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Procedures of foreign trade

The process to be followed to conduct the foreign trade is known as procedure of
foreign trade which is very much similar to those procedures of home trade. In some
cases like way of delivering goods and making invoices and payments system are
somehow different. Some commonly accepted procedures of the foreign trade are as
follows :

i. Enquiry of goods : Enquiry is the first step of home trade. A buyer seeks the
information about the goods or service he wants to buy. Inquiry about quality,
price, credit futilities, mode of payment, discount etc is done by buyer through
different sources such as letter, telephone, Internet, etc.
ii. Quotation : The reply given to an enquiry is known as a letter of quotation, and
the price quoted thereon are known as quotation. A letter of quotation must
give the correct description of the goods which can be supplied, their prices, the
terms of payments, the time of delivery and other conditions.

iii. Placing an order : The buyer would compare the quotation which he recodes
from various sellers and would place an order with the firm with whose
quotations and terms he is most satisfied. An order must be complete itself.
It should mention full details regarding the goods and other conditions, the
quality and quantity of goods, time and place of delivery and other particulars
which the buyer wants particularly to emphasize.
iv. Acknowledgment of the order : It is the process of giving information to buyer
by seller that he received the purchase order. Generally letter of acknowledgment
contains the entire particular contained in the order so that the purchaser may
correct any mistake that might have crept unnoticed.
v. Preparation of invoice : When the goods are ready for dispatch, the seller
prepares a statement of the amount payable to him by the buyer. This statement
is known as invoice. The object of the invoice is to explain to the buyer the
various items of which the total amount, he has to pay, is made up. Most
commonly, at the end of invoice' E & O. E' is written which is the abbreviated
from of 'Errors and omission Expected'.
vi. Letter of credit : A letter of credit is a document issued by a banker authorizing
the bank to which it is addressed to honor the bills of the person named to the
extent of certain amount. It is widely used means of payment in foreign trade.
Importer should open the letter of credit in local bank and local bank assures
the foreign bank to pay a promised amount of money after delivery of goods.
Exporter gets the payment from his local bank after delivery of goods and after
reviving goods by importer, the importer's bank pays the amount to exporter's
bank.
vii. Bill of landing : It is another important document used in foreign trade. It is
an official receipt given by a shipping company, acknowledging the receipt of
goods and bound the ship. It is always prepared in triplicate. It contains the
name of the ship, and other important details of the goods consigned. This

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