivery.

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Packing

Q. How do I pack my cargo?
Answer:
Packing requirements vary greatly and will depend on the type of cargo being shipped. There are many set rules for successful cargo packing. For example, any movement of the cargo within its own packaging during transit is likely to cause damage. So the tighter and more secure the packing, the less likelihood there will be of damage. We recommend you seek reliable advise on the type of packing requirements for your particular cargo.
We offer a cost-effective, professional cargo packing service. Please feel free to speak to one of our consultants for an obligation free quote. Our business is your business.

Packaging of your cargo is one of the most important areas of international trade & also one of the most overlooked resulting in cargo damage ,loss & costly insurance claims

Unit Loads
The type of materials used for shipping will vary according to the product, the type of transportation (ocean or air), and the ultimate destination. However, the basic principle of packaging is known as the "unit load' concept or "unitisation." Unitisation is based upon the theory that all shippers should pack their cargo so it may be moved and handled entirely by mechanical equipment, such as lifts and cranes, throughout the distribution network. This practice reduces the need for labour, the handling of boxes, and the amount of damage. Also, it allows for faster loading and unloading by transportation equipment, more efficient distribution centre operations and a reduced level of pilferage. The reduced costs of the distributor in terms of labour and time often result in cost discounts for the exporter.
In practice, the unit load concept means that small, highly expensive items, such as calculators, should first be totally enclosed in cartons, or double, even triple wall containers to avoid pilferage and damage. Second, the boxes or containers should be secured to pallets with shrink-wrap & plastic strapping. Large items can be secured directly to pallets, assuring that they are adequately protected from damage.

Considerations
· Type of carrier - What are the various types of carriers to be used before the goods arrive at their foreign destination? Usually, truck and ship are used.
· Types of hazard - For each type of carrier, what hazards are the shipments likely to encounter? For ocean shipping, this would include the type of storage, loading and unloading facilities, route, time of year (summer, winter, monsoon, etc.) port reputation, etc.
· Cost factors - As well as ensuring maximum protection for the goods being shipped, the exporter should minimize transportation costs by using lightweight, least bulky materials etc.
In some importing countries, import duties are based on the gross weight of the item, including the interior and exterior containers and packing material. An allowance for tariff purposes is given for "tare" (the difference between the gross and net weights) and so both weights should be shown on the commercial invoice.

Shipping Department Guidelines
· Pack contents tightly within the box, or crate. In this way the container wall is given added strength and harmful shifting of merchandise is avoided.
· Ship large loads whenever possible, as large loads are less likely to be damaged than small ones.
· Keep goods protected from rain, seawater and moisture.
· Heavy machinery and odd-shaped items should be boxed or crated and provided with skids for easier handling and storage
· Select the most advantageous pallet size and style. A four-way entry pallet permits handling from all four sides with a fork or pallet truck, thus facilitating handling. Additionally, the standard size pallet size of 40 inches by 48 inches (1000mm x1200mm) maximizes the volume, which can be loaded into shipping containers.
· Prepare ferrous surfaces with a rust inhibitor to enable your product to arrive at its destination free from rust or corrosion.
· Drain holes should be made in the skid or floor area of large containers, boxes or crates. This will allow seawater or condensation to flow out of the container.
· Do not try to put too much in each container, as the weight might exceed the limitations of the container being used.
· Ensure weight is distributed evenly within the crate.
· Marks should be applied with waterproof ink to three surfaces of each package. Cautionary markings should be in English, the language of the country of destination and the international graphic-handling symbol.
· Protect goods adequately from pilferage.
· . If the cargo is liquid, do not fill containers completely but leave expansion space to allow for variations in temperature. The cargo should be protected from rainwater damage that may occur when air cargo is taken to loading ramps.
· Shipments by air for liquid cargo, certain additional guidelines apply: The packing should be able to withstand air pressure; liquid cargo should be protected from the hazards of high pressure and leakage.
It is a "serious offence" and against air regulation for shipping liquid or pressurize products without first informing the airline about the contents of the goods and getting permission. As leaking liquid leak may endanger passengers as well as causing the airplane to malfunction - in other words, you can go to jail.
Packing: tips
1 consideration to keep in mind when shipping is theft. Theft can be a common problem in some foreign ports. So don't advertise the contents of your shipping containers with flashy logos or name branding.

PAYMENT

Q. How do I pay for my cargo?
Answer:
The method of payment most widely used in unrelated transactions is a "irrevocable letter of credit".
The bank, on behalf of the applicant, issues an irrevocable letter of credit to the beneficiary named in the letter of credit , to pay the beneficiary upon production of the shipping documents as specified In the letter of credit ,such as the Bill of Lading, invoices, packing list or insurance certificate .
To choose the best method of payment for your particular cargo and needs, we recommend you contact the International Department of your Bank

Q. How do I get paid for my cargo?
Answer:
We recommend the using irrevocable letters of credit as the best method to be payed for your cargo. As once you comply with the terms of the letter of credit and produce the correct documentation (i.e. Bill of Lading, invoices, packing list or insurance certificate) you will be able to redeem payment from the Bank.
To choose the best method of payment for your particular cargo and needs, we recommend you contact the International Department of your Bank
This months update focuses on an area of International trade that affects your CASH FLOW , methods of payments.

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OVERVIEW OF THE MAJOR PAYMENT METHODS AVAILABLE

With a globalised economy, and a very competitive international market for commodities, exporters are faced with difficult choices. From a sales and marketing perspective, building favourable credit terms into export contracts can be a means toward obtaining contracts, but can ultimately cause worse problems in terms of cash flow. So how can exporters collect payment while still remaining competitive, and insulate themselves from too great a risk? While collecting payment can be difficult in one's own economy, it can be even more difficult than you would think to collect it from an overseas supplier.
This month we cover these areas concerning methods of payment. Besides the most frequently used methods, such as Letter of credit, documentary credit and telegraphic transfers, is an option that has been around for hundreds of years, that many don't consider - Factoring.

The viable financing alternative: Factoring As the global economy has become increasingly competitive, companies are finding that they must be more flexible with customers to maintain and grow sales. Being able to offer international customers better financing terms is now an important part of any sales package. Since payment from companies in other countries involves elements of uncertainty that are unlike those faced with domestic companies, credit risk becomes more of an obstacle. Selling on open account, which may be best from a marketing and sales standpoint, is fraught with danger. In particular, you may not be able to discover or understand the customer's financial situation and the economic situation of the country in which the customer is located. Also, collecting from foreign accounts is every bit as difficult as you imagine it to be. Cash-in-advance terms are more often placing you at a competitive disadvantage, as open account terms with extended dating are becoming more common despite the dangers.
Other challenges emerge as customers prefer to trade in local currencies. In addition, most domestic banks will not provide the necessary financing on export receivables. This remains a critical issue as these receivables are now utilized as a financing tool in international trade programs.

However, there is an attractive alternative: international factoring. Many exporters have added factoring companies to their list of financial partners in an attempt to incorporate international sales and financing into their objectives.

International Factoring Comes Into Its Own
International factoring may be defined as the sale of assignments of short-term (generally 120 days or less) accounts receivable arising from an international sale of goods or services. There are four parties involved in a transaction: the exporter (seller), the Indian/European factor (export factor), the foreign factor (import factor) and the customer (buyer). Transactions are somewhat more complex than traditional domestic factoring since there are a number of parties, depending on how many countries there are in which the seller conducts business.
Although international factoring has become more visible in recent years, it is not new. Factoring has been used in one form or another since the fifteenth century when merchandise-such as fish, fur and timber-was exported to England with agents from London making loans and advances to these sellers to help provide working capital.
The nineteenth century was a period of resurgence for factoring, but it was centred more in the US rather than Europe. Beginning in the 1970s, a number of countries began enacting legislation to open the doors to opportunity for cross-border trade activities, and once again the factoring industry was revived as an alternative financing tool. In 1995, $23 billion in international trade was covered by factors, up 17 percent from a year earlier.

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Export and Import Letters of Credit - sight and term
Letters of credit are one of the methods of payment that may be used to settle payment for sale of goods between exporters and importers. Banks issue import letters of credit for their customers, and in doing so, provides a definite commitment to pay the beneficiary (exporter), providing all terms and conditions of the letter of credit have been strictly adhered to. There are various types of letters of credit such as: ·Irrevocable, Revocable ,Sight or Term (documentary) ,Confirmed, Standby Transferable ,Back to Back, Red Clause .Revolving Exporters may request a letter of credit, when they are unsure of the importer's ability to pay. Under a letter of credit, the issuing banks creditworthiness is substituted for that of the importer and this security for the exporter is paramount. Although it is important to note that a L/C does not replace the need for a clear and concise contract of sale. Importers may request letter of credit payment terms when they need goods by a certain date or they require specific documentation for importation.

Documentary Collections (including Bills of Exchange) can be an another option to be considered when negotiating a contract of sale. Collections can be either sight or term, also depending on contract of sale terms. Collections offer a compromise between letters of credit (which can be expensive), pre-payment (high risk to the importer) and open account (high risk to the exporter). Documents and bills of exchange (if applicable) are prepared by the exporter and presented to the exporter's Bank (remitting Bank) with instructions on how to handle the collection. The exporter's Bank sends the documentation to a Bank in the country of the importer (usually the importer's Bank, known as the collecting/presenting Bank) with instructions for presentation to the importer and collection of payment. If the collection is at sight, the importer must pay the amount of the collection, before they receive the documents that are needed to clear the goods. If the collection is at a previously negotiated agreed term, the importer is usually required to accept a bill of exchange before documents are released. Collections are sent and received with various instructions and each collection will be treated individually, depending on the instructions.

Methods of Payment
There are a range of payment options available for your Import and Export transactions. These include Prepayment by Telegraphic transfer or International cheque, Documentary Letter of Credit, Documentary Sight Collection, Documentary term Collection and payment after arrival of goods. These differing payment options provide importers and exporters flexibility in terms of payment. Considerations such as cash flow, risk, relationship and history with the overseas supplier/customer all affect which payment option is suitable.
Prepayment is where the consignment is paid for either by telegraphic transfer or international cheque prior to shipment. It provides the most protection and is the most ideal for the shipper.
Documentary Letter of Credit - issued by the buyer's bank guaranteeing payment, providing all terms and conditions in the letter of credit are met.
Documentary Sight Collection Shipping Documents are forwarded to the buyer's bank for delivery to the buyer only after payment is made.
Documentary term collection - shipping document are forwarded to the buyers bank for delivery to the buyer only after the buyer agrees to pay in full on a future fixed date.
Payment after arrival of goods Also known as open account trading or shipping goods on consignment payment is made by telegraphic transfer or international cheque only after delivery or on-sale of goods.

We recommended you spend some time to examine the methods you use in payment and in collecting payment. The right choice can mean the difference between success and failure with your CASH FLOW

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SHIPPING INFORMATION Exporting goods Laws and Government policies to control the export of goods from India/Europe. These prohibit the export of certain goods either absolutely or conditionally and adequately record India/Europe's international trade. Total prohibition applies to the export of protected wildlife, some heritage items, selected weapons and other dangerous goods. Documentation for Exporting Other than the mandatory export documents required by Indian/European authorities, the following documentation are also required (all of which Fair Impex Ltd. will organise for you). Commercial Documents Commercial Invoice Describes the goods which are the subject of the transaction between the buyer and the seller. Banks, customs or an insurance company will usually require such documentation. Packing List/Weight List Will list the precise contents for shipment. Facilitates customs clearance. Transport Documents Bill of Lading Issued by shipping companies, this acts as evidence of a contract of affreightment setting out the conditions of carriage, a receipt for goods and a document of title. Air Waybill Issued by the airline company acknowledging receipt of the goods for despatch by air. This document, however, does not convey title to the goods and is not necessarily required to be produced for delivery of the goods. Insurance Documents Due to the risks of damage or theft in international trade, marine cargo insurance is an important consideration. It is the overseas importers responsibility to ensure that the shipment is on a Free On Board (FOB) or Cost and Freight (CFR) basis. It is the exporter's obligation to arrange insurance in CIF/CIP contracts. Banks providing documentary credit will usually want insurance on at least the CFR value of the goods. Return to top Other Documents Certificate of Origin and Value A Certificate of Origin for goods is required for duty and import control purposes. The information on value is required for customs duty purposes in the country of importation. This information is required by certain overseas buyers and customs authorities, especially in areas of preferential trade agreements. Chambers of Commerce in Perth, Fremantle and Bunbury issues the Certificate of Origin and Value. Certified Commercial Invoices Certified Commercial Invoices are invoices certified by a Chamber of Commerce. Some overseas customs authorities may require them. Consular Invoice An invoice that is certified by the Consul of the country to which the goods are to be exported. Other documents mentioned above may also be required to be "legalised" by consular authorities. If you are unsure of what documentation is required for a particular transaction or country, the Chamber of Commerce and Industry can advise you. The Chamber and the Indian/European Institute of Export provide courses on documentation. About Customs and Quarantine Indian/European Customs and Quarantine import and export entry procedures are based on self-assessment by importers and exporters who should be aware of their obligations. Penalties may be imposed for the submission of incorrect or misleading information or for omitting information with the intention to mislead. The India/Europe Customs Act requires importers and exporters to retain commercial documents relating to a transaction for five years from the date of entry. These documents may be required for Customs audit purposes. Return to top