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Export ProceduresExport Procedures

Steps to follow when exporting goods

Australia’s top export marketsAustralia’s top export markets

• Japan

• USA

• Korea

• New Zealand

• China

Products exportedProducts exported

• Coal• Iron ore• Beef • Alcoholic drink• Aluminium

• Wool• Iron ore• Copper• Petroleum products

Australia’s exports to ChinaAustralia’s exports to China

• Unprocessed rural and resource commodities – iron ore, coal, alumina, petroleum,

liquified natural gas– wheat, wool, barley

• Manufactures and services such as– electrical machinery,

telecommunications equipment

China’s exports to AustraliaChina’s exports to Australia

• Labour intensive manufactured goods such as– textiles, clothing, footwear, toys,

furniture

• Higher-value added products such as– Computers, telecommunications

equipment, video recorders, televisions

Services are exported tooServices are exported too

• China is Australia’s seventh largest export market for services, particularly – education – tourism

• Australia is an important export market for China’s services – – shipping companies – airlines and – travel and tourism.

Steps to follow after a buyer places an order for your goods

Steps to follow after a buyer places an order for your goods

1. Check Export Laws1. Check Export Laws

– Australian laws will not let you export some goods

– Some goods are regulated and require export permits

• Export laws also require that

– All consignments with a value of more than $A500 must be declared to the Australian Customs Service when leaving Australia

2. Make sure that the customer is financially

sound

2. Make sure that the customer is financially

sound

Check with international banks

• Does he pay his bills on time?

• Does he owe money?

3. Think about pricing, quotations and the contract

3. Think about pricing, quotations and the contract

What costs do you have to think about?

– The cost of the product– Insurance– Freight – Packing

PricingPricing

E.G if you don’t pay for freight or insurance, you can charge the importer a lower price (- $1.20)

See Costing Table page 41

PricingPricing

– Name and description of the goods

– Quantity supplied  

– Price and currency

– Incoterm -which elements of transport and insurance costs are included in the quoted price?

– Packing specification

– Payment terms and method of payment e.g. prepayment, Letter of Credit, Bill of Exchange etc

Quotations-

– Shipping details and delivery schedule

– Documentation (certificate of origin, bill of lading etc)

– Warrantee

– Validity – period that the offer will remain unchanged

– Other specific conditions of sale e.g. samples for testing etc

The ContractThe Contract

• Remember that the process of …………….. and ……………….. makes a contract

Offer Acceptance

A quotation is a formal offer of goods for sale

SoIf a buyer accepts your offer there is now a contract. It is legally

binding on both parties.

The ContractThe Contract

• It is hard to withdraw or change an incorrect offer after it has been accepted.

• So make sure your pricing is accurate and the export offer is prepared very carefully

• Get advice from an international contracts expert.

4. Work out the best method of payment.

4. Work out the best method of payment.

What might go wrong?

• Payment could be delayed

• Changes in exchange rates could mean you lose money

• The importer might not pay

See methods of payment page21-22

Remember the different methods of payment?

Remember the different methods of payment?

Cash in Advance?Importer pays for the goods, thenExporter ships the goods

Letter of credit?Importer’s bank promises (on behalf of the importer) to pay the exporter through his bank, as long as certain terms and conditions are met

Remember the different methods of payment?

Remember the different methods of payment?

Documentary Collection/Bill of Exchange?Exporter gives his bank the document of title and invoice under a Bill of Exchange. The exporter’s bank passes them to the importer’s bank.The importer’s bank passes them to importer when the importer pays the value of the bill of exchange (same as invoice)

Open account? The exporter sends the goods to the importer, then sends the documents.

Then the importer pays.

Which method of payment is best for the exporter?

Which method of payment is best for the exporter?

Cash in Advance?Yes! The importer pays you before you ship the goods!

Letter of credit? Good for importer - expensive

Documentary Collection/Bill of Exchange?Yes! The importer does not get the goods until he has paid the money to the bank

Open account? No! You won’t be paid until after you send the goods!

5. Plan the shipping of the product overseas (freight)5. Plan the shipping of the product overseas (freight)

• Choose the best method for shipping the product overseas• This depends on the total cost:

– Risk of damages– Perishability of the product– Hazardous nature of cargo– Value of the shipment– Customer delivery requirements– The destination – are there ports, airports nearby?

• See the cost factors on page 15

• Air– More expensive– Faster– Less costs for other transport

• Sea– Cheaper– Slower– Need other transport once goods are unloaded

Intermodal or Multi-modal transport

Intermodal or Multi-modal transport

• Goods are packed in containers• Containers can be moved by

– A truck from the factory to the railway– Train inland to the port– Ship to the overseas port– Truck to the importer

• Good because– No unpacking of goods– Efficient– Safe

What goods would you ship byWhat goods would you ship by

Which method would be best?Which method would be best?

• If you need to export flowers from China to Australia?– Air? Sea? Train? Truck?

• If you are exporting iron ore from Australia to

China?

–Air? Sea? Train? Truck?

• If you are shipping a large load of wool from Australia to Shanghai, and then to Wu Xi ?

Decide if you want to use a freight forwarder

Decide if you want to use a freight forwarder

They will help you to transport and distribute your goods

Decide if you want to use a freight forwarder

Decide if you want to use a freight forwarder

They know

– Import and export rules of foreign countries– Methods of transport and distribution– Documents needed 

They provide services such as– Booking the shipping company or airline– Calculating costs– Monitoring the movement of the cargo– Providing and sending documentation– Storing cargo

Decide if you want to use a customs broker

Decide if you want to use a customs broker

They will organise import entry transactions for exporters such as

– preparation of paperwork

– advice on duties and taxes

– shipment release and customs payments

6. Organise export documentation: 6. Organise export documentation:

If you don’t have the correct and complete documents, your shipment can just sit for weeks on the wharf.

– The exporter will not get their money

– the importer will not get their goods 

Page 24

There are two main types of documentation:

There are two main types of documentation:

• Shipping documents

• Bank collection documents 

The exporter is responsible for making sure all documentation is correct

Shipping documentsShipping documents

These allow an export cargo to be: • moved through customs e.g export licence

• loaded on board a carrier (ship or aircraft) e.g. packing list

• shipped to a foreign destination e.g. bill of lading

Shipping documentsShipping documents

They include:

– Export licences

– Packing lists

– Bills of lading

Bank collection documents

Bank collection documents

These need to be given to the importer or to the importer’s bank so the exporter can receive payment.

Bank collection documents include:

Bank collection documents include:

• Commercial invoices• Consular invoices• Certificates of origin• Inspection certificates• Bills of lading• Manufacturing certificates• Insurance certificates• Dock receipts• Warehouse receipts

Important documentsImportant documents• Bill of Lading – the most important document

– It defines the contract between the exporter of the goods and the ship owners to carry the goods from one port to another

– It is also the document of titledocument of title to the goods and is fully negotiable.

– Transferring the bill of lading transfers the ownership of the goods. 

Important documentsImportant documents• Air Waybill

– same as Bill of Lading, but used when goods are sent by air, not by sea.

– Defines the contract between the exporter of goods and the airline to carry goods from one airport to another

Important documentsImportant documents• Bill of Exchange see page

– This is a demand for payment. – The exporter prepares it and presents it to the importer – The importer will pay

• “at sight” (i.e. when it is presented) or • on the date it matures, if it is a term bill.

Important documentsImportant documents

• Certificates of Insurance

– If the contract includes the INCOTERM CIF the exporter must

• organise insurance

• give the importer an insurance certificate 

Important documentsImportant documents• Certificate of Origin –

Some countries require a signed statement which says where the export item comes from.

Important documentsImportant documents• Inspection Certification –   Some purchasers and countries may require a certificate of inspection

• Export Permit – This is required by the Australian Government for most goods being exported.

Important documentsImportant documents• Commercial invoice

This is a bill for the goods given by the seller (exporter) to the buyer (importer). It should include information about the transaction, including – a description of the goods,– the address of the shipper and seller – the delivery and payment terms.  

The exporter must make sure all documentation is correct

7. Organise finance for the export transaction

7. Organise finance for the export transaction

• Talk to your bank about ways to finance your export plans– Overdraft – Commercial bills – Foreign bill negotiation facility – Foreign currency export advance facility– Foreign currency accounts

8. Organise Insurance8. Organise Insurance• Insurance against loss or damage during transit. – who will pay? It can be the

exporter or importer.– It depends on the INCOTERM in the contract

• Insurance against default of buyer. This is insurance against the risk of non-payment by the importer (Exporter pays)

• Product liability insurance if the product could cause damage or personal injury. (Exporter pays)

8. Organise Insurance8. Organise Insurance• Insurance against loss or damage during transit. – who will pay? It can be the

exporter or importer.– It depends on the INCOTERM in the contract

• Insurance against default of buyer. This is insurance against the risk of non-payment by the importer (Exporter pays)

• Product liability insurance if the product could cause damage or personal injury. (Exporter pays)

9. Check regulations9. Check regulationsa) Export regulations

– Australian Customs Service controls the export of goods from Australia

– The Australian Quarantine and Inspection Service (AQIS) also provides information on exporting animal and plant products

9. Check regulations9. Check regulationsb) Overseas Countries' Importing Regulations

– Most countries have import and exchange control regulations

– Exporters must contact the customs department in the country they are planning to export to, to find out what the regulations are

9. Check regulations9. Check regulations• World Trade Organisation (WTO)

– The WTO is the only global international organisation that deals with the rules of trade between nations. 

– Exporters should check its website for information on world trade conditions and regulations

A summary of the steps for exporting from Australia

A summary of the steps for exporting from Australia

1. Check Australia’s export laws – are the goods restricted?

2. Make sure your customer is financially sound3. Decide on the price of the goods, based on landed costs

Prepare a quotation, and negotiate a contract

A summary of the steps for exporting from Australia

A summary of the steps for exporting from Australia

4. Work out preferred payment terms– Cash in Advance?– Letter of Credit?– Bill of Exchange (Documentary Collection)– Open Account

5. Choose method of shipment and freight forwarder or customs agent

A summary of the steps for exporting from Australia

A summary of the steps for exporting from Australia

6. Organise export documentation– Shipping documents e.g. packing list– Bank collection documents e.g. Bill of Lading

7. Plan finance8. Organise insurance9. Check regulations

• Australia’s export regulations• Country’s importing regulations• WTO’s regulations

A summary of the steps for exporting from Australia

A summary of the steps for exporting from Australia

See what happens when paper products are exported from my husband’s company in Melbourne, to Hong Kong PAGE 221

Your homeworkYour homework

1. Do the Export procedures crossword (page 33)2. Do the exercise on page 323. Revise all your notes from last homework for the

test

How much can you remember?How much can you remember?

• Your university buys books from Box Hill Institute. Box Hill Institute sends them to China

– Who is the exporter?

–Who is the importer?

How much can you remember?How much can you remember?

• What is a tariff? A tax or duty collected at the border

• Who usually pays the tariff?

The importer

How much can you remember?How much can you remember?

Sometimes you can pay less duty (concessional rate of duty)

• What do you have to prove to get a concessional rate of duty?

• The product you are importing does not compete with Australian-made products

• Australian manufacturers will not manufacture it

How much can you remember?How much can you remember?

• A contract results from a process of ……….. and…………?– Offer– Acceptance

How much can you remember?How much can you remember?

• The seller makes an offer in writing and you accept it in writing. Is this a contract?

• The seller makes an offer in writing and you ring him on the phone and accept it. Is this a contract?

• The seller makes an offer to your face. You nod your head and shake his hand. Is this a contract?

How much can you remember?How much can you remember?

• What do trading terms (Incoterms) in a contract show?

Who will pay the costs of insuring goods and transporting them

How much can you remember?How much can you remember?

• You are importing goods from Melbourne, Australia.• The INCOTERM is EX_Works Melbourne

Who will pay the costs of insuring goods and transporting them – you or the exporter?You must pay for all costs – the price quoted by the exporter only covers supplying the goods (Packed) at his premises

How much can you remember?How much can you remember?• You are importing goods from Melbourne, Australia.• The INCOTERM is FOB Melbourne

Who will pay the costs of insuring goods and transporting them – you or the exporter?The exporter must pay for all costs until the goods are on the ship. You must then pay for transport and insurance from that point

How much can you remember?How much can you remember?

• What is a Letter of Credit?

This is issued by the bank. The bank promises for the importer to pay a certain amount of money to the exporter through another overseas bank, once certain terms and conditions are met

How much can you remember?How much can you remember?

• What is an Open Account?

The exporter sends the goods, then sends the documents to the importer who then pays for the goods

• Which method is best for the importer?• Exporter?• For both?

How much can you remember?How much can you remember?

• What is a forward exchange contract??

This means the bank agree to fix the rate at which they will buy or sell foreign currency at a set future date

e.g If I was selling you Australian boomerangs for A$5 each, you could agree with the bank that on 30 June, they will sell you the dollars for 6.1yuan each

How much can you remember?How much can you remember?

• What do freight forwarders do?– Help exporters with transportation and distribution of goods

• Book transport• Organise documents• Store cargo

• What do Customs brokers do?– Help with customs documents– Help you understand duties, taxes– Arrange customs release & payment