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Identifying and Contracting Prospective Buyers back
Identification of right market buyer and product seta the ball of success rolling.
Steps to identify Market and Buyers :
  • Analyze past trade statistics and prioritize markets.
  • Identify database to shortlist buyers in priority market.
  • Calculate landed cost to buyers and estimate viability based on present prices
  • Study product features and estimate product adaptation cost
  • Estimation of market size and set a target
  • Study market penetration methods and compare suitability towards markets identified
  • Cost of promotion and business development
Business Correspondence :
The aim of such correspondence is to obtain following :
  • The specifications of the products already in use in the country.
  • The import policy is vogue in the country (e.g. whether there is any import licensing, any restriction on remittances, any pre- qualification for product / supplier etc.).
  • The trade practices in the country with special reference to your product, information like whether importers import and distribute the product/ high sea sales, whether agent is required to book orders from actual users, etc.
  • The prices at which the product sell in the retail / wholesale market, the duty structure and any other cost element to arrive at the landed costs.
  • Study of various market segments Importers, Supermarkets, Government Supplies, Institutional sales, tenders, OE Supplies, etc.
  • The various factor that rule the market - Quality, Price, Delivery, Brand Popularity, Credit terms, etc.
  • Role of Advertising and Publicity with reference to the product and the country.
Making Offers to obtain confirmed orders :
After having generated firm inquiries one should proceed to make a firm offer. An offer ISA document which is drawn in favor of the buyer clearly indicating the items offered the price at which it is offered, quantity, terms of delivery payments, etc. Offers are normally made through Performa invoices clearing stating the terms and conditions. After making an offer, it is always advisable to obtain buyer’s acceptance. One point worth mentioning is that laws in a certain countries demand additional information on the offer. This should be ascertained before making the offer. The following information should incorporated in the offer :
Unit price and currency : While quoting the price an exporter should ascertain :
  • Whether there is any floor price / Minimum export price for the item in the question. This information can be obtained from the concerned Export Promotion Council / FIEO.
  • Whether there is any Value Addition Criteria especially if the benefit of Advance Licenses / IPRS / etc. are to be availed.
Description of the item : This should incorporate as many details to avoid any dispute in future.
Quantity : The quantity should be mentioned, more so if your prices are quantity based.
Terms of Delivery : FOB / CFR(C&F) / CIF etc. The terms of delivery are specified in the INCOTERMS (International Commercial Terms) specified by the International Chamber of Commerce.
FOB : Free on Board – the exporter bears all costs till the goods are loaded on steamer / aircraft.
CFR : This was originally C&F. The exporter bears all expenses till the materials reaches destinations.
CIF : The exporter also bears the insurance till destination, in addition to cost in CFR.

Payment Terms : The mode of payment from the buyer has to be clearly stated. A few of the common modes of payment are as under :
1. Letter of Credit : This a documentary credit whereby a bank guarantees the payment on behalf of buyer subject to the beneficiary submitting documents confirming to the L/C terms.

2. Cash against documents or D/P( Documents on presentation) : This is same as what we refer in India as Documents through bank. The bank delivers the negotiable set of documents to the beneficiary after he makes the payment to the bank.

3. Documents on Acceptance (D/A) : This is a credit facility given for a certain period. D/A 90 days means that the beneficiary will pay 90 days after the documents are delivered to/accepted by the buyer.

4. Advance payment : One can also ask for the Advance Payment in full or part. It should however be noted that the payment has to come through authorized banking channels. After one receive the advance payment a FIRC (Foreign Inward Remittance Certificate) should be obtained from your bankers. This should be submitted to the negotiating bank after the shipment.

There are few points that an exporter has to bear in mind with reference to our Exchange Control Regulations :
  • All payment transactions should be effected through banking channels only.
  • Negotiable documents cannot be sent to the buyer directly without prior permission from RBI.
  • Deferred payment terms (credit terms beyond 180 days) cannot be offered unless there is a specific approval from RBI.
  • It is the exporter responsibility to ensure that the payment is realized in India 180 days from the date of export.
5. Mode of payment : One should clearly state whether shipment will be made by air, ocean liner, post parcel, road, etc.

6. Packing : The manner in which the goods will be packed should be mentioned (eg. Wooden cases, gunny bags, corrugated boxes, etc.) It is desirable to give details of both primary and secondary packing.

7. Validity : The validity of your offer should be clearly indicated. There may be occasions when by the time you receive the orders your inputs cost have increased. You are in awkward position and may loose credibility with your buyer.

8. Delivery : You should clearly state the delivery period. This should also indicate whether shipments will be in parts( part- shipment); whether trans shipment should be allowed.

9. Any other point that you may like to indicate : examples: Force Majeure Clauses, Exchange Fluctuations, Freight Rate Revisions, Guarantee/Warranty obligation, Arbitration clause, Jurisdiction, etc.