A foreign trade order must go through eight links: inquiry negotiation, signing of contracts, collection, preparation and production, customs declaration and inspection, booking of ships, export tax rebates, and bank foreign exchange. There are three key elements that must be noted.
Three keys
Key 1: Document transactions
A documentary transaction refers to the use of a set of documentary documents to represent the goods. The transaction is aimed at this set of documents, and whoever obtains this set of documents is the owner of the goods. In this way, the goods remain as immobile as possible, and the document is bought and sold at will, leaving it to the holder of the document to decide when and how to finally dispose of the goods. This set of documents usually includes several core documents:
1. Bill of lading (i.e. Bill of lading (abbreviated as B/L)
2. Invoice (Invoice) is different from the concept of ordinary invoice, "invoice" in foreign trade refers to a signed document made by oneself to list the name, quantity and price of the goods.
3. Packing List
4. Other documents that explain the situation of the goods, such as inspection certificates that prove the quality of goods, certificates of origin that prove the place of origin, etc.
In a sense, foreign trade operators deal with not piles of items, but stacks of paper. Therefore, it is not surprising that a foreign trade salesman completes a transaction and has never seen the appearance of the goods from beginning to end, he only needs to handle the stack of paper carefully.
Of course, this brings some risks, such as forging documents to commit fraud, but fraud itself is a crime in countries around the world, and there are corresponding measures to pursue it.
The market is highly competitive, and in many cases, price becomes the only factor in whether or not to close the deal. We often see foreign traders exporting goods at prices below the cost of domestic sales. Are they crazy? No. Even if it is "sold at a low price" below the purchase price, foreign trade is still profitable. This is the second key secret of foreign trade: the tax refund system.
Key two: the tax refund system
Export tax rebate is an important concept in foreign trade, and it is also the main source of profit in foreign trade business. Under normal circumstances, the price before domestic purchase or export is the price including tax, that is, the price at which VAT has been paid. If the product is used for export, this part of the tax should not be levied, and what has been collected can be returned to the exporter in part or in whole according to the procedure.
Foreign trade transactions usually have a relatively high value of goods, and the corresponding tax rebates are also considerable. Of course, the state is also very strict in tax refund management, which is closely integrated with foreign exchange management.
Therefore, the source of foreign trade profits comes to a considerable extent from the export tax rebate in the national export tax rebate system, which is one of the most significant characteristics of foreign trade and is closely related to the daily operation of most foreign trade salesmen.
Key three: Letter of credit transactions
In international trade, buyers and sellers are far apart, with different backgrounds, the preparation and handover of goods, and the payment cycle of goods are very long. Therefore, business credit has become a big problem.
As a result, a unique mode of operation for foreign trade has emerged: letters of credit. The creation of letters of credit is based on the characteristics of foreign trade "documentary transactions".
The so-called letter of credit, in layman's terms, means that the buyer and seller agree on the transaction conditions in advance, such as product name, quantity, quality standard, price, delivery time, etc. Then the buyer finds a bank (usually the buyer's account bank, or has a certain guarantee) as an "intermediary", and with the bank as an intermediary, the buyer and seller no longer directly trade money and goods, but deal with the bank separately.
If the seller does not deliver on time, according to quality and quantity, he will not get the money; If the buyer doesn't pay, he can't get the goods. On the contrary, with the guarantee of the bank, as long as the seller delivers the goods, he will definitely get the money. This method does not occupy the buyer's funds, but also gives the seller a good credit guarantee. This document used to prove the commercial credit of both parties is called a letter of credit.
The most basic letter of credit generally has four related parties:
1. Importer: responsible for applying to its own bank to open a letter of credit, called the letter of credit applicant
2. The importer's bank is responsible for opening a letter of credit, reviewing documents and allocating payments, which is called the letter of credit issuing bank
3. The exporter is responsible for the payment guaranteed by the letter of credit according to the shipment of the letter of credit, which is called the beneficiary of the letter of credit
4. The exporter's bank is responsible for obtaining the letter of credit for the exporter, transferring the documents and contacting the issuing bank, which is called the notification bank
In addition, the bank ultimately responsible for the appropriation is called the letter of credit repayment bank, which is generally the issuing bank; It can also be paid in advance by another bank and charged a small fee, called the letter of credit negotiation bank, which is generally the notification bank.
Letters of credit are the most important and most common tool in foreign trade. In order to regulate the use of letters of credit, the ICC has developed a unified standard "UCP600", or "Uniform Provisions on International Documentary Credits", as the basis for use and arbitration.
Three "pitfalls"
For many small and medium-sized enterprises, they not only want to get a "piece of the pie" in international trade, but they are often afraid of being deceived. In the process of foreign trade, what are the traps that may be stepped on, and how can enterprises identify and avoid these traps?
Trap 1: Foreign buyers ask for goods
Many companies are hot-headed when they see foreign businessmen asking for goods, and do not pay attention to the hidden risks of payment methods. For example, some buyers let the enterprise buy goods on credit, sell the goods and then give money, and if they can't sell, they accumulate backlog, passing the risk to the enterprise.
Suggestion: It is best to use L/C letters of credit for payment, and it is necessary to have a letter of credit issued by a reputable bank, because in South America, Central America and other countries, even 3 yuan, 10 yuan can be issued by the bank. The second payment method is D/P (payment slip), D/A (acceptance delivery), even if it is a close customer, try not to use the credit method.
Trap two: The buyer conceals the fact of filing for bankruptcy protection
Some buyers have filed for bankruptcy protection, but the company has shipped the goods out and cannot recover the payment, and after investigation, it is found that the buyer has no ability to repay at all. But because the buyer has filed for bankruptcy protection, the company simply cannot sue such a buyer.
Recommendation: To investigate the credit status of buyers, you can investigate and evaluate buyers' ratings through lawyers or credit rating agencies.
Trap 3: The buyer changes the terms of the letter of credit after signing the contract
Some buyers may modify the terms of the letter of credit after the contract is signed, such as modifying the quantity, difference, quality, etc. of the goods, or changing the product quality requirements. After the shipment is made, the enterprise may not be able to comply with the terms of the letter of credit and therefore cannot recover the money.
Advice: Enterprises must be careful about all contracts, amendments to the terms of the letter of credit, and seek professional lawyer advice.
How to identify these pitfalls?
These traps that appear in the operation of the import and export business have a common purpose, that is, to defraud money! As a reminder, although these scams are clever, they will always show some flaws, and it is unlikely that they will be seamless. As long as foreign trade companies and enterprises are vigilant and master the method of identifying traps, they can completely avoid falling into traps.
One: contract identification
In the import and export business, if it is difficult to achieve the wish in the identification of authenticity, the other party colludes in several aspects, cooperates with each other, and repeatedly emphasizes the authenticity, and the foreign trade company wants to try, it can take a rigorous contract to identify the other party.
If the contract concludes quality clauses, certification clauses, price clauses, inspection clauses, claim clauses, payment clauses, transportation clauses, detailed specifications, requirements, etc., and requires the other party to have a legal representative or a letter of attorney to sign the document. Particular emphasis should be placed on the location of the contract.
In the import contract, it is emphasized to prove the quality standards of imported goods, assessment clauses, protective clauses, inspection clauses, transportation requirements, etc.
In the export contract, there must be a strict arbitration clause, stipulating that the exporting country is the place of arbitration for resolving disputes and disputes.
Note! In the import and export, a written contract must be signed, because the written contract has certainty, admonition and openness, and has the role of evidence. There are some frauds that will definitely show flaws in the written contract, and foreign trade companies can identify them in time when signing the contract.
2. Credit investigation and identification
In import and export trade, it is very important to choose a transaction partner, and we must carefully examine the authenticity of the other party's identity and check the credit status of the other party.
For example, look at the original and copy of the business license, verify the authenticity of the original and copy, and go to the local administrative authority for industry and commerce and the tax authority to understand and verify its business activities and whether it is still legally carrying out business activities through legal channels.
There is also the status of the goods / registered capital / legal address, etc. It is also necessary to examine the authenticity of the other party's asset credit and performance ability, and understand the basic accounts and business activities opened by the other party. Such as production and processing capacity, export license, raw material supply, source of goods, etc.
The credit standing of the parties is related to their ability to bear debt responsibilities and whether they have the sincerity to perform the contract. When investigating and identifying credit, it is necessary to clearly identify the qualifications of the subject. If the other party appears as a natural person, or as a legal person or unincorporated economic organization, or as a legal representative, or as an authorized agent.
Identification methods may also take:
(1) Bank enquiry
(2) Inquiries from overseas organizations
(3) Industry inquiries
(4) Inquiries from importers and exporters
(5) Inquiries from relevant institutions, etc
Third: risk avoidance identification
The use of risk avoidance means is very important in the practice of import and export trade, such as in the purchase and sale of huge sets of equipment, in the trade of batch delivery, importers should strive to use revolving letters of credit to avoid risks.
Generally, fraudsters will of course object to the use of revolving letters of credit, since this would allow final payment to take place after the equipment had been properly installed or the consignments had been delivered, thus ensuring that the quality of the goods supplied by the exporter met the requirements of the letter of credit.
In the issuance of letters of credit, no negotiable letters of credit are opened, and the use of freely negotiated letters of credit is avoided. It is necessary to clarify the content of the terms of the letter of credit.
Exporters may consider using confirmed letters of credit whenever possible to properly select Incoterms. In order to prevent letter of credit fraud, exporters should try to use Group C Incoterms (e.g., CFR, CIF, CPT, CP, etc.), and as importers, they should try to use Group F Incoterms (e.g., FCA, FAS, F0B, etc.).
In the transaction charter booking, avoid dealing with the owner of the flag of convenience ship of the nature of the "leather bag company", and at the same time pay attention to not leasing old ships and old ships, and choose ship types suitable for the characteristics of the cargo, so as to ensure the safety of the goods during transportation.
In addition, it is necessary to strictly review the documents, strengthen the identification of counterfeit letters of credit and "soft terms" letters of credit, and once discovered, it should propose to amend the letter of credit.
Four: Legal identification
In order to rectify and regulate the order of the market economy, the state has formulated a series of import and export laws and regulations. Therefore, correctly grasping and applying these laws and regulations to standardize and identify the operation of import and export business can play a positive and effective preventive role.
In the export business, the relevant provisions of laws and regulations such as the Law on Foreign-related Economic Contracts, the Foreign Trade Law, the Customs Law, the Product Quality Law, the Administrative Measures for the Verification and Cancellation of Export Receipts, the Provisions on Several Issues Concerning Tax Refund (Exemption) of Export Goods, and the Commodity Inspection Law are used to identify them by comparison, analyze the irregularities and risks of the export business, and finally make a decision on whether to operate or not.
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