Unit Five Export / Import Transaction. Objectives Get the students to be familiar with the Export / Import procedure. Cultivate the students’ ability.

Unit Five

Export / Import Transaction

Objectives

Get the students to be familiar with the Export / Import procedure.

Cultivate the students’ ability of problem solving.

Help the students overcome the vocabulary barrier in reading.

Section A

Introduction International business is the worldwide exchange of

goods and services among nations, generally using some form of currency as payment. Exports are goods traded and sent out of a country, while imports are goods purchased abroad and brought into a country. A country can also export and import talents, patents, know-how, and skills. When you are planning on exporting your products or services, you may consider what export /import procedure you have to go through. This unit will give a brief introduction to the conduct of export / import transaction.

Pre-reading

Before reading the following passage, answer these questions:

1. Are you familiar with the procedure of export / import transaction?

2. Which step do you think is the most important one?

Text Export / Import Procedure Most countries of the world export goods to other

nations, likewise, most of them import goods from other countries. In port countries, one can see ships of many countries loading and unloading goods of all descriptions. Everyone is aware that this flow of resources in and out goes on, but not everyone understands the way in which the transactions that cause the flow are made. An export / import transaction usually undergoes four steps: preparation for exporting / importing, business negotiation, implementation of contract, and settlement of disputes (if any).

Step 1 Preparation for Exporting Market research is the first thing to do in the conducting of an

export trade. To look for a good market, an exporter must consider such factors as political and economic conditions, physical and climate conditions, social conditions, traditions and customs, existing products and structure of trade, geography and communications, legal aspects and so on. The exporter certainly cannot go to every country to find out every piece of information. The following is a list of possible information sources: specialized trade publications; International Trade Central Literature; government departments; export promotion organization; private business firms; banks; custom offices. Besides, exporters also have field investigations, a large-scale survey of thousands of consumers.

Once the overseas market has been founded, the next step is to look for suitable customers of high credit standing with whom the maker or exporter expects to establish good business relationships. The information about the credit or financial standing of an overseas trader can be obtained from various sources, such as banks, chambers of commerce and other trade associations, professional credit information services, and consulates stationed abroad.

Export promotion, indispensable to export trade, stands for activities that communicate the merits of the product and persuade target customers to buy it. The four major ways are advertising, personal selling, sales promotion and publicity.

Step 2 Business Negotiation International business negotiation is the dealings between

supplier and customer in order to reach agreement on the price, quantity, quality, payment and other terms and conditions of a sale. Generally business negotiation needs going through five links: enquiry, offer, counter-offer, acceptance and conclusion of a contract.

Business negotiations in international trade usually start with an enquiry by an importer to an exporter, asking for the price lists, catalogues, samples and details about the goods or trade terms and conditions. However, sometimes an exporter can also initiate the negotiation by making an enquiry to a foreign importer, including his intention of selling certain goods to the latter. According to the commercial practice the receiver of an enquiry will respond without delay in the usual form of a quotation, an offer, or a bid.

There are two kinds of offer: offer with engagement (firm offer), offer without engagement (non-firm offer). The latter is subject to change without previous notice while the former is a definite commitment on the part of a supplier.

A satisfactory offer will include the following: name of commodities, quality, quantity and specifications; unit price and type of currency; packing condition and date of delivery; terms of payment and discount; the terms of validity of the offer; indication of what the price covers.

A counter-offer is an offer made by a buyer to a seller, accepting some terms and changing other terms. Such alterations indicate that business has to be negotiated on a renewed basis.

An acceptance must be unconditional. It should be an unreserved assent to all the terms designated in the offer. In principle, if additions, modifications or limitations to the offer are made they are a counter-offer, and not an acceptance.

In the course of business negotiation, an offer with engagement or a counter-offer is accepted, the transaction is completed and a contractual relationship between the offeror and offeree is concluded. It may be formal or informal. The contract which is generally adopted in import and export business is the formal written contract, either a sales contract or a purchase contract, sometimes in the form of purchase order when countersigned by the seller, or a sales confirmation when countersigned by the buyer. Legally, both the sales contract （ or the purchase contract ） and the sales confirmation (or the purchase confirmation) are equally binding on the parties. The former consists of not only such main terms as the name of commodities, specifications, quantity, packing, marking, price, shipment, port of shipment and port of destination, and payment, but also those clauses concerning insurance, commodity inspection, claims, arbitration and force majeure; while the latter covers several main items only. Thus, the former is appropriate to transactions of large amount and huge quantity. If the amount is not large or the business is done by means of agency arrangement or exclusive sales agreement, the sale or the purchase confirmation is often used.

Step 3 Implementation of Contract Nowadays a lot of export / import transaction is concluded

under CIF and sight L/C terms. The following steps should be taken while implementing the sales contract.

After a contract is concluded, it is the main task for the exporter to get the goods ready and to check them against the terms stipulated in the contract. If necessary, the exporter should obtain a certificate of inspection from the institutions concerned where the goods are inspected.

A letter of credit is the most common method of payment in foreign trade. Once two parties agree to adopt it, it is very important for the exporter to examine the details mentioned in the letter of credit received. If there should be any discrepancies, the exporter should contact the importer immediately for amendments so as to get the due payment.

When the goods are ready, the exporter has to choose the right mode of transport. He may well try and find the cheapest mode of getting his goods to the export market. In general, the most common and the cheapest method of transport is a ship (sea freight) that often takes several months to complete its voyage. If sea freight is chosen, the exporter has to make an arrangement with a shipping company to have the goods to be shipped on or before the date of shipment agreed to in the contract. By booking the shipping space, he knows when and where to load the goods. In that event, the goods are then loaded, certain procedures in customs formalities have to be completed. After the goods are loaded, the shipping company issues a bill of lading, which is a receipt to evidence the loading of the goods on board the ship. To protect the goods in transit against damage or loss the exporter usually applies to an insurance company for insurance covering the goods to be transported. In this way an insurance policy is made out by the insurance company. Both the bill of lading and insurance policy constitute the chief shipping documents that are vital in export trading.

In international trade, it is essential that the exporter delivers the goods and the importer makes the payment of the goods. If the exporter has duly shipped the goods, he is entitled to the receipt of the payment. Under a letter of credit term, he draws a bill of exchange, or a draft, and presents the bill accompanied by shipping documents to the bank who pays the documentary bill. As to the shipping documents they include commercial invoice, bill of lading, insurance policy, packing list, weight memo, certificate of inspection, and, in some cases, consular invoice, certificate of origin, etc.

Step 4 Settlement of Disputes Despite the careful performance of a contract by

the parties involved, sometimes, complaints or claims may arise. In accordance with specific conditions, complaints and claims may be made to the exporter, importer, insurance company or shipping company as the case may be.

From the above, we know that any export / import transaction may start from market research and afterwards there follow the establishment of business connections, inquiries, offers (or replies to inquiry), orders, payment by buyer (or importer) and delivery of goods by seller (or exporter), and completion of the transaction.

Post-reading

Answer the questions on the text. 1. What export /import procedure you have to go through when you

are planning on exporting your products or services? 2. What is the first thing to do in the conducting of an export trade?

What is the purpose of doing this? 3. Where can you find a target market? 4. What resources you can make use of to obtain the information

about credit or financial standing of an overseas trader? 5. The marketing communication mix is adopted to promote export

business? What are they? If possible, state the advantages and disadvantages respectively.

6. What are five links the international business negotiation need going through?

7. What is the difference between firm offer and non-firm offer? What should be included in a satisfactory offer?

8. What should be stated clearly in a sales or purchase contract? 9. What steps should be taken when implementing the sales

contract? 10. Which party will be responsible for the settlement of disputes?

Section B Reading Skills

Identifying the meaning of the unknown words through context

1. Some sentences give the definition for a difficult word directly in the sentence or by means of punctuations. Dashes ---, parenthesis ( ) and commas, are often used.

2. An unfamiliar word is further explained by the apposition. 3. Readers can easily figure out the meaning of a new word through a list

of names and examples. 4. Synonyms and antonyms are used as context clues. 5. Experience and general knowledge help you guess the meaning of new

words. 6. The reader’s understanding of the cause-effect pattern offers a clue to

the meaning of the unknown word. 7. Guess the meaning of a familiar word through the logical relationship

between sentences or phrases, which mainly appears as general conception before specific one or vice versa.

8. Transitional words can also be a help to guess the meaning of the unknown words.

Speed Reading Task

Let’s have a glimpse of practical international trade. Use techniques for speed reading to find out the answers to Exercise 1 as quickly as possible.

True or false 1. _____ Exporting is merely an extension of selling in the home

market. and therefore it can not be difficult to deal with. 2. _____ Quality of products is the only factor that the exporters

should pay attention to among variables in exporting. 3. ______ Publicity can be used to build a long-term image for a

product as well as to trigger sales. 4. _____ The exporters should be careful to quote for the export

market in order to be competitive with similar products. 5. _____ To find the cheapest method of getting his product to the

export market, the cost is the only factor that must be taken into account.

6. _____ An exporter uses insurance to minimize the risk of fire or leakage that always occur.

7. ______ Quoting the suitable terms of payment can ensure the exporter a fair profit.

8. _____ In any event it is a good thing for an exporter to obtain a large order.

KEY: F F T T F F T F

Section C Case Study

Task Get the students in pairs, one as Mr. Smith, and the other as Mr.

Zhang, work the following case out as a role play. The setting is at the meeting room of Mr. Zhang's company. About 10 minutes later, put up the performance in class.

Mr. Smith, a businessman for the Middle East, was very glad to have the chance of attending The China Import and Export Commodities Fair. He was interested in some items of exhibits and wanted to purchase some tea from Mr. Zhang's (the Sales Manager of a Chinese company) company. They discussed about business enquiries and offers.

Mr Smith told Mr. Zhang that both Hangzhou longjing tea and Hangzhou silk sold well in their market. Mr. Zhang then introduced some new varieties of tea recently such as Curls black tea. They were all the best selling lines in many countries. Mr. Smith thanked Mr. Zhang for his recommendation and would like to make a trial sale of it. He wanted to order 2,000 kg of the Curls black tea and 4,000 meters of Hangzhou silk. Mr. Smith needed shipment in October or November and asked Mr. Zhang to supply the official offer next week.

NOTES

1. To look for a good market, an exporter must consider such factors as political and economic conditions, physical and climate conditions, social conditions, traditions and customs, existing products and structure of trade, geography and communications, legal aspects and so on.

要想寻找优质市场，出口商必须考虑众多因素，诸如政治经济条件、自然和气候条件、社会环境、文化习俗、现有产品结构、地理和通讯条件、法律等方面。

2. The four major ways are advertising, personal selling, sales promotion and publicity.

（出口营销的）四种主要方式是：广告、派员销售、推销和公关宣传。

3. International business negotiation is the dealings between supplier and customer in order to reach agreement on the price, quantity, quality, payment and other terms and conditions of a sale.

国际商务谈判是买卖双方为在价格、数量、质量、支付方式以及其他条款方面达成协议所进行的交易。

4. The contract which is generally adopted in import and export business is the formal written contract, either a sales contract or a purchase contract, sometimes in the form of purchase order when countersigned by the seller, or a sales confirmation when countersigned by the buyer.

在进出口贸易中普遍采用的合同是正式的书面合同，有的是销售合同或购货合同，有的则是需要反签的购货订单或需要买方反签的销售确认书。

5. The former consists of not only such main terms as the name of commodities, specifications, quantity, packing, marking, price, shipment, port of shipment and port of destination, and payment, but also those clauses concerning insurance, commodity inspection, claims, arbitration and force majeure; while the latter covers several main items only.

销售合同（购货合同）除了包括商品的名称、规格（型号）、数（重）量、包装、运输标志、价格、装货以及交货港、装运港以及付款方式之外，还有保险、商品检验、异议索赔、仲裁、不可抗力，而销售确认书（购买确认书）只包含一些主要条款。

6. Nowadays a lot of export / import transaction is concluded under CIF and sight L/C terms.

如今许多进出口业务都是以货交目的港的成本、运费加保险费价和即期信用证的方式成交。