Typical Export Process

A  TYPICAL EXPORT TRANSACTION

Step 1–  The  exporter  establishes  initial  contact by responding  to  an  overseas  buyer’s advertisement (ad ) for  a product  that  she/he  can  supply.  Such ads are available in various trade publications.  The exporter’s  letter briefly  introduces  the company  and  requests  for  more  information  on  the  product  needed  as  well  as  bank  and  trade  references.

Step 2 — The  prospective  buyer  responds  to  the  exporter’s   letter  or  fax by  specifying  the  type  and  quantity  of  product  needed,  with  a sample  where  appropriate. The  potential importer  also  sends  his/her  trade  references.

Step 3 —  The exporter  checks  with  the  consulate of  the    importer’s  country  to  determine:       

                    Whether  the  product  can  be  legally  imported and   any  restrictions  that  may apply, and

                    Whether there are any requirements  that  need  to  be  met .

The consulate may indicate that a certificate of origin is needed to clear shipment at the foreign port. The exporter also verifies the buyer’s bank and trade references through its bank and other U.S.government agencies, such as the Department of Commerce.

Step  4 — The  exporter  ( if  an  agent ) contacts  manufacturers of  the  product  to  a) establish  if  the  given  product  is available  for  export  to  the  country  in question, b) obtain and  compare  price  lists,  catalogs  and  samples.

Step 5  The  exporter  selects  the  product  from  responses  submitted  by  manufacturers based   on  quality, cost  and  delivery time.  The  sample  selected  is  sent  by  airmail to the overseas  customer  to  determine if the product  is acceptable  to  the  latter.  In  the meantime, the  exporter  prepares  and  sends  a price  quotation  suggesting  the  mode of transportation and  letter  of  credit terms.  The price quotation should include commission and markup.

Step 6 —  The  exporter  obtains  a  positive  response  from  the  overseas  customer,  and is requested  to  send  a  pro forma  invoice to  enable  the latter  to  obtain  an  import and  foreign  exchange  permit.  The exporter sends the pro forma invoice.

Step 7 — The  overseas  customer  receives  the  pro forma  invoice,  opens a confirmed irrevocable  letter  of  credit  for  the  benefit  of  the   exporter,  and  sends  an  order  to the latter  to  ship  the merchandise.

Step 8 —   The  exporter  verifies  with  its  bank  about  the  validity  of  the  letter  of  credit and  finds  that  it  meets  the agreed  conditions  in  the  export  contract  and  that  it  will  be honored  by  the bank  if  the  exporter  meets  the  terms.  The  exporter  ships  the merchandise, and submits  the  required  documents (such  as  bill  of  lading, commercial  invoice, consular  invoice,  certificate  of  origin,  packing list  etc.) to  the  bank  with  a  request  for  payment.  The  exporter  is  paid,  the  merchandise is on  transit, and  the  transaction  is  completed.

EXPORT PRICING: EXAMPLE

Factory Price 
Domestic freight 
Subtotal 
Export documentation 
Subtotal 
Ocean freight and insurance 
Subtotal 
Import duty (12% landed cost) 
Subtotal 
Wholesaler markup (15 %) 
Subtotal 
Importer or distributor markup (22%) 
Subtotal 
Retail markup (50%) 
Final Consumer Price