Trade guides

The international trade journey in brief

Every cross-border sale moves through the same broad stages, whichever side you are on. Knowing them helps you see which risks sit where.

1. Requirement and sourcing. A buyer defines the product, specification, quantity and delivery point; potential suppliers are identified.
2. Verification. Both sides check who they are dealing with — business details, documents and track record.
3. Quotation and negotiation. Price is agreed together with an Incoterm, lead time, payment method and quality terms.
4. Contract or purchase order. The agreed terms are written down. This is the reference for everything that follows.
5. Payment arrangement. Advance payment, documentary collection, open account or a Letter of Credit, arranged through banks.
6. Production, inspection and packaging. Goods are produced or procured, checked where agreed, and packed for the route.
7. Freight, customs and shipment. Carriage is booked, export clearance is filed, and goods are loaded.
8. Import clearance and delivery. Goods are cleared at destination, duties are paid and goods are delivered.

Incoterms in one paragraph

Incoterms® rules (current edition: 2020) define where the seller's delivery obligation ends, who arranges and pays for carriage and insurance, and where risk passes. They do not set the price or transfer ownership. Always state the rule and a named place — for example “FOB Chennai” or “CIF Jebel Ali”. FOB, FAS, CFR and CIF are intended for sea and inland waterway transport; for containers, FCA, CPT and CIP are often more suitable.

Buying from abroad

Before you source

• Write a clear specification: grade, standard, dimensions, packaging and labelling for your market.
• Check whether the product needs an import licence, registration or standards certification in your country.
• Identify the HS code — it drives duty rates and regulatory checks. In India, importers need an Importer-Exporter Code (IEC).
• Work out a landed cost: product price, freight, insurance, duties and taxes, clearance and inland transport.

Choosing a supplier

• Compare quotations on the same Incoterm and named place.
• Ask for samples, test reports and certificates before the order, not after.
• Review the supplier's business information and bank details through appropriate verification procedures.

Documents you will usually need

Commercial invoice, packing list, bill of lading or airway bill, certificate of origin (for preferential duty), insurance certificate (if the seller insures) and any product-specific certificates. Your customs broker files the import declaration (in India, the bill of entry).

Common pitfalls

• Paying a large advance to an unreviewed supplier.
• Incoterm and freight arrangements that do not match.
• Missing certificates discovered only when goods arrive at port.

Selling abroad

Export readiness

• Registrations: in India, IEC and GST; check whether your product requires registration with an export promotion council or a regulatory authority.
• A product specification sheet, capacity and realistic lead times.
• An export price built up for each Incoterm you are willing to offer.
• Packaging that suits the product, the route and the destination's marking rules.

Quoting a buyer

State the Incoterm and named place, currency, validity, minimum order, lead time, payment terms and what is included (inspection, certificates, special packing). An incomplete quotation slows down a serious buyer.

Getting paid

The payment method sets your risk. Advance payment is safest for the seller; open account is riskiest. A Letter of Credit shifts the payment undertaking to a bank — but only if your documents comply exactly with the credit.

Documents

Commercial invoice, packing list, shipping bill (export declaration, filed by your customs broker), transport document, certificate of origin, insurance certificate under CIF/CIP, and any inspection, phytosanitary or health certificates the buyer or destination requires.

Letters of Credit explained

A Letter of Credit (documentary credit) is an undertaking by the buyer's bank to pay the seller when the seller presents documents that comply with the terms of the credit. Most credits are subject to the ICC's Uniform Customs and Practice for Documentary Credits, UCP 600.

The parties

• Applicant — the buyer who asks its bank to issue the credit.
• Issuing bank — issues the credit and undertakes to pay against compliant documents.
• Beneficiary — the seller.
• Advising bank — authenticates and passes the credit to the seller.
• Confirming bank — optionally adds its own undertaking to pay.

How it works

1. Buyer and seller agree payment by LC in the contract.
2. The buyer applies; the issuing bank issues the credit (usually as a SWIFT MT700).
3. The seller checks the credit, requests amendments if needed, and ships.
4. The seller presents the documents within the presentation period and before expiry.
5. Banks examine the documents. If they comply, payment or acceptance follows.

Why review matters

Banks deal in documents, not goods. A small inconsistency — a late date, a different description, a missing signature — can make a presentation discrepant and delay or put payment at risk. Reviewing the draft before issuance is the cheapest point to fix a problem.

Note: Essoria provides consultancy, document-review and coordination support. Banking functions, LC issuance, advising, confirmation, negotiation, payment and final authentication are performed by the relevant authorised financial institutions.