Take CIF as an example to explain the fulfillment process of export contracts. Under the CIF trade term and when the transaction is completed by letter of credit, the fulfillment process of export contracts can be divided into four sections: goods, certificates, ship, and payment. Among them, “goods” refers to the implementation of goods, including the preparation of goods and inspection. “Certificate” refers to the implementation of letters of credit, including the links of urging, examining and modifying certificates. “Ship” refers to the shipment of goods, including chartering, booking, customs declaration, insurance, and issuing shipping notices. “Payment” refers to the preparation of documents and the settlement of exchange, including the preparation of documents, documents, delivery of documents, settlement of exchange, verification and tax refund. The four sections complement each other and influence each other. Only by accurately completing each link can the export contract be successfully fulfilled.
1. Implementing goods
Implementing goods means that the exporting enterprise makes the goods ready for shipment before the latest shipment date specified in the contract, including preparing goods, inspection, and making preparations for chartering, booking and customs declaration.
2. Inspection Report
The general procedure for inspection and quarantine of outbound goods is: inspection and quarantine first, then release for customs clearance.
The declarant of outbound goods subject to statutory inspection shall submit the inspection to the inspection and quarantine agency with relevant documents within the prescribed time limit; the inspection and quarantine agency shall review the relevant documents, accept the inspection report if it meets the requirements and calculate the fees, and then transfer it to the inspection department for inspection and quarantine. Generally, export commodities should be reported for inspection at the latest 7 days before export declaration or shipment. For some goods with longer inspection and quarantine cycles, sufficient time should be left; outbound animals that need to be quarantined should be reported 60 days before departure and reported 7 days before quarantine.
In principle, goods subject to statutory inspection and quarantine should be inspected and quarantined at the place of origin, except for live animals that are inspected and quarantined at the exit port. Under normal circumstances, the declarant should fill in and provide the “Outbound Goods Inspection Form”, accompanied by the export contract or order, commercial invoice, packing list, copy of letter of credit or relevant correspondence, original factory inspection form issued by the production unit, etc. If the transaction is based on samples, samples must also be provided.
3. Implementing the letter of credit
Under the letter of credit payment method, the exporting enterprise must implement the letter of credit while implementing the goods. Only when the original letter of credit is received and the content of the letter of credit is confirmed to be consistent with the contract and operating practices after review, can the goods be shipped. If the goods are shipped rashly without the letter of credit being implemented, it will bring passiveness to the export enterprise’s settlement of foreign exchange.
Implementing the letter of credit includes three links: urging, examining and modifying the letter of credit, among which the examination link is the most important and indispensable link.
Under normal circumstances, the buyer should open the letter of credit at the time specified in the contract, but in actual business, sometimes the buyer cannot open the letter of credit on time. In order to ensure the smooth performance of the contract, the seller needs to urge the buyer to open the letter of credit. Method of urging: The seller uses email to urge. The core content is: The goods under contract No. xx are ready, please open the letter of credit as soon as possible.
The letter of credit review includes two links, one is the letter of credit review by the notifying bank, and the other is the letter of credit review by the seller. These two links are equally important, each with its own focus, and cannot replace each other. They are indispensable.
In actual business, the more common letter of credit modification is “extension”. That is, if the beneficiary cannot complete the delivery on time, he requires the applicant to extend the shipping period and the validity period of the letter of credit simultaneously.
4. Goods shipment
Export goods can be shipped by the exporter to the carrier by himself, or entrusted to a freight forwarding company (hereinafter referred to as freight forwarding). In actual business, the latter accounts for more than 75%, because freight forwarding can not only provide professional freight services including chartering, ordering, inspection and bill of lading, customs declaration, and packaging at the place of origin, but also provide preferential freight rates that individual exporters cannot apply for from the carrier. Unless the importer specifies a carrier or a freight forwarder, the exporter should choose a freight forwarder based on the freight forwarder’s grade, advantageous routes, competitiveness of the freight rates offered, and comprehensive service capabilities.
5. International trade documents and preparation
After the export goods are shipped, the export company should prepare various documents correctly in accordance with the requirements of the letter of credit. After verification, the documents should be submitted to the bank for settlement within the effective period of the letter of credit. After settlement, the export exchange verification and tax refund procedures should be handled in a timely manner.