You are on page 1of 21

PROCESSING AN EXPORT

ORDER
INTRODUCTION
 Export order must confirm to the terms of
contract and then sent to the overseas
buyer.
 But before its confirmation, it must be
scrutinized with regards to products and
their specifications, terms of payment, price,
delivery schedule etc.
 The immediate task of exporter is to
acknowledge the export order which is
different from its acceptance .
 Then he should proceed to examine the
export order with respect to following
parameters.
 1. Nature :
Export order is a document, communicating
the decision of foreign buyer to purchase
items from exporter. It would clearly indicate
the exporter’s pro-forma invoice/quotation
number and its date, including item,
quantity, price, delivery date, shipping
marks, insurance, payment terms,
documents required etc.
Before acceptance, the export order should
be scrutinized in all aspects
 2. Acknowledgement :
The exporter should write a simple letter to
overseas buyer thanking him for the
export order and stating that the
confirmation of the same would be sent
soon.
 3. Scrutiny :
The export order should be carefully scrutinized in
terms of pro forma invoice/contract sent to the foreign
buyer, on the following aspects:
– The order has been received for same products for which quotation/offer
was sent.
– Size and specifications are also as per quotation/offer. Unit measurement
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 out
any room for confusion.
– Pre-shipment inspection is as per agreed in pro forma invoice. Pre-
shipment inspection can be done by-
 Exporter
 Inspection by exporter nominated agency
 Inspection by importer nominated agency
 Export Inspection Agency (EIA) GOI authorized agency
The inspection agency has to be agreed upon in pro forma invoice
– Payment conditions are same as stipulated.
– The order must provide all the details relating to kind
of packaging required including the labels and the
marks to be put up. The instructions have to be
explicit specifying requirements in full details as there
could be separate labels for the articles and for
packaging.
– Shipment and delivery date is in conformity with the
exporters production plan.
– Documents required are in conformity with those
mentioned in pro forma invoice. Generally following
documents are required:
– Bill of Exchange
– Bill of Lading
– Certificate of Origin
– Packing List
– Insurance Policy/Certificate
 4. Confirmation :
If the exporter is satisfied on various
aspects mentioned in the export order he
should send a formal confirmation to the
overseas buyer.
 5. Clarification :
If the exporter is not completely satisfied with the
terms of export order, clarification should be sought
from the buyer before its confirmation.
The clarification could be in terms of :

 Quantity
 Delivery schedule
 Terms of payment
 INCO terms etc.

The delivery period should be specific and not in


terms like “immediate delivery,” or “as soon as
possible.”
Contents of Export Contract
 1. Product description and Specifications
Includes products name, technical name,
quality specifications and grade, details as
to standards, sizes, reference to samples
and their specifications.
 2. Quantity
Ordered quantity both in words and figures. This is
essential to leave out any room for confusion.

Unit measurement needs to be specified as well. It


could be numbers, volume, or weight.

In addition care should be taken while stating the


unit of measurement in international or country
specific terms, for example, Metric Ton is 1000
kgs. whereas the US Short Ton is 907 kgs. and
the British Long Ton is 1016 kgs.
 3. Packaging Labeling and Marking

The order must provide all the details relating


to kind of packaging required including the
labels and the marks to be put up. The
instructions have to be explicit specifying
requirements in full details as there could be
separate labels for the articles and for
packaging.

In each case of marking, information that has to be


indicated on each package should be in easily readable
ink, giving the name of the consignee, contents of the
package including name of the product, net and
sometimes also the gross weight, country of origin etc.
 4. INCO terms, Price and Value
The total value of order needs to be clearly
stated both in numbers and words in the
decided currency. Price would of course
depend upon terms of delivery and for this
generally INCO terms are used.

 5. Taxes, Duties & Other Charges


Who would bear which tax depends very
much on how the prices are quoted and
herein INCO terms become relevant.
 6. Delivery Period
It is important that contract do clearly indicate
stipulations with regard to delivery period. The
delivery period should be specific and not in terms
like “immediate delivery,” or “as soon as possible.”
In case of late deliveries the importer can insist
upon the payment to be made by the exporter by
way of liquidated damages, a sum equal to certain
% of the contract price for every week of delay.
 7. Consignee Detail
If the consignee is different from the buyer, his
complete name and address is required.

 8. Transfer of Risk
INCO terms define the point at which risk passes
on from exporter to importer.

Unless other wise agreed between the parties,


the risk passes from the exporter when the
goods are handed over to the first carrier for
transmission to the importer.
 9. Mode of Payment
The contract should clearly indicate the
mode of payment- whether it is L/C, or
Documentary Collection D/C, or Document
on Acceptance D/A.

 10. Inspection Clause


If a buyer wants a pre-shipment inspection
carried out, it must be mentioned in the
contract. The details of the inspection
agency must also be given.
 11. Test Certificate
At times, the importer may ask the exporter to
conduct certain test son the material, for
example, a colour bleed test on fabric, and
submit a test report by a prescribed agency. This
must form a part of the contract.

 12. Commission/Discounts
In case exporter is required to pay any kind of
commission or offer any discount to the buyer or
his agent, the export order must provide details
of the same.
 13. Insurance
The contract must clearly provide insurance instructions
for the exporter, if he is to arrange insurance. In case the
buyer is responsible for insurance, the order must say so.

 14. Documents Required


The export contract must specify all documents required
to be submitted by the exporter to the importer. The
exporter then has to comply with all the documentation
required very religiously. Generally following documents
are required:
 Shipping Advice
 Commercial Invoice
 Bill of Exchange
 Bill of Lading
 Certificate of Origin
 Packing List
 Insurance Policy/Certificate
 15. ‘Force Majeure’ clause
Force Majeure literally means “greater-force”.
This clause excuses a party from liability if some
unforeseen event beyond the control of that
party prevents it from performing its obligation
under contract.

Typically force majeure clauses cover natural


disasters or “Acts of God”, war etc.

It is important to remember that force majeure


clauses are intended to excuse a party only if
the failure to perform could not be avoided by
the exercise of due care by that party.
 International Chambers of Commerce via ICC
Publication No. 421 has enumerated the following
circumstances as the one in which the force
majeure clause will be applicable :

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


 Natural disasters such as violent storms, cyclones,
earthquakes, tidal waves, floods, destruction by lightning.
 Explosions, fires, destruction of machines of factories and of
any kind of installations.
 Boycotts, strikes and lockouts off all kinds, go-slows,
occupation of factories and premises and work stoppages
which occur in the enterprise of the party seeking relief.
 16. Arbitration Clause
For settlement of disputes two options are
available-
– Either go to Court of Law
– Or may chose to resort to arbitration

In international trading transactions, parties


normally do not like to go to courts and instead
decide to go to Arbitration.

The fact that the disputes are to be settled by


resorting to Arbitration should be clearly stated
in the export contract, also mentioning therein
whether Arbitration will be in accordance with
International Chamber of Commerce rules or the
rules set out by UN Commission on International
Trade Law will be applicable.