You receive a fax transmittal from Japanese buyers you met in New York. They indicate that they want to order 5,000 down bed pillows. The pillows must contain no less than 85 percent cluster prime white goose down. To make the transportation as cost-effective as possible, they want pricing for a full ocean container. Before placing the order, they want to discuss the details of the sale.
Their fax indicates that although the buyers prefer to pay for the pillows on open account terms, they will consider your suggestions for payment options. Also they are unwilling to purchase against the documents unless they can first inspect the pillows on their arrival in Japan. They want this right of inspection to find out if the quality is what they ordered and to look for possible freight damage. They feel strongly about this issue and insist on these conditions, unless you can provide them with adequate protection. In addition, they want to consider the cost of alternative shipping arrangements before deciding whether to handle these themselves.
1. Prepare a pro forma invoice giving your buyer several options for shipping the pillows. Consider how to pack and transport them to the closest or best seaport. What facilities are available for handling containerized cargo or for multimodal transport in your region? Using Incoterms, present a breakdown of the shipping alternatives and costs involved in the transaction. Contact a freight forwarder and inquire as to what services it can provide.
Can the freight forwarder assist you in obtaining the information you need to prepare your pro forma invoice?
2. In determining your export price, what other factors must you consider in addition to freight costs? Do you consider additional communication expenses, port fees, trade show expense, forwarder fees, sales agents, and clerical expenses? Discuss your export pricing with your marketing team and decide on your pricing strategy.
3. Prepare a letter to accompany the pro forma invoice explaining why payment by "cash against documents" is fair to both parties. What can you propose to address the buyers' concerns that the goods shipped will conform to their quality specifications? How will the goods be protected from marine risks?