Practical Exporting and Importing in Canada [1 ed.] 9781442656369, 9781442651470

Citation preview

PRACTICAL EXPORTING AND IMPORTING IN CANADA

As every schoolboy knows, Canada is one of the larger trading countries of the world but, from the point of view of balancing her international merchandise trade payments, she does not export enough. The purpose of this book is to describe, not in broad economic terms, but in daily practical detail, the work of the exporter and of the importer. Pitfalls abound for the unwary trader, and Mr. Arnold knows them all. His book is written around the activ­ ities of an export merchant, since he, unlike his confreres in a larger type of organization, deals directly himself with banks, brokers, suppliers, shippers, buyers, insurance agents, freight forwarders, and the other agencies serving the exporter and importer. Thus the reader acquires an all-round understanding of the trader's business world. The book is written with admirable directness and clarity, with an astute and alert business sense underlying the writing. The book will also make useful reading for any student of international trade theory and would be especially helpful to commerce classes and to trainees in business firms of all kinds associated with Canadian trade. J. R. ARNOLD directs a trading company in Vancouver, which he founded himself in 1944, and has lectured at the University of British Columbia on practical exporting and importing.

This page intentionally left blank

PRACTICAL EXPORTING AND IMPORTING IN CANADA

J* R. ARNOLD Foreword by William O. Perkett

UNIVERSITY OF TORONTO PRESS

COPYRIGHT, CANADA, 1961 UNIVERSITY OF TORONTO PRESS PRINTED IN CANADA

University of Toronto Press

Diamond

Anniversary 1961

FOREWORD

CANADA'S GROWTH AS A NATION is now dependent upon her ability to develop secondary industries that can compete in world markets. Unfortunately most Canadian manufacturers are not aware of the opportunities that exist abroad for the sale of Canadian goods, and many do not possess the knowledge necessary to sell in foreign markets. Those who desire to sell abroad would be well advised to study carefully the economic principles underlying international trade and the political relations that have created, in part, many of today's trading patterns. Those seeking to sell overseas must also be thoroughly grounded in the technical and procedural problems involved in exporting. The purpose of this book is to give those interested in foreign trade, particularly those contemplating the formation of an export-import firm or those seeking employment or advancement in the foreign trade field, some insights into the mechanics of exporting and importing. No attention is paid to the subject of international economic theory or to the commercial problems of Canada as a whole. A careful study of the book will provide the reader with many valuable insights into the complexities of selling in overseas markets. To export successfully in today's highly competitive markets, one must possess knowledge V

of the techniques used in the movement of goods in a multitude of vastly different markets, as well as an understanding of the habits and customs of people who live in foreign lands. Only by possessing such knowledge and through its application to individual business problems can firms develop successful, long-lasting business relations. The book begins with a discussion of the administrative and legal problems involved in organizing an export business in Canada. The author then discusses the problem of locating buyers and agents abroad, and indicates sources of information which should be utilized. Each step which normally would be taken to secure and complete either an export or an import transaction is then described in detail. In each step is included a description of what should be done, as well as a multitude of warnings designed to show the reader some of the pitfalls to be avoided. Particular attention should be paid to these warnings, as the problems of foreign trade are greater than those of domestic trade: extreme international competition, different business customs and language, great distances between buyer and seller, the time required to conclude a deal—all these factors and more make international trade a particularly risky field of endeavour for the unwary and may well cause some hesitation among those considering entering it. Until a contract has been completed, no business deal is consummated. The reader's attention is forcefully directed to the language and communication problems involved in selling abroad. Unfortunately, misunderstandings do arise. Great care must be taken to ensure that both buyer and seller thoroughly understand their rights and obligations. After discussing the problem of formulating a contract, the author turns his attention to vi

the technical problems of documentation, pricing, financing and shipping. By using examples from his own business experience, the author vividly illustrates the care which must be taken to avoid errors which can lead to misunderstandings and unprofitable business relations. Throughout the discussion of procedures the author draws the reader's attention to the institutions with whom the exporter must work, in particular, communications, insurance, shipping companies and freight forwarders, brokers and banks. Those interested in exporting or importing would be well advised to study carefully the role these institutions play in foreign trade so they might work closely with them. It is, of course, impossible to cover fully in any book all the procedural problems which will be met when selling abroad. If this book succeeds in creating interest in the technical problems and procedures involved in selling abroad it will have performed a very useful function. Such knowledge is vital to successful overseas selling, and works such as this contribute and engender interest in the subject. Further, this book should be welcomed by educators and business men alike because of the systematic manner in which the author discusses the technical and procedural problems, and because, unlike other available texts, it discusses trading from the Canadian point of view. WILLIAM O. PERKETT University of British Columbia

Vll

This page intentionally left blank

CONTENTS

FOREWORD

v

1. THE BUSINESS OF EXPORTING

1

METHODS OF OPERATION

The export merchant; locating goods and customers 2. YOUR BUSINESS RELATIONS

10

ORGANIZING YOUR FIRM COMMUNICATIONS

Cables; telephone; letterheads and supplies FINANCIAL ARRANGEMENTS

Banking; letters of credit; drafts; Export Credit Insurance; accountants; other brokers and export agents; currencies MARINE INSURANCE

Types of policy SHIPPING COMPANIES

Ocean carriers; railroads; trucks; airlines; parcel post CUSTOMS BROKERS

ix

3. COSTS AND QUOTATIONS

48

TERMS AND TERMINOLOGY

Marking and strapping; terminals; weight or measure; bills of lading; misleading terms; GIF and others; dock receipts and clean documents; quotation terms; minor allowances OPTIONAL EXPENSES

Labels; samples 4. HANDLING SOME SHIPMENTS HERRING FOR HONG KONG, I

Information necessary for costing; mechanics of export costing; recheck before cabling; export costing sheet FLOUR FOR GAMBIA, I

Assessing suppliers' quotations; handling the counter-offer HERRING FOR HONG KONG, II

The letter of credit; ordering from supplier; shipping space FLOUR FOR GAMBIA, II

The unclean shipment; hunting for a solution HERRING FOR HONG KONG, III

Financing with buyer's letter of credit; claiming against the letter of credit; sight draft sales X

61

FROZEN FISH FOR FRANCE: USING THE FREIGHT FORWARDER

Selecting the shipping route; costing the shipment; financing by back-to-back credit 5. THE BUSINESS OF IMPORTING

89

KINDS OF ORGANIZATION BRINGING IN THE GOODS

Finding a supplier; checking with customs; sampling the market RESELLING THE GOODS

Price structure; terms CURRANTS FROM TASMANIA

Dealing with an insurance claim APPENDIXES

115

TRADE TERMS EQUIVALENTS

INDEX

119

XI

This page intentionally left blank

PRACTICAL EXPORTING AND IMPORTING IN CANADA

This page intentionally left blank

1. THE B U S I N E S S OF E X P O R T I N G

WALK INTO THE LARGEST EXPORT OFFICE in your area and observe the busy scene around you. No doubt you will be greeted by an attractive young receptionist-switchboard operator, who will ask you to take a comfortable chair until the executive for whom you have asked is free to receive you. As you wait, you gaze past the receptionist to the rows of filing clerks, stenographers, customs clerks, traffic men, accountants, and traders. Possibly you wonder just how this firm came into being; how it reached its present size; and what is the guiding power behind it. Before you is a group of specialists, working as a team in the interests of Canadian exports—the source of so much of our prosperity. METHODS OF OPERATION

Although outwardly there appear to be several organizational ways of exporting, each follows the same basic 1

pattern; it does not matter whether the firm is large, like the one you visited, or just a one-man export merchant's business. As the experience of the author in incorporating and operating an export merchant business has been gained without guidance, but solely by trial and error in the "hard knocks" school, and because the small independent exporter is brought into contact with all the varied operations of exporting to a greater degree than a member of any other larger exporting organization, this small book deals mainly with this method of operation. Briefly, the three other methods are: an export department of a manufacturing plant or packer, with or without branch offices abroad; an independent firm dealing in one commodity—for example, lumber or fruit— either as export agents for a group of mills or growers, or with exclusive export contracts with a number of these sources; and an independent firm with several departments, each dealing in a special commodity. A manufacturer's export department can be formed either to handle exportable surplus after the demands of the domestic market have been met, or can be set up by direct design if the product has universal appeal and production can be increased so that all export orders can be filled. Examples of the latter are firms such as Coleman Lamp and Stove Company Limited, automobile manufacturers, and, of necessity, packers of fish and fresh fruits whose domestic markets cannot consume the season's catch or yield. In such organizations an export manager is appointed. Each of his subordinates is an expert in one field. A typical staff is an export clerk, conversant with the completion of export documents required for various destinations; stenographer-translators with knowledge of

2

one or more foreign languages; an accountant; a code clerk, charged with coding outgoing cables and decoding incoming; a traffic manager to route shipments by the cheapest and fastest or most advantageous ways, such as by truck, rail, refrigerated truck, or "reefer" railway car, or by air express or freight, and to schedule arrivals at seaboard with loading dates of suitable ocean carriers. Most of their export sales are consummated abroad either by company representatives moved to the foreign field by their firm, or by resident nationals who act as agents in each market-country for the manufacturer. Resident agents are selected carefully, usually after a trip abroad by the export manager, and then are granted an exclusive contract for the sale of the factory's goods in that country or area. Most handle other goods with the proviso that they be non-competitive, but a few are fulltime salesmen for the manufacturer. As well as striving to close sales the exclusive agent must, for his own welfare and that of his principal, be ever alert to changing demands in his territory, to inroads by goods of competitors who may have improved their product, and restrictive legislation by his government. As trade is a two-way street, many of our independent exporters act as exclusive agents for the import of foreign goods, so these factors must be kept in mind. The one-product specialist is the next general type of exporter. An example is a dealer in hardwoods. Most act as export merchants, buying and selling, and a few as brokers, receiving a commission for bringing buyer and seller together, and handing the shipping and collecting duties over to the seller. His office can be large or small. He must have the initiative to find reliable sources of continuous supply at competitive prices, be able to supply the prospective buyers with prices at destination, and above 3

all must be a specialist with years of product training. Often he has his own buyers travelling his general area contracting against either firm orders or for future expected orders, expediting shipments from suppliers, and contacting other possible sources of supply. If the product is one, such as lumber, which enjoys a domestic market as well as a foreign one, he may employ a staff of full-time salesmen across the country, leaving him free to concentrate on executive duties and exports. Some of the older firms divide their efforts into several departments, each department handling only one type of goods. These might include lumber, under one trader, fish products under another, and flour and feed under a third, all striving to retain their accounts and to open new accounts in different countries. This method, however, does not always work to the advantage of the firm, especially if any of the commodities are seasonable. There may be periods when one department or another is rushed off its feet while others are doing little or nothing. Unless the firm is large, with enough overseas customers, the drain on the resources by having an idle department is too great, and it would appear that specialization has been carried too far. THE EXPORT MERCHANT

Regardless of the concentration of skilled personnel composing the staff of an export office, you still may wish to explore the possibility of opening your own office as an export merchant. Do not despair, for a host of specialists stands ready to assist you. Some will work for you gladly without charge, and others you need pay only for each specific job done for you. By utilizing their services you eliminate from your overhead a fixed payroll which could be met only if you were doing a steady, large volume of business. Until total fees each month charged by some of 4

these specialists exceed the normal salary of an employee on your staff, you should not consider replacing the outside expert, who charges only for his services per shipment you make, with a permanent, salary-drawing employee. Each of these agencies will be dealt with in detail in the following chapter. In brief, they are your banker, a chartered accountant, a customs broker, the telegraph and cable company representatives, an insurance agent, the railroad freight and foreign freight offices of the railroads, agents for marine shipping lines, truckers, manufacturers, and other export merchants. These individuals and firms will compose your staff for the internal operation of your business. In the allied field of finding goods to sell, and markets and customers to buy from you, there are also many agencies who will eagerly support and guide your efforts. The basic problem of the export merchant is threefold: what to sell; where to find the goods; and where to find the customers. Taking these in order: first, on the negative side, one basic rule is never to offer technical goods unless you have a thorough training in such goods. Most exporters, as you can readily understand, would be completely at sea quoting lumber or electronic equipment. On the positive side, should a firm do business on merchandise with a steady repeat demand, or on a "one shot" basis? In my opinion, the answer is: "both." Effort should be concentrated on the sale of goods with a steady repeat potential, but from time to time opportunities arise to dispose of a factory, or even a government surplus; or a sudden demand is created in a foreign country due to climatic conditions, or a strike, or some other extraordinary development that has reduced the domestic or foreign supply. It is seen readily that the exporter who could 5

dispose of the surplus butter that has plagued governments of Canada since shortly after the Second World War could earn an astounding profit. Again, after the 1960 revolution in Cuba, when United States supplies were cut off, there was a time of opportunity; as there was also in the Hawaiian Islands in 1947 during the strike of longshoremen against US cargoes. Thus the export merchant must ever keep abreast of world affairs, and above all must not be a mere offerer of goods, but must be a "trader," with a finger on the pulse of markets around the world, aiming always to make what profit he can in this competitive field. Another basic rule is that in finding the goods, you must—except in rare circumstances—obtain them from the source, and definitely not from another agent, unless that agent will split normal profits or commissions with you. Most factories will be glad to have you quote their products overseas. Even some with resident foreign agents are prepared to package or label goods under a different brand name, as they realize it is impossible for one man or one firm to obtain all the business in a country. LOCATING GOODS AND CUSTOMERS

To locate manufacturers interested in export, purchase a copy of the annual Trade Index from the Canadian Manufacturers' Association. Listed in alphabetical order you will find all member factories and the goods produced by each. A second section lists goods alphabetically and tells which firm is the manufacturer of each item. The Departments of Trade and Industry in the various provincial governments also publish trade indices, and usually these, being for an individual province, are more detailed than the CMA book, which covers all of Canada. 6

Purchase Trade of Canada from the Dominion Bureau of Statistics. Listed in it are all commodities exported and the countries to which these exports were consigned. This is a made-to-order list of who buys what. A subscription should be entered for the Department of Trade and Commerce journal, Foreign Trade. It is compulsory reading for all exporters as it is replete with timely articles by trade commissioners on all aspects of export trade, including requirements in various countries. Call on your local Board of Trade or Chamber of Commerce for a source of goods you cannot locate, and do not overlook the most obvious directory of all—the yellow pages of your telephone book. As well as locating goods for you, your local Chamber of Commerce is invaluable in finding customers to whom to sell. They receive literally hundreds of overseas enquiries each month, offering goods and asking about sources of supply here. Both import and export contacts can thus be made. Check the Chamber's foreign trade files frequently. Also write the Board or Chamber in each of the large centres in Canada and the United States to ask for brokers who will co-operate with your firm. If your firm has established these connections, you will often obtain requests for goods found only in your area, and you will sometimes want hard-to-locate goods from theirs. Such a connection should be on an exclusive basis with commissions or profits split evenly. The chartered banks, too, receive many overseas enquiries and maintain foreign departments in the large centres in Canada, ready to assist the exporter. Canada maintains trade commissioners in forty-seven countries, and the service is expanding yearly. Each officer is a veritable encyclopedia of information, and numbered among his duties are finding prospective buyers 7

for your goods, giving opinions on credit and veracity of customers, recommending reliable individuals or firms who may act as your agents overseas, answering your enquiries as to the type of goods needed in his area, the desired packaging and labelling of such goods, the rates of duty, and other import requirements or restrictions. If your firm becomes involved in a trade dispute, the trade commissioner is prepared to act as a conciliator to bring about an amicable settlement. Get to know the trade commissioners and utilize the services they offer. Also be sure to register your firm with the Department of Trade and Commerce at Ottawa in the Exporters' Directory, as then every trade commissioner is notified of your specific field of export and will recommend your firm when enquiries for goods come to hand in the country where he is located. Numerous foreign countries as well maintain trade commissioners or consular oflGices in Ottawa and in some of the larger centres throughout Canada. They stand ready to help you regarding any problem relating to trade with their countries. Some of the provinces also have established a permanent trade representative in the United Kingdom to assist in the sale of goods in the entire European market. United Nations and the US Department of Agriculture supply regular bulletins of specific periodic procurements and other worthwhile information and statistics. Subscribe to their mailing lists and read every bulletin carefully. Watch the shipping journals closely; much information is given in their pages about specific cargo movements and world affairs, as the transportation companies realize that, if they can aid the exporters to find markets, they too will benefit from increased freight shipments. 8

Each year a number of trade fairs are held in Canada, the United States and abroad. Numerous domestic and foreign buyers attend. The time spent in planning ingenious displays and the expense involved have proven well worthwhile. Many overseas and domestic sales are finalized at these fairs; new countries can be opened to your goods, and new sources of goods to import can be found. At the outset, if you cannot have a display, plan to attend some of the trade fairs in Canada or the United States. In view of the number of countries represented, attendance is the next best thing to a trip abroad, and in some instances is even more rewarding.

9

2. YOUR B U S I N E S S RELATIONS

THIS CHAPTER is CONCERNED with explaining in some detail your dealings, as an export merchant, with the various firms, agencies and other bodies with which you will be working. ORGANIZING YOUR FIRM

The first step is to incorporate your firm, as you are in a business with a certain amount of risk no matter how closely you try to safeguard your activities. Working through an incorporated company not only allows you a certain prestige in using the word "Limited" on your letterhead, but protects you from personal liability arising out of transactions of the firm. Incorporation probably will cost from two hundred to five hundred dollars, depending on the total value of the shares to be authorized. Your lawyer will advise you on how many shares to have issued, but it is suggested that this be kept to a minimum. Then, in the future either additional shares or, 10

even more advantageously, redeemable preference shares, can be issued for financing if desired. Remember that under Canadian law, once a company has issued shares they can never be repurchased by the company unless they are specially authorized redeemable shares. The choice of name should be given considerable thought. You will wish to convey to as great an extent as possible exactly in what business you are engaged. Further, the name must be approved through your lawyer by the Superintendent of Companies in your provincial capital. If the suggested name is similar to the name of an existing company, it will be disallowed, so you should submit several names in order of preference. The next concern is office space. Your choice of location and premises will depend to a great extent on your finances, but even with adequate capital there is no need for modern offices in the heart of the city. In businesses dealing directly with the public such as investment and insurance firms, the prosperous appearance of the office is usually an important first impression to give the client. Advertising agencies in particular have of recent years indulged in ultra-modern, expensively furnished offices. In the export business, however, such costs can be kept to a bare minimum. You will rarely, if ever, see your customers personally unless you make an overseas trip. No one enquires, or seems to care, from what kind of an office you operate as long as you deliver goods that are up to standard at the time promised. Thus, if necessary, a small office, located in the manufacturing or wholesale district, and a telephone-answering service will suffice. Most of the storage and distributing firms have a number of offices specially for manufacturers' agents and exporters. They provide telephone service, accept telegrams, and forward mail—all for a nominal charge. 11

Stenographic service is supplied as needed at an extra charge. Many large deals have been made in such offices and many men who occupy them enjoy five-figure incomes. Another advantage of the export business is that the office can be moved in future to allow for expansion with a minimum of disruption. With this in mind, many exporters use a post office box for mail in order to have a permanent address. COMMUNICATIONS CABLES

The cable address is the next problem to be answered. If possible, it should have some similarity to your company name. The communication companies now require that a cable address be not less than six, and not more than ten letters, and that it can be pronounced. Prior to 1950, cable addresses of less than six letters were permissible. The author's firm, Associated Trading Corporation Ltd., has the cable address ATCOL. Unlike a telegram, every word in a cablegram, including the address and signature, is chargeable. The only two exceptions to this are that (a) multiple word proper names, such as Prince Edward Island or Hong Kong, are charged only as one word, and (b) in counting words the country of destination is never charged. The cable address, of course, saves a great number of words for the senders of incoming cables; outgoing cables are signed only by the cable address. All that is necessary is to register with either of the telegraph companies and pay a nominal annual fee ($2.50) that has not increased during the last twenty years. The company with which you register will notify 12

the other telegraph company. As cables are one of the major items of cost in the export business, it is imperative to have a cable address. Types of Cables. Several types of cables are accepted and these are always filed with either of the telegraph companies for transmission. In theory, if you show a routing on the cable form, the telegraph company concerned should route by that cable or wireless company. In actual practice, however, because each company has exclusive contracts with various cable companies and wireless services, you should ascertain from each of the telegraph companies the names and routes of their connecting companies. It will be found that if cables are sent by direct routes (and you can be sure of that only by filing with the right company) that not only will the service be better, but possibly the rate itself will be lower. A talk with the cable representative of both companies will determine which countries each serves better. The first type of cable is full-rate. The minimum charge is for seven words, with an extra charge for each additional word. Full-rate cables are sent and delivered ahead of all others except urgent cables which take precedence over all other traffic. If a hundred messages have been filed ahead of an urgent cable, it will still be sent first. Again the minimum charge is for seven words, with additional charge for each word over seven, and the rate is twice that of a full-rate cable. A third type is a code message. Again there is a sevenword minimum charge. The most commonly used codes are, Bentley's Second Phase, Bentley's Complete, and ABC 6. If you find some difficulty when composing a code message in conveying a clear meaning using all code words, you are allowed to insert some plain language 13

words. As long as the plain language word is not over fifteen letters it is charged as one word, though code words themselves are usually only five letters each. If some plain language words are used, it is known as a mixed message. It is often difficult or nearly impossible to obtain the exact meaning desired by the use of code unless one is a trained cypher clerk, or is using code continually. Thus it is better as a rule to use plain language messages. Cables are one of your best salesmen. They get your exact offer to your prospective customer, along with terms, dates of shipment, and all other details. You cannot afford the least misunderstanding of the type of goods and their quality, terms of payment or times of shipment; otherwise, there will be either lost or unfilled orders, disgruntled customers, and possibly even litigation. For these reasons do not skimp on your cable content. Also check on every cable and double-check before you file it for transmission, first to see if some words can be eliminated without endangering the clearness of the context, but mainly to be certain it is correct, clearly understandable, and contains every item of information needed by your prospective buyer or your agent. A fifth type of cable is the letter telegram, commonly called an LT. It is somewhat similar to a night letter between points on this continent. You are charged for twenty-two words, and the basic rate is one-half that of a full-rate or code message of seven words. Your LT is delivered at destination the following morning, unless across the international date line, when it is delivered the second following morning by date. If you are in any doubt about the best type of message to file because of time differential or date differential, call your cable representative. Sometimes an LT would be delivered to a business address as soon as a full-rate 14

message. This is so for most cables filed in Canada for trans-Pacific points on Fridays, as it is already Saturday at destination. Also, in Montreal, if filing a message in the afternoon for Europe, an LT would be used, as European offices would be closed at the time. Cable costs to any destination are identical regardless of the Canadian point of origin. Thus it is the same price to cable Paris, France, from Halifax, Winnipeg or Vancouver. Telex. One fairly recent development in the communications field must be mentioned. That is the use of international telex, officially known as "overseas teleprinter exchange service." The machines are installed in offices at a basic monthly rental and are connected directly with machines in offices abroad. An efficient stenographer types the messages and they are reproduced as she types by the machine in the overseas office, and replies are sent in a similar manner. As well as the monthly rental, there is a charge for the first three minutes each time the machine is used, and a flat charge per minute if employed over the basic three minutes. These charges are from $9.00 to $12.00 per basic three minutes, depending on destination, plus one-third of the basic charge for each additional minute. It is readily seen that to employ telex a firm must have a large daily volume of cables, but for such firms a saving of both time and money results. A small printed card is issued by telex, showing charges for each country, and opposite each is shown the number of hours to be added or subtracted from the time at the point of sending to find the time at destination. Some of the cable companies also issue a "world time map" for office walls. From it you can ascertain at a glance the day and time in any foreign country. The cable and telegraph companies supply free pads 15

for typing messages, or if you prefer you may phone your cables in, asking before the girl begins to take down the message that she make a copy. The copy is then mailed or delivered to you for your file. Although errors seldom occur, copies should be checked carefully. If an error is discovered call the telegraph company at once and they will dispatch a free service message to correct the error. One further service is offered by the cable companies. This is a "multiple address" cable. It is one cable to be delivered to several firms in the same city, and is used only if a general offer is being made. It is less costly than if individual cables are sent. Again, remember to check and double-check your cables before filing. Be reasonably economical, but don't skimp on words if doing so makes the meaning in the least obscure. TELEPHONE

With long-distance direct dialing, reduction in rates and increased dependability, long-distance calls are increasing in popularity. Before placing a call make notes of its purpose, rehearse the conversation, and then when connected, be courteous but to the point. Remember it is a business call, and the place for the chit-chat about the weather or the golf game is after the business has been transacted, and then only if time remains in your basic three minutes. LETTERHEADS AND SUPPLIES

Now that you have chosen the name of your firm and have had it approved, decided on your cable address, located your office, and had your phone installed, you are ready to order office supplies. As letterheads are often the first impression foreign firms receive of your company, they must be considered 16

as one of your senior salesmen. Thus it is recommended that they be on the best paper obtainable, and that they be embossed and not merely printed. For overseas airmail they should be on light weight paper, with another paper of heavier weight for domestic mail. The large or number10 envelope is recommended in both instances, with the envelope for foreign mail being airmail weight. Inscription on the letterheads should show the name of your firm, the street address, post office box number, telephone number and cable address, as well as the words "Importers and Exporters." The street address should be extended to show the province, followed by the word "Canada." As well, it is suggested that in small print you show the name of your bank, and also the words "Your file no. . . . our file no. . . ." Quite a number of import houses overseas use file numbers and it is a courtesy to them. All the above information might suggest a rather cluttered letterhead, but this is not so if small type is used for everything except your firm name. As well as letterheads, you must order invoice forms as these are required for all sales. Similar to letterheads, you should order one set on airmail weight paper, and another set on regular weight paper, for export sales and domestic sales respectively. Wording of a typical invoice is shown in Figure 1. Below the line are listed the goods sold, with their description and price. Cable ATCOL Phone MU 5-1111 ASSOCIATED TRADING CORPORATION LTD. 726 Blank Street, Vancouver, B.C., Canada Date: Sold to: Customer's order no.: Terms: Figure 1. The heading of an exporter's invoice.

17

Printed order forms too are necessary. They should be in pads with consecutive numbering in duplicate. They show quantity, description of the merchandise ordered, unit price, and total price; and below can be typed the terms and other pertinent information. Remember always to confirm all verbal orders whether given in person or by telephone by completing in detail and mailing to the supplier your firm's order, placing a copy with the same number, in your file. By thus confirming prices, quantities, terms of delivery and of payment, and delivery dates, any possible misunderstandings are forestalled. FINANCIAL ARRANGEMENTS BANKING

Your bank will supply you without charge the only other necessary form. These are drafts, and are always required for foreign shipments except to "open account" customers. In all business, and specially in the import-export field, your bank is one of the most important agencies with whom you deal. The bank is in every transaction with you, whether it is notifying you of receipt of letters of credit and putting them to the credit of your account on production by you of the required documents; whether it is in the extension of credit to allow you to purchase goods; or whether it is merely in answering letters of enquiry about your firm from foreign fields or domestic suppliers. Your bank is a vital factor in your everyday business life, and you must woo their confidence zealously. In every city you have a choice of banks, and once you have chosen which bank is to carry your account, then decide whether you will deal with the smaller neighbourhood branch near your office, or the main branch for your city in your financial district. Before reaching a 18

decision it is necessary to hold a full discussion with the manager of the local branch and possibly also with the manager or senior accountant at the main city office. Generally, if you carry a small or moderate account at the main city office, you rank away down the list of important customers, and because of the size of their staff and the number of large transactions they are handling each day, it takes a long time to become known to them. In the small bank, however, the number of employees is few, and the number of large accounts is usually far less, so that you soon become well known to the manager and accountant. Against this you must balance the fact that the "line of credit" which can be extended, without reference to the bank supervisors, by a small branch is far less than at the main city office. Thus, if you have goods of $25,000 to be purchased on credit, probably this amount would be above the limit of the responsibility of the local manager, who would therefore have to refer your request to the main office and receive their approval before he could grant you the loan. The manager of the main office has, on the other hand, far wider discretionary powers. If, however, the local manager is a "live wire," he would leave for the supervisor's office as soon as your request was received and would have an answer for you within an hour. If the advantages of the small branch and the credit terms of the main office can be so combined, it makes for ideal banking. Before you open your account, tell the bank manager what you expect to need in the way of credit, whether it is for a few days only while letters of credit are being negotiated, or for discount of drafts. If the local manager promises you prompt service on advances over his normal limit, you can be well satisfied. If he is loath to promise such a service, do not deal with his branch. 19

Banking today appears to be as much, if not more, on the basis of trust than in years gone by. A customer of the bank who keeps his word implicitly, week after week, month after month, soon builds a substantial line of credit regardless of—or even without—actual collateral. Thus, it is a definite rule never to be broken, even if your bank is holding ample security, that you never make a promise to your banker that you cannot fulfil to the letter on the exact date. If you are not sure that you can meet your dead-line, tell your banker, but be completely honest with him. His advice is usually extremely sound, and if he reasons against any particular transaction, it is usually found later that a loss would have been suffered if his advice had not been heeded. LETTERS OF CREDIT

Mention has been made of letters of credit as one of the documents to be handled by your bank. You must have a full understanding of buying or selling by letter of credit. A letter of credit is the actual document sent, usually by cable from the buyer's bank, to a correspondent bank at or near the seller's city. Often letters of credit for Canadian firms are cabled to a US bank, copied and signed there, and forwarded by airmail to the Canadian exporter. At other times they come from a bank in your own city direct to you. The document itself guarantees to pay you the purchase price when every term and condition in the letter of credit has been met. When referred to in cables, it is often shortened to either LC or Lecredit to reduce cable costs. The credit can be either revocable or irrevocable, though very few revocable credits are ever issued because they are not a binding undertaking between the bank and the exporter, and may be modified or withdrawn without 20

notice. Hence the first thing to check is that the credit is irrevocable. Once satisfied that it is irrevocable, you know it cannot be altered or withdrawn before the date of expiry which it bears, unless consent of all parties concerned is given. It is common knowledge that when cashing a cheque, it must be endorsed exactly as shown on the face. A similar, but even more stringent, rule holds for a letter of credit. Each document it requires must be completed word for word exactly as it states even to copying a mis-spelled word from the credit to your documents. If this is not done, your bank usually will not negotiate the credit for you, or if it does, the issuing bank may refuse to honour it on presentation. By that time the shipment would be well on its way, and if the price of the goods has fallen, the overseas buyer might withhold permission to alter the credit to conform to the wording of the documents. Thus every word of a credit must be checked on receipt. Minute word-for-word instructions must be relayed to those making out forms such as "on board bills of lading," your own invoices, and other forms requested by the credit. When all forms have been completed they must be checked word for word against the letter of credit before presenting them to your bank. Then when all the documents and the letter of credit are taken to your bank, your account will be credited with the amount specified. If, on receipt, any stipulations of the credit cannot be met, or if the terms are so different from your offer that you cannot comply in every detail, cable the buyer immediately, pointing out the differences, and asking for an amendment to the credit. Partial shipments. Most letters of credit allow for partial shipments, especially for goods in short supply or 21

types of goods where it would be nearly impossible to ship the exact amount. An example of this latter type of goods is baled hay, where the weight of each bale is approximate, but never identical with all other bales. Thus an exact tonnage right to the pound would be impossible, and so partial shipments are allowed. Anything less than the exact amount called for, whether you ship in one lot or in several actual lots is considered as a partial shipment. As a result, if goods cannot be weighed or measured exactly to make up the exact total, be sure the credit allows partial shipments. Extensions. If, by any chance, you cannot supply the full amount ordered before expiry of the credit, cable your customer as soon as you know the order will be incomplete. Be sure to give your reasons and ask for an extension of the credit. If the balance of the goods can be handled by the buyer during the time you can fulfil the order completely, no doubt he will extend the expiry date of the credit. Releases. Once in a while a letter of credit will arrive tardily, or in response to a quotation in which you have protected yourself by stating, "subject to supply" or "subject to prior sale" and you find you cannot supply at all. Possibly the reason for the late arrival is not the buyer's fault. Foreign exchange difficulties and import permit regulations in many countries still hamper promptness. By all means notify the customer by cable, and release the letter of credit by writing the correspondent bank in Canada or the United States, returning the credit with your letter. This particular transaction is thus ended without any liability on your firm. Cost of letters of credit. Letters of credit set up in Canada for purchases abroad have a minimum bank charge of $5.00 plus one-quarter of one per cent of the 22

amount the first thirty days, and this percentage increases by one-sixteenth of one per cent each thirty days after the first. Then, too, there is the normal interest on the money or securities held by the bank to cover the credit. Our bank charges are nominal compared to the charges of some foreign banks, so it is vital for goodwill that letters of credit be negotiated with all reasonable speed, and that the minute you know you cannot supply, the credit be released. Always try to put yourself in the buyer's place, and treat him as you would want to be treated. Even exporting solely by letters of credit, there is always an interval of from a few days to two weeks between the time the export merchant must pay for the goods, and when the letter of credit is deposited to his account. This is because the shipment must reach seaboard, and actually be loaded on board the ocean carrier before all documents can be obtained. Usually your bank will advance the funds for payment of the goods and other charges against the letter of credit. Then when you have all the required documents to cash the credit, the bank deposits the total amount to your account, debiting you with the advances they have made. DRAFTS On occasion you will find it necessary to ship "draft with documents attached" to good customers or to compete in areas which normally do not set up letters of credit. The meaning of the term is that you attach the bills of lading, insurance certificate, customs forms, consular or other required forms, to a draft which you make out for the full selling price. You then present the draft with forms attached to your bank. They are then forwarded by your bank to their correspondent bank in the 23

city of destination. The bank at destination informs the importer, and holds the documents until the draft, which is a demand for payment, is met. The draft usually reads "at sight," which denotes payment is required as soon as the buyer is notified. Actually, however, drafts are never paid until the goods arrive at destination. Thus there is a long delay in actual receipt of your money. The cost of drafts. In connection with the cost of drafts there are several factors which must be considered when quoting for shipments on those terms. First, your money is tied up for a considerable period of time, so the interest factor must be counted. Possibly your bank will discount your drafts, but if they do, you are charged interest, or rather the interest is deducted from the proceeds. Then, if by chance, the draft is not paid by the buyer, you still are liable to the bank. Next, the correspondent bank in the foreign country will deduct their charge for handling and collecting before remitting to your bank. Our banks charge a very nominal fee for handling and forwarding drafts, but in some countries the charge runs exceedingly high. All these factors enter into your costing. Further, if you expect to do much draft business, no doubt your bank will require you to be covered by Export Credit Insurance. Some areas, notably most South American countries, do nearly all their import business on a draft basis. EXPORT CREDITS INSURANCE

If you decide to quote in areas which normally do business on credit terms, it is useless to request Letters of Credit. Some areas never ask credit terms, and it is only by actual practice that you become familiar with the methods of business usual in various parts of the world. 24

If credit terms are to be quoted, discuss the matter in detail with your bank manager, and consider the coverage offered by the Export Credits Insurance Corporation. This is a Crown corporation which commenced business at the end of the Second World War. It divides its insureds into two groups: (1) those which offer credit of a few months; and (2) those firms which, owing to the type of goods they manufacture—usually capital goods such as locomotives or other costly machines—grant credit of from six months to several years. Only the first group is of interest to the export merchant as a general rule. In favour of insuring, you will find, is the fact that the following risks are covered: bankruptcy of the foreign buyer; his failure to pay within one year for goods accepted; war or revolution in his country; edicts by his government preventing payment, such as cancellation of import permits; blockage of funds or other restrictive legislation. You cannot cover these risks, which do arise in the export industry, with any commercial insurer. Your bank will be in favour of you insuring, and no doubt will look more favourably on discounting your drafts if shipments are so insured. Against insuring are several points to consider carefully. First, the corporation insures only eighty-five per cent of the value of each shipment. This is not so great a hardship to manufacturers as it is to export agents. If only eighty-five per cent of the manufacturer's invoice was paid, he might be out his profit but suffer no other loss. The export merchant, on the other hand, operates on a mark-up of from two per cent to five per cent and so would suffer a substantial loss unless at least ninety-five per cent of his invoice price could be claimed. The corporation asserts that the fifteen per cent co-insurance tends 25

to a more careful selection of credit risks by the exporter, but it does appear this could be made more equitable between manufacturer and export merchants. If the corporation would raise their percentage limit, the export merchant would, it seems, be more prone to subscribe. Working on such a small margin—and it must be kept small to compete—generates a hesitancy to add anything to the cost, good as coverage may be. Reporting of all credit shipments at the end of each month is required by the corporation, and this can impose a problem nearly impossible for the export merchant to solve. A definite prerequisite to shipments on credit terms is that the exporter obtain two credit reports on each account, and that he submit them for approval to the corporation. This sounds reasonable, as the Canadian trade commissioner in the buyer's area and the buyer's banker will supply the reports. The usual procedure is for the seller to ask his own bank to obtain a credit report from the buyer's bank. Your bank will get a faster and more accurate report than if you wrote the buyer's bank direct. In actual practice, however, complications can and do arise. Take the actual case of the active agent in the West Indies who tours the islands on sales trips. At the conclusion of a trip he cables or airmails his orders to be shipped by first available vessel to fifteen or twenty firms in various island destinations. Your agent is working on commission, so cannot be expected to accept one consolidated order and distribute the goods himself, and there just is not time to write the trade commissioner at Port of Spain and the various banks and await their replies and then obtain corporation approval before shipping. The only courses open in such a case are: to violate the terms of the insurance contract; not to ship the goods within a reasonable time; or to terminate the insuring contract with the corporation. It is hoped that with co26

operation of overseas agents and the corporation, coverage can be revised in the future to insure this type of shipment. One other minor irritation is that the rates charged are confidential, and are compiled only after a list of shipments made during the previous year has been submitted to the corporation along with a list of expected sales in the next twelve months. Thus, one exporter is never certain that his rate is identical with his competitor's, though no doubt it would be as long as the same type of goods was being shipped to the same destinations. Under the insuring contract, all credit shipments must be reported and insured. Some exporters feel that as the bulk of their shipments are consigned to firms with whom they have dealt for a number of years, they can afford to take a chance on some other accounts. They argue that for the premiums saved by not insuring shipments to their steady accounts, they are in fact self-insuring against any bad debts. This may be so, but the corporation has many claims due to the bankruptcy of old-established businesses as well as of the virtually unknowns. Thus, if credit shipments are to be made, discuss the problem thoroughly with your bank manager, and consider carefully the pros and cons of Export Credit Insurance. ACCOUNTANTS

An accountant is the comptroller of your business. He is necessary both for the internal operation of your business, and for the returns that must be submitted to the government. The profit and loss statements he will supply show the dollar value of your purchases, of your sales, and your expenses in detail. Study these carefully, as from time to time danger signals can be read between the 27

lines. Expenses may be too high. Why? Analyse them, and find what expenses may be unnecessary; others may be reduced without hindering the sound operation of your company. The difference between purchase price total and sales total may be too narrow, so that in future one per cent or some other small amount must be added to your quotations to offset unforeseen overhead. Then again, possibly no danger signs are seen, and month by month a reasonable profit is shown. Your bank will be most interested, and a good statement from your accountant will strengthen your credit with them. Your accountant also will compile for your signature your firm's tax returns, and file them. He will advise you as to when this must be done, depending ou your company's fiscal year. If, after filing, assessments are made against the tax return, he will negotiate with the tax department regarding them on your behalf. Until you can employ a full-time accountant, any one of chartered accountancy or certified public accountancy firms will provide you with such a service for a very low monthly fee. All that is necessary is to keep all bills, cancelled cheques and bank statements and submit them each month to the accountant. He will do the rest. Some accounting firms even arrange to pick up all vouchers monthly at your office and mail you a statement a few days later. It is a good policy to pay all accounts, except petty cash items, by cheque, and make sure a receipt is obtained for any purchases from the petty cash fund, even postage stamps. In that way the accountant's job is made easier, and his statements then are correct to the cent. OTHER BROKERS OR EXPORT AGENTS

If you build up gradually several other export agents in various North American centres and keep in touch with 28

them, they can begin to occupy over the years a place similar to a branch office of your own concern. It has been discussed already how these contacts are made. Once established they should be kept informed of quotations that you believe to be of interest to them. Prices to them must be the same as FAS your seacoast shipping point, with the understanding that you will supply them with prices delivered to any destination. The profit on any sale must be split evenly, and you will find once confidence has been gained, that a good deal of business will result. Pass on to your United States correspondents enquiries for goods you know can be obtained cheaper there. Until you or they can make a trip to the other's city, you can get to know them well by telephone. Longdistance rates to the USA are far lower than our Canadian phone tolls, and you will find a telephone call periodically will pay you dividends. CURRENCIES

Quotations usually are in United States dollars for foreign shipments. Thus the exporter must watch the fluctuations of that currency against our own. You will be paid in US dollars, and if at the time $1.00 Canadian stands at $1.02 US, or, as usually shown, the US dollar is at a discount of two per cent (worth approximately 98 cents in Canadian), you will be losing around two per cent when you convert unless you have allowed for this. For large shipments it is prudent, as soon as the order is confirmed or the letter of credit is received, to buy "forward dollars" from your bank. For a small fee your bank in this way guarantees to convert your US dollars, when they are paid to you, into Canadian currency at a fixed rate. Your bank will give you full details in this

29

regard. You can see this takes any gamble out of fluctuating exchange rates. Some exporters, however, take a chance on exchange variations on the theory that these are both up and down. Thus if there is a slight reduction in profit on one shipment due to a decline in the value of US dollars, they will make it up in all probability when the next shipment goes forward. Restrictions. During the war and for some three and a half years after, Canada had a Foreign Exchange Control Board which controlled the flow of money out of the country, and recorded the amounts entering. Gradually the exchange controls have been lifted either partly or in whole in one country after another, but a large number of countries still retain either monetary or import controls. This situation is not static, but changes from country to country from time to time in varying degrees. In some countries importers must apply for permits which will allow them to spend so many dollars on a certain type of goods, usually from a certain source. These regulations, of course, hamper trade and make the job of the Canadian exporter more difficult. By close correspondence with agents and buyers overseas, however, and by regular reading of our government trade bulletins, exporters can stay abreast of conditions and become familiar with what can be shipped where and when. MARINE INSURANCE

Another agency from whom you, as an exporter, will receive expert advice is your marine insurance company or agent. Not only will your agent advise you on which type of insurance should be purchased to cover each particular 30

commodity going to any specific destination, and quote you rates, but the insurance bulletins and endorsements usually are an uncanny forecast of future conditions in foreign countries to which they refer. These, to the astute exporter, can act as a warning or even as a danger signal, especially on credit shipments of any type. Endorsements. Take as example a bulletin headed "Delays at Destinations on Shipments to South American Ports." The bulletin reads in part: Underwriters have been concerned for some time over long delays at certain foreign destinations. These delays seem due mainly to lack of dollars, although in some cases they may be due to the failure of the consignee to obtain the necessary import permit, or the cancellation of permits, or difficulties in obtaining the necessary dollars, resulting in doubt as to the continuation of the coverage under the Marine Extension Clauses. We are therefore enclosing endorsement to your open policy PC no. 57, effective at the expiry of the contractual forty-eight hours, and listing such destinations.

The endorsement itself limited the coverage, or ended it in some instances, immediately the shipment had been transferred to lighters or was placed on the dock in the South American port. Another bulletin which was issued some three months before trouble boiled up in the Middle East: Re Palestine Situation: Due to the increasingly serious situation in Palestine [at the time it looked placid], which the underwriters fear may break into open hostilities, it is necessary to restrict War and Strikes, Riots and Civil Commotion coverage on shipments to Palestine to cover only while actually on board an overseas vessel.

The dangers noted in such bulletins are apparent, and the value to the exporter of this type of commercial intelligence is readily seen. 31

Open policy. To facilitate coverage, and for practical business reasons an exporter is generally covered by the insurance company under an "open policy." Under this arrangement the exporter promises to place all his insurance on shipments with the insurance company during the life of the policy, and the insurers agree they will cover each shipment. The policy "lives" until it is cancelled, by due notice, given by either party. Further, if any change is to be made in the terms of the open policy, the insurer must notify the insured, giving notice as stated in the policy. Hence the vital bulletins from time to time. The company usually supplies forms in triplicate to be filled out by the exporter, one set being for each shipment of goods. Coverage then takes effect automatically as soon as one copy of this notification form is mailed to the insurer. The exporter's copies are known as "insurance certificates" as distinct from an individual insurance policy which a few insurers still issue on receipt of a notification. The usual wording of the part of a letter of credit or detailed order concerning insurance is "insurance policy or certificate." Thus, as soon as the exporter has completed the notification he holds in his hands one of the documents required: an insurance certificate. The shipper is billed for his insurance on a consolidated account each month. Value to be insured. It is normal for buyers to request that 110 per cent of the total cost of goods plus freight plus insurance premium be insured. This appears to be over-insuring. A few buyers now request insurance up to 120 per cent, though 110 per cent is the normal. If you insured your home for 110 per cent of its value and it burned to the ground, the insurer would pay only its replacement cost, or its true value, so no benefit would ensue from over-insuring. With marine shipments, however, the loss suffered by the importer in event of a total 32

TO C. E. BLYTH & CO. LTD. Application

618 WEST FENDER STREET

VANCOUVER, B.C.

PA 8O38

Declaration by «——— Open Policy No

»

57

417

,.of PROVIDENCE WASHINGTON INSURANCE COMPANY

Loss, if any, payable toConsigned to

~—

Notify

..at-

, .—

on,

(Give number of packages and nature of goods)

„,...„

On deck,

....Under deck ~~~

per Steamer frOm

1C

.......

or Sailing Date .

l._.L._..

1 . J .,.,-r-.-T-,T-.,.,.rr...., J ..... 1 m._u.-.

„.........„..„,

tO

..,...-.„....«_„..„

(Destination)

(Point ol Shipment)

To be insured as per Policy for $.— UNDER DECK DOLLARS

CENTS

~

as below.

MARKS:

ON DECK DOLLARS

CENTS

INVOICE COST PLUS FREIGHT

Prepaid and/or Guaranteed

PREMIUM TOTAL % If to be DUTY insured COLLECT FREIGHT If to be Insured PLUS

TOTAL

Rate

Premuum

Rate

Premuum

Rate

Premium

TOTAL PREMIUM $

Insurance Conditions Required:

Date 90

»K«.

Per.. ..„ . IMPORTANT: THIS APPLICATION MUST BE COMPLETELY FILLED OUT. 4.41.

C.

*

W.

Figure 2. Application form for marine insurance.

33

claim would be not only the price he paid for the merchandise, the freight and insurance, but interest on his money so invested, and the profit he failed to make due to the claim. An individual has an "insurable interest" in a profit he expects to make on a normal commercial transaction. An insurable interest must be present before an insurer can cover it against risks. For these reasons, 110 per cent of the cost of goods, freight, and insurance premium is usually insured. You must remember this when costing goods for export. It would take years in the marine insurance field to become an expert, and that is why you should consult your insurance agent before each insurance certificate is completed, to ascertain which type of contract should be purchased, and what additional risks over and above those covered by the basic policy might be encountered due to the type of goods or the destination. You are in the export business, and are not expected to be an insurance consultant, but it is necessary that you have a clear understanding of the three basic types of policies and what they cover, and of the more commonly used supplementary coverages. TYPES OF POLICY

The main types of policies are the FPA policy, the WA policy, and the all risk policy. The FPA policy is "free of particular average," which means in common language "free of partial loss." Consequently, before a claim could be entered, there would have to be a complete loss by burning, sinking or stranding of the carrying vessel. As these risks are fairly remote the rate for this type of insurance is the lowest of the three. The WA policy, so named from "with average" covers either complete or partial loss, provided a partial loss is 34

in excess of what is known as "the franchise." This, in the trade, is usually three per cent. Thus if less than three per cent of the goods destroyed is the amount of the claim, the insurer is not liable. If, however, three per cent or more of the shipment is lost, the insurer is liable for the total amount of the loss. Thus the franchise is not a deductible amount as in automobile insurance. The percentage of the franchise has been known to vary, so be sure to check the figure in your open policy. Once an open policy has been issued the franchise cannot be increased except by the giving of notice by registered mail by the insurer to the exporter. The third type, which has a still higher rate, is the all risk policy. Under this contract the shipper's goods usually are covered from his or his supplier's warehouse, whether or not either or both are at seaboard. The FPA and WA policies usually afford protection only from the time the goods are loaded on board the ocean carrier, with the insurer's liability usually ceasing as soon as unloaded at the foreign port. The all risk policy gives broader coverage than does either of the other two types. Besides loss from the usual hazards of navigation of sinking, stranding, and burning, the all risk contract insures against theft, pilferage and vandalism and other perils with the exception of inherent vice. This latter is deterioration which could have had its origin in the commodity itself, such as weevils in cereal or oil becoming rancid. Theft and pilferage are rampant in some countries, and for such destinations it should be automatic for the exporter to cover with all risk insurance. Until you become familiar with these destinations, you should consult your insurance agent. After a while you will become familiar with the type of policy best suited for each type of goods to various destinations. 35

Besides insuring all risks when required, it is incumbent on the exporter to take all possible steps to reduce the hazard of pilferage. As a result most shippers of canned goods have every two cartons double-wired together. Although there is an extra charge for this by the suppliers, it nearly eliminates the possibility of theft. It is far easier for a workman at a foreign port to carry away unnoticed one case of thirty or forty pounds than to carry two cases bound together, with a weight of sixty to eighty pounds and of such bulk that concealment is difficult, if not nearly impossible. Both the insurance company and the importers appreciate extra precautions on the part of the shipper. This helps goodwill, and makes repeat orders easier. Further, when a claim does arise, the insurance company knows every precaution has been taken, which helps toward prompt settlement. Supplementary cover. On any of the three types of policies, a commonly used supplementary cover of war and strike is often required by importers. Even if not requested, it should be added for certain destinations. It does not cover for loss due to delay by war, strike or civil commotion, but only for actual damage due to, or loss from, these causes. The premium is very nominal, and a number of firms add this clause automatically when completing their insurance certificates. Two other additions to policies are also in common use. One is the warehouse-to-warehouse clause which can be added, and the other is short-term cover. The first is exactly as the name implies—continuous coverage from the time the goods leave the supplier's warehouse until they reach the importer's warehouse. Most firms use short-term cover from time to time. On one occasion a carload of flour from the prairie arrived at the ocean terminal on the exact date the vessel was to commence loading. The freighter approached the dock 36

and executed a sudden turn in the current, knocked askew an outer piling, and damaged her rudder and propeller in the manoeuvre. As a result the ship was towed to drydock and did not commence loading for twelve days. In the meantime the flour had been unloaded from the railroad car and sat in the dock shed. The bank had advanced nearly thirty thousand dollars against the letter of credit on notification of arrival of the railroad car. They were a lot happier when handed a short-term cover policy insuring the flour against all risks until loaded aboard. Premiums for the short-term cover are calculated in days, the policy continuing as long as the exporter needs the coverage. Then he notifies the insurer and the policy is cancelled and the premium calculated by the number of days it had been in force. When to insure. You must remember that marine insurance generally (unless a warehouse-to-warehouse clause is included or has been added to the policy) does not take effect until the merchandise is loaded aboard ship in apparent good condition. Thus the exporter must think of every shipment in terms of the question, "When does his liability commence?" It commences when he takes title to the goods, and this is dependent solely on the terms of the sale. On one order, an exporter in Montreal might be exporting steel rods from Hamilton, and the terms could be "on board railway cars, Hamilton." That is when payment is due, unless the mill has granted him credit terms; and even if credit was given, the time when the rods are actually loaded on the railway cars is when the exporter's liability begins, and when his insurance should become effective. On the other hand if the terms of the sale are "free alongside the ocean carrier" the exporter's liability does not begin until the goods are delivered to, and unloaded at, the wharf and the ship begins loading. The necessity for adequate insurance 37

coverage to coincide with passing of title from the supplier to the exporter is seen readily. It must be borne in mind constantly. SHIPPING COMPANIES OCEAN CARRIERS

Before you can "cost" or "price" your goods for shipment you must know how they are going to reach their destination. Thus it is wise to build a phone index of the various transportation lines with a notation as to the general areas covered by each steamship line. For shipments out of west coast ports a weekly is published in San Francisco called the Pacific Shipper, in which is shown the name of every vessel expected to load at west coast North American ports during the next few weeks, the dates of loading, the ports of call, the agents in each North American city, which ships have refrigerated space, and which carry limited passengers. It is well indexed, so you can look up the port to which you wish to ship to find the name of the ship, the dates of loading, and the agent for that line. An excellent Canadian publication showing loading dates at BC ports is Harbor & Shipping, published in Vancouver. The eastern seaboard cities are served by a similar publication printed in Montreal called the Shipping Register. Another advantage of subscribing to a good shipping publication is that a great deal of export intelligence is given prominence as well as the data on ship movements. Included are changes in freight tariffs, alteration in conference rules, Export-Import Bank and World Bank loans to foreign governments, announcements of trade fairs, new markets for goods, and many other items of vital interest to the alert exporter. 38

If you live in a port city, the Merchants' Exchange will supply you with specific information about the arrival of any incoming ship. Individual shipping company agents, too, will tell you which company to contact for destinations not served by their own vessels. Even then, some destinations will require trans-shipment, which is very costly and often prohibitive, and in rare cases you will have to decline possible business because no carrier serves the particular destination. At the outset you must determine whether to become a "contract" or "non-contract" shipper. Each part of the western world has what is known as a "shipping conference" for that area, formed by the major shipping lines in and out of that area. If you become a "conference shipper" by signing a shipping contract with the various conferences, you receive a lower rate than does a casual shipper. You must, however, guarantee to ship all your goods by conference vessels, and the penalties are extremely heavy if you break the contract. Due to the reliability of conference shipping lines, and because you must have competitive rates, most exporters join the various conferences, such as the "Pacific Coast European Conference," the "Atlantic European Conference," and others. Any shipping agent will make the necessary arrangements for you. Independent ships do come into port from time to time, and to obtain cargo usually offer rates far below those of the conferences. As a rule they do not give any regular service, so except for spot shipments would not be very satisfactory. Some exporters have incorporated a subsidiary or separate company which does not become a conference signatory. It is quite often dormant for long periods until an independent ship appears in port destined for a foreign country from which the exporter is holding orders. Then 39

the subsidiary company comes to life for this one shipment. Technically the exporter is not breaking his conference contract by following this course. Some argue, rightly, that this is not good business ethics, and their opponents argue that in business you must look after yourself. Recently it has been decided by some of the conferences that if the overseas buyer stipulates that nonconference vessels are to be used, the shipper is not violating his conference contract by using them for those orders. Choosing a ship. Usually it will be found that there are several vessels in port or due shortly for a required destination. On which one will you ship, provided space is available? Again, by actual experience, the exporter becomes familiar with which lines offer fast service, learns which ships in the same line are fast, and which are slow. Some may be scheduled direct to the port you desire; others, though faster, may call at several other ports first and so take longer to reach your destination. If you are shipping against letter of credit your customer does not want his goods in transit longer than necessary, as his money is tied up until the shipment arrives; and if you are shipping by draft with documents attached you know you will not be paid until the merchandise is unloaded in the foreign port. Consequently, ship by the fastest practical vessel and route. In the case of perishables, probably refrigerated space would have to be reserved. For semi-perishables the danger of spoilage during most seasons is greater if the vessel travels by way of southern routes than over northern routes; so during those periods, even if a southern route vessel is faster, it would be impractical to ship by it. Other goods, such as fresh fruit and vegetables, geneally require ventilated stowage; and some goods should 40

go as deck cargo. You will find that only a comparatively few ships offer refrigerated space, commonly called "reefer," and some do not have ventilated stowage. In some instances, however, ships without reefer space will consider carrying a small amount of frozen cargo in refrigerators usually assigned for frozen food for the crew. Repeat business can only be obtained by shipping by the fastest but best route for the commodity concerned. If in doubt, ask your shipping agent. They desire repeat business from you, and so you can trust their advice. Options. If you believe you can close an order, and wish to cable your prospective customer giving exact shipping date and name of the ship, the transportation companies usually are very generous in giving you an option on space until the vessel commences loading. Here again, if your order is not forthcoming, it is both ethical and right to cancel the option immediately you know you will not require the space. It is appreciated by the shipping agents. Incentive Rates. Incentive rates may be granted under conference contracts. Thus, the shipping company will set a minimum quantity, such as five hundred tons, and reduce the regular conference rate if you ship more than the minimum in one lot. Also, for quantity shipments, they are usually prepared to call at a port in the general geographic area of their usual destinations but not on their regular scheduled ports of call. This often eliminates the necessity of trans-shipment, which is costly, and difficult to cost correctly. RAILROADS

The Canadian railroads, too, have their own exportfreight departments which can be very helpful to the 41

exporter. Goods coming from interior Canadian points to seaboard are routed by them on your instructions to the exact ocean dock where your vessel will be berthed. Also they are prepared to advise the inland exporter on ocean carriers, and will complete arrangements for export of goods transported by rail to the coast. Railroad Rates. Often goods designated for export are charged a lower railroad rate than if they are being moved for home consumption. Further, in some instances, the point of manufacture has a marked bearing on the ocean freight rate. This, the shipping conferences say, has been brought about by interior factories or exporters promising that if the ocean rate is reduced to offset the amount expended on inland freight, they will ship a definite amount of the commodity in a definite period. It does not appear that the conferences check on these moral commitments, and it is admitted that they have come about as a result of pressure groups of manufacturers. As a result, some goods manufactured east of the Rocky Mountains and carried to the west coast for ocean shipment take less than half the ocean freight rate charged on similar goods manufactured either on the west coast itself or west of the Rockies. Railroad rates also vary with commodity and destination, and in general westward-bound freight is charged a lower rate than the same freight eastward-bound— except in the Maritimes, where often the reverse is true. Again, this is probably due to lobbying by Ontario and Quebec manufacturers. Thus make sure you have the exact inland and ocean freight rates before you begin to cost your shipments prior to making overseas quotations. When a railroad car arrives at the dock-side, there is an unloading charge, depending on the commodity, to put 42

the goods on the dock or in warehouse beside the dock. The export-freight department of the railroad will give you the exact rate. Later a shipment will be followed through to show itemized charges. All railroads have two sets of rates, one for small shipments based on a minimum charge of one hundred pounds, and a lower rate for carload shipments, which usually are thirty thousand pounds or more. The higher rate is known as the "LCL" rate, which denotes "less than carload lots"; and the lower rate is the "carload" rate. An intermediate rate, much lower than LCL is afforded for small shipments by use of "pool cars." Several private firms are engaged in the pool-car business. From the main cities they dispatch every day or two a car made up of small shipments from numerous shippers; sometimes it is a grocery car, or a furniture car, or sometimes a general merchandise car. The pool-car service is not used often by exporters, but it is convenient at times, and should be kept in mind. TRUCKS Shipments by truck to seaboard for export, and to the United States have increased to such an extent that even the railroads have set up subsidiary truck lines. Both regular freight and refrigerated freight is moved in quantity in this way. The truck has the advantage of being able to pick up from the supplier's warehouse and deliver to the ocean terminal or the US customer. AIRLINES All major airlines now have scheduled aircraft for regular freight hauls. All manner of goods are being shipped by air, but its higher cost, compared with that of surface transportation, means that this type of transport 43

is utilized by the exporter only when exceptional speed in delivery is required, or if goods are extremely perishable. PARCEL POST At times, depending on the article shipped, parcel post is an ideal way to export goods. Some of the British exporters of cutlery use this method exclusively. The shipment is bundled into parcels, each of the maximum weight allowed by the post office, and delivered to the mail by truck. The exporter is relieved of checking ships' loading dates, of obtaining space, and paying terminal charges. The post office provides that service, and as mail usually goes by first-class liner, the time in shipment is short. On arrival in the country of destination, after clearance through custom house, the post office delivers the shipment to the importer's warehouse. The exporter, however, is not relieved of supplying export forms, and documents required by the country of destination. These latter usually are forwarded in the regular way through the exporter's bank. Insurance can be arranged within limits by the post office, or full coverage by your insurance company. Do not overlook parcel post as a method of forwarding goods for export if it can be applied to any of the merchandise you handle. It is easy, fast, and very satisfactory to both shipper and foreign buyer. CUSTOMS BROKERS

The customs broker is one of the most important specialists ready to help the exporter. On all export shipments a series of sometimes perplexing forms must be completed; some must be forwarded, some filed with various 44

CUSTOMS, CANADA, EXPORT ENTRY

B 13 4-59

REPORT NO...

See instructions on reverse side

PLACE OF LADING

DELIVERING CARRIER (NAME OF RAILWAY OR VESSEL, ETC.) (IF BY HIGHWAY, SO STATE)

ENTRY No

OUPUT

PORT VIA (STATE IF SHIPPED VIA UNITED STATES PORT. OR DIRECT FROM CANADIAN PORT)

This space for

use of

The following articles of domestic and/or foreign production are delivered by or on behalf of

BUREAU OF STATISTICS only

Nam* of owner

ADDRESS OF OWNER_

(COUNTRY)

CONSIGNEE

Country of final or ultimate destination

For wxpotation to

ADDRESS

MARKS ON PACKAGES

Number

of Packages

DESCRIPTION OF GOODS •Precis* description of goods or articles is required. generat terms such as meats,dry goods ,avhinery, Prints, etc., will no tbe accepted.

VALUE Actual amount received or to be received in terms of Canadian Dollars, exclusive of all charges. If no payment, estimate value. State number DOMESTIC FOREIGN of pounds, tons, products including or imported gallons, yards, imported —Jproducts in same etc. Processed in condition as imported Canada QUANTITY

(SIGNAL) (PRODUCTION)

(SPECIAL)

STAMP OF CHIEF PORT

N.B.

If not a sale, state reason for export, i.e. loan, repair, processing, exhibition, etc.

On overseas shipments direct from Canadian ports, state or estimate here amount of Inland freight from place of lading to port of exit, plus handling charges to and at port of exit—Canadian $

EXPORT PERMIT NUMBER

|F COLUMN

,„..

,

"FOREIGN" USED, STATE HERE

COUNTRY OF ORIGIN OF GOODS IMPORTED CUSTOMS EXCISE OFFICER

DATE

I Return To: ,

I HEREBY CERTIFY THAT THE INFORMATION GIVEN ABOVE

Address:

IS TRUE AND COMPLETE IN EVERY RESPECT, SIGNED BY_

INDICATE: OWNER Q OR AUTHORIZED AGENT Q USE SPACE ABOVE FOR RETURN ADDRESS RESIDENCE

Figure 3. The B 13 form used at present.

authorities, and some, occasionally, accompany the shipment. The customs broker keeps up to date with the various forms used by each country, including consular forms, which must be completed for some destinations including most South American countries. These forms must be completed by an expert, especially if they have to be typed in a foreign language. Very few goods of Canadian origin require an export permit, but for statistical purposes all shipments out of the country require what is known as a B 13 form. During the Second World War this form was enlarged and its main purpose then was to control foreign exchange within Canada. Some two years after the war monetary controls were lifted in Canada, and the B 13 became a form for recording exactly what, how much, and to what destinations, Canadians export. You will soon become familiar with this simple form and where it is to be filed, but at least for the first few shipments a customs broker should complete this as a guide. All that is necessary to obtain full export papers for any destination is to phone all details of each shipment to your customs broker, and he will complete all export documents required and deliver them to your office for a very small fee. The information you supply your broker is held in strict confidence so you need not hesitate to answer his questions fully. When you decide on a broker, he will supply power of attorney forms for your company's signature. These allow him to act in the place of the firm to obtain export permits, if required, and consular forms, and to clear goods entering Canada as well. Most customs brokers, even if they have no branches, have correspondent firms in all main centres across Canada. Thus, if your firm is in Ontario and you have a 46

supplier in Quebec City, with an order for Belgium, you would contact the correspondent customs broker in Quebec City, sending him full details of the order and the shipping instructions. He would then obtain space in his capacity as forwarding agent, notify the suppliers when and to which dock to deliver the goods (or if it was winter time he would communicate with his correspondent firm in Halifax or Saint John, NB, for space), complete all export papers with the exception, of course, of your commercial invoices and insurance certificate, prepay the freight if necessary, and forward the documents to you with his account. In this way you can ship from any locality goods you have never seen from suppliers you have never met personally, and have the shipments handled as efficiently as if you were on the scene yourself. For imports, too, the customs broker is extremely valuable. His duties in this regard will be discussed later.

47

3. C O S T S AND QUOTATIONS

BEFORE GOODS CAN BE "cosxED" or priced for export, it is necessary that you should have complete details from the supplier, including cubic measurement, weights of cases, terms of the sale, whether his prices are net, or if they carry a discount or commission for your firm. Some goods do take a discount or commission; others do not, and again it is only by actually handling the shipments or enquiring closely of the factory representatives that you will become familiar with each classification. In this business particularly, you will get nothing unless you ask for it, so when obtaining quotations from suppliers assume the price includes a commission for you, by saying, "Of course, that price includes commission." If it does, you will be told the rate; if not, the reply usually is, "No, sir! That price is net.9' A further point to remember is that in certain instances there is no set export price for goods. This does not hold if those goods are in heavy demand, or if they are a natural monopoly, such as sockeye salmon. Often, however, goods for export are surplus goods, the supplier 48

paying his way and making a reasonable over-all profit on domestic sales. The goods he has over may be sold for any reasonable amount instead of being carried in inventory. Again export goods may be by-products of the manufacture of his regular goods. The by-product may have little or even no market in Canada. The factory is geared to show a profit on the sale of its regular goods, and any amount received from sale of by-products is surplus. This is the case of glucose and some starch manufacturers who have a by-product, dry wheat gluten, which normally is sold nearly exclusively to the orient as a base for food condiments. Such manufacturers will always quote a price, but if it is too high for your market, tell them. Often, and specially when dealing with by-products, when an actual letter of credit is received, the exporter can offer the factory cash on the line and the supplier will reduce the price, giving the exporter an extra profit. This may not be considered ethical, but it is a fact to bear in mind that in the export business, and especially with surplus goods, there is often a first, second and third "asking" price, and sometimes a "selling price" below those again. If any charges over and above the price of the goods are left in doubt, they would be charged to the exporter. Hence it is absolutely necessary to understand the trade terms, and each of the charges accruing to the shipment from the time it leaves the supplier's warehouse until it reaches its ultimate destination, and to understand clearly who is responsible for each of these charges: the supplier; you, the exporter; or the foreign buyer. For the same reason, a written confirming order must be used as a confirmation by you, so that, not only price of goods is confirmed, but the responsibility for payment of the various charges is also confirmed. 49

TERMS AND TERMINOLOGY MARKING AND STRAPPING

First, marking and strapping. All export goods have a mark applied to the carton, box or wrapper so the ship's supercargo officer can identify the shipment and the port by the mark. Often the mark is requested in the letter of credit or order, such as "mark required: 'ABC Company, Liverpool.' " If thus requested, the mark must be relayed to the supplier exactly as stated. The supplier has a stencil cut, and each package has this mark applied by painting over the stencil. If no mark is requested, the exporter chooses a mark, notifies the supplier, and identifies the goods on his own invoices showing this mark, in this manner: "1,000 cases each 48 x 20 Imperial oz. tins, Bartlett Pears, Valley Brand, marked 'ABC Company, Liverpool.'" Strapping is the trade term for wire binding of cases. The wire is bound around each case to prevent goods falling out with rough handling, and to reduce pilferage from cases. Both marking and strapping usually are included in the manufacturer's price, and so for his account. If double wire strapping or two cases strapped into bundles is required, however, the exporter expects to pay an extra charge for this. The supplier will advise you as to the amount of this extra charge for your information in costing. So the goods are marked and strapped at the supplier's warehouse or factory. Where does the exporter's responsibility for charges start? There again it depends on the terms of the order. TERMINALS

"FOB dock and FAS at dock" look very similar, but the profit on the shipment can disappear by not having a clear understanding of the terms, or of which term 50

applies. Even more dangerous is the simple term "FOB." This latter means "free on board" and the neophite might think that its intention is "free on board the ocean vessel" whereas in the trade it means "free on board at the location quoted." Thus, FOB Winnipeg, could mean either loaded on a truck at the supplier's plant in Winnipeg, or possibly loaded on board railroad car, Winnipeg, though the latter usually would be stated as "FOB railway cars, Winnipeg." Thus you can see that even if the supplier is at the port of shipment, and quotes "FOB" there could be a charge for trucking to the dock, plus the charges at the wharf. The wharf charges are known as "terminal charges" and are referred to simply as "terminals." The terminals are made up of three separate parts; wharfage, handling and cargo rates, and they can vary slightly with any particular docks in the same city. A close approximation for most cargo is $2.50 per "ton"; but if, on any shipment, these are to be charged to you, be sure to check the exact amount for the commodity in advance. If a shipment arrives by railroad car there also is a charge for unloading the car. It is dependent solely on the type of goods, and must be ascertained in each instance. A few types of heavy goods which cannot be handled by the normal ship's cranes take a loading charge as well as terminal charges. If the supplier's quotation is "FAS" all these charges except a heavy loading charge, if applicable, are for his account. The meaning of this term is "free along side vessel at the ship's tackles." In other words, the supplier is paying all charges to that point. WEIGHT OR MEASURE

To the ocean carriers and the wharf companies, a "ton" can be either gross weight of 2,000 pounds, or forty cubic feet. Goods are classified to produce the greater 51

revenue for the carrier, so that if 2,000 pounds of a certain commodity could be stored in fifteen cubic feet of the ship's hold, charges at the dock and for ocean freight, would be by weight. However, 2,000 pounds of another type of goods might take up eighty cubic feet, and so would be charged by "measure." Bearing in mind that forty cubic feet is one "ton," in this case you would be charged for two tons, as eighty cubic feet of the ship's hold would be occupied. If goods are charged by weight by the ocean carrier, the weight classification should hold for terminals; and, of course, if the carrier charges by measure, the dock company should charge on the same basis. Of recent years, however, some of the dock companies have not held strictly to this; so again, if terminal charges are for your account, check with the wharfage company to see if your particular goods will take weight or measure, and what the wharfage, handling and cargo rates will be per "ton." It cannot be stressed too strongly that the order must be confirmed in writing, showing type of goods, quantity and price, whether or not marking and strapping is included in the price, and whether the supplier has quoted FAS or FOB and where. An FAS Halifax order should read: "240 cases Moir's Pot of Gold Chocolates, each case 12 x 1 Ib. boxes, price x dollars per case, FAS MV Dorothea, CNR Wharf, Halifax, Marked "Rusto, Auckland, NZ." All cases wire strapped. Marking, strapping and all charges to FAS to your account." See Figure 4. The experience of the author with his first export shipment—a very substantial order for $35,000 of canned fish for a South American destination, and paid by letter of credit by the New York office of the buyer— illustrates the point. The quotation had been costed to 52

PURCHASE ORDER

AiSSOCIATED TRADING CORPORATION LTD. 726 HOMER STREET VANCOUVER, B. C.

6ABII * ATCOI.-VA NCOUVKIt

TILIPHONKIl

p AC trie 4>n PACtrie 41 Ta

i[CISTS,. „...„.„.„.„ „«...„ «-,.........-™ „...„„ ..»«... „. ». ^..._. IMease Ship to

...»».«».»......„»...«.»._

Involce to „ .„

Ship.ria Quantity

When Unit

Description

IMPORTANT BritUh and Foreign Shipper* must supply certified invoices in triplicate of the ityle to conform to Canadian Customs regulation*. Each package must be legibly marked and in' dtvidually numbered, diitingui thing it from each other package; the number of packages contained in the shipment, tbe individual number of each package and the content* of each package mutt be clearly stated on the Custom*' invoice*. All trade Discounts must be deducted from the Total and described as such. Acknowledge order promptly and *tate when shipment will be made. AUliwoicet and package. mu« bear the .bove number.

Price

No

954

Auociifcd Trading Corporation Limited

Figure 4. A typical purchase order.

53

show a net profit of about $3,000. On receipt of the letter of credit, a personal call was made to the supplier, who had agreed to custom-pack the fish. This was arranged at the stated price. The supplier then asked if space had been taken, and received a rather vague look in response. The supplier then picked up the phone and arranged shipping space to tie in with his production. Then the fatal mistake was made: the order was not confirmed in writing. The supplier was assured of $30,000 for the canned fish; it was to go on a certain vessel at a set date, but aside from that nothing was finalized. When the goods were trucked to the dock, a bill was presented covering not only the $30,000 purchase, but marking and strapping charges, trucking costs to the wharf, wharfage, handling and cargo rates, and inspection certificate charge. The expected $3,000 profit had shrunk to $300, and indeed it was very fortunate that a loss did not result. It was a bitter but well-learned lesson, and it was the first and last order on which there was not a complete understanding as to whose account various charges were to be made. Order forms were printed, and it was the last order not to be confirmed in writing. BILLS OF LADING

As soon as the shipment is stowed in the ship's hold, the supercargo notifies the shipping agents, and they complete the bills of lading, word for word from your instructions. The bills of lading are marked "on board" as a guarantee that the goods have been loaded on the vessel, and the agent signs them. Hence the term "on board bills of lading." Normally a "full set" of negotiable bills of lading are requested by the buyer. A full set is usually three copies, though more will be issued by the steamship company if 54

requested. The negotiable bill of lading is actual evidence of ownership of the goods, and it belongs to the party whose name is thereon. The buyer's request might be that they be made out to the order of your firm, and endorsed in blank. On receipt, you then endorse them, and they are negotiable in a similar way to an endorsed cheque. MISLEADING TERMS

It must be remembered or learned that in different parts of the world the same term may have a different meaning from what it has in Canada. "Ton" is a dangerous word. Here it means 2,000 pounds, whereas in the sterling area it denotes 2,240 pounds. Thus, if you are quoting 2,000 pounds, either state the weight as such, or use the term "short ton." Certainly it means extra words for which you will have to pay in a cable, but it eliminates misunderstanding. Again a ton may be mistaken for a "metric ton" in some countries; and in the dry herring trade it is equivalent of 2,000 pounds of fish and 200 pounds of salt, for a total of 2,200 pounds. For these reasons explain sufficiently so that the buyer knows the exact quantity you are offering for the price you quote. "Gallon" is another misleading term, even between Canada and the United States, and should never be used without strict designation, such as "imperial gallon" or "US gallon." C/F, and others. Most buyers request GIF quotations, denoting cost of the goods (loaded on board) plus ocean freight, plus insurance, the term itself meaning "cost, insurance, freight." By obtaining a GIF quotation the buyer knows exactly how much the goods will cost him landed at the wharf in his nearest port. A few importers request "C & F" quotations, being cost and freight, and they secure the insurance themselves. 55

If you have an agent overseas to whom you are sending prices, quote him CIFC, which is GIF plus his commission included in the quoted prices. If quoting on shipments that will be paid by a draft through your bank, and you wish to let the buyer know the interest on the draft will be included in your price, you quote CIFI, which, of course is GIF plus interest. DOCK RECEIPTS AND CLEAN DOCUMENTS

When goods are delivered to a wharf, the wharfage company issues a "dock receipt" as evidence that the shipment has been received by them, either to be put in their shed until the vessel commences loading, or to be loaded on board immediately. If the number of cases, cartons or bales tallies with the number they should have received, and if these all are in apparent good order, no deficiencies are noted on the dock receipt, and it is called a "clean dock receipt." If, however, there is damage to a shipment, or shortages, these facts are noted to relieve the wharfage company of liability for them, and the document is referred to as an "unclean dock receipt." This classification can be used for any other shipping document as well, so that often a letter of credit will refer to a "clean" on board bill of lading. QUOTATION TERMS

In quoting, as well as in making sure that the prospective buyer will be clear as to all terms and conditions of the shipment, you must protect yourself against contingencies that can and do arise. Prices may be fluctuating, supply may be limited, other orders may arrive first, or a factory may not be able to fill your orders. If you make an offer you cannot fill, at best you lose the goodwill of the customer, and at the worst, you may be liable for his 56

loss. For these reasons you must choose very carefully the terms which are applicable when quoting. The generally used ones are as follows: "firm offer" means you can definitely supply the goods at the price and terms quoted. It is wise to qualify this by a time limit unless supplies are plentiful and likely to remain so, without any change in the current price. "Prompt acceptance" is acceptance within a reasonable time, usually within three days to one week after receipt of your cable. "Immediate acceptance" is more urgent and denotes your customer must give you an affirmative answer immediately he receives your cable if he wants to be sure to obtain the goods. "Subject (to) supply" is another term used if goods are coming off the production line in limited supply, or if stocks are being depleted, or for any other similar reason. MINOR ALLOWANCES

On purchases of canned fish, the packers usually give a "swell allowance" of one-twelfth of one per cent to cover any claim for a few tins swelling in transit due usually to climatic conditions. Other similar minor allowances are made by other trades and you only become familiar with them through usage. Generally they are so small they do not affect costing. Most overseas buyers are fully aware of these allowances, and being so minor, they should always be passed on if they are granted by your suppliers. OPTIONAL EXPENSES LABELS

If you are dealing in canned goods you may desire that your own labels be used. Some types of labels hinder sales 57

in some markets; others boost them. There is the wellknown story of the exporter who had a cannery pack for him the best brand of salmon for the China market and offered it at the lowest possible price. His branch office in China could not move a case of it, though in some other countries it sold well. On submitting samples to the trade commissioner it was found the label was bright blue with a white polar bear superimposed. The exporter was amazed to learn that the shade of blue he had chosen is the funeral colour in China, so the meaning to Chinese who could not read English, was that the can contained dead polar bear. Never having tried that delicacy, the buyers shied away. The story continued that when a bright red label was used, with a healthy-looking salmon superimposed, the resultant sales set records. Owing to the numerous sizes of tins and the various grades of their contents, if you intend to order labels you must be prepared to invest a minimum of a thousand dollars, and probably more, in labels. The advantage, of course, is that you will have your own exclusive brands, and then, by constantly checking the quality supplied, you should be able to build up a demand for your brands in the countries to which you ship, as distinct from building a demand for the supplier's brands. In effect, you are building your own business, instead of the factory's. Due, however, to the investment and the fact that until you are well established it is difficult to tell what products and sizes will sell best, labels should not be considered at least until they can be paid for out of profits. When you do have your own labels, the supplier will label his tins with them as you order, and will give you an allowance which approximates the amount you paid the lithographer. Most suppliers of goods packed in paper and in jute or 58

cotton bags also will supply under your brand or your customer's brand. This does not present any problem as these special brand bags or sacks can be ordered as needed, provided they amount to the very reasonable minima required by the bag manufacturers. The suppliers then give you a bag allowance to compensate for the cost. The one main point to remember is to check the quality constantly on all custom-packed items. The factory is no longer responsible in the foreign field, and it is quality that will determine the repeat orders. Further, if selling your own brands, "products liability insurance" should be considered. Under it you are protected by the insurance company for any action brought against you because of illness or death caused by consumption of any of your products. The annual premium is quite nominal, depending on your volume. SAMPLES From time to time the exporter will receive requests from unknown firms abroad for samples, with nearly as often the request that they be sent by air express. It seems that the more urgent the request, the less business ever results. A sample shipment requires the same documentation as a regular shipment, and though most suppliers will gladly furnish a reasonable supply of samples, they are costly to forward by air. If sent by ship, there is a minimum bill of lading charge, even if the weight is only a few pounds. It is reasonable to expect requests for samples from your overseas agents and from established customers from time to time, and indeed, if the goods offered are such that they lend themselves to sampling you should anticipate these valid requests and keep your agents supplied. As a general rule, however, the time

59

spent in packing and documentation for samples to unknowns can be better spent in regular activities. If an order happens to result, it no doubt would be on a draft or credit basis. One exception to the rule is if an unknown agent or firm remits for the samples at the time they are requested.

60

4, H A N D L I N G S O M E SHIPMENTS

YOU HAVE APPOINTED SEVERAL OVERSEAS AGENTS On

recommendation of the various Canadian trade commissioners, and have sent out a large number of airmail letters to leads obtained from your local Board of Trade. Several replies have been received. One is from a firm in Hong Kong, whose cable address, you have noted from their letterhead, is FELDRO, asking for an immediate quote by cable on five hundred tons of dry salt herring, GIF Hong Kong, and requesting you advise them of the earliest ship which can carry the goods. HERRING FOR HONG KONG, I INFORMATION NECESSARY FOR COSTING

Now you are on the firing line. You must do some fast but thorough costing; then make out your cable; check it and double-check it. Just what steps must you take?

61

First, as dry salt herring is a fish product you call a fishing company to enquire if they can supply. You are surprised to learn that only two of the numerous fishing concerns pack this product, but your first contact willingly gives you the names of the suppliers and the sales manager of each. Contacting them you find the first firm is booked with orders for the next thirty days. At the second firm, however, you are more fortunate, and are told they will be happy to pack five hundred tons for you on firm order. On enquiring when you could obtain delivery you learn that the fish must be left in brine for ten days and then salted, packed and crated, so the earliest delivery, subject to catching the fish, (referred to as "subject to catch") will be fifteen days. Further, you learn that the packing is in large wooden crates, with a net weight of the contents being as close to 420 pounds as possible, but varying from 410 to 460 pounds. The "cubic," or volume taken up by a crate is 8M cubic feet. Remembering that a "ton" of dry salt herring is 2,000 pounds of fish plus 200 pounds of salt, for a total of 2,200 pounds you are rather in a quandary. You ask how you will know the quantity of fish shipped in each crate, and you receive the information that every tenth crate is picked at random on the ocean dock, and the contents weighed by a firm of independent bonded weighers. From this the total shipment is averaged in weight, and this figure is final as between all parties. As to quality, a certificate is issued by the Government of Canada Fisheries Inspector, and his certificate is accepted proof in this regard. Some neophyte exporters believe that pretending to know all about a product new to them puts them in a better light with the supplier. Nothing could be more false. Do not hesitate to ask all the questions that come

62

to your mind, and make notes until you are fully satisfied you have obtained all pertinent information. You ask the packer then about terms, and he tells you the established price this season is $120 per ton FAS ship, including marking, supplying certificates and a commission or discount of 2M per cent to you. This completes the information you need from the supplier. Back at your office you check your shipping directory to find the agents for lines to Hong Kong who have vessels loading in about three weeks. The shipping company informs you that the rate for dry salt herring is $33.75 US per ton to Hong Kong, and that this commodity takes "cubic,"that is, forty cubic feet are charged as one ton. They offer the further information that no doubt the buyers will want this shipment by the northern route because of less danger of spoilage due to warmer weather on the southern route. Their first ship is the SS Washington Mail leaving in exactly four weeks. No other shipping company can be located that has a northern route vessel earlier. The last call is to your insurance company. As there is no danger of pilferage from strong wooden cases of this size, all risk insurance is not necessary, so you obtain the rate for WA insurance on this commodity to Hong Kong. Although not presently in a war area, the buyers possibly might want the war and strike clause added, so you also determine this rate. Basic WA coverage is 75 cents per $100, and the rate for the supplemental war and strike clause is 2% cents per $100. MECHANICS OF EXPORT COSTING

You are now ready to cost the shipment. On your scratch pad you mark the price, $120 per ton. 500 tons 63

is $60,000, less 23£ per cent discount, leaving a net price of $58,500. You recheck this figure, and to be certain, note again that the price is FAS, so you are not responsible for cartage, weighing, wharfage, handling and cargo rates. Marking of cases is also included. Now for the shipping charges. The supplier has informed you that the cases will have a net weight of 410 to 460 pounds, but are supposed to be an average of 420 pounds. As the freight is charged by cubic, the more weight there is in the cases, the better it is. But you cannot afford to have your price too low and so suffer a loss, so you cost out assuming that each case will contain only the average promised of 420 pounds. If the cases average more, you will have charged the buyer too much for freight, which would be more profit for you. As your competitors must be just as careful, they will be doing the same figuring. So you continue with your scratch pad. Each ton of this commodity is 2,200 pounds, so 500 tons will be 1,100,000 pounds. To obtain the number of cases you divide this by 420, as each case will contain 420 pounds. This comes to 2,619 cases to the closest number. Again you check the division. The shipping company told you this commodity goes by "measure" and the supplier, by your notes, told you that each case is eight and a half cubic feet. Thus you multiply the number of cases, 2,619 by 8.5 to find the number of cubic feet for the total shipment. This amounts to 22,261.5 cubic feet. To find the number of cubic tons at 40 cubic feet to the ton, you divide this total by 40, and obtain the answer of 556.54 cubic tons. Again you check your figures. The freight rate is $33.75 US per ton, so you multiply this by the number of tons (556.54) and find the freight on the total will be $18,782.22 US. 64

Thus cost of goods is $58,500 net (Canadian) cost of freight 18,782 (US) Total net C & F is $77,282—if currencies are at par. You note that the supplier is to be paid in Canadian money, but that the freight is in US dollars. As the buyer is, we hope, paying us, and if so we will receive US dollars from him, he will require US dollars to be returned to him in event of an insurance loss. If the two currencies are at or very near par, the exchange rate need not be considered in the calculation. If, however, US money is at a discount, you must charge more to obtain $58,500 in Canadian funds. Similarly if US is at a premium, you would not need to charge quite so much, and must make an exchange calculation in your costing to remain competitive. You will note to make the allowance for exchange is a simple matter, provided you separate clearly what portion of the funds must ultimately be in Canadian currency and what part in US. In this quotation, the cost of goods FAS must be Canadian, and the freight and insurance premium in US. On checking, you find US currency at a premium. The banks always quote two rates: the first is the amount of Canadian money you will receive when you sell the bank one US dollar; and the second rate is the amount they will charge you in Canadian currency to obtain one US dollar. As the banks make a profit from their foreign exchange transactions, they pay slightly less for foreign currency than they charge to obtain it. In this case Jou hope to have the US funds to sell to the bank, so you request this rate and find the bank will pay you $1.03 Canadian for each US dollar. The only items in your costing that must be in Canadian currency are the cost of the goods FAS, and your 65

profit. Thus you now convert the net cost of the goods to US dollars: You can obtain $1.03 Canadian for $1.00 US; therefore $1.00 Canadian from $1.00 US; L03 therefore $58,500 Canadian from 58,500 X 100 103 which equals $56,796 US. This is the net cost of the goods FAS. You must now add your profit. As this is a quotation only, and the buyer might cable a lower counter offer, and especially with this commodity where, not knowing the exact weight per case until the time of shipment, you decide to add 2& per cent to the cost of the goods plus freight. This C&F total is: cost of goods $56,796 plus freight of $18,782 for a total of $75,578 US. The profit of 23£ per cent on this would be $1,889, also in US currency, for a total C&F price of $77,467 US. The insurance rate, you found, is 75 cents per $100, plus 21A cents per $100 for war and strike supplemental, for a total of 7734 cents per $100, or $7.75 per $1,000.00. Remember the buyer no doubt will want 110 per cent of the cost plus freight plus the insurance premium returned in event of a claim. 110 per cent of the C&F price is $85,213 US. The insurance premium, too, will have to be covered by insurance. It would be an intricate calculation to arrive at the exact amount including 110 per cent of the insurance premium, though several formulae have been worked out to calculate this if you must arrive at the right cost to the exact cent. As the insurance premium is only $7.75 per $1,000 it is not a vital factor. In other words, if you base your coverage on an insured value of $86,000, then calculate the premium and find 66

the total GIF cost is $100 more than that, the insurance premium on the extra $100 can be disregarded. It is only 77/2 cents, and in the time spent working out the exact formulae you should earn far more than that. So you calculate the premium on $86,000 and find it is $665.50 US. Added to your C&F price of $77,467 gives you a GIF Hong Kong price of $78,132 US. Your profit could have been shaded as you expect to receive a premium on the US dollars, but the total should not be out of line, and you know you can reduce the price slightly if necessary. $78,130 will suffice. RECHECK BEFORE CABLING

Before compiling your cable you must recheck all your figures from the start. Then transfer them to a costing sheet or plain piece of paper on which you mark the various charges and file for future reference. Then recheck the stipulations. It is noted that the supplier said, "subject to catch," so there is a possibility that you may not be able to supply at all, and so must protect yourself against this contingency. Further, you noted that the earliest delivery after placing of order with the supplier would be fifteen days. The Washington Mail will be sailing in twenty-eight days. Thus you have a maximum leeway of thirteen days to get your cable to your prospective customer, receive from them a letter of credit, and place your order with the fish plant. To allow the full thirteen days would be too close a margin. The supplier should be given all the time possible to catch and pack the fish, but more urgent is the possibility of competitors' orders being placed ahead of yours. Your cable must convey this urgency. Your notes also show that certificates by an independent bonded weigher are final as to weight, and the 67

COSTING SHEET Shipment Memo

Figure 5. A sample costing sheet, completed as for the shipment of herring described in the text.

Fisheries Inspector's certificate is final as to quality. These facts must be included in case that on receipt of the shipment the buyer claims weight or quality are deficient. From this reasoning and information you compile your cable: FELDRO HONGKONG CAN SUPPLY SS WASHINGTON MAIL (date) SUBJECT CATCH FIVE HUNDRED TONS DRY SALT HERRING GIF HONGKONG SEVENTY EIGHT THOUSAND ONE HUNDRED THIRTY DOLLARS US STOP WEIGHT CERTIFICATES AND GOVERNMENT FISHERIES CERTIFICATES FINAL FOR WEIGHT QUALITY STOP IMMEDIATE LECREDIT REQUIRED ATCOL

It is not necessary to name the port of shipment as a rule, since the buyers can know this from shipping guides; but it could be helpful if you were exporting from an inland centre, especially if through a small port. The final step is to call the cable company to learn which is the most advantageous type of cable to send. With the time differential between Canada and the orient, you probably will be advised to file an LT message. The total word count is forty one; nineteen words over the basic rate, but to condense any part of the cable would not be practical. You have now done everything possible to obtain the order, and all you can do is wait with fingers crossed, and in the meantime quote other goods to as many prospective buyers as possible. EXPORT COSTING SHEET

If you have not used a costing sheet, you may be interested in making some of these up. They itemize all possible charges, and have the dual use of recording and making sure no charge has been omitted from your calculations. As some orders require that you show the 69

FAS price, the freight and the insurance separately, no doubt for customs purposes, they facilitate the completion of commercial invoices at the time of shipment. A typical costing sheet is shown in the illustration. FLOUR FOR GAMBIA

At this time you receive an airmail request from an agent in Gambia, Africa, whom you have appointed on the recommendation of one of the Canadian Government Trade Commissioners for a cabled price CIFC for 1.500 fifties, flour, 72 per cent extraction from hard wheat; 13 to 14 per cent protein; ash not to exceed one-half of one per cent. They prefer a "straight" to a "clear." It is to be packed cotton bags with the customer's brand design* A sample of the design was submitted in the letter. He has asked for the normal commission for agents of five cents per hundred pounds. This all sounds very technical, and in a way it is. You can receive clarification from any miller, who will explain the meaning of the terms. Flour in itself, however, is not a technical product. All that need be done is to pass on the exact specifications to the flour mill, and request that they forward you an analysis certificate by an independent testing laboratory. Several registered laboratories are located in each city for just such work.

ASSESSING SUPPLIERS' QUOTATIONS For this quotation you decide to ask two milling companies; one local mill, and one prairie mill, wiring the specifications to the latter by day letter. From the local mill you receive a price of $4.30 per 100 pounds, packed in fifty pound bags, FAS vessel, net. From this price they will grant you 12 cents per bag if you supply the special bags. 70

You check with the bag manufacturer, and submit the design to them. They will be pleased to make up the 1,500 bags and deliver to the local mill, all taxes included, for 14 cents per bag. This is 2 cents per bag, or 4 cents per 100 Ibs. more to be added to the price of the local mill, making a net FAS price of $4.34 per 100 pounds. Within an hour a wire is received from the prairie miller, quoting as follows: FLOUR TO YOUR SPECS IN SPECIAL BAGS FIFTIES FOB RAILWAY CARS YOUR PORT $4.11 HUNDRED STOP TERMS CASH AGAINST RAILROAD BLADINGS* STOP PRICE FIRM FORTY EIGHT HOURS.

Flour, being a wheat product, varies in price with the daily wheat market, and prices do not stay firm very long. The margin of profit is small, and business must be finalized by cable. The repeat business, however, makes it an attractive product to handle. Ships to the African coast are not numerous, but there is one due to load in ten days. You find out from the agent at which wharf she will be berthed, and also obtain the ocean freight rate of $22.50 per ton weight. Then you check with the dock company to learn the terminal charges on flour. These, you are told, are as follows: unloading railroad car $2.17; wharfage 60 cents; handling $1.22 and cargo rates 5 cents—all on a per ton weight basis. This is a total of $4.04 per 2,000 pounds, or 20.2 cents per 100 pounds. Added to the prairie mill's price of $4.11 per 100 pounds, the total FAS price is $4.31.2 per 100 pounds, as against the local mill's quotation of $4.34 when the bag allowance is taken into account. *A common abbreviation of bills of lading. Two other handy and frequently used cable or telegram abbreviations are "Reurlet" (re your letter) and "Reurtel" (re your telegram or cable).

71

As flour is extremely competitive, even a few cents difference in price is a factor, so in this case you use the prairie supplier's price, and shade it to an even $4.31. Insurance is checked, and found to be 1 per cent against all risks. So your costing shows all details to FAS at $4.31 add profit and commission 10 add freight 1.128 Interim total $5.53& For insurance, to increase to 110 per cent add 10 per cent or 55/2 cents making the insurable value $6.09 per 100 pounds. The insurance premium at one per cent thereon is six cents to the closest fraction, so this is added to your interim total of $5.53)2 for a CIFC price of $5.59M per 100 pounds. For safety this is increased slightly to $5.60. After rechecking your calculations your cable goes out as follows: AGENT GAMBIA REURLET FLOUR FIFTIES CUSTOMERS BRAND $5.60 HUNDRED CIFC IMMEDIATE LECREDIT NECESSARY ATCOL

In your correspondence previously the agent had been advised of possible daily fluctuations in wheat and flour prices and so should know the urgency of the matter. It is apparent that he does, for the next morning you receive his cabled reply: IMMEDIATE LECREDIT IF PRICE REDUCED $5.50 CIFC AGENT

HANDLING THE COUNTER-OFFER

This poses rather a problem, as ten cents from the price represents your profit and your agent's. You check 72

with the local mill, but they are not prepared to take a reduction of nearly fourteen cents in their price, so you place a long-distance call to the prairie firm. This is no time to be hesitant. You must tell your supplier definitely that you can obtain an immediate letter of credit if he can shade the price by ten cents per 100 pounds. He promises to sharpen his pencil, and wire you within an hour. True to his word, a telegram of acceptance comes in, and you immediately cable the reduced price to your agent. Late the following day you receive a phone call from a main city office of one of the banks telling you that a letter of credit has been received by them in your favour for $4,125.00 US for shipment of 1,500 fifties of flour. They say you will receive this in the morning mail. Immediately you wire the prairie supplier to place your order, giving him the loading date of the ship and the ocean dock to which you want the car billed. The next morning you receive the letter of credit from the bank, and check it against the specifications. All appears to be in order except one point: the credit reads "partial shipments not allowed." This, however, does not cause much concern, as 1,500 bags of flour have been ordered. From the credit you compile your written order form and mail it to the supplier, showing his FOB railway car price, and mark it "partial shipments not allowed." HERRING FOR HONG KONG, II THE LETTER OF CREDIT

A few days later you receive an air mail letter from a bank in the United States. Attached to it is a letter of credit from Feldro, Hong Kong, in the amount of $78,130 for dry salt herring. It contains a number of 73

stipulations which must be read carefully. The letter of credit has been cabled from the buyer's bank to the nearest correspondent bank in the United States. Remember, a letter of credit is a credit set up by the buyer through his bank in favour of the seller, and payable to the seller only when he has complied with all the stipulations set out in the credit before the stated expiry date. The usual letter of credit is on a printed form, with the required terms and conditions typed in. The credit you have received is as follows. [The name of the bank and the date] Confirmed irrevocable straight credit Associated Trading Corp. Ltd. Your town, Canada. All drafts drawn must be marked drawn as per advice ccf 7955. We are instructed by Feldro, Hong Kong, to advise you that they have opened their irrevocable credit in your favor for a sum not exceeding Seventy-Eight Thousand One Hundred Thirty Dollars US Currency (US $78,130) available by your drafts at sight on us. To be accompanied by: Full set/s onboard bills of lading at least two originals . . . Marine War Risk insurance policy/ies certificate/s; Weight certificate/s. . . . Certificate/s Government of Canada Fisheries Department Inspector. . . . Your invoice/s in triplicate with FAS price and freight shown separately thereon evidencing shipment of: Five Hundred Tons Dry Salt Herring in Standard Export Boxes of 8.5 cubic feet each, by steamer/s and/or Motorvessel/s from your city to Hong Kong. Partial shipments allowed. Bladings must be dated latest thirtieth. Cases marked: SUN/Hong Kong. The above mentioned correspondent engages with you that all drafts drawn under and in compliance with the terms of this credit will be duly honored on delivery of documents as specified if presented at this office on or before [date]. [Name of US Bank]

74

Remember that documents required by the letter of credit must be made out exactly as stated or the drafts will not be honoured on presentation. Re-reading the credit, it is found that you must supply the following: 1. At least two original sets of on board bills of lading. These must show ";c tons (to the exact weight) Dry Salt Herring in Standard Export Boxes of 8.5 cubic feet each." You must even capitalize the words that are capitalized in the credit. Further, the bills of lading must be dated on or before the 30th. Usually a letter of credit also gives implicit instructions as to which firm's or bank's name is to be on the bills of lading, thus evidencing title of the shipment in that party's name. In this particular credit, however, these instructions were omitted, so you should tell the shipping agent to make up the bills of lading in your firm's name, and just prior to turning them in to your bank with the other documents, you endorse them, so that they are negotiable by the buyer or his bank. 2. Marine policy or certificate, including war and strike supplemental. 3. Weight certificate by an independent firm of weighers. 4. Government certificate by the fisheries inspector. 5. Of course, commercial invoices, with the description of the goods exactly the same as on the bills of lading and in the credit. Invoices must be in triplicate, and show the FAS price and freight separately. 6. Each case must be marked SUN/Hong Kong. ORDERING FROM SUPPLIER

The first step is to notify the supplier by telephone, and to make sure your order can be filled. Then the terms of the sale from the supplier to you are checked, and trans75

ferred to your firm's order form. The written order would state: .

500 tons, each 2,200 Ibs; Dry Salt Herring in standard export boxes of 8.5 cubic feet each; net weight each box approximately 420 Ibs. All cases to carry mark SUN/Hong Kong, at $120.00 (Canadian) per ton, less 2% per cent discount: 500 tons @ $120.00 per ton $60,000 Less 2X per cent 1,500 Net price $58,500 all charges to FAS to your account. To be shipped on the SS Washington Mail, dock to be designated. Weight certificate/s and Government fishery inspector's certificate/s to be supplied to your account. SHIPPING SPACE

Now that it is known the supplier can pack for you, the next step is to confirm the shipping space. This, of course, is done by phoning the shipping company. They confirm, and tell you they will mail a "freight engagement form," which is a contract to be signed by your firm guaranteeing to accept and pay freight charges for the shipping space they have allotted you on the vessel. In turn it guarantees that this space is available to you. Not all, but a great number of, shipping firms use freight engagement forms. When the form is signed and returned to the agents, be sure to send a letter giving them the word for word instructions to be followed when they make out the bills of lading. For the present you have done everything possible in connection with this order until the shipment is on the dock. FLOUR FOR GAMBIA, II

In the meantime your bank has phoned to state they have received a sight draft with railroad bills of lading 76

attached covering 1,500 bags of flour. An analysis certificate also is attached to the draft. The bank requests instructions, and you ask them to hold the draft, and you will call them when the car of flour arrives. Four days later the railway freight office notifies you the car is in and has been switched to the dock, so you request the bank to pay the draft and send the bill of lading for the car to the wharfage company so the flour can be unloaded before a demurrage charge accrues on the car. THE UNCLEAN SHIPMENT: HUNTING FOR A SOLUTION

The next day the wharfage company calls to say the flour has been unloaded, but they have to issue an "unclean" dock receipt because two bags have been torn and are nearly empty. This, of course, protects the wharfage company, proving that the damage occurred before the goods came into their custody. The dock receipt, itself, is proof that the goods have been unloaded onto the dock or dock shed. Their receipt reads: "1,498 cotton sacks, each 50 Ibs. flour, plus two sack same badly torn and nearly empty." Now you wish you had required an amendment to the letter of credit on receipt, to allow partial shipments. The bank has advanced the price of the flour, and under its terms, you will not be able to cash the letter of credit unless either an amendment is forthcoming, or you obtain two more bags of flour to make up the 1,500 total. You check with the shipping company to find out the latest possible date for the loading of the vessel, which, fortunately has not yet berthed. You are told six days. Already your cable costs and day letter and phone call amount to $10.90 on an anticipated profit of $37.50, but it is no time to consider profit, with an advance by the bank of nearly three thousand dollars and a useless 77

shipment sitting on the dock—useless unless you can comply with the terms. So you phone the prairie supplier to ask if he has two additional bags from the run. Unfortunately, though the bag manufacturers supplied extra bags to him, there is no flour from the run left over, and more serious is his statement that he had checked elevators in his city that morning, and there will not be a bushel of number one northern wheat in for a week! At least you are able to salvage one thing from the $3.50 phone call; you request that he send you three empty bags by air mail. Your costs are now $14.40, but there is no course open except to cable your agent requesting that the buyers amend the credit to allow shipment of 1,498 bags. The costs are now $17.05. No doubt the thought enters your mind to get any type of flour, and fill the two bags with it, but this is rejected, first, because actually it would be taking money under false pretences, and secondly, the shipment must be up to standard if you wish to build repeat business. The handwriting is on the wall in this case, and if you break even you will be fortunate. Your only hope is to make a profit on future orders from the same customer. Then the cable from your agent arrives: BUYER REGRETS IMPORT PERMIT ALLOWS EITHER EXACTLY ONE THOUSAND OR FIFTEEN HUNDRED NO PARTIAL SHIPMENTS.

Now what is to be done? Only one course is open: to call on the local mill. When the situation is explained the local manager is not very sympathetic. He states that a good supplier would send a few extra bags each shipment; that he has no number one Alberta wheat in his storage, but there is plenty in elevator. Of course, he adds, 78

he must draw a minimum of 500 bushels at a time, which means considerable cost in trucking; storage, and other costs, and as he doesn't mill much of that type of grain it might be on hand for some time. Of course, under the circumstances, he will be glad to help you out, but there must be a minimum charge of fifty dollars partly to defray his costs. As you are on the spot, you accept his offer and order the most expensive flour probably ever sold in Canada, at $50.00 per 100 pounds! Total costs now $67.05, offset by a profit of $37.50, so you are suffering a loss of $29.45, but consider that fortunate in the circumstances. Of course you have filed a claim with the railroad, and will recover the actual price of two bags of flour, but this amounts to only approximately four dollars. They would not, however, countenance any claim for your expenses. On your written order to the mill you had included the words, "Partial shipments not allowed," but as the railroad bill of lading they forwarded to your bank with their draft proved that 1,500 bags of flour had left the mill in good condition, you have no possible claim against them. The only course open is to absorb the small loss. Indeed the experience gained is worth many times this small sum. So you pick up the two bags of flour from the local mill and take them to the wharf along with the unclean dock receipt, and exchange it for a clean dock receipt. Two days later you have all the documents necessary to cash the letter of credit. These you take to your bank, and while there obtain a draft for your African agent's commission. This is forwarded to him immediately by air mail, with, of course, no mention of the difficulties you have encountered. 79

HERRING FOR HONG KONG, III FINANCING WITH BUYER'S LETTER OF CREDIT

You check with the fishing company and find the shipment of dry salt herring is going to the dock the next day, and the day after you will receive their invoice for payment together with the weight and quality certificates. It will be three or four days after that before you receive the on board bills of lading from the shipping company. Until all documents are in your hands you cannot cash the letter of credit, but the suppliers, of course, want their money as soon as the goods are weighed. This requires a talk with your bank manager. The letter of credit is taken to the bank, and the manager is told that you will be able to claim against the credit as soon as the on board bills of lading are received in four or five days. It is better, when dealing with the bank, to allow some extra leeway in time, so that you are positive your promise to them can be met. When fully satisfied, the bank will arrange an overdraft for you so that you can issue a cheque to the suppliers, and also pay freight charges, and so pick up the required documents. You might wonder why, with the goods on the wharf ready to go, that there is always a delay of three or four days before the on board bills of lading can be made out. First, it takes time to load an ocean-going vessel. Unless there is an urgent rush to sail, the stevedores work one shift only. As overtime pay gets progressively higher each hour, the shipping companies cannot afford around the clock loading. Secondly, the storing of the cargo is supervised by a ship's officer, known in his capacity of loading officer, as the supercargo. He is entrusted with a dual job, of making sure the cargo which will be unloaded at the first port of 80

call is loaded last, and so is readily available; and also of loading the vessel evenly so there will be no list to port or starboard. Thirdly, there are always numerous shippers with goods going forward on the same vessel. Immediately your goods are loaded on the ship, the bill of lading clerk at the shipping agent's office is notified. He is responsible for making out the on board bills of lading to your exact instructions, and you can call for them immediately after they are prepared. At that time, before surrendering the bills of lading, the shipping agents require your check for the freight. CLAIMING AGAINST THE LETTER OF CREDIT

Now that the shipment actually has been loaded on board the vessel, you must complete any further documents, and assemble the others so that you can claim against the credit. Again you consult your list of papers required by the letter of credit. Check each off, one by one, making sure they have been completed word for word, as required by the letter of credit. You have in your possession the on board bills of lading, made out to your firm. Now you endorse these, putting a non-negotiable copy in your file, and setting aside the endorsed negotiable copies. With these you put the weight certificate and the Fisheries Inspector's certificate. Next you make out the insurance certificate, adding the war and strike clause as required. One copy is set aside with the other documents; the other copy is mailed to the insurance company. Following that you complete your own invoice forms in quadruplicate, three being required under the credit, and the fourth copy for your file. 81

Your customs broker has already completed a B 13 form, but this document does not accompany other papers required by the credit. The B 13 is called a Customs, Canada, Export Entry Form. Its main purpose now is for governmental statistics. On it are shown the names of the buyer and the seller; the number of cartons, and the marks; description of the goods; gross and net weights, and the value. It is stamped by the harbour master's office, and is official permission to export the shipment. Except for goods of strategic nature, permission is a mere formality. It can be seen, however, how necessary is the information for the Dominion Bureau of Statistics, and for the Department of Trade and Commerce. Now that all forms have been completed, checked and assembled, you must make out the draft. As required by the letter of credit, a sight draft, on draft forms supplied by your bank, is filled in on the United States bank, and marked "drawn as per advice CCF 7955." This is signed by your firm, clipped to the other documents and the actual letter of credit, and taken to your bank. These are then checked by your bank to make sure they conform in every respect, and being found in order, the amount of the draft is credited to your account. SIGHT DRAFT SALES

If the terms of your sale are "draft with documents attached" as much care must be taken as if the customer had put up a letter of credit. The buyer's order, no doubt, would list the documents required, and these must be completed exactly as shown. Otherwise the customer might have difficulty in clearing the shipment through customs on arrival, which would mean delay or nonpayment of your draft on them. Always remember two points: you want each order to be finalized as easily and 82

simply as possible both to build repeat business and so that payment will not be delayed or withheld; and that in case of an industrial dispute, your customer is thousands of miles away in a country foreign to you, making any dispute tedious, and collections expensive if not impossible. Further some buyers can be trusted to co-operate to reach an amicable solution to any dispute; others, especially if price of goods ordered has dropped, will take advantage of the least technicality to refuse the shipment, or refuse payment of either a draft or a letter of credit. You can picture your predicament, with a shipment on the other side of the world to dispose of or to collect for, under these circumstances. The goods have left the ocean carrier; have been put ashore at customs, and now the marine insurance has expired. You are at the mercy of the buyer, but by the good graces of the Canadian trade commissioner in the area, often a solution can be reached. Far better, however, not to give the buyer this opportunity, by making sure all documents needed are forwarded, and that each complies, letter by letter and word for word, with his order or credit. It is also a good policy, from the moment you receive an order, to imagine yourself in the buyer's position and do unto him as you would want him to do unto you. Acknowledge his order or credit. Give an estimated shipping date; include the name of the carrier if possible. Then, if delays occur, if the expected vessel is diverted, or if part of the order only will be ready to ship by stated vessel, let the buyer know. Keep him fully informed until the actual shipment leaves. Then write an airmail letter to confirm the goods have gone forward on that day by named vessel. The buyer's goodwill that you gain is well worth the little time and effort needed to keep him fully posted. 83

FROZEN FISH FOR FRANCE: USING THE FREIGHT FORWARDER

You have received an enquiry from Le Havre, France, for 60,000 pounds of frozen white fish, each with heads and tails removed; wrapped individually; weight from 2 to 4 pounds per fish, and packed in wood boxes of 100 pounds net weight. This is a product of Manitoba and is not available in your area. First you check the Canadian Manufacturers' Association directory, and finding two suppliers listed in the Winnipeg area, you write both, giving complete specifications. The letters are sent by special delivery, both to gain attention, and because time is a factor. In the letters you request full details and price FOB railway refrigerated car, or reefer truck, Winnipeg. SELECTING THE SHIPPING ROUTE

Next you call the railway foreign freight office, requesting the carload rate on reefer car from Winnipeg to Vancouver, and from Winnipeg to Montreal, and asking the approximate time in transit to each city. At the same time you confirm that the prospective order is over the minimum weight for carload lots. Having checked your shipping guide you also ask the freight office to obtain from the named shipping agents at Montreal and Vancouver the ocean reefer rates from those ports to Le Havre. The foreign freight office promises to wire for the information, and inside of an hour they call you back. The rate to Montreal is lower, as is the Montreal-Le Havre ocean rate compared to the Vancouver-Le Havre rate. In the meantime you have called a cross-country trucking firm and find their rate for reefer truck to Vancouver 84

is lower than the railroad rate to Montreal or Vancouver. Transit time, too, is less, but they insist on immediate unloading of the truck on arrival, or an exorbitant demurrage rate. This would mean that unless you can arrange for the shipment to arrive on the exact day the vessel is to load, the fish would have to be stored in cold storage warehouse at Vancouver. With "in" and "out" charges, plus storage, plus trucking to the wharf, considerable expense could result. Then the ocean rate from Vancouver is the higher of the two, so you discard the possibility of shipping by truck to the west coast. Now that your costing will be by the Montreal route, you write your customs broker in that city. He acts also as a freight forwarder. From his firm you request unloading charges and the terminal charges at Montreal, and the name of the wharf where the designated vessel is to berth. Three days later you receive his reply with the information you requested, and in the same mail a letter from both packers in Winnipeg. One is booked to capacity with orders; the other quotes you a net price, FOB railway car, Winnipeg, subject to supply. If there had been any urgency you would, of course, have phoned the suppliers and phoned or wired the customs broker. No reefer ship for France, however, is scheduled from Montreal for two and a half weeks, so there was ample time to assemble all information by letter. COSTING THE SHIPMENT

Now that all replies are in, you cost the possible shipment, by adding the following items: 1. Price of goods, FOB car, Winnipeg. 2. Five per cent as profit. 85

3. 4. 5. 6.

Railroad freight. Three days' demurrage at Montreal (to be safe). Charges for unloading car. Montreal terminals (handling, wharfage, cargo rates). 7. Ocean freight. 8. To the total of the first seven items, add 10 per cent to find the insurable value. 9. Add the insurance premium for this value, and be sure warehouse to warehouse clause is included as your responsibility will start when the shipment is on the railroad car at Winnipeg. 10. Add nominal amount for freight forwarder's fee. Your own local broker will give you a close approximation of this. Then you compile your cable, remembering to protect yourself fully. After checking the time in France on the card supplied by the cable company, checking and rechecking your figures, and checking the cable to see if wordage can be reduced without anything becoming obscure, you file it as an LT message: BUYER LEHAVRE REURLET FROZEN WHITEFISH OFFER SUBJECT SUPPLY SUBJECT PARTIAL SHIPMENT SIXTY THOUSAND POUNDS YOUR SPECIFICATIONS X DOLLARS US CIF LEHAVRE IMMEDIATE LECREDIT NECESSARY ATCOL

This is slightly over the twenty-two words allowed for basic charge, but there appears to be no way to reduce the number of words and yet get all pertinent information to the buyer. So the cable is filed. In the export business many tedious hours are spent assembling information; costing and quoting with no resultant orders sometimes for days on end. In this case, 86

however, the letter of credit arrives promptly. Immediately you phone the supplier long distance to place the order, and you confirm by mailing them your signed order form completed in detail. FINANCING BY BACK-TO-BACK CREDIT

Your banker has recommended a "back-to-back" letter of credit issued in favour of the supplier through your bank to their main Winnipeg office, in the amount of the cost of the shipment and railroad freight. This means your bank holds the letter of credit from the French firm as collateral, and allows you, on the strength of this, to set up your own letter of credit in favour of the supplier. The supplier obtains his money when he turns over to the Winnipeg branch of the bank the railroad bills of lading, inspection certificate and receipt for rail freight. These are then forwarded from the Winnipeg branch to your own bank. On receipt, they are released to you, and sent on to the freight forwarder in Montreal. The supplier has, of course, been instructed to have the name of the wharf in Montreal on the railroad bills of lading, and the name of the freight forwarder who then will be notified of arrival of the car. If the freight forwarder has not done business with your firm before, he may require a back-to-back letter of credit as well, to cover unloading charges, terminals and ocean freight. Usually, however, as his firm is a correspondent of your own local customs broker, that is sufficient recommendation for you to be granted credit. When the car reaches the dock at Montreal, your freight forwarder handles all details, completes and files the B 13 export form, pays all charges, obtains the on board bills of lading made out exactly as instructed by you, and either sends these directly to you with his con87

solidated account or attaches them to a sight draft on your firm through the bank. On receipt of these forms, you check them against the wording of the letter of credit, make out commercial invoices, add the insurance policy, complete your draft on the bank stated in the credit, and lodge them with your own bank. Although you do not know the supplier or the freight forwarder, and have not been in Winnipeg or Montreal during this time, the transaction has been handled as smoothly as if you had been on the ground personally looking after all details. The extra cost is small: a few long-distance calls and telegrams, a small bank charge for the back-to-back letter of credit, and a very nominal fee charged by the freight forwarder. The total is so small that it can be absorbed by your firm without adding it for costing purposes. Thus by the use of freight forwarding firms you can ship from any part of the country to any destination.

88

5. THE B U S I N E S S OF IMPORTING

KINDS OF ORGANIZATION

IMPORTING CAN BE DEFINED as "Exporting in reverse." The same basic problems are present: finding the goods, costing the goods, and finding the customers. Again, as in exporting, import houses can be organized as: (a) import agents or brokers; (b) branch offices of British, US, or foreign exporters; (c) resident representatives in Canada of one plant or factory abroad; and (d) import merchants. The import agent or broker works on a commission basis; he finds prospective buyers for the products of the overseas firms which he represents, explains the terms of payment and delivery to them, obtains their orders and forwards them, with credit reports if required, to his principals abroad. The foreign factory handles the shipping and financing, and remits the agent's commission along with copies of their commercial invoices for goods shipped. The broker's formal duties end with the dispatch of 89

the order, but the experienced broker follows up the delivery of the order with a visit to make sure everything has been received in good condition. In event of complaints as to quality, poor packing, or shortages, it is the agent to whom the buyer will look, and not the overseas shipper. After all, he is the man on the ground who can be contacted with little or no expense to the importing firm. Thus any complaints are passed to him, with the result that it is the agent who pays cable charges or other expenses in this connection. In times of shortages, known as "sellers' markets," agents can represent nearly any type of goods for which there is a market, as buyers are clamoring for supplies, and are willing to import for their own account. In normal times, or during a "buyers' market," only capita] goods can usually be handled by brokers. For other types of goods, the domestic buyers want to be able to pick up their phone and have their stocks replenished that day from local warehouse stock held by the importer. The branch office is a very satisfactory method of operation. The foreign home office and branches in other countries are able to secure goods required in Canada at best possible prices and terms and forward to the branch here. With an office in the country of export to which the foreign supplier in that country can look for payment, terms usually are more generous than those afforded a straight import house in Canada. The third class, resident representatives, act in a similar manner to the import broker. They may be on salary, commission, or both. Any of these first three types of importer must, of course, handle complaints, keep buyers informed as to incoming shipments, and also keep their principals or head office informed about changes in demand in this country, changes in styling or packaging, 90

alterations in rates of duty or sales tax, inroads of competitors' goods, tenders coming up for bid, advice on advertising media, and any other pertinent information that could either hinder or help sales. The fourth classification, the import merchant, actually purchases the goods himself for resale, manufacture or processing in Canada. Then he must sell, invoice and collect for them. To be a well-rounded organization, both the branch office operation and the import merchant should be exporting as well as importing. Nearly all follow this policy, and the type of goods imported is allied to their exports. As example, most food exporters import other food stuffs or ingredients for the food industry. Often while personally contacting factories for goods to export, or when arranging export shipments, requirements which can be imported are found by the alert exporter. One such import house, while obtaining export quotations for jams, found the factory was not satisfied with their source of citrus fruits which they purchased for the manufacture of marmalade. The exporter made enquiries and found an excellent supplier in Australia. A steady, profitable, and mutually satisfactory business resulted. Considerably more capital is required, of course, by the import merchant than the purely export merchant. If buying by letter of credit, your money will be tied up for a considerable time—from the time you place the order until the goods arrive, are then sold, invoiced and paid for by domestic buyers. Even if draft or other credit terms are granted by your overseas suppliers, you are responsible for payment of duty and sales tax, cartage and warehousing, sales expenses and deliveries—all before you can invoice for your sales. On occasions the bank may grant advances against orders of buyers with excel91

lent credit rating or on orders from government bureaux; or they may discount your invoices after you have made the sales and shipped to your customers. Generally, however, you should have the assets to cover all the necessary expenses until the date these are actually paid for by your customers. BRINGING IN THE GOODS FINDING A SUPPLIER

Once you have decided the type of merchandise you wish to import, turn to the natural areas of manufacture or of produce for such goods. Citrus fruits are found in California, Texas, Florida, and Australia; transistor radios in Japan and Holland; binoculars in Japan or Germany. These are the natural areas. Then write the Canadian trade commissioner in the foreign country, requesting a list of suppliers. Originally our trade commissioners were not concerned with goods to be imported into Canada, but some years ago the Department of Trade and Commerce realized that trade is a two-way street. The trade commissioners then assumed the duties of finding imports for the Canadian market, as well as carrying on their former duties of salesmen abroad for Canadian goods. Numerous foreign countries as well, maintain their trade commissioners, commercial attaches, or consuls both in Ottawa and in some of the main cities in Canada. Any of them will help you in any way to locate exportable goods in their country. Many of their countries publish a trade directory in English, listing most manufacturers and exporters. English usually is the language of foreign trade, but from time to time letters may be received in another language. As we learned, some import-export houses 92

maintain a staff of bilingual or trilingual stenographers for such correspondence; others use translation bureaux; but most will not reply to such correspondence except to write the foreign firm to say that it is regretted that due to possible misunderstandings as a result of imperfect translations, the firm conducts correspondence only in English, or only in French and English. The trade directories published for distribution in Canada by many foreign countries are therefore printed in English. Boards of Trade and Chambers of Commerce have been established in nearly all major exporting centres of the world in order to promote trade; they will be glad to put you in touch with suppliers. Your local Board of Trade, no doubt, receives numerous enquiries each week from overseas firms wishing to export to Canada. Check these periodically, as some good connections can result. If possible, contact the manufacturer or producer direct, as you must obtain the lowest possible prices for import as well as for export. It would appear that the fewer middlemen who enter a transaction, the lower the price will be. This is often true if the manufacturer maintains his own export department, but not always. Realizing that any one firm cannot obtain all the business all the time, a fair percentage of exporting manufacturers will offer their products to independent firms at the same prices they themselves quote, less a small discount. This holds true in foreign countries as well as in Canada. Indeed, it has been known that some independent exporters, by being shrewd "traders," have even underquoted the manufacturer on job lots or on surplus goods. You will soon discover from Canadian buyers if your prices delivered are too high. If so, advise the foreign export house, giving them a GIF Canadian port price to which to work. In that regard, goods cannot be offered to a Canadian 93

importer at a lower price than offered to the home market in the country of export, without invoking a Canadian "dumping duty." Both domestic and export prices must be shown on the Canadian customs forms required to clear shipments entering this country. CHECKING WITH CUSTOMS

Some goods which you believe will appeal to buyers of Canadian firms, have been located, and you are considering bringing in a substantial quantity. What steps is it advisable to take? At the outset, consult your customs broker. Goods entering Canada can often be classified by customs officers in two or more different ways. Aluminium saucepans might be classed as "household goods made wholely of aluminium" and bear one rate of duty, or be classified as "kitchen utensils" and bear a different rate. The broker will classify the goods so they will enter under the more advantageous rate, and will complete a specimen customs form that you can send the exporter. Further he will advise you as to regulations to which the goods must conform. Many types of merchandise come under these regulations, and will not be permitted entry at all unless they conform. A few examples are: clothing must carry a country-of-origin label; the registered sterling number and mark must be on all articles of silver if they are classified as "sterling silver"; fruits and fruit juices can only be in standard-sized tins so the housewife can compare prices fairly (the containers must be 6, 10, 15, 20, 28, 48 or 105 fluid ounces. The figure must be shown in a correct size on the label, along with the percentage, if any, of sugar added.). So, besides advising on duties payable, the customs broker will list the other requirements which must be 94

followed strictly so a shipment will be allowed to enter the country. These requirements, of course, would be incorporated in the stipulations contained in your order and letter of credit when actually placing the order. The customs broker also will obtain a refund of duty, known as a drawback, on any imported goods which later you export from Canada, by filing the B 13 forms for this purpose. If you have not imported identical goods previously, if the type of merchandise makes it practical, a small sample shipment should be ordered and paid for at the time of order. There are two main reasons for this; first, you will establish your exact unit cost; and secondly, you will have samples that the buyers can examine for quality. Another reason which seldom causes difficulty is the column in the Canada Customs Import Forms, which requires the foreign supplier to state "the fair market value at the time and place of shipment in the currency of the country of export." If, however, the figure in this column is queried by our customs appraisers the importer can count on innumerable difficulties. If this figure is higher than the price charged the importer, a dumping duty of the difference is imposed. This must be paid in cash by the importer, and then as well, regular duty rates and sales tax are calculated on the higher figure. In some instances such as on shipments from "Iron Curtain countries" it is often difficult to obtain a fair market value. Occasionally these goods are manufactured for export only, and never offered on their home market; and in other cases they are shipped direct from the factory to government retail outlets, with no wholesale or jobber price. Then, if queried by Canadian appraisers, either an arbitrary price is set by them, or the shipment is held in bond until authorities in the country of export have been 95

questioned as to costs of manufacture. To this, the customs adds a percentage for overhead, and then establishes a fair price in the foreign country, and imposes a dumping duty if then applicable. Thus, if the goods you are considering for import may fall within this class, not only is it prudent, but it becomes vital, to bring in a small test order before becoming too deeply involved. SAMPLING THE MARKET

Quite often you might believe goods that are priced for your market should sell readily, but you cannot afford to place import orders of any size relying solely on your own personal opinion of the marketability of merchandise. The buyers for factories, wholesale, chain, and department stores have their fingers on the pulse of the buying public, and a consolidated opinion should be obtained from them. On occasions you will be told that a very similar article has been in stock for months, and for unknown reasons just will not sell. Again you may be told that if packaging was different, the article would be satisfactory; or the price is higher than competitor's. These men are professional buyers and their advice or comments must be heeded. At times they like the samples; the price is right, and they are prepared to order for future delivery. All these are advantageous to you. So you order in and pay for a small sample shipment, asking the supplier to list the FAS cost and the ocean freight separately (so that you can estimate duty), and the weight and cubic of cartons, so you can estimate terminals and cartage. A number of import firms use a "purchase record form," somewhat similar to their export costing sheet. On it are listed all possible charges for incoming shipments. 96

PURCHASE RECORD Purchase number Customer

Invoice number

Suppliers

Terms

Merchandise

Via Month

Month Items

Preliminary Estimate

Reference

Amount

Reference

Amount

Invoice

Freight Terminals Duty Insurance Labels Labelling Cartage Storage Comnission Consular Bank charges Misc.

Total Inv. no.

Invoice amount Total pu[•chase cost

Figure 6. A purchase record.

97

On the sample order of $120 which you have placed, you find the FAS cost is $100 and the ocean freight is $20. So your purchase record shows: Invoice (cost of goods) $100.00 Ocean Freight 20.00 Marine Insurance 1.50 Duty at 20 per cent 20.00 Federal sales tax at 11 per cent on duty paid value of $120 13.20 Incoming terminals 1 ton at $3.10 3.10 Total to customs warehouse Bank: 6 per cent on money, for three months Customs broker's fee Cartage, storing, and distributing Total

$157.80 2.40 3.50 15.00 $178.70

If you do not have your own warehouse, any of the public warehousing companies will send their truck to the customs warehouse to pick up the shipment, and store it. They keep an exact daily stock list so they can tell you at any time how many items they are holding for you. Then when sales are made, they distribute to the local customers, and deliver to the railroad or other carrier for out of town deliveries. RESELLING THE GOODS PRICE STRUCTURE

Now you know your definite costs. If the shipment consisted of ten units, each has a cost of $17.87. How are these to be priced for resale? 98

This depends on several factors: the type of goods, the class of customer, and the price of competitive products. Some importers take competitors' prices and offer their goods at approximately the same prices, regardless of their cost, as long as these prices will show them a profit. It has always seemed a rather slipshod method of pricing, and often as not springs from greed to make an excessive profit, if the shipment has been bought on advantageous terms. A pricing system that bears a definite relationship to the cost of the goods, the importer's overhead, and his sales expenses appears to be more sound and far more fair to the ultimate buying public. Usually a mark-up of 25 per cent is needed to cover overhead and to show a profit. Again, the type of goods must be taken into consideration. Food stuffs, as example, seldom carry as big a mark-up as hardware items. Further you must consider whether supplies are available throughout the year and, if so, whether or not the items will be steady repeat ones. If so, the closer they are priced, the more readily they will sell. With the samples you have brought in you know the competitor's ultimate price to the consumer is $49.95. Thus you have sufficient leeway. You have estimated you need a profit of 25 per cent on this type of goods, that is, 25 per cent of unit cost of $17.87. This would be $4.46 to add. So your lowest sales price would be $22.33 per unit. In the case of most staples, the price will be doubled to $44.60 before they reach the buying public's hands. In this case you could suggest a retail price of $45.00, still be on a very sound pricing basis, and remain well below competitors' retail prices. From the suggested retail price, wholesalers receive the largest accumulated discount, usually quoted as "suggested price ($45.00) less 3334 per cent, less 25 per cent." 99

If this double discount is calculated, you will see it amounts to exactly 50 per cent off the suggested retail price, as first, it is 33& per cent off $45.00, reducing that figure to $30.00; less 25 per cent from the $30.00 only, bringing it down to $22.50, which is your selling price to the wholesaler. The wholesaler passes on the 33/3 per cent discount to the retailer, selling to him at $30.00. If you take orders from department or chain stores, their usual discount for staple items is 40 per cent from suggested retail, or in this case, $45.00 less 40 per cent for a selling price of $27.00. If selling to wholesalers, it would not be ethical to approach individual retail outlets except for the chain and department stores. Often, however, in order to get the wholesaler to buy from you, it is necessary to obtain "detail orders" from individual retail stores. In doing this, you actually sell the retailer, quoting him the suggested retail price less 33/3 per cent in this case, and telling him that the wholesaler of his choice will supply him. When several such detail orders have been secured, they are turned in to the wholesalers, who, in turn, must order from you. This may seem as if you are doing the wholesaler's work for him, but it sometimes is necessary; and usually the wholesaler then places an order with you usually many times the total of the detail orders, as he knows other accounts will want the goods as well, and there may be repeat orders to consider before you have another shipment arrive. TERMS As well as setting prices for resale, you must consider on what terms you wish to sell. Often invoices will be paid faster if a discount is allowed; so quite common terms are "one per cent (or even two per cent) 10 days; net 30 days." This means if the buyer pays your account in full, 100

he may deduct the one per cent or two per cent, as the case may be, if his cheque is mailed you within the ten days. If he does not pay until expiry of thirty days, he must pay the full amount. Usually in the trade, discounts are shortened to a simple "2% ten; net 30" and are fully understood. It is a matter to decide when pricing whether a prompt payment discount is to be a real discount, or if it is to be added, in effect, to accounts who do not take discounts as a form of penalty. In the former case, you must be prepared to sacrifice two per cent from your sales price for prompt payment. In the latter case, of course, you add a final two per cent to your sales price before selling. One final point on terms. You must quote "where": whether delivered, or at your warehouse, or FOB truck or railroad car. Then the buyer has all the facts. Further, some firms accept drafts, and others will flatly refuse to recognize a draft, paying on invoice only. If the money is needed, your bank no doubt will discount drafts sent out to customers with a good credit rating, so it could be advantageous to find out at the time of the order whether the customer prefers a draft and invoice, or an invoice only. It is no reflection on firms that will not accept drafts, as their bookkeeping is set up to pay invoices only. So ask at the time of the order, and note on your file the method each prefers. Import, in a similar way to exports, can be divided into three main classes: seasonable goods; steady repeat items, and "one shot sales." Seasonable items would be mandarin oranges from Japan, or Christmas cakes and puddings from Britain. "One shot" items might be surpluses in a foreign country; or unique goods, such as steel bars, required under a specific tender or contract. The steady repeat items are the ones relied on to build a business, but the seasonable products repeat year after 101

year, and so do become steady items, but at more infrequent intervals. Discussions with buyers of all types of firms often results in lists of goods they would buy if prices were right, or quality better than their present purchases. The overseas import houses to whom you are shipping often can locate and quote you on these enquiries. Do not ask for general lists of GIF prices, however, unless there is a reasonable possibility of sales. You have learned the work entailed in GIF costing, so be selective with your requests. When ordering from foreign suppliers you must be as careful with terms, stipulations, and certificates required as if you were costing for export. Check with your customs broker to learn all the requirements of Canadian customs both for the particular item, and then incorporate each of these requirements in your letter of credit, and for the documents which must accompany the exporter's draft on your bank. Remember, that unless you are fully protected in this manner, your letter of credit could be cashed, as the shipper would have complied with all your conditions; the goods arrive, and then admission of them to the country could be prohibited. Such a loss could bankrupt your firm. At other times the custom officials, who always do their utmost to co-operate, will allow your shipment to enter if goods are relabelled, or remarked, piece by piece. At best this is frustrating and expensive, and can so easily be avoided by making sure every entry requirement is met before the goods are shipped by the foreign supplier. CURRANTS FROM TASMANIA

You have received from a local buyer of a jam factory the information that the price of currants they have been 102

using has risen, and that of recent months the quality has not been too good. He has given you an indication of a price that would interest him, and has told you the packing is in tins of five imperial gallons each. You begin the hunt, sending letters to the Canadian consul general in San Francisco who, you see from the directory handles trade matters for California; and to the Canadian trade commissioners at Sydney, Melbourne and Canberra in Australia. Also you write a San Francisco broker with whom you co-operate, and two Australian firms who buy from you. In due course you analyse the replies. California sources can offer no better price or terms than the buyer presently enjoys. You do discover, however, a packer in Hobart, Tasmania, who quotes you a price in Australian pounds, FOB dock at Sydney, Australia, and states he cannot give a through bill of lading as all shipments from Hobart must be shipped to Sydney and then trans-shipped from there. You check the currency rate of Australian pound in the journal, Foreign Trade and find it is $2.20 Canadian, making a most attractive price for the currants, if the trans-shipment is not too expensive. From your shipping guide you locate the local agents of steamship lines from Australia, and from them obtain the ocean rate. Estimating terminal charges at Sydney, you make a rough costing to land the goods in Canada. Then from your customs broker you obtain the rate of duty, finding it extremely low as Commonwealth preference is granted. He also gives you the requirements that must be adhered to for the currants to be approved for entry, and looks up the name and address of a freight forwarding firm in Sydney, Australia. Adding local port charges and duty and trucking, you are able to arrive at an estimate of delivered-to-buyer 103

price, that you feel is reasonably close to what the actual price will be. Re-checking your figures you find you have not included all risk insurance, so you phone your insurance company. When this is added, plus a reasonable profit, your price is still in the bracket that should interest the buyer. The result is a trial order of twenty-five tins, to be delivered as soon as possible. Carefully you check the customs regulations; noting a document for each that will cover the requirements. The seller's terms are "FOB dock, Sydney, Australia, with letter of credit required," so you make a condition of the sale "a clean dock receipt, Sydney ocean dock, covering 25 tins, each containing five imperial gallons, grade one, dried currants, and notify the Sydney freight forwarding firm." The next step is to airmail the Sydney freight forwarder to ask him to act for you, and enquiring if he wishes payment in advance. You, of course, tell him you hope to have steady repeat shipments for him to handle. For trans-shipments like this some buyers instruct the exporter to have the original bills of lading marked "Notify agent of such-and-such a shipping line" at the point of trans-shipment. When the goods arrive at that point, the agent of the ocean carrier that brings it on to Canada is notified. As he is anxious to obtain business for his line, he will look after the shipment. This sounds all very well, but the shipping agent is really acting over and above his duties on your behalf. Remember, he is the agent of the shipping company and not your agent. In the event of having to trace goods back to find shortages or to discover who is responsible for damage, he represents his company, and not you. The very small fee which is charged by the freight forwarder and which you would 104

otherwise save does not nearly offset the advantages of having your own agent, who will act on your behalf if necessary should a claim arise, at the point of transshipment. Eight days later you receive a reply from the freight forwarder stating that he will be glad to act if you complete and return the power of attorney form he enclosed. Also he has made arrangements that the shipping company will cable their Canadian agents stating the freight charges on each shipment, and you can pay these locally. He will pay terminals and any other charges and bill you. As a result, the documents arrive at your bank three weeks later, and in another two weeks the shipment itself arrives and is cleared through customs by your broker without any unforeseen difficulty. The cartage company delivers directly to your customer, who is very pleased with the quality, and promises an additional order as soon as he reduces stock slightly. Now you have all the statements in, and so can check your costs exactly. The total is just slightly higher than you had estimated, but the difference is not significant, so your profit is virtually unchanged. In a few weeks' time you obtain a repeat order from your customer, and again everything goes smoothly. From this you reason that if one food processor is satisfied with the price and quality, others could be potential customers as well. From the Trade Index you obtain the name and address of several similar plants across the country, and write each of them, offering to send a sample from a five gallon tin which you took from the last shipment for this purpose. After obtaining the pool-car grocery rate to each destination, you are able to quote them a definite price delivered to their city. Then you canvass the large wholesale grocers to see if 105

any would be interested in ordering to package into retail containers for sale to the public through grocery outlets. You find one firm which promises to buy if you will carry a stock locally up to five tons, so they can draw one ton a week for five weeks. You agree to this provided they will give you their written order guaranteeing to take deliveries as stated. This they do, issuing to you their signed order. In the next three days you receive small trial orders from two of the firms to which you had sent samples. You consolidate all the orders, and place one order for the total with the supplier. The trade is really beginning to develop. Over the months the orders increase in size and number so that all profit earned by handling this commodity must be set aside to meet the increasing size of your letters of credit. For this reason you write the suppliers and point out the value of your business to them, and state that if sight draft terms could be granted you could place even larger orders. In due course their reply arrives. The best terms they can offer are letter of credit for seventy-five per cent of their FOB dock, Sydney, price and sight draft for the balance with customs forms and inspection certificate attached to their draft. Although not the terms you had hoped to be granted, this is a concession and will alleviate the strain of having to supply letters of credit for the full amounts. So your next order is placed on this basis. DEALING WITH AN INSURANCE CLAIM

About six weeks later you receive a call from the shipping company's agent that the carrying vessel has arrived, and they ask you to come to the dock as soon as possible to inspect your cargo, which now is a significant part of their freight for your port. 106

The agent meets you at the wharf and takes you aboard the ship and below to number three hold which your shipment occupies. As you step off the ladder you hear in the confined space what sounds like a loud report and a metallic clatter. On closer inspection you notice the lids from some of the tins are missing, and some tins appear swollen, and some are dripping. Instead of dry currants, the lidless tins contain a mass of wet, seemingly fermented fruit. It is impossibe to know the extent of the spoilage until the cargo is in warehouse, so you return to your office. Now you are in a predicament with a valuable shipment on which three-quarters of the GIF price has been paid, and which now appears to be in bad condition, even to the extent of a possible complete loss. What must be done? First, you must enter a general claim against any and all parties who could be responsible. These are the suppliers, the wharf company in Sydney who handled the goods, and the shipping company. Evidently they were in good, or apparently good condition when loaded aboard at Sydney, or a clean on board bill of lading would not have been issued. Also your customers must be notified, but until you have made a complete inspection of the shipment that would not be wise. Enough of the currants still might be in good condition so that a reasonable percentage of each order could be filled. As this is the first occasion you have been faced with a claim, you phone your insurance agent for instructions. He tells you that the first duty is to do everything reasonable to protect the shipment from further damage. In this case no steps need be taken by you as putting the goods in warehouse for inspection is all the care necessary. Then you are to write the shippers and the shipping 107

company, keeping a copy of each letter for your insurance claim file. You are told that if these parties deny liability, the insurance company will step in, and that a surveyor to assess the loss will be appointed immediately. So you write the shippers and the shipping company by registered mail, telling them you are holding them liable, and filing a copy of each letter in your insurance file. Next you cable the suppliers: YOUR SHIPMENT THIRD BADLY FERMENTED SOME LIDS BLOWN STOP PLEASE CABLE BANK RELEASE DOCUMENTS WITHOUT FURTHER PAYMENT STOP YOUR EQUITY GUARANTEED IF HELD BLAMELESS

Two days later your bank 'phones to say the suppliers have complied with your request, and the documents can now be released to you. Then you receive a call from the insurance surveyor requesting: a copy of the commercial invoice, one negotiable bill of lading, a copy of any correspondence with the shipping company and the suppliers, and a negotiable copy of insurance policy or certificate. These are always required for a claim, as is a demand on the shipping company, which, of course is with your correspondence. You arrange to meet the surveyor at the customs warehouse and bring the required documents. When you inspect the shipment with him you find about half of it is in good shape. These tins are marked, and you arrange with customs to hire two men to pile these separately. The remainder of the tins are either swollen or have lids missing. From the warehouse the surveyor takes you to the ship and down to the now empty hold. Apparently the boilers are located next to this hold behind the steel 108

partition. As he progresses, the surveyor constantly makes notes on his report. Even with little or no steam up on the ship, the hold is very hot and humid, and besides, water is dripping freely in several places from outside steel plates. That afternoon you write your out of town customers to let them know you can fill only half of each order, of course giving them the reason. Then you call on your local customers. When you explain the difficulty to the marmalade manufacturer, he tells you he might be able to use slightly fermented currants in mince meat if the Department of Agriculture would approve. The next day you call at your insurance agent's office to go over the survey report. The causes given for spoilage are given as follows: (1) tins not properly sealed; (2) entry of water; (3) excessive heat in the hold where stored for the type of goods; and (4) possible inherent vice. The surveyor certified that on twenty tins which had not swollen, which he selected at random, fifteen lids were loose and easily removable by inserting the tip of a finger under the edge. You discuss the report point by point with your agent. First, if the cause is due to loose lids, the suppliers would be liable. Secondly, leaking plates of the ship, unless a result of stranding, collision or other marine disaster often are excluded as risks covered by marine insurance. In this instance, however, you have all risk coverage, so an insurance claim would be upheld. If the loss occurred from excessive heat in the hold, the shipping company would be liable. Lastly, inherent vice, which in this case would be fermenting of the fruit without external cause, would not be covered even by your all risk policy. The inspection cer109

tificate supplied by the shippers, however, makes this a remote possibility only. So, with all risk insurance, three of the four causes would be covered. On the fourth, inherent vice, you would have to look to the supplier for payment, but you would have to be able to disprove the government inspection certificate which he supplied. If it could be proven excessive heat in the hold caused the fermentation, the shipping company ultimately would be forced to pay. The insurance company will do everything possible to fix the blame correctly, and definitely they will not try to avoid payment unless they are convinced the claim arose solely because of an uninsured risk. As inherent vice is listed as a possibility by the surveyor you arrange to have tests made by an independent registered laboratory, by sending them one tin of fermented currants and one tin in good order. The next afternoon the tests are completed and the findings over the seal and signature of the laboratory are: (1) The fruit in good condition does not contain sufficient moisture to cause fermentation. (2) Five per cent water to the contents found in the spoiled tins would cause fermentation if 80 degree heat added for ten days or more. This immediately raises a question in your mind, so you cable the freight forwarder in Sydney to ask if the shipment was in the hot sun there for any length of time before the trans-shipment was made. In due course his reply is received: SHIPMENT IN DOCK SHED ONE DAY ONLY

Armed with this information you make an appointment with the surveyor, a Lloyd's man, who acts as settling agent in your city for a number of marine insurers. 110

He checks your information carefully against the results of his investigations. He is glad to have the assurance that the shipment had not been exposed to the sun in Sydney. He then states his assessment is as follows. Liability: divided equally between supplier for tins not properly sealed, and the ocean carrier for excessive heat in the hold, they being aware of the type of goods carried. Loss: 50 per cent; 25 per cent assessed to supplier; 25 per cent to shipping company. This report is sent to your insurance company and they phone later to say they are prepared to issue their cheque in your favour for 50 per cent of the insured value (and you had insured for 110 per cent of the GIF price) provided you will call at their office and bring the seal of your company to sign and seal the subrogations. A subrogation is an official document assigning the damaged or spoiled cargo to the insurers. By having title, the underwriters then legally can press their claim for recovery against any and all parties they believe to have contributed to the loss. You tell the insurance company of the possible sale of the fermented currants to your customer, and they state they will seek approval required to allow entry into Canada of these goods, and any monies they may receive from the sale of these goods would be "salvage" and would be deducted equally from the amounts they will seek from the supplier and the ocean carrier. Then you tell them the supplier waived the balance of 25 per cent of their FAS Sydney invoice so you could take possession on arrival of the shipment. The underwriters request that you withhold this payment until they learn if the suppliers will admit partial liability. If they do not, no doubt you will be served with an order to pay 111

this into court until the legal action that would ensue is settled. In any event your loss has been paid in full, plus a small profit on the spoiled goods, and any further expense and effort will be on the part of the insurance company. Remember, when dealing with insurance claims, there are several things to be done. First, the onus is on you to protect, to the best of your ability, the shipment from any further loss or damage, and this must be undertaken at the earliest possible moment. The insurers expect to pay the claim arising from the disaster or occurrence of the event causing it, but rightly they will not pay for additional damage or loss due to your negligence or neglect. If reasonable expense is entailed to protect the shipment or the salvaged portion of it, you will be reimbursed by the underwriters. Next, you must file a claim against the ocean carriers, and any other party you feel may be partially or wholly responsible, keeping a copy of all correspondence for the insurance company. Usually, unless there is clear-cut negligence, the ocean carrier will deny any liability on their part. Then you claim against the insurance company, sending them copies of all letters from and to those you consider at fault, as well as the documents listed previously. The insurers pay you the loss, subrogate the claim, and pursue their claim against the parties they believe responsible for the loss. If a claim is for a complete loss, the surveyor will demand all copies of the negotiable bills of lading, not one copy only as required for a partial loss. Fortunately claims are not encountered very often, but when they are they must be handled according to the simple rules: first, protect the shipment from further loss; 112

then lay the claims; then on denial of liability by the carrier, the supplier, or others, notify the insurer with copies of correspondence and required documents. Both the export and the import fields could, and in many instances do, have texts or long articles written on minute but important phases, such as "whether to take a trip abroad or whether the possible benefits would justify the expense entailed," "whether to replace your own agent sent from Canada by a resident of the foreign country in a definite period, because of lack of substantial results," and "whether to build a branch factory abroad, and if so where." In most instances these are basic problems of management encountered in the operation of any business, and each, though vitally important to those concerned, does not bear as great a relation to general exporting and importing as do the basic ABC's of the business. The budget for the export or import department should, to a great extent, influence management decisions in what, to the individual firm, is probably a major problem. A public company, manufacturing mainly for the export market, as are the pulp mills for example, spends millions of dollars in the expansion or adaptation of plant and equipment to retain and increase their markets. In this they are different from most exporters, but in the basic techniques of the trade, and in the basic problems of finding the goods (or adapting to the markets), finding and retaining customers, handling the shipment either by charter vessel carrying nothing but their products or in one-ton lots, in cabling, in protecting the firm in quotations or by the terms of the letter of credit or purchase order, in covering with insurance, in filing insurance 113

claims, and in all other basic facets of the industry—all import-export houses are alike. That is why this text has dealt only with basic every-day problems, and not with management decisions, large or small. If the fundamentals are well learned, and if you can truly be a "trader" and not just an "offerer of goods," you need not be concerned about entering any branch of the import-export field, provided it does not require any special technical training which you may lack.

114

APPENDIXES

TRADE TERMS WARNING. Trade terms do not all have the same meaning in all countries. Therefore be very careful when using them, and if you feel there will be any doubt or misunderstanding, do not use abbreviations. The International Chamber of Commerce has been and is working on uniformity of trade terms, but as only seventeen have been adopted, a great deal of work is yet to be done before a uniform understanding of all trade terms in all countries is achieved. Main trade abbreviations, with Canadian interpretations, are: A/R All risks A/S At sight B/L Bill of lading Bs/L Bills of lading CAD Cash against documents C &F Cost and freight C &I Cost and insurance CIF Cost, insurance, freight CIF & C CIF plus commission CIF & E CIF plus exchange CIF & I CIF plus interest COD Cash on delivery c/s Case(s) cwt Hundredweight (112 or 100 Ibs) D/P Documents against payment FAA Free all average (insurance) FAS Free alongside (ship) 115

FOB FPA GA IB L/C LCL M/V NCV n.o.p. n.o.s. PA PL Pro-forma S/D SS TBL TT

W/M WPA WR

Free on board Free of particular average (insurance) General average (insurance) In bond Letter of credit Less than carload lots Motor vessel No commercial value Not otherwise provided Not otherwise specified Particular average (insurance) Partial loss Form for guidance only; e.g., "pro-forma invoice" Sight draft Steam ship Through bill of lading (from point of origin to final destination when trans-shipment required) Telegraph (or cable) transfer (of money) Weight or measure With partial average (insurance) War risk (insurance)

EQUIVALENTS A table of equivalents is not needed very often in the exportimport trade, but on the few occasions it is needed, time is saved by having it easily accessible. 1 litre is 1.76 imperial pints or .22 of an imperial gallon. 1 litre is 2.113 US pints. 1 imperial gallon is 1.2 US gallons. 1 kilogram is 2.2046 pounds. 1 short ton is 2,000 pounds. 1 long ton is 2,240 pounds. 1 metric ton is 2,200 pounds (occasionally 2,205 Ibs). 1 ton measure is 40 cubic feet. 116

To change: Ounces to grams Pounds to grams Pounds to kilograms 100 pounds to kilograms (kilos) Tons to kilos Grams to ounces Kilograms to pounds Kilograms to pounds in hundredweights Kilograms to short tons Inches to millimetres Inches to centimetres Feet to metres Yards to metres Miles to kilometres Centimetres to inches Metres to feet Metres to yards Kilometres to yards Kilometres to miles

Multiply by: 28.35 453.6 .45 50.8 1016. .035 2.2 .02 .001 25.4 2.54 .3048 .9144 1.6 .4 3.3 1.1 1093.6 .62

117

This page intentionally left blank

INDEX

Abbreviations, 71 Accountants, 26 Airlines, 42 Allowances, 57 Bags, 58 Banks, 18 Branch office, 90 Brokers, 29 Bills of lading, 54, 59, 71 Cable address, 12 Cables, types of, 13 Cabling, 68, 69, 72, 86, 108 Clean documents, 56 Choosing a ship, 40 Conference shippers, 39 Confirming orders, 52, 75 Currencies, 29 Costing information, 61 Costing, mechanics of, 63, 85 Costing sheet, 69 Counter offer, 72 Customs brokers, 44 Dock receipts, 56, 104 Drafts, 23-4, 82 Duty, dumping, 94 Duty, favourable rate, 94 Export costing, 61, 63, 69, 85 Export Credits Insurance, 24 Export merchant, 4 Export publications, 6, 7, 8 Finding suppliers, 5, 92, 102

Foreign Exchange Control Board, 30 Freight engagement, 76 Forwarding agents, 47, 84, 104 Import agent, 89 Import broker, 89 Import costing, 98 Import merchant, 91 Import regulations, 94 Incentive rates, 41 Incorporation, 10 Insurable value, 32 Insurance, claims, 105 export credits, 24 marine, 30 open policy, 32 types of policies, 34 supplemental cover, 36 Insure, when to, 37 Letter of credit, 20, 73 claiming against, 81 financing with, 80 back-to-back, 87 Labels, 57 Letterheads, 16 Manufacturer's export department, 2 Marking, 50 One-product specialist, 3 Open policy, 32 Parcel post, 43

119

Prices, assessing, 70 Prices to exporters, 48 Purchase record, 96 Pricing for re-sale, 99 Quotations, 56 Railroads, 41, 84 Resale pricing, 99 Resident representatives, 90 Samples, 59 Sampling the market, 95 Shipping companies, 38 Shipping conferences, 39

120

Shipping space, 76 Strapping, 50 Suppliers, 5, 92, 102 Telephone, 16 Telex, 15 Terms of sale, domestic, 100 Terminals, 50 Trade commissioners, 7 Trade fairs, 9 Truck shipments, 42, 84 Unclean documents, 77 Weight or measure, 51