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Procedure Example for an Export Transaction

A buyer contacts a supplier and asks for a quote on some merchandise.

Supplier responds affirmatively and requests information about:

  • The buyer's background (corporate profile, parties involved in transaction, credit references)
  • The buyer's purchasing intentions (number of pieces, delivery point, delivery deadlines, intended use of the product, final consumer)
  • Product specifications (modification or customization required)

Buyer provides information. Supplier responds by:

  • Running a due diligence check on the buyer (commercial risk)
  • Checking US export control laws for possible restrictions and prohibitions (ITAR, EAR, OFAC)
  • Identifying foreign documentary requirements for customs clearance (phytosanitary requirements, origin certifications, legalization of documents, etc.)
  • Researching buyer's country political and economic factors (political risk), and market potential (repeat sales)
  • Contacting a freight forwarder to investigate the best routing and check freight rates to the requested destination (can also be done in house)
  • Offering a price to the buyer with a specified sales term and method of payment

Supplier may also check:

  • Production scheduling
  • Financing options (pre- & post-shipment)

Buyer provides feedback to any supplier questions. Buyer may ask for price concessions, a different payment method and sales term.

Supplier and buyer negotiate sales term and payment method and settle on pricing. (For customized products, seller may ask for partial pre-payments) Buyer may ask for financing. Supplier responds by approaching his bank for assistance with:

  • Pre-shipment financing, or
  • Credit financing (methods to extend credit/loans to the buyer), or
  • Handling the payment method (T/T remittance, L/C, documentary collection)

Buyer places an order with the Supplier. Supplier responds by:

  • Acknowledging and accepting the order from Buyer
  • Contacting its freight forwarder, or carrier, for a booking
  • Seeking authorization for approval to export (in most cases, not necessary)

Supplier manufactures product and delivers shipment to carrier for transport overseas. Supplier also:

  • Sends freight forwarder its shipping instructions
  • Notifies buyer of shipping details
  • Sends transport documents along with commercial invoice, packing list and other required documents to Buyer for the customs clearance procedure
  • If a Letter of Credit is the prescribed payment method, Supplier either submits its draft and required documents to the paying bank or uses its freight forwarder for submittal.

Shipment arrives at its intended destination. Carrier sends Arrival Notice to Buyer (consignee). Buyer responds by:

  • Submitting one non-negotiable copy of the bill of lading along with the commercial invoice, packing list, and other required documents to its Customs Broker for submittal of an entry summary to his national customs authority in order to clear customs
  • Submitting one endorsed original bill of lading to the carrier in order to obtain the cargo's release from the carrier

Cargo is released to the buyer.

301 S. PARK AVE. | P.O. BOX 200533 | HELENA, MT 59620-0533 |  T: 406.841.2870 |  F: 406.841.2871 | TDD: 406.841.2702