International Trade Processes

International Trade Processes

1. Sales Contract process
2. Letter of Credit (L/C) process
3. Cargo Shipment process

Ad1. Sales Contract process

a. Promotion/Introduction letter
Expoters promote their goods through trade exhibition, newpapers, magazine, radio and television ads both at home and abroad. Promotion can also be made through assistance from the National Export Development Agency (Badan Pengembangan Ekspor Nasional - BPEN), KADIN, Trade Attache of Indonesian Embassy abroad.

b. Letter of Inquiry
Interested importer can send a letter of inquiry to exporter. This letter of inquiry usually contains inquiry for price quote, product specification, quantity of goods, delivery time and destination port.

c. Offersheet
In response to the letter sent by interested importer, exporter will usually reply by sending the importer an offersheet. Offersheet contains information as requested by the importer – product price, specification, quantity (1 container / 2 container), delivery time, destination port, packaging method, brochure, and if necessary, sample product.

d. Ordersheet/Purchase Order
After reviewing the offersheet sent by the exporter, the importer will place an order in a form called ordersheet or purchase order.

e. Sales Contract
Exporter will prepare a sales contract based on information specified in both the offersheet and purchase order together with clauses on force majuere, claim, shipment date, transshipment, partial shipment, inspection, packing and marking, and marine cargo insurance. Sales contract must signed by both the exporter and importer. The sales contract is made in two copies, each having the same tenor.

f. Sales confirmation
Importer will review the sales contract and sign it if it approves and send the sales contract back to the exporter.

Ad2. L/C Opening process

a. Importer requests its forex bank to open a letter of credit (L/C) to provide some funds to pay its liabilities to the exporter as much as agreed and specified in the sales contract and pursuant to the provisions of The Uniform Customs and Practice of Documentary Letter of Credit dari International Chamber of Commerce Paris No 500 or commonly referred to as UCP-DC-500. The forex bank requested by the exporter to open an L/C is called an opening bank/issuing bank. This opening bank will be responsible for the L/C to the exporter receiving the L/C. Importer requesting the opening of L/C is called applicant.

b. Opening bank will issue an L/C through a correspondent bank of the country where the exporter is from. Such L/C opening can be by letter, wire, telex, facsimile or other legal electronic media. The correspondent bank requested by the opening bank to deliver L/C opening mandate is referred to as advising bank

c. Advising bank notifies with a cover letter that there is an L/C opened for the interest of the exporter. The cover letter is referred to as L/C advice. While the exporter receiving the L/C is called beneficiary.

ad3. Cargo shipment process

a. After receiving L/C confirmation, the exporter prepares goods which are ready for export, and files booking to the shipping company. The exporter then arranges export formality, for example filling in PEB (Pemberitahuan Ekspor Barang) or Export Notice, and applies certificate of origin.

b. After loading the goods to the ship, the shipping company submit receipt of goods received, copy of forwarding contract and copy of goods ownership in the form of bill of lading.

c. Shipping company is then responsible to forward the cargo to destination port.

d. After receiving shipping document from the opening bank, importer as consignee, will secure import clearance in Custom and Excise of the destination port. Importer will later contact the shipping agent in the destination port to receive the goods/cargo.

e. Shipping agent surrenders the cargo/goods to the importer.

source: various sources