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14 Simple Steps To An Effective for export transaction

export transaction
The entire 14-step process for conducting an export transaction is summarized. Take for
example an Indian importer and US exporter.

 Step1: The Indian importer places an order with the US exporter and asks the American if he
would be willing to ship under a letter of credit.

 Step 2: the US exporter agrees to ship under a letter of credit and specifies relevant
information such as price and delivery terms.

 Step 3: the Indian importer applies to (e.g.) State bank of India for a letter of credit to be
issued in favour of the US exporter from the merchandise the importer wishes to buy.

 Step 4: the state bank of India issues a letter of credit in the Indian importer’s favour and
sends it to the US exporter’s bank, the bank of New York.

 Step 5: the bank of New York advices the US exporter of the opening of a letter of credit in
his favour.

 Step 6: the US exporter ships the goods to the Indian importer on a common carrier. An
official of the carrier gives the exporter a bill of lading.

 Step 7: the US exporter presents a 90 day-time draft (bill of exchange) drawn on the State
Bank of India, in accordance with its letter of credit and the bill of lading to the bank of New
York. The US exporter endorses the bill of lading so title of goods is transferred to the Bank
of New York.

 Step 8: the bank of New York sends the draft and the bill of lading to the State Bank of India.
The State Bank of India accepts the draft, taking possession of the documents and promising
to pay the now accepted draft in 90 days.

 Step 9: State Bank of India returns the accepted draft to the bank of New York.

 Step 10: the bank of New York tells the US exporter that it has received the accepted bank
draft, which is payable in 90 days.

 Step 11: the exporter sells the draft to the bank of New York at a discount from its face value
and receives the discounted cash value of the daft in return.

 Step 12: State Bank of India notifies the Indian importer of the arrival of the documents. He
agrees to pay the State Bank of India in 90 days. State Bank of India releases the documents
so the importer can take possessions of the shipment.

 Step 13: in 90 days, the State Bank of India receives the importer’s payment, so it has funds
to pay the maturing draft.

 Step 14: in 90 days the holder of the matured acceptance ie, bank of New York presents it to
the State Bank of India fro payment. The State Bank of India pays.

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