Page 163 - DMGT547_INTERNATIONAL_MARKETING

International Marketing

Notes 4. Advance payment of USD 2500/- or equal to this amount can be made for commercial
purposes. If the following conditions are followed by the contract party:
a) Documents produced by the parties must be evidence showing the demand of the
overseas supplier.
b) Payment must be given to the overseas supplier.
c) Endorsement in the import licence if any.

d) Import is permitted either by a licence covered under OGL. As regards exports,
depending on the nature of goods exported and the competitiveness of the product,
advance payments are insisted.

Example: In the case of export of vegetables and fruits, it is customary to demand 100%
advance payment.
e) Application in F.A.I. in duplicate.
f) Importer will submit evidence of import in the Exchange Control Copy of Bill of
Entry/Postal wrapper within a period of 3 months.

9.1.2 Open Account System

1. It is just opposite to the Advance payment.
2. Meaning: When an Exporter agrees to sell the commodity on open account system to the
Importer, he despatches the goods to the buyer directly followed by the transport
documents and an invoice requesting payment.
3. The Exporter loses control over the goods completely and leaves everything on the integrity
of the buyer.
4. It is beneficiary to the Importer; the Exporter bears the entire financial and commercial
risks. This system is normally resorted to when the goods command buyer’s market.

5. The commercial risk is, to some extent minimised by taking a policy of ECGC. To take
care of the interest of the Indian Exporters, there are Exchange Control restrictions imposed
by RBI on open account export Sales.

9.1.3 Consignment Sale

If you sell goods sold on consignment, you have agreed to sell the goods without first buying
those goods from the owner. Typically, your agreement specifies one of the following:
1. You agree to sell the goods on behalf of the owner as an agent
2. You agree to purchase the goods for an agreed price when you find a buyer.

There are no restrictions on what goods can be sold on consignment. Goods regularly sold on
consignment include: motor vehicles, boats, wedding and formal dresses, cameras, farm
machinery and artworks.

Example: Selling on consignment means giving your car to someone else, usually a
motor dealer, to sell on your behalf. Generally you set the minimum price you will accept and
the dealer will add a commission to it.

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