quoting ….shipping ….getting paid
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Quoting….Shipping
….Getting paidPresented By:Kathy EdwardsGlobal Business Solutions 800-499-6065
What is a Proforma QuotationAn offer to sellExporter’s recommended
PricePayment termsDeliveryMethod and terms of shipment
How is a Proforma Quotation used?
To communicate to your buyer
To obtain import license
To open letter of credit
To arrange for foreign currency
PRO FORMA INVOICE/ QUOTATION
No. 3856MI InvoiceDate: 3/30/2009
Bill to: Ship to:USA Imports
Please AdvisePO Box 000Istanbul
Turkey
Payment: WHAT PAYMENT TERMS DO WE QUOTE?
Estimated Delivery:
Quantity
Description
Approx.
Carton
Total Amount
3000
cartons
USD
USD6000 Board Feet Red Lumber $.1800
$ 10800.003000
Board Feet White Lumber
$ .1800 $ 5400.00Board Feet Blue Lumber
$.1800 $ 5400.00
Global Business Solutions2721Merry Oaks Trail
Winston Salem, NC 27103 USAPh 336-794-3930
Option 1Cash In Advance
Exporter has paymentExporter has productImporter must trust that shipment will be madeRequiring this method may cost you the sale
The Exporter
Option 2Letter of Credit
What IS letter of credit?Who benefits from a letter of credit?Do l/c’s guarantee payment?How does an l/c benefit the importer?Can exporters determine the cost of an l/c in advance?
Importers Bank
What is a Letter of Credit?
The Exporter
Exporters Bank
The Importer
Importers Bank
Pro Forma Quotation
L/C
Advise
Who benefits from a Letter of Credit?
Every time a banker touches a letter of credit this song plays
♪Advising fee
♪Confirmation fee♪Amendment fee♪Discrepancy Fee
♪Examination fee ♪Wire transfer fee♪Courier fee♪Because I said so Fee
Exporters can NOT determine the cost of a Letter of Credit in advance.
It is not possible to know the cost of a letter of credit in advance due
to:1. Number of Banks 2. Number of Amendments 3. Number of Discrepancies4. Bank charges
Letter’s of Credit do NOT Guarantee Payment to the Exporter• Almost 80% or l/c’s have discrepancies
L/C’s are CONDITIONAL documentsONE discrepancy can void the L/CPayment only when all conditions of the letter of credit have been met
L/C’s require expertise in document preparation
Even exporters with skilled documentation staff loose control of l/c documents due to freight forwarder errors
Letters of Credit protect banks, not exporters
In current economic conditions, even banks are not comfortable with many issuing banks.
Does a Letter of Credit benefit Importer?
For the importer, a letter of credit is the same as cash in advance plus bank fees because:
The importer must provide funds to their bank when the L/C is issues either in the form of cash, frozen credit facility, or a bond
The only advantage to the importer is the assurance that the exporter will ship something.
Because banks deal in documents, there is no guarantee of what is shipped.
What happens when an l/c has discrepancies?
The issuing bank must ask the importer for permission to pay
What is the term used when a bank asks the importer for permission to pay?
Documentary CollectionDocuments sent on approvalCash against documents
Option 3: Collection (Sight draft, Cash against documents)
Exporters Bank Importers Bank
Goods
Documents
Option 4 – Export Credit Insurance
Ship on open account terms with payment insuredBe more competitive by offering open account terms rather than CIA or L/CMarket to riskier areasObtain loans based on insured foreign a/rProtection against commercial and political risks
Benefits of Credit InsuranceFinancing
Banks will loan against insured receivablesCompetitivenessCompetitiveness
Don’t walk away from a saleReduce or eliminate write off’s
Typical cost of insurance is fraction of write off
Secure your 2nd most fluid asset after cash
Types of Credit InsurancePrivate sector coverage
Minimum premiumInsure domestic as well as exportNo restrictions for non us products, sale to military, etc.
Government backedUS content requirementDoes not support sales to militaryBacked by full faith and credit of US governmentApproval of your buyers in advance
Single buyer coverageMedium term coverage for payment terms beyond one yearLoans to foreign buyersLetter of credit coverage
EXPORT-IMPORT BANK OF THE UNITED STATES SHORT TERM MULTIBUYER EXPORT CREDIT INSURANCE POLICY
SMALL BUSINESS POLICIES= PREMIUM RATE SCHEDULE *
Term Class I Class II Class III Sight Letters of Credit $0.03 $0.03 N/A S/DD/P; CAD $0.06 $0.08 $0.20 1-60 Days $0.16 $0.20 $0.55 61-120 Days $0.27 $0.33 $0.90 121-180Days $0.35 $0.43 $1.15 181-270 Days $0.43 $0.54 $1.45 271-360 Days $0.53 $0.65 $1.77
ExIm Bank Rates
Credit Insurance
Insurance for insomniacs…….. insurance that lets you sleep
ProForma Quotation – Part 2International Commercial Terms
InCo Terms
What are InCo Terms?
What shipping terms do we quote?
Shipping Terms
INCO Terms
International Commercial Terms
http://www.iccwbo.org/index_incoterms.asp
www.iccbooks.com
Estimated Delivery: Ten (10) weeks after receipt of signed order and deposit
Recommended method of shipment: Oceanfreight
Quantity Description
Approx. Carton Total Amount
3000
cartons
USD USD
6000 Board Feet Red Lumber $.1800
$ 10,800.00
3000 Board Feet White Lumber
$.1800 $ 5400.00
Board Feet Blue Lumber
$.1800 $ 5400.00.
Total Ex Works $21,600.00
Inland Freignt & Forwarding (FOB) $ 200.00
Ocean Freight (CFR)and Insurance (CIF) $ 5,559.86
Total CIF Istanbul, Turkey
Finance charge for 60 day terms
$27,359.86
$ 820.80The above offering is based on current prices $28,177.66
Buyer must notify exporter of any product distpute within 10 days
of receipt of lumber. After 10 days importer accepts product as delivered.
ProForma Quotation – Part 2 What shipping terms do we quote?
What’s the deal with FOB?!
There are more terms than
FREE ON BOARD
EXW …Ex WorksSeller prepares goods and places them on the loading dock.
FCA – Free Carrier AtSeller delivers goods, cleared for export to named place specified by the BUYER. (EXW + Loading+Customs paperwork)Exporter not responsible for unloading at destination.Delivery of goods into truck, rail, or container. Freight placed in custody of transport driver.
FOB – Free On BoardExporter pays crating, containerization, transportation, loading, and port charges. Goods cleared for export by seller.
CFR – Cost & FreightSeller pays all cost and freight to get cargo to port of import.CFR (Named port of import)
CIF – Cost Insurance & FreightExporter pays all costs, freight, and insurance to point of import.
CIP –Carriage & Insurance Paid To
Seller pays freight and insurance to designated point which has been specified by the SELLER.CIP Charlotte Airport, CIP Spartanburg, CIP London Airport.
DAF – Delivered At Frontier Seller delivers freight, cleared for export to named port of import. (DAF Buffalo, NY)
DDP – Delivered Duty PaidSeller delivers to buyers door with all freight, all inland transportation,all taxes, fees and DUTY paid. Buyer unloads freight
The MOST Important Term…
C O M M U N I C A T I O NC O M M U N I C A T I O N
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