Business Correspondence 3

http://blog.stikom.edu/ana

Business Correspondence 3

• 2 credits (100’)• Sources:

– Models Business Letters, Emails & Other Business Documents by Shirley Taylor

– Commercial Correspondence by A. Ashley• Scoring system:

– Class assignment, homework, quiz : 40%– Mid test : 30%– Final Test : 30%

Meeting 1-2: Introduction to International Trade– Commission agents– Goods on consignment– Indents– Bill of landing– Import documentation and procedure– Bonded warehouse

Meeting 3: Banking

– Kinds of bank accounts– Expression in banking

Meeting 4: Banking (Home Business)

• correspondence with bank

• bank loans and overdraft

• other banking correspondence

Meeting 5: Banking (international business)

• Bankers’ draft

• Bankers’ transfer

• Bill of Exchange

• Documentary bills

• Bankers’ commercial credits

Meeting 6: Inquiry letters to insurance

Meeting 7: Claims for insurance

Meeting 8-9: Reports • Components of reports• Writing Reports

Meeting 10-11:Proposal • Components of Proposal• Writing Proposals

Meeting 12-13: Business Plan • Components of business plan• Samples of business plan• Writing business plan

What is International Trade?

exchange of capital, goods, and services across international borders or territories.

Domestic and International Trade

• factors of production such as capital and labor are typically more mobile within a country than across countries

• international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labor or other factors of production.

Regulation of international trade

• regulated through bilateral treaties between two nations

• The regulation of international trade is done through the World Trade Organization at the global level, and through several other regional arrangements such as MERCOSUR in South America, the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, and the European Union between 27 independent states.

Risk in international trade

• Buyer insolvency (purchaser cannot pay); • Non-acceptance (buyer rejects goods as different

from the agreed upon specifications); • Credit risk (allowing the buyer to take possession

of goods prior to payment); • Regulatory risk (e.g., a change in rules that

prevents the transaction); • Intervention (governmental action to prevent a

transaction being completed); • Political risk (change in leadership interfering with

transactions or prices); and • War and Acts of God.

Transactions usually takes place in the following ways:

• The overseas buyer employs a commission agent in the exporter’s country.

• The exporter employs an agent living in the buyer’s country.

• The exporter sends the goods to a factor in the importing country for sale “on consignment”

• The exporter → The consignor

• The importer → The consignee

• Buying and selling overseas → fax → New technology → EDI (Electronic Data Interchange) → reduces paperwork.

Purchasing goods from abroad

(Importer): Contact Exporters requesting

quotations/samples. → (Exporter): Provide quotations/samples → Place order with supplier (indent with an agent) → Arrange with shipping company → Arrange transport of goods to dock → Arrange insurance → Shipping company issues Bill of Lading → Arrange insurance → Send shipping documents → Notify importer of date of sailing and arrival.

On receipt of goods, pay dock charges if necessary, plus any customs charges. → Arrange

transport from docks to own premises. → send payment to

exporter.

Commission Agent

• Individual or firm employed to buy or to sell in their own names for the accounts of the principal.

Tasks:• Obtaining quotations• Placing orders• Supervising fulfillment and arranging for the dispatch

of the goods.• Collect payments for the principal and hold liable for

payment should the buyer fail to pay.

Agent acknowledges order

Your order number C75 to 10 February for 1500 fibreglass wash basins in assorted colours will be placed without delay. We have already written to a manufacturer in North London and will do everything we can to ensure early shipment.

We note your request for the basins to be arranged in tens and packed in cartons rather than wooden containers in order to save freight.

We shall arrange insurance on the usual terms and the certificate of insurance will be sent to you through our bankers along with our draft bill and other shipping documents.

Agent requests quotation from manufacturers

We have received an order for 1500 (fifteen hundred) 40 cm circular fibreglass was basins in assorted colours for shipment to Bahrain. Please quote your lowest price fob London and state the earliest possible date by which you can have the consignment ready for collection at your factory.

Your prize should include arrangemeny of the basins in tens and packing in cartons of a size convenient for manual handling.

Goods on Consignment

• Goods which an exporter sends to an importer, the invoice will not immediately be issued.

• The goods is sold and then the exporter will draw up an invoice for the stock has been sold.

Company in Nairobi requests goods on consignment

Buyer’s request

We are the largest department store in Nairobi and have recently received a number of enquiries for your stainless steel cutlery. There are very good prospects for the sale of this cutlery, but as it is presently unknown here we do not feel able to make purchases on our own account.

We would like to suggest that you send us a trial delivery for sale on consignment terms. When the market is established we would hope to place firm orders.

If you agree we would render monthly accounts of sales and send you the payments due after deducting expenses and commission at a rate to be agreed. Our bankers are the Nairobi branch of Midminster Bank Ltd, with whom you may check our standing.

We believe our proposal offers good prospects and hope you will be willing to agree to a trial.

Company in Nairobi requests goods on consignment

Seller’s acceptance

Thank you for your letter proposing to receive a trial delivery of our cutlery on consignment which we have carefully considered.

We are sending you a representative selection of our most popular lines and hope you will find a ready sale for them. Your suggestion to submit accounts and to make payments monthly is quite satisfactory, and we will allow you commission at 10% calculated on gross profit.

The consignment is being shipped by SS Eastern Prince, leaving Southampton for Mombasa on 25 January. We will send the bill of lading and other shipping documents as soon as we receive them. Meanwhile a pro forma invoice is enclosed showing prices at which the goods should be offered for sale.

We are confident that this cutlery will prove popular in your country and look forward to trading with you

Indents

• Foreign buyers who placed orders through commission agents or commission houses in the supplier's country.

• An order to an agent to buy goods on behalf of foreign buyer.

Tasks:

Give details of the goods required, prices, packing and shipping instructions and method of payment.

Foreign buyer deals with commission house

Buyer (in Egypt) sends indent to commission house (in England)

We have received the manufacturer’s price list and samples you sent us last month and now enclose our indent number 762 for goods to be shipped by the SS Merchant Prince due to leave Liverpool for Alexandria on 25 July. The indent contains full instructions as to packing, insurance and shipping documents.It is important for the goods to be shipped either by the vessel named, or by an earlier vessel; if there are any items which cannot be supplied in time for this shipment they should be canceled. When we receive the goods we shall pay you the agreed agency commission of 5%. The account for the goods will be settled direct with the manufacturers.This is a trial order and if it is met satisfactorily we shall probably place further orders

Agent places order with a firm in Manchester

We have just received an order from Jean Riachi & Co of Mansura, Egypt. Particulars are shown in the enclosed official order form together with details of packing and forwarding, case marks, etc.The goods are to be ready for collection at your warehouse in time to be shipped to Alexandria by SS Merchant Prince due to sail from Liverpool on 25 July or by an earlier vessel if possible. Prompt delivery is essential and if there are any items which cannot be included in the consignment they should be canceled.Invoices priced ex warehouse should be in triplicate and sent to us for forwarding to our customers with the shipping documents. The account will be settled by our customers direct with you. As del credere agents, we undertake to be responsible should the buyer fail to pay.This is a trial order and if it is completed satisfactorily it is likely to lead to further business. Your special care would therefore be appreciated.Please confirm by return that you can accept this order, and arrange to inform us when the goods are ready for collections.

Meeting 2

Bill of Lading• Serves as the consignor’s receipt for the goods

taken on board ship. • Describes the consignment, its destination, and

who it is for. • A document of title to the consignee to give right

to claim the goods to which it refers.

Bill of lading is usually prepared in a set of 3 originals and 3 copies. → state the name of vessel, the time of sailing, marks and identification on cargo, the delivery address and the statement “ clean shipped on board” →goods are not damaged ,,, on board ship.

Signed by the chip’s captain.

Import Documentation and Procedure

• Before the ship arrives, the importer (either a merchant dealing on their own account or an agent) will usually have received the shipping documents.

• The original documents would go through the bank, but it is normal practice for photocopies to be despatched by a courier service so that the importer can go through the import procedures before the goods actually arrive.

Import Documentation and Procedure

Shipping documents include:

1. An advice of shipment specifying the goods and stating the name of the carrying ship, its date of sailing and probable date of arrival.

2. A bill of lading

3. An invoice (pro forma if the goods are imported on consignment)

Import Documentation and Procedure

When the ship arrives, the importer must obtain release for the bill of lading and proceed as follows:1. The importer must endorse the bill of lading and

present it to the shipping company, or their representative, at the port

2. The freight must be paid (if not already prepaid by the exporter) and any other charges due to the shipping company.

3. The importer must prepare and submit the necessary import entries on official forms provided by the appropriate Customs authorities

An import transaction(a). Importer (London) places order

(Japan)

Our order for 20 Super Hitachi Hi-Fi Systems (SDT 400) is enclosed at the cif price of $550 each, as quoted in your letter of 10 June.

Through the Midminster Bank Ltd, 65 Aldwych, London WC2, we have arranged with the Bank of Japan, Tokyo, to open a credit in your favour for $6000 to be available until 30 September next.

Please let us know when the consignment is shipped.

An import transaction(b) Importer opens credit

The importer writes to the Midminster Bank in London opening credit

I have completed and enclose your form for an irrevocable credit of $6000 to be opened with the bank of Japan, Tokyo, in favour of Kikuki, Shiki & Co, Tokyo, for a consignment of music systems, the credit to be valid until 30 September next.

An import transaction(b) Importer opens credit

When the consignment is shipped the company will draw on the Bank of Japan at 30 days after sight; the draft will be accompanied by bills of lading (3/3), invoice and certificate or policy of insurance.

Please confirm that the credit will be arranged

An import transaction(c) Supplier in Japan presents

documents to Bank of Japan, Tokyo

We enclose a 30 days’ sight draft together with bill of lading (3/3), invoice, letter of credit and certificate of insurance relating to a consignment of music centres for shipment by SS Yamagata to Videohire Ltd, London.

Please send draft and documents to the Midminster Bank Ltd, 65 Aldwych, London WC2 $LS, with instructions to hand over the documents to Videohire Ltd against their acceptance of the draft.

An import transaction(d) Supplier sends advice of shipment

YOUR ORDER NO 825

We thank you for your order for 20 Super Hitachi Music Centres. I am glad to say we can supply these immediately from stock. We have arranged to ship them to your London warehouse at St Katharine Docks, London by SS Yamagata sailing from Tokyo on 3 August and due to arrive in London on or about the 25th.

An import transaction(d) Supplier sends advice of shipment

The shipping documents will be delivered to you through the Aldwych Branch of the Midminster Bank Ltd against your acceptance of the 30 days’ sight draft as agreed in our earlier correspondence.

We hope you will find everything satisfactory.

An import transaction(e) Importer acknowledges

consignment

ORDER NO 825

Your consignment of Music Centres reached London on 27 August.

Thank you for the care and promptness with which you have fulfilled our first order. We expect to place further orders soon.

Bonded Warehouse

Warehouse whose owners have entered into a bond with the Custom authorities as a guarantee that the goods will not be removed until duty on them has been paid.

Clearance of goods from warehouse

This letter is from a tea blender to their broker,

who has bought a quantity of tea and holds the

delivery order issued by the importer.

We refer to the 12 chests of Assam, ex City of Bombay, which you bought for us at the auctions yesterday and for which we understand you hold the delivery order.

Please clear all 12 chests at once and arrange with William Transport Ltd to deliver them to our Leman Street warehouse

Useful Expressions

Enquiries and ordersOpenings

1. Thank you for your quotation of… and for the samples you sent me.

2. One of our best customers has asked us to arrange to purchase…

3. Your letter of … enclosing indent for .. Arrived yesterday.

Useful Expressions

Enquiries and ordersCloses

1. Please deal with this order as one of special urgency.

2. We look forward to receiving further indents from you.

3. We thank you for giving us this trial order and promise that we will give it our careful attention.

Useful ExpressionsConsignmentsOpenings1. We regret that we cannot handle your

goods on our own account, but would be willing to take them on a consignment basis.

2. We have today sent a consignment of … by SS Empress Victoria, and enclose the shipping documents.

3. The consignment you sent us has been sold at very good prices.

Useful ExpressionsConsignmentsCloses1. Please of course credit our account with

the amount due.2. We look forward to hearing that you have

been able to obtain satisfactory prices.3. We will send you our account sales, with

banker’s draft, in a few days.4. We enclose our account sales and shall

be glad if you will draw on us at 2 months for the amount due.

ReferencesTaylor, Shirley. 2005. Model Business

Letters, Emails & Other Business Documents. Harlow: Pearson Education Limited

Ashley, A. 2003. Commercial Correspondence. Oxford: Oxford University Press.

King, F.W & D. Ann Cree. English Business Letters. Singapore: Longman Singapore Publishers. Pte. Ltd.