Import/Export Business Training Overview

Students

Teacher: Ijaz Ahmad

Assessment Factors of Import/Export Business:

1. Task
2. Cost
3. Risks

Perquisites of Import/Export Business:

1. Careful Planning
2. Clear Understanding.

Careful Planning: 

         i.      Preparing Business Plan

        ii.      Product Selection

      iii.      Target Market

Clear Understanding:

         i.            What and where to export?

        ii.            What are the international rules? (ICC Paris, France 1919)

      iii.            What are the procedural requirements?

      iv.            What costs are involved?

       v.            What risks are involved?

Common Mistakes Made By New Exporters:

1. Insufficient commitment by top management about potential risks and resources to overcome
2. Failure to obtain expert counseling on export business
3. Failure to develop and implement an effective export business plan.
4. Failure to develop to affective marketing mix strategies i.e. product, price, place, and promotion strategies.
5. Failure to assess the company’s export potential by examining opportunities and resources.
6. Failure to select the right target market.
7. Neglecting the export business when domestic market is in boom.

Import/Export Business Procedural Steps in Pakistan:

Step 1:  Preparing Import/Export Business Plan

Step 2:  Business Formation/Registration

Step 3:  Issuance of National Tax Number (NTN) from FBR

Step 4:  Opening of Bank Account with Business Name

Step 5:  Issuance of National Sales Tax Registration Number (STRN) from FBR

Step 6:  Registration with Customs’ WEBOC website, Membership of LCC, & Trade Associations

Step 7:  Searching for Buyers/Importers

Step 8:  Identification of Potential Buyers

Step 9:  Selection of Import/Export Channel

Step 10:  Introduction Letter Sending To Buyer

Step 11:  Inquiry Letter Receiving from Buyer

Step 12:  Quotation Letter/Samples Sending to Buyer

Step 13:  Order Confirmation by Importer

Step 14:  Sales Contract Issued by Exporter

Step 15:  Sales Contract Accepted by Importer

Step 16:  L/C Issued by Importer’s Bank

Step 17:  L/C Issued by Importer’s Bank

Step 18:  Production Readiness Arranged by Exporter

Step 19:  Transportation of Goods Arranged by Exporter Till Karachi Port

Step 20:  Custom Clearing Agent Hired by Exporter with Documents of Invoice, Clearing List, Sales Of Tax Invoice, Form E, B/L, Performa etc.

Step 21:  Agent Arranges Custom Clearance for Exporter

Step 22:  Goods Loaded on Ship by Agent

Step 23:  B/L Arranged From Shipping Company by Agent

Step 24:  B/L Received by Exporter from Agent and Other Documents are Prepared As Required in L/C

Step 25:  Original Documents Submitted by Exporter in His Bank

Step 26:  Exporter’s Bank Adds Instructions & Dispatches the Documents to Importer’s Bank

Step 27:  Importer’s Bank Checks the Documents as Per L/C.

Step 28:  Importer’s Bank Sends the Payment to Exporter’s Bank If All Documents Are Right.

Preparing Import/Export Business Plan:

1.               Executive Summary

2.               Background Information

3.               Marketing Research

4.               Marketing Decision

5.               Legal Decision

6.               Product Facilitation

7.               Personnel Facilitation

8.               Financial Decision

9.               Implementation

10.            Appendices

Business Formation/Registration:

1. Sole Proprietorship
2. Partnership Firm/Association of Persons (AOP)
3. Company (Private/Public)

Payment Terms: 

1. Clean payments:

Clean payments are characterized by trust, either the exporter dispatches the goods trusts the importer to pay once the goods have  been received or the importer trusts the exporter to dispatch the goods after payments is received in advance.  In clean payment all shipping documents are directly handled by importer and exporter and bank is only involved in payment transaction.

                                 i.      Open account

In open account the exporter sends the goods to importer before the payment is made by importer. So exporter trusts the importer to pay after receiving the goods.

                               ii.      Payment-in-advance

In this payment importer sends the payment in advance to exporter before receiving the goods from exporter. In this case importer trusts the exporter to send good after the advance payment.

2. Documentary Collection:

A method of payment used in international trade in which the exporter entrusts the handling of documents to bank sand entrusts the bank concerning the release of the documents to the importer.

                                 i.      Documents against Payment (D/P), Sight Collection, Cash against Documents (CAD)

The bank releases the documents to the importer only against payment.

                               ii.      Documents against Acceptance (D/A), Term Collection, Usance Bill

The bank releases the documents to the importer only against acceptance of draft (bills of exchange) payment.

3. Letter of Credit (L/C):

L/C is the written undertaking of a bank on the instruction of applicant (buyer) to the beneficiary (seller) to pay a specific amount at a specific date provided the beneficiary submits documents in conformity with L/C within the prescribed deadline.

                                 i.      L/C at Sight

If the payment is to be made at the time that documents are presented in the issuing bank is called L/C at Sight.

                               ii.      Term L/C

If the payment is to be made at a future fixed date as per acceptance of draft by buyer from the issuing bank is called Term L/C.

International Import/Export Procedure Summary:

1. Seller and Buyer conclude a sales contract, with method of payment usually by letter of credit (documentary credit).
2. Buyer applies to his issuing bank, usually in Buyer’s country, for letter of credit in favor of Seller (beneficiary).
3. Issuing bank requests another bank, usually a correspondent bank in Seller’s country to advise and usually to confirm, the credit.
4. Advising bank, usually in Seller’s country, forwards letter of credit to Seller informing about the terms and conditions of credit.
5. If credit terms and conditions conform to sales contract, Seller prepares goods and documentation, and arranges delivery of goods to carrier.
6. Seller presents documents evidencing the shipment and draft (bill of exchange) to paying, accepting or negotiating bank named in the credit (the advising bank usually), or any bank willing to negotiate under the terms of credit.
7. Bank examines the documents and draft for compliance with credit terms. If complied with, bank will pay, accept or negotiate.
8. Bank, if other than the issuing bank, sends the documents and draft to the issuing bank.
9. Bank examines the documents and draft for compliance with credit terms. If complied with, Seller’s draft is honored.
10. Documents are released to Buyer after payment, or on other terms agreed between the bank and Buyer.
11. Buyer surrenders bill of lading (B/L) to shipping company in case of ocean freight in exchange for the goods or the delivery order.