Y 1 TAKE 1 Y 1 TAKE 1 BUY 1 TA BUY 1 TA EXIM for Beginners by, Sovan Bapari By, Mr. Sovan Bapari (Marketing Chief & Co-Founder of DIMEKH.COM) EXIM for Beginners Participants of Import-Export Market & Their Details Contents Participants of Import-Export Market & Their Details Payment Methods Payment Terms Letter of Credits - Types & Details Delivery & Incoterms Documentation Work and Specifications of Every Document Licenses Government & Boards Marketing Plans & Details 1. 2. 3. 4. 5. 6. 7. 8. 9. There are mainly four types of people working in the import-export market: 1.Buyer 2.Merchant Exporter 3.Manufacturer 4.Trader & Commission agent MANUFACTURER Manufacturing Industries Definition: Manufacturing industries are those that engage in the transformation of goods, materials or substances into new products. The transnational process can be physical, chemical or mechanical. Manufacturers often have plants, mills or factories that produce goods for public consumption. Machines and equipment are typically used in the process of manufacturing. Although, in some cases, goods can be manufactured by hand. An example of this would be baked goods, handcrafted jewelry, other handicrafts and art. There are several massive manufacturing industries in the United States including food, beverage, tobacco, textiles, apparel, leather, paper, oil and coal, plastics and rubbers, metal, machinery, computers and electronics, transportation, furniture and others. More than 12 million Americans are employed across manufacturing industries. Further, many millions more are employed indirectly by the manufacturing industries. Manufacturing is vital to the U.S. economy, making up a large percentage of the country’s gross domestic product (GDP). Manufacturing industries are responsible for the goods in our economy, or the physical products we buy and use every day. What Manufacturing Industries Do: Manufacturers create physical goods. How these goods are created varies depending on the specific company and industry. However, most manufacturers use machinery and industrial equipment to produce goods for public consumption. The manufacturing process creates value, meaning companies can charge a premium for what they create. For example, rubber is not particularly valuable on its own. But when it is formed into a car tire, it holds substantially more value. So, in this case, the manufacturing process that allows the rubber to be transformed into a necessary car part adds value. Prior to the Industrial Revolution, the majority of goods were made by hand. Since the Industrial Revolution, manufacturing has grown increasingly important, with many goods being mass produced. Mass production means that goods can be produced much more quickly and with more precision. This drives down prices and makes many consumer goods cheaper, their cost within reach of the general public. When the assembly line was introduced into manufacturing, production further skyrocketed. Then, in the early 20th century, Henry Ford introduced a conveyor belt that physically moved products through the factory, from one station to the next. Each station also had a worker responsible for fulfilling a specific stage in the production process. This simple conveyor belt tripled production, and changed manufacturing forever. Today’s advancement of computer technology allows manufacturers to do more with less time. Now, thousands of items can be manufactured within the space of minutes. Computer technology can be used to assemble, test and track production. Each year, technology continues to make manufacturing increasingly efficient, faster and more cost-effective. However, automation also eliminates many manufacturing jobs, leaving skilled employees without work. Typically manufacturing units can be of the following types: Clothing & textiles Petroleum, Chemicals and Plastics Electronics, Computers and Transportation Food Production Metal Manufacturing Wood, Leather and Paper Clothing and Textiles: Petroleum, Chemicals and Plastics: The process of turning chemicals, coal and crude oil into usable products, along with the making of soaps, resins, paints and pesticides and medicines belong to this sector of manufacturing. But rubber manufacturing is considered a part of plastic work. This sector of industry also includes the use of crude oil to make certain plastics, as well as gasoline and other chemicals. Electronics, Computers and Transportation: Companies that process raw wool, cotton and flax to make cloth are categorized under the clothing and textiles sector. This also applies to using wool and cloth to make clothes, outerwear, upholstery fabrics and bedding. The output of seamstresses and tailors belongs to the clothing and textile sector. Synthetics such as polyester fall under chemical manufacturing. The material, not the product, is at the center of defining this sector. without work. Though these fields are closely related, they are usually treated as different sectors of manufacturing. Most of the products in this manufacturing sector use electric power, and all require a power source. Within this sector, you'll find all appliances and microprocessors, semiconductors, chips and all audio-visual equipment. The transportation sector is self-defining, as it contains all automobiles, trains and planes that do not fall under other sectors, such as metalwork or chemical manufacturing. Food Production: Metal Manufacturing: Along with oil and chemical manufacturing, metals belong to heavy industry, while the remaining sectors are generally considered as light industry or consumer-oriented industry. The production of metals includes all forms of iron, aluminum and steel manufacturing, as well as forging, engraving, coating and stamping. Wood, Leather and Paper: The inclusion of agriculture into manufacturing in modern society shows how agriculture has changed over the years, imitating more of a food production factory than an organic-style farm of just a century ago. As the simplest of all manufacturing industries, it includes all forms of food production – from the farm to the dinner table – including such work as canning and purifying. Wood production includes all forms of manufacturing floors or housing, as well as sawing and laminating. Under leather industries, you'll find all tanning and curing, but the creation of leather clothes falls into clothing and textiles. The paper production process is typified by the cleansing of raw wood pulp into paper products of various kinds. “In addition to these, there are various other manufacturing sectors Fast Moving Consumer Goods, for example: Electronics, Printing & Publishing, Industrial Equipment, Service Providers & Innovative Products.” MERCHANT EXPORTER TRADER & COMMISSION AGENT As an international trader, you're an intermediary in the buying and selling, or importing and exporting, transaction. Import/export management companies use two basic methods to price their services: commission and retainer. A commission agent works for businesses of all sizes as a middleman between companies and vendors. A person in this role can work in many industries, from real estate to sales and entertainment, and in many parts of the world. A commission agent can also work for more than one business at a time. "Merchant Exporter" means a person engaged in trading activity and exporting or intending to export goods . Merchant exporter procures the material from a manufacturer and exports in his firm’s name. Here the merchant exporter procures the order from the international market. Merchant exporter does not have its own manufacturing unit or processing factory. Merchant Exporter can export the excisable goods either directly from the premises of the manufacturer, with or without sealing of the export consignments, or through his premises under claim for rebate or under bond. Payment Methods, Payment Terms, Types & Details of LC, Delivery & Incoterms FIVE PAYMENT METHODS IN INTERNATIONAL TRADE FOR EXPORTS AND IMPORTS: 1. CASH-IN-ADVANCE In order to become successful in today’s global marketplace, exporters should provide their customers with appealing sales terms supported by suitable payment methods. The ultimate goal is getting paid in full and on-time for each export sale. An applicable payment method must be chosen carefully to reduce the payment risk while also fulfilling the needs of the buyer. There are a variety of ways that payments can be made, including a different level risk for collection. We will try to explain these methods from most secure to least secure for exporters. i) Telegraphic Transfer Also known as a wire transfer, the telegraphic transfer is a common way to get paid when exporting internationally. ii) Bank Draft and Transmittal Letter Cash-in-advance payment terms can help an exporter avoid credit risks, because payment is received up front before the ownership of the goods is transferred. For international sales, wire transfers and credit cards are the most common used cash-in-advance options available for importers. This presents the least risk to a seller while having the most risk to the buyer. However, requiring payment in advance is the least favorite option for the buyer, because it generates an unfavorable cash flow. Especially when traders do not know each other, buyers are concerned that the goods may not be sent if payment is made in advance. Also, exporters who insist on this payment method as their sole manner of doing business may lose to competitors who offer more attractive payment terms. To help in the transfer of exported goods, bank drafts are essential in the proper documentation to help keep shipping items organized along their route and efficient for the exporter. A bank draft is an important part of the international sales process for transferring control of the exported goods from the seller in exchange for funds from the buyer. It is often called a documentary collection, because the seller attaches documents to a draft and a cover letter. Usually the seller’s bank will send the bank draft and related documents via the freight forwarder to the buyer’s bank or a bank with which it has a relationship in the buyer’s country. When the buyer authorizes payment for the goods, the buyer’s bank will release the documents to the buyer and transfer the funds to the seller’s bank. The bank draft may or may not include a transmittal letter, which includes details of the draft transaction including the types of additional documents that are included and payment instructions. 2. LETTERS OF CREDIT A letter of credit, or “credit letter” is one of the most secure payment methods available to international traders. It is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount and it is one of the most secure payment methods available to international traders. The buyer sets up credit and pays his or her bank for this service. A Letter of Credit is useful when well-founded credit information about a foreign buyer does not exist or is difficult to secure, but the exporter is satisfied with the creditworthiness of the buyer’s foreign bank. A Letter of Credit also protects the buyer as they do not need to make a payment until the goods have been shipped as promised. Different Types of Letters of Credit: i) Commercial Letter of Credit This is a standard letter of credit that’s commonly used in international trade, and may also be referred to as a documentary credit or an import/export letter of credit. A bank acts as a neutral third party to release funds when all the conditions of the agreement have been met.