Foreign Trade Export Operation Process: Quotation, Order Placement, Payment Terms, Customs Clearance, Shipment, Insurance, Bill of Lading and Settlement of Exchange

 The export cargo workflow covers: Quotation, Order Placement, Payment Terms, Goods Preparation, Packing, Customs Clearance, Shipment, Cargo Insurance, Bill of Lading and Exchange Settlement.

1. Quotation

International trade starts with inquiries and quotations. An export quotation normally specifies product grade, specifications, special packing requirements, order quantity, delivery schedule, transport mode and material. Common trade terms: FOB (Free On Board), CFR (Cost and Freight), CIF (Cost, Insurance and Freight).

2. Order Placement

Once both parties agree on the quotation, the buyer issues a formal order. After negotiation, both sides sign a Purchase Contract. The contract covers product name, specifications, quantity, price, packing, origin, shipment schedule, payment terms, settlement, claims and arbitration. Signed in duplicate with company stamps, each party retains one copy. This marks the official commencement of export business.

3. Payment Terms

Three mainstream international payment methods: Letter of Credit (L/C), Telegraphic Transfer (T/T) and Direct Payment.

1. Letter of Credit (L/C)L/C is divided into clean L/C and documentary L/C. Documentary L/C requires supporting documents while clean L/C has no attached documents. Simply put, L/C guarantees payment collection for exporters.

Key note: Shipment must be completed within the L/C validity period; document presentation cannot exceed the L/C expiry date. L/C is widely used in global trade and its issuing date must be clear and complete.

2. Telegraphic Transfer (T/T)T/T is foreign currency remittance. The buyer transfers funds to the seller’s designated foreign exchange bank account. You may agree on payment after goods arrival.

3. Direct PaymentBuyer and seller complete goods handover and payment directly.

4. Goods Preparation

Goods preparation is critical and must strictly follow the contract. Checkpoints:

1. Product quality & specifications match contract requirements.

2. Quantity meets the contract or L/C.

3. Production schedule aligns with vessel plan to ensure cargo ready before shipment.

5. Packing

Packing types (cartons, wooden cases, woven bags etc.) are selected based on cargo features.

1. General export packing: Follow universal export standards.

2. Special packing: Comply with buyer’s special requirements.

3. Packing and shipping marks: Double-check to satisfy L/C requirements.

6. Customs Clearance

Customs clearance is complicated yet mandatory; failed clearance will terminate the transaction.

1. Statutory inspection commodities require export inspection certificates. The inspection process includes application, sampling, inspection and certificate issuance. Goods passing inspection will get a release note or customs release stamp on the declaration form.

2. Licensed customs declarers submit documents to customs: packing list, commercial invoice, electronic customs power of attorney, export contract copy and inspection certificate.

• Packing List: Detailed packing document issued by exporter.

• Commercial Invoice: Sales proof issued by exporter.

• Electronic Customs Power of Attorney: Authorization for customs broker.

• Commodity Inspection Certificate: Legal document issued by entry-exit inspection authority for customs release, duty assessment and dispute settlement.

Note: The old paper export verification sheet has been abolished in China, so I removed it in this website version to avoid outdated information.

7. Shipment

Select loading method based on cargo volume and buy insurance as agreed in Purchase Contract. Two container options:

FCL (Full Container Load)

Common dry container specifications:

• 20GP: Internal 5.69×2.13×2.18m, max gross weight 17.5 tons, volume 24–26 CBM

• 40GP: Internal 11.8×2.13×2.18m, max gross weight 22 tons, volume 54 CBM

• 40HQ: Internal 11.8×2.13×2.72m, max gross weight 22 tons, volume 68 CBM

• 45HQ: Internal 13.58×2.34×2.71m, max gross weight 29 tons, volume 86 CBM

• 20ft Open Top: 5.89×2.32×2.31m, 20 tons, 31.5 CBM

• 40ft Open Top: 12.01×2.33×2.15m, 30.4 tons, 65 CBM

• 20ft Flat Rack: 5.85×2.23×2.15m, 23 tons, 28 CBM

• 40ft Flat Rack: 12.05×2.12×1.96m, 36 tons, 50 CBM

Container types by material: aluminum alloy, steel, plywood, fiberglass reinforced plastic. Container types by usage: dry container, reefer, dress hanger, open top, flat rack, tank container.

LCL (Less than Container Load)

Freight is calculated by cargo volume or weight.

8. Cargo Insurance

Insurance terms are normally stipulated in the Purchase Contract. Main categories: ocean marine cargo insurance, overland, air and postal cargo insurance. Ocean marine insurance has Basic Risks and Additional Risks.

1. Basic Risks

• F.P.A. (Free From Particular Average): Covers total loss from maritime natural disasters, total loss during loading/transshipment, general average sacrifice & salvage charges, total/partial loss caused by vessel stranding, sinking, collision, fire and explosion.

• W.P.A. (With Particular Average): Covers all F.P.A. risks plus losses from heavy weather, lightning, tsunami and flood.

• All Risks: Covers W.P.A. plus general additional risks.

2. Additional Risks

• General additional risks: Theft, Pilferage & Non-Delivery, Fresh Water & Rain Damage, Shortage, Leakage, Breakage, Hook Damage, Intermixture & Contamination, Packing Breakage, Mould, Sweat & Heating, Risk of Odour.

• Special additional risks: War Risk, Strike Risk.

9. Bill of Lading (B/L)

After customs release, the shipping company issues B/L. It is the core document for importer’s cargo pickup and exporter’s exchange settlement. Normally 3 original B/Ls are issued as per L/C requirements. Exporter keeps 2 copies for tax rebate and sends 1 original to the buyer.

• Sea freight: Importer must present original B/L, packing list and commercial invoice to collect goods.

• Air freight: Fax copies of air waybill, packing list and invoice are acceptable for cargo collection.

10. Exchange Settlement

After shipment, the exporter prepares documents (packing list, commercial invoice, B/L, certificate of origin etc.) strictly in accordance with L/C clauses and submits to bank for negotiation within the presentation deadline.

Besides L/C, remittance options include T/T, D/D and M/T. T/T is the most widely used today.

Note: Chinese export enterprises are eligible for export VAT rebates.