Professional Documents
Culture Documents
Session Plan - 12
Logistics and shipment planning
Sea and Air freight, Forwarding agents and 3PL , Reservation of space (CBM calculations), ship sailing and planning, Containerization
Books for ref: A guide to export policy procedure and documentation( M.I.Mahajan) , 16th Edition
Shipments are sent by : Sea Post (Courier) Air Contract with the buyer decides the mode of the shipment
Shipping Documents are very important in export trade. Should be made very carefully Should be handed over to bank timely
Air: Recently got popular Adv: -expensive but saves time (saves storage and transit time) -Reduces extra efforts of packaging - If payment on goods receipt. beneficial for exporter
Freight rationalization
Increase of oil price has increased freight prices Buyer overseas are paying the freight. High freight will effect the selling price. Will effect the final selling price (to consumer) Does not work in favor of India Imp. To keep the sea/air cost lowest..thus sea is favourable
Exports by Courier/Post
Can be sent through any post office Authorized international courier companies. Products grouped under two heads: : Trade samples and gift parcels not involving foreign
exchange :Merchant goods involving foreign exchange
Samples as gifts for value not exceeding Rs 25000/- can be sent by post without any pre approval Other samples can go with a certificate from the bank stating no involvement of foreign exchange Mutilated samples
Exports by Air
Seasonable or high in cost but low in bulk goods are aired.
Lesser packaging charges as less handling of goods in transit Less chances of damage Ensures faster delivery which leads to quicker returns Reaches the related country directly Proof of exportation is known as Airwaybill no.
Agents provide arriving and sailing details of the ships. Shipping order is issued by the shipping company confirming the booking
Transportation Facility given by railway goods Indian railways give preference to exporters
Shipping order is checked for train booking. For wagon booking following papers are req: Shipping Order Forwarding note Type of wagon req.
Mid stream Vessels and Shed Vessels Vessels are accepted thru jetty and sometimes thru Mid stream. In midstream cargo has to be taken by boats for loading. This is called Overside loading. No extra charges for loading and unloading
Mates Receipt
After cargo is loaded chief of vessel issues mate reciept. It contains: name of shipping line, vessel, port of loading, port of dispatch, place of delivery, shipping marks, kind of packages/containers, no. of packages/containers, description of goods, gross weight, condition of cargo at the time of receipt on board. It is presented to companys office or agents office in exchange of Bill of Lading.
Bill Of Lading
Is a document issued by the shipping company or agent acknowledging the receipt of goods mentioned in the bill for shipment and undertaking to deliver the goods in the like order and condition as received . Goods will be cleared only if the frieght and other charges are paid.
Containerisation
Is a method of distributing merchandise in a unitised form
Container Types:
General purpose container: closed and are suitable to carry all type of general cargo. Made of steel body. Fruit containers: Insulated container with internal dimensions slightly longer. Refrigerated containers: fitted with refrigeration unit Bulk Containers: to carry dry powers Ventilated Containers: made of steel, have full length top and side ventilators Flat rack containers Open Top Containers: top loading where height of cargo is in excess of height of the container. Half Height Version: to carry heavy dense cargos such as steel, pipes and tubes.
Tank Containers: custom made containers Open Sided containers: for plywood etc.. Hanger Containers: used for dry cargo, equipped with removable beams. Used for shipment of garments on hangers. Bin Containers: have no doors, ideal for heavy dense cargoes such as steel pipes Average operational life of a container is 12 yrs
Advantages of containerisation:
Permits door-to-door service.. (factory to retail area) No intermediate handling at terminal/port.quick ransits permits less risk of cargo damage. Low risk of damage attracts buyer for cargo bookings Elimination of intermidiate handling at terminals enable substantial labor savings Less packing needed Cargo arrives in better condition More reliable transits Faster transits encourage many importers to hold reduced stocks.
Dis-advantages of containerisation:
Capital Intensive project Expense at the chosen terminal include cost of cranes, traders, van carriers etc..and also creating stacking space. Not all merchandise can be containerized Container in itself is a high capacity carrying unit..exporters with limited trade have are unable to fill the container to capacity and thereby adjust their stuff to other modes which are going to the same destination The container owners have to ensure the full utilization Few countries restricts internal movement.
. Books for ref: A guide to export policy procedure and documentation( M.I.Mahajan) , 16th Edition
Pricing Policy The primary motive of any business activity is to make profit. In any business profit depends on the price policy. Price policy is influenced by two major factors..ie.. Costs and the market situation
Parameters of pricing
Cost and market situations
Cost as well as market situation are different for the goods sold in abroad market and domestic market. The basic raw material cost is same But features like extra care and supervision given to export goods, packing, marking and labeling result in higher cost of the product. situation is also diff in abroad. There is a tight competition with the products exported in other countries so the price has to be highly competitive.
Economy of scale
Size of international market is unlimited If a proper survey and understanding of market is done products can be produced in huge bulk which will in result in lowering the final price.
Technological improvements
Companys involved in marketing are regularly busy in their technology improvement and up-gradation. Modern manufacturing techniques result in higher production and better quality. Results in increased sales and better prices
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The cost-plus approach The contribution pricing or marginal costing The value added costing
Eg: Raw material cost Labor cost Packing cost Transport cost Total
Total no. of units produced: 1000 pcs Average cost per unit ie..10000 / 1000 = 10 Profit margin 10% = 10/Selling price = 20/-
Fixed costs:
Cost of land, building or rent Lighting, heating, cooling etc (of office area) Office expenses Management of the business Staff Research and development Plant and machinery
Variable costs
Raw materials, components used in the product Labor directly employed in the production of export product Fuel and power used in production Transportation on carriage of goods to godowns or factory Packing, labeling and marking of goods Commission paid to salesmen and agents
When deciding the principle and approach to export pricing, terms of delivery shld be considered. These also effect the prices Terms of delivery lay down three Conditions: What charges and expenses will be incurred by exporter and importer? When and where the delivery of goods takes place? When and where the title of the goods passes to the importer?
Standard terms of delivery are existing since long but manier times the meaning varies from country to country. The ICC (Intl chamber of commerce) has codified them under the name INCO TERMS. These were put into force in 1936 and after many revisions in 1953, 1967, 1976, 1980 and1983, the last revised terms were put into practice in july1990.
Each term defines the transfer of responsibility from one the other. The documents made are based on the conditions of the chosen terms and delivery. Carriers and forwarders also work based on the chosen term of delivery.
Delivered Docks:
Includes basic price plus packing and transport to the port, mentioning clearly the port at which the goods will be delivered. The exporter should keep in mind the port while doing the product costing. If any exporter from Mumbai presumes that he wil be shipping from Mumbai port and buyer term says Kolkata the the exporter has to bear the cost of sending the goods to Kolkata port.
FOB includes FOB port town + charges incidental to actual shipment of goods but ocean freight and marine ocean charges. Common in garment exports and in countries where importer has to pay import duty on the FOB price. FOB is a mixed contract , the exporter would base his quotation on and FOB basis but in addition act on behalf of his customer in arranging shipment procuring the bill of lading and insurance.
CFR (Cost and freight) (named port of destination) Also known as CIF
Exporter must pay the cost and freight till the goods reach the destination. This covers all the risk , loss , loading goods clearance beared by the exporter.
Terms of payments
Export payment terms or method of payment depends on each buyer , the nature of business, customs of trade and abv. all the foreign exchange regulations of the exporter (v.imp) and importer.
Documentary credit or a letter of credit (L/C) are very popular for international transactions. A confirmed ir-revocable , Documents against payment (D/P) should always be sought for exporting goods.
Payment Terms
Subject to legal conditions, the method of payment depends on the below commercial factors: Amount of transaction Nature of Goods Exported Credit Standing of the buyer Economic Situation in the country of the export Exchange and Import controls in the country of import Credit terms granted by competitors Financial Condition of the exporter
Method of Payment
Letters of credit:
bankers commercial letter of credit is known as Documentary letter of credit It is also described as commercial letter of credit as it is used in commercial transaction (ie.. Sale and purchase of goods)
Parties to Documentary Credit There may be 3-4 parties to the documentary credit:
The buyer applicant for the credit ie.. Importer The seller ie.. Exporter (beneficiary) The bank Issuing the L/C (the buyers bank) Advising / confirming bank or paying agent- issuing banks correspondent bank.
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The custody of goods remains with the exporter until the payment is received.
Exporter can face the Risk of non-acceptance of documents by the importer.
Export Regulations:
Documentation Regulatory Requirements
Importance of Documentation:
Most important aspect of overseas trade. Correct documentation is very important. Right documents help the exporter to get the payments smoothly and on time.
Contd..Documents involved in overseas trade: Manufactures certificate GSP certificate (generalized system of preferences): for
developing countries.no import duty
Certificate of Inspection: consignment has been inspected Antiquity certificate : issued by archaeological survey of India Packing List / note Export declaration Forms: gives details of the categories Certificate of measurement: size of weight of the cargo for freight
calculation
Trans shipment permit: permit for changing vessal Shipping Order: for cargo booking Cart-lorry ticket: to admit lorry inside the port gate
Commercial invoice Customs Invoice: US, Canada and Australia requires these Shipping Advice: information to importer Shipping bill: to allow shipment Freight Declaration: whoever pays the freight Health Certificate; for food products Certificate of Value: req. for few countries, value Bank Certificate of Export and Realization:
Packing shld be strictly done as per the requirements, if no instructions follow the customary stds of the importing country Size of packing shld be taken care as sea freight depends on the space it covers and air freight depends on the weight.
Labeling:
On request exporter puts various kinds of labels, price tags etc.. Trims, packing material imported comes free without import duty as these will be re-exported with the garments.
Marking:
Shipping marks as requested by the buyer shld be marked on each and every consignment so the every pack can be identified individually thru out its destination. One ship carries large amount of shipments of various exporters so correct marking is very imp. Marking includes: shipping marks of consignee eg: importers name, port of despatch, port of destination, steamers name and bill of lading no. Also the exporters address and very imp. The packing list.
A Packing List : is an important shipping document. It is an itemized list of what a particular shipment contains, including the quantity and description of each item. It usually accompanies domestic as well as international shipments. A packing list is created by the shipper to inform all parties including the receiver of the goods, the transportation company, and customs agents (if applicable) about the details of the shipment. It Is the list of items one particular carton or container is carrying. Its should have complete details of the item: size, color total no. of pcs
Invoices
The commercial invoice is essentially a bill (i.e. invoice) from the seller (the exporter) to the buyer (the importer) describing the parties to the agreement, the goods to be sold, and the terms involved, as agreed between the exporter and importer. As such, the commercial invoice is the final bill exchanged between the seller and the buyer. The commercial invoice will normally be presented on the exporter's letterhead and will be addressed to the importer. It should contain full details of the consignment, including price and other related costs, in order to facilitate customs clearance. It must also be signed and dated. Freight and insurance, when included in the selling price, should be itemised separately as these charges are not subject to duty in certain countries. It is important that the commercial invoice clearly differentiates between the dutiable component of the order (the market value of the order), any other typically non-dutiable charges such as freight and insurance, and the total invoice value of the order.