Tuesday, May 31, 2016

Handling the Critical 5Ps of Export Business Success-Part-3 (The Purchasers)

One of the major challenge of exporters in most parts of the word is getting buyers for their products. The fact that export business involves trade across borders makes it very difficult to get across to the various intending buyers around the world due to the distance, language barrier, cultural differences and many more factors.

Getting purchasers and signing an export contract (agreement, purchase order, sales & purchase contract) mark the commencement of an international trade transaction. Invariably, an export contract can be defined as a document that needs to be signed by both importer and exporter before a legally binding international trade can take place between them. The questions that anyone looking to get purchasers and sign an export contract with them need to answer in the business should include the following: What the content of a typical contract are? Where can one get the links to buyers? When should an exporter go ahead to sign the export contract? Who are the people that can link exporters to buyers? Why does the exporter need to sign an export contract? Which contract terms are most preferred? How can one secure an export contract from buyers abroad?

The first question states that, what are the content of a typical contract are? The content of an export contract should include but not limited to the following: Buyer & Seller’s Name, Buyer & Seller’s Contact details, Buyer & Seller’s Account Details, Description of goods, Quality Specification, Quantity, Packaging, Latest date of shipment, Pricing, Incoterms 2010, Origin, Port of loading and port of discharge, Payment terms and Payment methods, Shipping Documents
Dispute resolution, Inspection, Insurance, Force Majeure, Termination, Special Conditions, Governing law, Juridictions and Signature of Buyer & Seller.

The second question is where can one get the links to buyers?. This is a very important question because it exporter to know the options that are available to him. These include online trade platforms (alibaba.com, tradekey.com, tradeboss.com, tradeindia.com etc), going on trade mission to the country of the buyers abroad, advertising on the media platforms in the buyer's country, visiting the Nigerian Export Promotion Council (NEPC), visiting bilateral chambers of commerce like Nigerian British Chamber of Commerce, Nigerian German Business Council, Nigerian Netherlands Chamber of Commerce etc

The next and very critical question is, when should an exporter go ahead to sign the export contract? It is extremely important that an exporter should not rush to sign an export contract until he has been able to answer the following questions. Where do I intend to get the items to be exported? Does the source have enough quantity of the items to meet the volume demanded in the contract within the specified period? Can I transport the required quantity to the port and still be able to ship them abroad within the shipment period? How much do I need to raise in order to fund the export project? Do I have all the funds for the project? Do I need to source for equity or debt to fund the deficit? Can I get the funds for the project and still be able to ship within the stipulated shipment period? As soon as you sign the contract, the time starts ticking and so it is wise for you to ensure that the questions about source of goods, funding and logistics are answered before the contract is signed.

The fourth question is, who are the people that can link exporters to buyers? Some of the people that an exporter should look out for in their search for links to buyers abroad include: Trade brokers, friends and relatives abroad and existing exporters. The trade brokers are professionals who specialize in connecting buyer's to sellers around the world at a fee. A number of these brokers are commissioned by buyers to help them search for products to buy. They are also engaged by sellers to help them market their products and search for credible buyer's around the world. A number of these brokers are fund in London (covering Europe), New York (covering North and South America), Dubai (covering Africa & Middle East) and Shanghai (Asia). Another very credible channel of getting buyer is working with friends and relatives abroad. This is a less costly and reliable channel because it involves a known person. The details of how this works will be discuss in one of the subsequent editions of export matters. The last one with least probability is getting buyer's through current exporters. Except for exporter who have a large heart, willing to see other people grow and knowing fully well that the market is large enough for everyone, most exporters do not like to reveal their buyer to intending exporters.

The fifth question to be answered is, why does an exporter needs to sign an export contract? Why can't he just get a proforma invoice and base on this ship the goods? It is very important that things do go wrong in international trade and the only way to seek a redress and get a judgment in your favour if the other party have erred is through a contract that both of you have signed. If there is no binding agreement showing the roles and responsibilities of the parties then it will be difficult to hold the erring party to account when things go wrong.

The second to the last question is, which contract terms are most preferred? This means the terms of delivery which is also called the Incoterms. These are international commercial terms that defines the where the risks and costs of the exporter ends and where that of the importer starts. It is wiser for the exporter to choose the terms that is first reasonable and also enables the exporters to incur minimal cost with his risk ending on or before the port of loading. Reasonable in the sense that it does not requires the importer to come and pickup the goods at your warehouse in Nigeria (Ex-Works-EXW) or a shipping line terminal (Free Carrier-FCA) when a lot of your competitors are willing to deliver to the port. Largely in Nigeria, many deliver to the port using Free on Board (FOB) Cost and Freight (CFR). However, if you have a higher power in the negotiation, then you can go for EXW or FCA.

The last in the series of questions to be answered as an exporter seeks for purchasers is how can one secure an export contract from buyers abroad? Having been able to get a link to a buyer, how them do you eventually secure the contract? You need to demonstrate credibility (your consistency of result in export business or other businesses that you have done), cohort (the experience of the team working with you), competence (to deliver the right quality and quantity), character (that you will abide by what will be signed in the agreement) and cash (that the cash to do he business is available or will be made available as at when needed). These are traits that you must have and also find a way to communicate in all your conversation with the intending buyers.

Finally, I will like to state that if the challenge of getting purchasers are going to be surmounted by an exporter, then the seven questions posed in this edition of export matters have to be adequately answered.

For questions on this thought, you can reach me via email to bayemibo@3timpex.com

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