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GLOBAL MARKETING

“The process of focusing the resources


(people, money, and physical assets)
and objectives of an organisation on
global market opportunities and
threats”.
History For Trade
 Difficulties in transportation and
communication;

 Delays after manufacturing;

 Border disputes, a history of invasions,


and other tensions between countries;

 Paper money was less readily available, so


it was more difficult to match products for
barter between the same buyer and
sellers.
Reasons for Globalization of
Markets
 Technological Progress
 Increasingly rapid technology lifecycles

 Change in the Customer Behaviour

 Countries promoting global trade

 Each country differs in their relative


strengths
Reasons for Globalization of
Markets
 Differencein timing of the demand
for various products across the
countries

 Internationalization or Cost
Effectiveness

 Theory of Relative Advantage


INTERNATIONAL MARKETING
– Macro dimensions of the environment are
economic, social, political, legal and
technological.
– Single most important characteristic of
global marketing environment is the
economic dimension.
– Due to global economic growth, markets in
every region of the world are potential
targets for almost every company from
high tech to low tech across the spectrum
of products from basic to luxury.
An Overview of World Economy
– Emergence of global markets leading to
new opportunities resulting into
displacement of local competitors.
– Significant increase in the integration of
world economy.
– Today the integration is to the extent of
50% as compared to 10% at the
beginning of the 20th century.
– Integration is particularly striking in two
regions i.e. the European Union and the
North American Free Trade Area.
Reasons for exploring Foreign
Markets
 Absorb overhead cost
 Domestic market is saturated

 Quick Profits

 Spreads corporate risks and


minimizes the impact of undesirable
domestic situations such as
recessions.
Stages of market development based on GNP per capita
correspond with the stages of economic development.

Income group by per % of world GNP Stage of Economic


capita GNP Development

High income 80 Advanced,


countries GNP per industrialized,
capita (>$11,116) postindustrial.
Upper Middle 7 Industrializing
Income Countries
(GNP per capita
>$3,596 but<$11,115)
Lower Middle 10 Less developed
Income Countries (LDC)
(GNP per capita
>$906 but <$3,595)
Low-Income 3 Preindustrial(LDC)
countries(GNP per
capita
<$905)
COUNTRIES
a) Low and lower-middle income countries are
referred to as less developed countries or LDCs.
b) Upper middle income countries are also called
industrializing countries.
c) High income countries are referred to as
advanced, industrialized, and post industrial.
→Some countries are moving up the economic
ladder while others are stagnating in their
economic development e.g. Estonia, Peru and
South Africa are moving from the lower middle
category to upper income category.
Characteristics of Low Income
Countries

 Limited industrialization and a high percentage of


population engaged in agriculture and subsistence farming
 High birthrates
 Low literacy rates
 Heavy reliance on foreign aid
 Political instability and unrest

⇒Implications of International Marketing


 Demand for many categories of consumer goods and
services are limited because of low levels of income.
 Even the products like refrigerators, TVs, and electric fans
are considered as luxuries.
Characteristics of Low Income
Countries
 Import or production of certain items may not be allowed
or encouraged by the governments.
 Prices and hence the demand of certain categories may get
affected adversely by high taxes because of their
categorization as luxuries.
 Obsolete technologies are not uncommon in LDCs. Several
developing counties even import second hand plant and
machinery.
 Exception is Bangladesh, where GNP per capita is $366 but
growing garment industry has enjoyed increasing exports.

→Companies in developed economies view the developing


countries as a market for obsolete technologies and
products.
Lower Middle Income Countries

Lower Middle Income Countries are at


early stages of industrialization and
marketing implications are:
* Growing domestic markets for
clothing, batteries, tyres, building
materials, and package foods.
* Good location for production of
standardized or mature products
such as clothing for exports.
Upper Middle Income Country
Upper Middle Income Countries are industrializing
countries and are characterized by
* Declining percentage of population engaged in
agriculture as people move to industrial sector.
* Degree of urbanization increases
Rising wages, advanced education and high rates of
literacy.

⇒Marketing implications are


 Rapid, export driven economic growth
 Frequently become formidable competitors.
Developed Economies
Developed economies are characterized by
* High levels of income, consumption and business
competition.
* More liberal foreign trade.
* Markets for many product categories nearing saturation or
have already saturated or even declining.

⇒ Marketing implications are


 Fast technological changes and innovations.
 Consumption of basic and life style products is very high in
most households.
 Create new markets such as markets for multimedia and
interactive forms of electronic communications.
Developed Economies
For a company in a developing country to do
business in advanced and more
competitive environments it is vital to
understand differences in respect of

 Product quality
 Features

 Styling and finish

 Packaging.
Developed Countries
For a company in a developing country to do
business in advanced and more
competitive environments it is vital to
understand differences in respect of

 Product quality
 Features

 Styling and finish

 Packaging.
Challenges faced by Exporter
 Countries to enter
 How to enter each country
 How to adapt product and service features
to each country
 Pricing
 Communication to fit the cultural practices
of each country
 Different legal systems
Challenges faced by Exporter
 Different styles of negotiation
 Different requirements of buying, owning
and disposing the property,
 Currency
 Different language,
 Conditions of corruption or political
favoritism
Barriers To Trade
 Tariff
Barrier
 Quotas

 Voluntary Export Restraints

 Subsidies to Domestic Products

 Non-Tariff Barriers
Justification for Protectionism
 Protection of an Infant Industry
 Resistance of Unfair Foreign Competition

 Preservation of a vital domestic industry

 Intervention into a temporary trade


balance
 Maintenance of domestic living standards
and preservation of jobs
 Retaliation
Development of Foreign Market
1. Exporting Products and Services
from the Country of Origin
 International Licensing
 Franchising
4. Management Contracts
5. Joint Venture Arrangement
6. Setting up Manufacturing
Operations in Foreign Countries
Different Types of Firms

 Domestic

 Export

 International

 Multinational

 Global or Transnational
Foreign Exchange
 Foreign Exchange: Transactions methods
used to make payments between
countries.

 Payments can be either by way of paper


currency, notes, checks, bill of exchange,
etc.

 The foreign exchange (also known as


"forex" or "FX") market is the place where
currencies are traded.
Top 10 Strong Foreign Currencies
Rank Currency Code Symbol
1 United USD $
States Dollar
2 Euro EUR €

3 Japanese JPY ¥
Yen
4 British GBP £
Pound
5 Swiss Franc CHF Fr
Top 10 Strong Foreign Currencies
Rank Currency Code Symbol
6 Australian AUD $
Dollar
7 Canadian CAD $
Dollar
8 Swedish SEK kr
Krona
9 Hong Kong HKD $
Dollar
10 Norwegian NOK kr
Krona
Payment Terms

 Advance Payment from the Buyer

 Letter of Credit at sight

 D/P basis-Documents against payments

 D/A basis- Documents against acceptance


Advance Payment from Buyer
 Exporter may receive advance payment from the
overseas buyer either through T/T or wire
transfer.
 T/T means telegraphic transfer, or simply wire
transfer. It's the simplest and easiest payment
method to use
 It takes 3-4 days for us to received the wire
transfer made from anywhere in the world
 Shipments are to be made within one year from
the date of receipt of advance remittance
 Shipping Documents have to routed directly
Documentary Collection
 A Documentary Collection is a method of
payment used in international trade
whereby the Exporter entrusts the
handling of commercial and often financial
documents to banks and gives the banks
instructions concerning the release of
these documents to the Importer.
Documentary Collection
The two most common conditions for release
are:

 D/P basis-Documents against payments

 D/A basis- Documents against acceptance


D/P basis-Documents against
payments
 A type of payment for goods in which the
documents transferring title to the goods
are not given to the buyer until he has
paid the value of a draft issued against
him.

 Also known as a sight Collection.

 After receiving the payment from buyer,


bank hands over documents to him and
remitting the money to exporter
D/P basis-Documents against
payments
 The major advantage of the use of cash against documents
payment is the low cost, versus using a letter of credit.
 But, this is offset by the risk that the importer will for some
reason reject the documents (or they will not be in order).
Since the cargo would already be loaded (to generate the
documents), we have little recourse against the importer in
cases of non-payment.

 So, a payment against documents arrangement


involves a high level of trust between the exporter
and the importer.
 To our customers who have long-standing relationships
with us, for larger quantity order shipped by sea, we
usually make the payment arrangement as 50% made via
T/T advance payment and 50% made via D/P to expedite
the whole transaction process.
D/A basis-Documents against
acceptance
 A type of payment for goods in which the
documents transferring title to the goods
are not given to the buyer until he has
accepted the draft issued against him.
 Documents may be released only if the
Importer accepts the accompanying draft,
thereby incurring an obligation to pay at a
specified future date. Also known as a
term Collection.
Documentary Collection
Advantages:
 Ability to examine documents before
paying or accepting a draft.
 Unlike a Letter of Credit, a line of credit is
not required and fees are minimal.
 Under a term Collection, you obtain goods
and deferred payment.
Disadvantages:
 Under a sight Collection, you must pay
when taking possession of documents.
Letter of Credit
 Defined as written instrument issued by a
bank at the request of its customer, the
Importer (Applicant), whereby the bank
promises to pay the Exporter (Beneficiary)
for goods or services, provided that the
Exporter presents all documents called for,
exactly as stipulated in the Letter of
Credit, and meets all other terms and
conditions set out in the Letter of Credit. A
Letter of Credit is also commonly referred
to as a Documentary Credit.
Letter of Credit
Types of Letter of Credit

 Revocable
 Irrevocable

 Transferable

 Confirmed

 Unconfirmed

 Standby

 Cash advance against Letter of Credit


Types of Letter of Credit
Revocable:
A revocable letter of credit allows for
amendments, modifications and
cancellation of the terms outline in the LC
at any time without the consent of the
exporter. Because this places the exporter
at risk, revocable LC is not generally
accepted.
Types of Letter of Credit
Irrevocable:
An irrevocable LC requires the consent of
the issuing bank, beneficiary and the
applicant before any amendment,
modification or cancellation to the original
terms can be made. This type of LC is
always preferred as payment is always
assured provided the terms and conditions
of the LC are met.

Irrevocable letter can both be either


confirmed or unconfirmed.
Types of Letter of Credit

Confirmed: A confirmed letter of credit is


when a second guarantee is added to the
documents by another bank. The advising
bank, the branch of the correspondent
through which the issuing bank routes the
LC, adds its undertaking and commitment
to pay the LC.
Types of Letter of Credit
Unconfirmed: An unconfirmed LC is
when the documents bear the
guarantee of the issuing bank alone.
The advising bank merely informs
the exporter of the terms and
conditions of LC, without adding its
obligation to pay. The exporter
assumes the payment risk of the
issuing bank, which is typically
located at foreign bank.
Types of Letter of Credit
 Standby: Form of bank guarantee.
In case the buyer does not pay then the
seller presents the draft and documents to
bank for payment.

 Transferable LC: An irrevocable LC may


also be transferable. It is often used when
the exporter is the middleman of the
importer’s agent, and not the actual
supplier of the merchandise.
Letter of Credit-Benefits to Buyers
 Facilitates financing—Creating Banker’s
acceptance
 Buyer can confirm the merchandise is
shipped on or before due date.
 It is safer to deal with bank than to
prepay.
 Buyer gets better terms and prices.
Letter of Credit-Benefits to Buyers
 No cash is tied in the process. Buyer does
not have to pay cash to foreign seller till
he receives the documents to the title of
goods purchased. Especially helpful while
dealing with unfamiliar suppliers and laws
 Protects buyer since bank only pays when
supplier meets with all LC conditions.
 The buyer can build safe guard in LC
including inspection of goods, QC and set
production and delivery times.
Letter of Credit-Benefits to Sellers

 Assures security of payment from international bank


once the terms of LC are met.
 Seller can determine when payment will be satisfied
and ship the goods accordingly.
 Bank bears the responsibility of oversight
 Seller does not have to open an account and the
credit risk is eliminated.
 Gives seller the finance facilities
 Once the bank confirms the LC political, economical
risk and questions regarding buyer’s ability to pay are
eliminated. The confirming bank is obliged to pay
even if buyer goes bankrupt provided the LC terms
are met.
Export Credit Guarantee
Corporation of India Limited
 Export Credit Guarantee Corporation of
India Limited was established in the year 1957
by the Government of India to strengthen the
export promotion drive by covering the risk of
exporting on credit.
 ECGC Export Credit Guarantee Corporation of
India Ltd (ECGC) is a Government of India
enterprise under the administrative control of
Ministry of Commerce, GOI.
 ECGC is one of the premier export promotion
organizations setup by the Government of
India for providing credit insurance and
guarantee functions to the Indian exporters
and the banks.
Export Credit Guarantee Corporation
of India Limited
 Provides a range of credit risk insurance
covers to exporters against loss in export
of goods and services
 Offers guarantees to banks and financial
institutions to enable exporters to obtain
better facilities from them
 Provides Overseas Investment Insurance
to Indian companies investing in joint
ventures abroad in the form of equity or
loan
Export Credit Guarantee Corporation
of India Limited
 How does ECGC help exporters?
 Offers insurance protection to exporters against
payment risks
 Provides guidance in export-related activities
 Makes available information on different countries
with its own credit ratings
 Makes it easy to obtain export finance from
banks/financial institutions
 Assists exporters in recovering bad debts
Provides information on credit-worthiness of
overseas buyers
ECGC-COMMERICAL RISKS
 Insolvency of the buyer

 Failure of the buyer to make the payment


due within a specified period, normally
four months from the due date. Buyer's
failure to accept the goods, subject to
certain conditions.
ECGC-POLITICAL RISKS
 Imposition of restriction by the
Government of the buyer's country or any
Government action, which may block or
delay the transfer of payment made by
the buyer.
 War, civil war, revolution or civil
disturbances in the buyer's country. New
import restrictions or cancellation of a
valid import license in the buyer's country.
ECGC-POLITICAL RISKS
 Interruption or diversion of voyage outside
India resulting in payment of additional
freight or insurance charges which can not
be recovered from the buyer.
 Any other cause of loss occurring outside
India not normally insured by general
insurers, and beyond the control of both
the exporter and the buyer.
Guarantees to Exporter

 SCR or Standard Policy


 Small Exporters Policy

 Specific Shipment Policy - Short


Term (SSP-ST)
 Export Turnover Policy
SCR or Standard Policy:

 Shipments (Comprehensive Risks) Policy,


commonly known as the Standard Policy,
is the one ideally suited to cover risks in
respect of goods exported on short-term
credit, i.e. credit not exceeding 180 days.
 This policy covers both commercial and
political risks from the date of shipment.
 It is issued to exporters whose export
turnover is more than Rs.50 lacs.
Small Exporters Policy

 The Small Exporter's Policy is basically the


Standard Policy, incorporating certain
improvements in terms of cover, in order
to encourage small exporters to obtain
and operate the policy. It is issued to
exporters whose anticipated export
turnover for the period of one year does
not exceed Rs.50 lacs
Export Turnover Policy
 Turnover policy is a variation of the
standard policy for the benefit of
large exporters who contribute not
less than Rs. 10 lacs per annum
towards premium. Therefore all the
exporters who will pay a premium of
Rs. 10 lacs in a year are entitled to
avail of it.
Specific Shipment Policy - Short
Term (SSP-ST)
 Specific Shipment Policies - Short Term (SSP-ST)
provide cover to Indian exporters against
commercial and political risks involved in export
of goods on short-term credit not exceeding 180
days. Exporters can take cover under these
policies for either a shipment or a few shipments
to a buyer under a contract. These policies can be
availed of by
(i) exporters who do not hold SCR Policy and
(ii) by exporters having SCR Policy,
 in respect of shipments permitted to be excluded
from the preview of the SCR Policy.
Different types of SSP (ST)
1. Specific Shipments (commercial and
political risks) Policy - short-term.
2. Specific Shipments (political risks) Policy
- short-term
3. Specific Shipments (insolvency & default
of L/C opening bank and political risks)
Policy - short-term
Guarantees to Bank
 Packing Credit Guarantee

 Export Finance Guarantee

 Export Production Finance Guarantee

 Post-Shipment Export Credit


Guarantee
International Commercial (INCO)
Terms
– International Chamber of Commerce (ICC) has developed these terms
defining the costs, risks, and obligations of sellers and buyers in
international goods transactions.
– Incoterms are a set of contractual instruments facilitating the sale and
transport of goods in international transactions and hence must specifically
be included in the contract.
– In case of dispute, courts and arbitrators will look at
 The sales contract
 Who has the possession of the goods, and
 What payment, if any, has been made?
– Incoterms 2000 are included in a contract of sale if the parties want to
 Complete sale of goods.
 Indicate each contracting party’s costs, risks, and obligations with regard
to the delivery of goods.
 Establish basic terms of transport and delivery clearly defining transport
mode of delivery, customs clearance, passage of title, and transfer of risk
Incoterms 2000
Incoterms 2000 are grouped into four categories.
(1) The E term- EXW
- Seller makes the goods available to the buyer at the sellers’
own premises.
(2) The F terms- FCA, FAS, and FOB.
- Seller is responsible to deliver the goods to a carrier named
by the buyer.
(3) The C terms- CFR, CIF, CPT, and CIP.
- Seller is responsible for contracting and paying for carriage.
In certain cases seller also incurs additional costs covering
the risks of loss or damage once the goods have been
shipped.
(4) The D terms- DAF, DES, DEQ, DDU, and DDP.
- Seller is responsible for all costs and risks associated with
transporting the goods to the destination.
Incoterms categories
Group Code Name of the term
Group ‘E’ Departure EXW Ex Works(named place)
Group ‘F’ Main FCA Free Carrier (named place)
carriage unpaid FAS Free Alongside Ship(named port of shipment)
FOB Free on Board(named port of shipment)
Group ‘C’ Main CFR Cost and Freight( named port of destination)
carriage paid CIF Cost, Insurance and Freight (named port of
CPT destination)
CIP Carriage Paid To (named place of destination)
Carriage and Insurance Paid to (named place of
destination)
Group ‘D’ Arrival DAF Delivered at Frontier (named place)
DES Delivered Ex Ship (named port of destination)
DEQ Delivered Ex Quay (named port of destination)
DDU Delivered Duty unpaid (named place of
DDP destination)
Delivered Duty Paid ( named place of destination)
Description of Incoterms 2000
EXW-Ex works (named place)
– Seller completes the delivery when it places the
goods at the sellers’ premises or another named
place e.g. point of production, factory, or
warehouse) before the good are cleared for
exports and loaded on to the buyer’s vehicle.
– Seller should be held responsible for costs and
risks of loading the goods onto the vehicle.
– Such a stipulation should be made in the
contract.
– If buyer can not handle export formalities, the
EXW term should not be used.
Description of Incoterms 2000
FCA-Free Carrier (named place)
– Seller delivers the goods at the named place,
after export clearance, to the carrier
nominated by the buyer.
– The named place in FCA and all other ‘F’
terms is domestic to the seller.
– Seller is not responsible for loading the goods
on vehicle.
– FCA term may be used for any mode of
transport included multimodal transport.
– The buyer names the carrier who is to receive
the goods.
Description of Incoterms 2000
FAS-Free Alongside Ship (named port of shipment)
– Seller is said to have completed the delivery
when the goods are placed alongside the vessel
at the named port of shipment.
– The buyer has to bear all costs and risks of loss of
or damage to the goods.
– Seller is required to clear the goods for exports,
unless stipulated in the contract that buyer will
clear the good s for export.
– FAS term is used only for ocean transport or
inland waterway transport and is commonly used
in the sale of bulk goods such as oil, grains, and
ore.
Description of Incoterms 2000
FOB- Free on Board (named port of
shipment)
– Seller completes the delivery when the
goods pass the ship’s rail or ramp in case
of Ro-Ro ship.
– Buyer has to bear all costs and risks of
loss of or damage to the goods from that
point.
– Seller has to clear the goods for export.
– Used in the sale of bulk goods as well as
container loads where it is important to
deliver the goods on board the ship.
Description of Incoterms 2000
CFR-Cost and Freight (named port of destination)
– Seller clears the goods for export and is said to
have completed the delivery when goods pass the
ship’s rail or ramp in case of Ro-Ro ship at the
port of departure.
– Seller is responsible for paying for the costs
associated with transporting the goods to the
named port of destination (domestic to the
buyer).
– Once the goods pass on the ship’s rail or ramp at
the port of departure, buyer assumes the
responsibility for risk of loss or damage as well as
any additional transport costs.
Description of Incoterms 2000
CIF- Cost, Insurance, and Freight (named port of destination)
– Seller completes the delivery when the goods pass the
ship’s rail or ramp in the port of departure.
– Seller clears the goods for export and is responsible for
paying for the costs associated with transporting the goods
to the named port of destination.
– Seller is also responsible for procuring and paying for
marine insurance.
– Buyer assumes the responsibility for risk of loss or damage
as well as any additional inland transport cost after the
delivery at the port of destination.
Description of Incoterms 2000
CPT-Carriage Paid To (named place of destination)
– Seller nominates a carrier and delivers the goods to the
nominated carrier at the named place of destination
(domestic to the buyer).
– Seller clears the goods for export and pays the cost of
carriage to the named destination.
– The seller is also responsible for the costs of unloading,
customs clearance, duties, and other costs of carriage.
– Once seller delivers the goods to the carrier, the buyer
becomes responsible for all additional costs.
– Buyer will have an ‘insurable interest’ and hence will
acquire the insurance coverage.
Description of Incoterms 2000
CIP-Carriage Insurance Paid To (named place of destination)
– Seller nominates a carrier and delivers the goods to the
nominated carrier at the named destination (domestic to the
buyer).
– Seller pays the cost of carriage to the name destination and buyer
bears all risks and any additional costs occurring after the goods
have been delivered at the destination.
– Seller has to procure and pay for insurance against the risk of loss
or damage during the carriage.
– Though seller provides for insurance coverage during the main
voyage, the buyer may have additional ‘insurable interest’.
– Seller is also responsible for the costs of unloading, customs
clearance, duties, and other costs included in the cost of carriage.
– Used for any mode of transport, particularly for multimodal
transport.
Description of Incoterms 2000
DAF-Delivered At Frontier (named place)
– Seller is said to have completed the delivery
when the goods are placed at the disposal of
buyer on arriving vehicle, not unloaded.
– Seller has to clear the goods for export at the
named point and place at the frontier.
– While using DAF term, it is important to name the
precise place and time of delivery at the frontier
i.e. before the customs border of the country, to
enable the buyer to unload and secure the goods
in time.
– Seller is not responsible for procuring and paying
for insurance.
Description of Incoterms 2000
DES-Delivered Ex Ship (named place of destination)
– Seller is said to have completed the delivery
when goods are placed at the disposal of the
buyer on board the ship, but not cleared for
import at the named port of destination.
– Seller is responsible for all costs related to
transporting the goods to the named port of
destination prior to unloading.
– Term is used only for shipment by ocean or
inland water way or by multimodal transport.
Description of Incoterms 2000
DEQ-Delivered Ex Quay
– Seller completes the delivery when goods are
placed at the disposal of buyer on the wharf at
the named port of destination.
– Seller clears the goods for exports but not for
imports.
– The buyer assumes all responsibilities for import
clearance, duties, and other costs related to
import as well as for transport to the final
destination.
– Used only when shipments arrive at the port of
destination by ocean or by inland waterway
Description of Incoterms 2000
DDU-Delivered Duty Unpaid
– Seller is responsible for making the goods
available to the buyer at the named destination;
but not for unloading the goods from the arriving
means of transport.
– Seller clears the goods only for exports and the
buyer assumes all responsibilities for import
clearance, duties, administrative costs, and any
other costs related to imports.
– The buyer is also responsible for transport to the
final destination.
– Term is used when the named destination is
beyond the seaport or airport of entry.
Description of Incoterms 2000
DDP-Delivered Duty Paid
– Seller is responsible for making the goods
available to the buyer at the named destination,
but not for unloading the goods from the arriving
vehicle.
– Seller clears the goods for export and import and,
therefore, assumes all responsibilities for
delivering the goods to the named destination-
including import clearance, duties, and other
costs payable upon imports.
– Used when the named destination i.e. point of
delivery is beyond the seaport or airport of entry.
Processing of Export Order
1. Acknowledge the export order
2. Examine it thoroughly in respect of
a. the product and its specifications
b. preshipment inspection
c. payment conditions
d. special packaging, labeling and marking requirements
e. shipment and delivery date
f. marine insurance
g. documentation
h. arbitration
i. applicable laws and jurisdiction
Only if the exporter is satisfied on these aspects, a formal
confirmation of export order is sent to the buyer.
Elements of Export Contract
Product, Standards and Specifications
a. Product(s) name including the technical name, if any
b. Sizes, if any, in which the product is to be supplied
c. Standard/specifications, national or international or
according to the specific requirement of the buyer or as per
the sample approved by him
d. Quantity: both in figures and words clearly specifying
whether it is in terms of number, weight or volume and
nature of the same. For example, weight could be in terms
of metric ton of 1000 kgs, British Long ton of 1016 kgs or
American short tom of 907 kgs.
e. Inspection: whereas numbers of goods are subject to pre-
shipment inspection by designated agencies, the foreign
buyer may stipulate his own conditions and manner of
inspection by any other agency.
f. Total value of contract: both in figures and words specifying
the currency along with the name of the country. For
example, there is an Australian Dollar; a British pound and
Egyptian pound.
g. Terms of delivery: such as fob; cif; c&f etc should be clearly
incorporated in the contract.
Elements of Export Contract
Discounts and Commissions: contract should specify the amount of
discount/ commission to be paid and by whom i.e. by the
exporter/importer.
n. Licenses and Permits: should clearly state whether the export
transaction would involve any export (import) licenses and whose
responsibility and expense the same would be obtained.
o. Insurance: it is important to provide for insurance of goods against
loss, damage or destruction during the voyage in international trade
contracts as it takes long time before the buyers receive these.
p. Document requirements:
1. required for the exportation/importation of goods
2. needed by the buyer for taking the delivery of the goods
3. relating to the payment
4. special documents relating to the nature of the transaction
q. Force Majeure (Excuse for the non-performance of Contract): it is
desirable to include in the contract certain provisions defining the
circumstances, which would relieve them of their liability for non-
performance of their contract. These are the causes beyond the control
of the concerned party, which could not have been foreseen or avoided
so it becomes impossible to perform.
r. Remedies: to include specific remedies in respect of default of
contractual obligations. Exporters may approach the Indian Council of
Arbitration for obtaining its expert advice.
s. Arbitration: to provide for an arbitration clause for amicable and
quick settlement of disputes or differences that may arise between the
Elements of Export Contract
Taxes duties and charges: relating to exportation normally are a part of pricing
quoted by the seller. However, any levies in the country of importation should
be to the account of the buyer.
i. Period of delivery/shipment: the actual date(s) of delivery/shipment must be
stated along with the place of dispatch and delivery. The words like “immediate
delivery” are ambiguous and should be avoided. Also whether the time for
delivery will be calculated from the date of contract or from the date of receipt
of L/C.
j. Part shipment/ Transshipment: To clearly state whether the shipment is to
be effected in one single lot or part lots are accepted. Also whether the goods
are to be shipped directly to the port of delivery must be clearly stipulated. L/C
opened by the foreign buyer must incorporate such clauses.
k. Packing Labeling and Marking: type of package, labels including language
and colour, and marking requirements must be taken care of as required by the
buyer.
l. Terms of the Payment, Amount, Mode & Currency: the implications of
various terms of payment used in the international transaction must be
thoroughly understood. Exporter needs to specify whether the prices are based on
current rate of exchange of the Indian rupee with another currency and also whether
such fluctuations are to the account of the seller or the buyer.