Processing an Export Order

8/14/2019 Processing an Export Order

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PROCESSING AN EXPORTPROCESSING AN EXPORT

ORDERORDER


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INTRODUCTIONINTRODUCTION

Export order must confirm to the terms ofExport order must confirm to the terms of

contract and then sent to the overseascontract and then sent to the overseas

buyer.buyer.

But before its confirmation, it must beBut before its confirmation, it must be

scrutinized with regards to products andscrutinized with regards to products and

their specifications, terms of payment, price,their specifications, terms of payment, price,

delivery schedule etc.delivery schedule etc.


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The immediate task of exporter is toThe immediate task of exporter is to

acknowledge the export order which isacknowledge the export order which is

different from its acceptance .different from its acceptance .

Then he should proceed to examine theThen he should proceed to examine the

export order with respect to followingexport order with respect to following

parameters.parameters.


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1.1. NatureNature ::

Export order is a document, communicatingExport order is a document, communicatingthe decision of foreign buyer to purchasethe decision of foreign buyer to purchaseitems from exporter. It would clearly indicateitems from exporter. It would clearly indicatethe exporters pro-forma invoice/quotationthe exporters pro-forma invoice/quotation

number and its date, including item,number and its date, including item,quantity, price, delivery date, shippingquantity, price, delivery date, shippingmarks, insurance, payment terms,marks, insurance, payment terms,documents required etc.documents required etc.

Before acceptance, the export order shouldBefore acceptance, the export order shouldbe scrutinized in all aspectsbe scrutinized in all aspects


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2. Acknowledgement2. Acknowledg

ement ::

The exporter should write a simple letter toThe exporter should write a simple letter to

overseas buyer thanking him for theoverseas buyer thanking him for the

export order and stating that theexport order and stating that the

confirmation of the same would be sentconfirmation of the same would be sent

soon.soon.


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3. Scrutiny3. Scrutiny

::

The export order should be carefully scrutinized inThe export order should be carefully scrutinized interms of pro forma invoice/contract sent to the foreignterms of pro forma invoice/contract sent to the foreign

buyer, on the following aspects:buyer, on the following aspects: The order has been received for same products for which quotation/offerThe order has been received for same products for which quotation/offer

was sent.was sent.

Size and specifications are also as per quotation/offer. Unit measurementSize and specifications are also as per quotation/offer. Unit measurementneeds to be specified as well. It could be numbers, volume, or weight.needs to be specified as well. It could be numbers, volume, or weight.

Ordered quantity both in words and figures. This is essential to leave outOrdered quantity both in words and figures. This is essential to leave out

any room for confusion.any room for confusion. Pre-shipment inspection is as per agreed in pro forma invoice. Pre-Pre-shipment inspection is as per agreed in pro forma invoice. Pre-

shipment inspection can be done by-shipment inspection can be done by-

ExporterExporter

Inspection by exporter nominated agencyInspection by exporter nominated agency

Inspection by importer nominated agencyInspection by importer nominated agency

Export Inspection Agency (EIA) GOI authorized agencyExport Inspection Agency (EIA) GOI authorized agency

The inspection agency has to be agreed upon in pro forma invoiceThe inspection agency has to be agreed upon in pro forma invoice


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Payment conditions are same as stipulated.Payment conditions are same as stipulated.

The order must provide all the details relating to kindThe order must provide all the details relating to kindof packaging required including the labels and theof packaging required including the labels and the

marks to be put up. The instructions have to bemarks to be put up. The instructions have to beexplicit specifying requirements in full details as thereexplicit specifying requirements in full details as therecould be separate labels for the articles and forcould be separate labels for the articles and forpackaging.packaging.

Shipment and delivery date is in conformity with theShipment and delivery date is in conformity with theexporters production plan.exporters production plan.

Documents required are in conformity with thoseDocuments required are in conformity with thosementioned in pro forma invoice. Generally followingmentioned in pro forma invoice. Generally followingdocuments are required:documents are required:

Bill of ExchangeBill of Exchange Bill of LadingBill of Lading

Certificate of OriginCertificate of Origin

Packing ListPacking List

Insurance Policy/CertificateInsurance Policy/Certificate


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4. Confirmation4. Confirmation ::

If the exporter is satisfied on variousIf the exporter is satisfied on various

aspects mentioned in the export order heaspects mentioned in the export order he

should send a formal confirmation to theshould send a formal confirmation to the

overseas buyer.overseas buyer.


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5. Clarification5. Clarification ::

If the exporter is not completely satisfied with theIf the exporter is not completely satisfied with the

terms of export order, clarification should be soughtterms of export order, clarification should be soughtfrom the buyer before its confirmation.from the buyer before its confirmation.

The clarification could be in terms of :The clarification could be in terms of :

QuantityQuantity

Delivery scheduleDelivery schedule

Terms of paymentTerms of payment

INCO terms etc.INCO terms etc.

The delivery period should be specific and not inThe delivery period should be specific and not interms like immediate delivery, or as soon asterms like immediate delivery, or as soon aspossible.possible.


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Contents of Export ContractContents of Export Contract

1.1. Product description and SpecificationsProduct description and Specifications

Includes products name, technical name,Includes products name, technical name,

quality specifications and grade, details asquality specifications and grade, details asto standards, sizes, reference to samplesto standards, sizes, reference to samples

and their specifications.and their specifications.


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2.2. QuantityQuantity

Ordered quantity both in words and figures. This isOrdered quantity both in words and figures. This is

essential to leave out any room for confusion.essential to leave out any room for confusion.

Unit measurement needs to be specified as well. ItUnit measurement needs to be specified as well. It

could be numbers, volume, or weight.could be numbers, volume, or weight.

In addition care should be taken while stating theIn addition care should be taken while stating the

unit of measurement in international or countryunit of measurement in international or country

specific terms, for example, Metric Ton is 1000specific terms, for example, Metric Ton is 1000kgs. whereas the US Short Ton is 907 kgs. andkgs. whereas the US Short Ton is 907 kgs. and

the British Long Ton is 1016 kgs.the British Long Ton is 1016 kgs.


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3.3. Packaging Labeling and MarkingPackaging Labeling and Marking

The order must provide all the details relatingThe order must provide all the details relatingto kind of packaging required including theto kind of packaging required including thelabels and the marks to be put up. Thelabels and the marks to be put up. Theinstructions have to be explicit specifyinginstructions have to be explicit specifyingrequirements in full details as there could berequirements in full details as there could beseparate labels for the articles and forseparate labels for the articles and forpackaging.packaging.

In each case of marking, information that has to beIn each case of marking, information that has to be

indicated on each package should be in easily readableindicated on each package should be in easily readableink, giving the name of the consignee, contents of theink, giving the name of the consignee, contents of thepackage including name of the product, net andpackage including name of the product, net andsometimes also the gross weight, country of origin etc.sometimes also the gross weight, country of origin etc.


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4.4. INCO terms, Price and ValueINCO terms, Price and Value

The total value of order needs to be clearlyThe total value of order needs to be clearly

stated both in numbers and words in thestated both in numbers and words in thedecided currency. Price would of coursedecided currency. Price would of course

depend upon terms of delivery and for thisdepend upon terms of delivery and for this

generally INCO terms are used.generally INCO terms are used.

5.5. Taxes, Duties & Other ChargesTaxes, Duties & Other Charges

Who would bear which tax depends veryWho would bear which tax depends verymuch on how the prices are quoted andmuch on how the prices are quoted and

herein INCO terms become relevant.herein INCO terms become relevant.


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7.7. Consignee DetailConsignee Detail

If the consignee is different from the buyer, hisIf the consignee is different from the buyer, his

complete name and address is required.complete name and address is required.

8.8. Transfer of RiskTransfer of Risk

INCO terms define the point at which risk passesINCO terms define the point at which risk passeson from exporter to importer.on from exporter to importer.

Unless other wise agreed between the parties,Unless other wise agreed between the parties,

the risk passes from the exporter when thethe risk passes from the exporter when the

goods are handed over to the first carrier forgoods are handed over to the first carrier for

transmission to the importer.transmission to the importer.


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9.9. Mode of PaymentMode of Payment

The contract should clearly indicate theThe contract should clearly indicate the

mode of payment- whether it is L/C, ormode of payment- whether it is L/C, orDocumentary Collection D/C, or DocumentDocumentary Collection D/C, or Documenton Acceptance D/A.on Acceptance D/A.

10.10. Inspection ClauseInspection Clause

If a buyer wants a pre-shipment inspectionIf a buyer wants a pre-shipment inspectioncarried out, it must be mentioned in thecarried out, it must be mentioned in the

contract. The details of the inspectioncontract. The details of the inspectionagency must also be given.agency must also be given.


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11.11. Test CertificateTest Certificate

At times, the importer may ask the exporter toAt times, the importer may ask the exporter to

conduct certain test son the material, forconduct certain test son the material, forexample, a colour bleed test on fabric, andexample, a colour bleed test on fabric, and

submit a test report by a prescribed agency. Thissubmit a test report by a prescribed agency. This

must form a part of the contract.must form a part of the contract.

12.12. Commission/DiscountsCommission/Discounts

In case exporter is required to pay any kind ofIn case exporter is required to pay any kind of

commission or offer any discount to the buyer orcommission or offer any discount to the buyer orhis agent, the export order must provide detailshis agent, the export order must provide details

of the same.of the same.


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15.15. Force Majeure clauseForce Majeure clause

Force Majeure literally means greater-force.Force Majeure literally means greater-force.

This clause excuses a party from liability if someThis clause excuses a party from liability if someunforeseen event beyond the control of thatunforeseen event beyond the control of thatparty prevents it from performing its obligationparty prevents it from performing its obligationunder contract.under contract.

TypicallyTypically force majeureforce majeure clauses cover naturalclauses cover naturaldisasters or Acts of God, war etc.disasters or Acts of God, war etc.

It is important to remember thatIt is important to remember that force majeureforce majeureclauses are intended to excuse a party only ifclauses are intended to excuse a party only ifthe failure to perform could not be avoided bythe failure to perform could not be avoided bythe exercise of due care by that party.the exercise of due care by that party.


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International Chambers of Commerce via ICCInternational Chambers of Commerce via ICC

Publication No. 421 has enumerated the followingPublication No. 421 has enumerated the following

circumstances as the one in which the forcecircumstances as the one in which the forcemajeure clause will be applicable :majeure clause will be applicable :

War, civil war, riots and revolutions, acts of piracyWar, civil war, riots and revolutions, acts of piracy

Natural disasters such as violent storms, cyclones,Natural disasters such as violent storms, cyclones,

earthquakes, tidal waves, floods, destruction by lightning.earthquakes, tidal waves, floods, destruction by lightning.

Explosions, fires, destruction of machines of factories and ofExplosions, fires, destruction of machines of factories and of

any kind of installations.any kind of installations.

Boycotts, strikes and lockouts off all kinds, go-slows,Boycotts, strikes and lockouts off all kinds, go-slows,occupation of factories and premises and work stoppagesoccupation of factories and premises and work stoppages

which occur in the enterprise of the party seeking relief.which occur in the enterprise of the party seeking relief.


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16.16. Arbitration ClauseArbitration Clause

For settlement of disputes two options areFor settlement of disputes two options areavailable-available-

Either go to Court of LawEither go to Court of Law Or may chose to resort to arbitrationOr may chose to resort to arbitration

In international trading transactions, partiesIn international trading transactions, parties

normally do not like to go to courts and insteadnormally do not like to go to courts and insteaddecide to go to Arbitration.decide to go to Arbitration.

The fact that the disputes are to be settled byThe fact that the disputes are to be settled by

resorting to Arbitration should be clearly statedresorting to Arbitration should be clearly statedin the export contract, also mentioning thereinin the export contract, also mentioning thereinwhether Arbitration will be in accordance withwhether Arbitration will be in accordance withInternational Chamber of Commerce rules or theInternational Chamber of Commerce rules or therules set out by UN Commission on Internationalrules set out by UN Commission on International

Trade Law will be applicableTrade Law will be applicable