Purchase Order : Exporter , Importer, Buying Agent

1. Purchase Order
Ritu Jain

2. What is a Purchase Order
Export order is a document communicating
decision of the foreign buyer to purchase certain
item(s) from the exporter .

3. PROCESSING OF AN EXPORT ORDER
Nature of export order, export agreement and
export contract
The export order represents an “offer to sell”
made by the exporter and its ‘acceptance’ by
the foreign buyer.

4. PROCESSING OF AN EXPORT ORDER
It is defined as exchange of promises by the
parties to the agreement.
 The exporter promises to supply the goods as
per quality specifications and other terms and
conditions negotiated with the buyer of the
goods.

5. PROCESSING OF AN EXPORT ORDER
The promise of the buyer is to make payment
to the exporter when he/she supplies the goods
as per the terms and conditions of the export
order.
The export agreement could be written in the
proper legal format or it could as well be
evidenced by the exchange of letters between
parties.

6. PROCESSING OF AN EXPORT ORDER
Export order, export agreement, export
contract mean one and the same thing.

7. The sequence of steps are as follows:
1. The exporter locates a trade enquiry.
2. On receipt of the trade enquiry , exporter
sends the company profile , product profile
and promotional literature of the product
range to know the interest of the buyer.
3. The buyer may like to have details of a certain
product .
Process of Securing Export Order

8. The sequence of steps are as follows:
4. The exporter sends the quotation in respect
of the product of interest to the buyer. This
contains the basic details like FOB price, mode
of payment, photograph of the item along with
the specifications and the likely delivery time.
Process of Securing Export Order

9. The sequence of steps are as follows:
5. The buyer on receipt of the above- puts
forward the requirements as regards the
design , size , finish or other specifications of
the product in view. Once the product is
identified the process of negotiations of the
other terms and conditions begins.
Process of Securing Export Order

10. The sequence of steps are as follows:
6. The exporter sends the Performa Invoice to
the buyer setting out in detail the terms and
conditions negotiated between the two
parties. This Performa Invoice represents the
“offer to sell” made by the exporter.
Process of Securing Export Order

11. The sequence of steps are as follows:
7. The acceptance by the importer can be in the
form of the exchange of letters.
Process of Securing Export Order

12. Terms and conditions of an Export Order
This varies from order to order depending on
the nature of the product, parties involved and
so on.
Process of Securing Export Order

13. Following are the standard clauses:
1.Product and its description
2.Product specifications stating its quality
3.Price: FOB/CIF etc.
4.Quantity
5.Payment terms: Letter of Credit, Advance
Payment etc.
6.Delivery Schedule: Time period:
partial /complete dispatch
7.Mode of shipment: Air/Sea /Road/Post
8.Type of Shipment: Direct /Trans-shipment
Process of Securing Export Order

14. Following are the standard clauses:
9. Inspection
10. Labeling, packaging, packing, and marking
requirements.
11. Insurance : by exporter/importer
12. Documents required
13. Escalation clause: Sharing of increase in cost.
14. Force majeure Clause: Clause providing for excuse of
non-performance due to acts of God.
15. Arbitration Clause: Clause for settlement of dispute
16. Fines/Penalties
17. Applicability of Law
Process of Securing Export Order

15. 1. Both parties hold negotiations with regards
to the above points to conclude the business
deal.
2. After which a letter of thanks goes out to the
importer by the exporter for placing the
order. The exporter should also give a
confirmation on the order placed after a
scrutiny of the order
Process of Securing Export Order

16. 1. Item (product) – Is the order placed on the same
product on which the offer was sent and
exporter is still in the position to supply the
goods.
2. Sizes and specifications should be same as per
offer.
3. Pre-shipment inspection requirements can be
met. If the buyer requires the inspection to be
done by an agent /agency of his choice,
financial, legal and physical aspects of
inspections should be examined and
communicated to the buyer.
Scrutiny of the order placed :

17. 4. Payment terms are acceptable to both
parties.
5. Special packaging, labeling and marketing
requirements should be noted for compliance
and special care should be taken for packaging
for the goods required for direct sales to the
consumers. Packaging material should be
environmental friendly.
Scrutiny of the order placed :

18. 6. Shipment and delivery date in accordance
with the production plan of exporter: a)
whether part shipment is allowed , b) trans-
shipment is permissible c)port of
shipment/destination is same.
7. Who will do the insurance and conditions of
insurance.
Scrutiny of the order placed :

19. 8. Documents required by the buyer . Some
documents requiring special attention ;
a) Commercial invoice
b) Whether any kind of certification is required on the
Commercial Invoice by any authority – Embassy or
Consulate of the foreign country.
c) What kind of bill of lading is required.
d) What kind of certificate of origin is required? Is it
required to be issued by a trade association or
chamber of commerce .
e) Number of copies of the packing list required.
f) Whether cargo insurance is required.
Scrutiny of the order placed :

20. Explanations of the Terms commonly used:
I. Bill of Lading – is a document which has the
name of the carrier and to be signed or
authenticated by – a) the carrier or the named
agent for or on behalf of the carrier. b) the master
or a named agent for or on behalf of the master.
II. FOB – Freight on Board
III. Letter of Credit ( Documentary Credit)
The assurance of payment is provided by the
importer’s bank in the form of Letter Of Credit or
the Documentary Credit.

21. Once all the clarifications have been received a
letter of confirmation should be sent.