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Hi good evening welcome back this is my module
four lecture eighteen so we will continue where we

00:00:21.200 --> 00:00:31.600
left the incoterms so we discussed the incoterms
e and c now the another incoterms under category

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group d category incoterms so what are the group
d incoterms seller assumes all or most of the

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risk and takes responsibility of delivery at the
destination up to the agreed point of delivery

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so here it is not the port see the first one
was in the ex works e terms then the c terms

00:00:51.600 --> 00:00:57.840
that cost include that the ports here is up to
the destination okay so the d means destination

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so we say daf delivered at frontier seller
responsible to deliver the cargo up to the point

00:01:05.360 --> 00:01:10.560
of entry at destination risk and responsibility
further passes on to the buyer so from 

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The entry from that point it is a buyers
responsibility d is delivered ex ship

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seller assumes risk until the ship with the cargo
reaches to the port of destination then the risk

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shifts to the buyer from the point of discharge
of vessels onwards deq delivery delivered ex quay

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duty paid seller takes the responsibility until
the cargo is delivered after import clearance at

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destination and customs duty paid and delivered to
the point on buyers dock so that is known as a deq

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then the next one is delivery duty unpaid the
seller takes responsibility to deliver the cargo

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at destination port where the buyer takes
responsibility for import clearance and

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import duties and onward delivery that means
up to that port will be the sellers 

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Responsibility including insurance
freight everything but from the port

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the paying the import import clearance
charges import duties and onward delivery

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to the buyers place buyers destination will be the
buyers responsibility okay buyer has to take care

00:02:30.080 --> 00:02:36.560
and the last one is delivery duty paid so seller
takes the responsibility until the cargo reaches

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the destination clears customs pays the duty and
delivers a cargo at the buyers dock so that means

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it will be delivered at the buyers dock so that is
known as delivery duty paid so these are the very

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very important and crucial incoterms so these
incoterms will be internationally followed by

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all the countries whoever is doing the
international business has to follow these

00:03:01.760 --> 00:03:08.480
incoterms so now you can define your price
Based whether it is a ddp whether is a cif or is

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a cip whether it is fob or fos price depending on
the risk and the cost up to what point you want to

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take and how so that is the way how incoterms and
remember this is very very very very fundamental

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in deciding your pricing and this price apart
from the price the incoterms is the responsibility

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who takes the responsibility from which point
whether the responsibility is the sellers

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of the cargo or the inland transportation or
the insurance all these terms and the customs

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duty paying and the port clearance it is whose
responsibility so typically incoterms decides

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on that so in case in the international business
when you submit a quotation you have to submit a

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quotation either cif or cip or fob or ddu all 
Those concepts you have to make with the quote and

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take into consideration all the cost along with
your cost of your product so that you can you

00:04:18.800 --> 00:04:25.840
do not make any mistake in taking to the whatever
the cost component in each of this so and where is

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up to which point is up your responsibility most
commonly used are fob and cif and cip are the most

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commonly used and in some cases some ex work is
most commonly used in large equipment and others

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ddp is typically used if you look at this
amazon if you buy something from amazon.com

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and you pay the you buy it from amazon.com
and they and if you say that you are from

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India and your delivery address is India
they will calculate this the what is the

00:04:57.280 --> 00:05:02.240
insurance as well as freight and customs
duty and all those they will calculate 

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And give you the price which is delivery
duty paid it is typically used for this

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when you buy spares also when when the suppose you
have bought an equipment from us or from Japan and

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there is some the warranty during the warranty the
equipment had failed due to some parts component

00:05:21.280 --> 00:05:28.080
has become faulty so the manufacturer has to send
as agreed as a contract they have to send you the

00:05:28.080 --> 00:05:36.560
spare parts free of cost to you up to your
say in the warehouse up to your plant or the

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hospital or wherever you are using that
equipment when this that up to that point

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this they will send typically on ddp basis
that means delivery duty paid basis they

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will send so that you do not have any problem
the consignment the spares will come up to your

00:05:54.240 --> 00:05:59.120
hospital or up to your factory wherever 
It is located duty paid you have no headache

00:05:59.120 --> 00:06:04.000
into that so the seller will take care of that
so it is mostly the spares and the some of the

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smaller items these are all comes by ddp mode
okay so remember incoterms is very very crucial

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both for buyer and seller and as I told you I
may be repeating once again I have repeated the

00:06:18.320 --> 00:06:24.880
same thing previous session I am also repeating I
have seen many managers in my professional career

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that without understanding each of these meaning
has sold some equipment or some machinery and

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the company has faced several challenges and also
gone through lot of financial losses so be careful

00:06:40.400 --> 00:06:45.680
about this delete the all these incoterms and you
understand this term and the implication of terms

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and then submit your quote according to 
This term and you take this whole of this

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understanding properly that
is all from this incoterms

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illustration of the incoterms as I have just a
diagram illustration so the first one as I said

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you see the consignment on the ship so one is fas
this is the sellers warehouse the cargo has moved

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so sellers warehouses in the left the cargo has
moved and this is a ship you see that it is near

00:07:17.520 --> 00:07:24.480
the ship if it is alongside of the ship and buyers
country buyers warehouse the ship will move to the

00:07:24.480 --> 00:07:31.040
buyer his responsibility as up to the cargo is
up to the alongside of the ship that means if

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this is a ship and the alongside of the ship is
not on the ship alongside of the ship it is fas

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that means the sellers responsibility
the cost of transporting from stale

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Sellers warehouse domestics transportation
up to that cargo point alongside of the ship

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and insurance up to that point is the sellers
responsibility fas if I quote fas Kolkata sea port

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that means I will give it up to that alongside
of the ship putting it inside the ship and

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this cost is not not with me if I am quoting
fob then this is the free on board up to the

00:08:13.200 --> 00:08:19.600
ship that means the cost of putting the insurance
and transportation from my warehouse up to

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the board up to the inside the ship is also
my responsibility now why is this critical you

00:08:28.480 --> 00:08:35.440
have to understand why I am repeating why this
critical suppose the consignment while moving

00:08:35.440 --> 00:08:42.320
from alongside to inside the ship by the crane
if some accident happens some damage is there

00:08:42.320 --> 00:08:48.240
who will bear that cost who will take
The responsibility of the insurance in this case

00:08:48.240 --> 00:08:57.040
if it is fob the company the seller has to take
the insurance up to inside that port free on board

00:08:57.040 --> 00:09:02.960
up to that point is the sellers responsibility
so if any damage happens between the sellers

00:09:02.960 --> 00:09:09.120
warehouse to up up to when it is put in the
ship any accident happens or any damage happens

00:09:09.120 --> 00:09:14.880
the seller will be responsible and seller has to
do the insurance part of it and get the data claim

00:09:14.880 --> 00:09:20.320
from the insurance company if any damage happens
buyer has no responsibility into that if the

00:09:20.320 --> 00:09:26.960
seller quotes cif that means cost inclusive of
freight that means sea freight up to the buyers

00:09:26.960 --> 00:09:36.000
nearest port wherever see cif Yokohama port or cif
Singapore port all this will be up to cif port so

00:09:36.000 --> 00:09:42.320
that means cost of insurance and freight up to
Singapore port will be borne by the buyer so if I

00:09:42.320 --> 00:09:49.920
am quoting for this cargo say this is the cargo
if I am putting this cargo up to a fas hundred

00:09:49.920 --> 00:09:56.000
dollars Kolkata that means the cost includes
the transportation from my warehouse sellers

00:09:56.000 --> 00:10:03.280
warehouse up to the Kolkata port and insurance up
to the Kolkata port alongside of the ship is not

00:10:03.280 --> 00:10:11.280
inside the ship alongside of the ship if I quote
fob price hundred dollars to my Singapore customer

00:10:11.280 --> 00:10:18.800
that means my cost includes the domestic
transportation up to Kolkata port and inside

00:10:18.800 --> 00:10:23.680
up to inside the ship the cost of putting
it inside the ship and insurance up to

00:10:23.680 --> 00:10:29.600
putting it inside the ship is free on board
so that up to that point is my responsibility

00:10:29.600 --> 00:10:34.640
from there my Singapore importer will take
care of the insurance and freight up to

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His port there so his my responsibility ends
there as per the incoterms if I am quoting fob

00:10:41.360 --> 00:10:47.520
if I am quoting cif that means cost insurance
and freight up to Singapore port that means

00:10:47.520 --> 00:10:55.920
my goods in the ship I should also insure him
insure this up to Singapore port I should ensure

00:10:56.480 --> 00:11:02.640
and I should also pay the freight charges
for the for the sea she shipping company for

00:11:02.640 --> 00:11:07.360
carrying this good from Kolkata to Singapore
so freight and insurance up to Singapore

00:11:07.360 --> 00:11:14.800
okay so if any damage happens say there is some
damage happens during the ship voyage if some

00:11:14.800 --> 00:11:21.600
some unfort unfortunate thing happens and the
consignment is lost then the insurance company

00:11:22.160 --> 00:11:28.160
has to pay and the insurance charges has to be
borne by me I have to bear that insurance charges

00:11:28.160 --> 00:11:32.720
prior to shipment I have to make cif when
I quote I have to take care why I take care of

00:11:32.720 --> 00:11:38.320
that if I do not do that insurance if any incident
happens there will be total loss you just cannot

00:11:38.320 --> 00:11:43.280
claim anybody and so that your buyer will say
that you have quoted cif Singapore that means you

00:11:43.280 --> 00:11:47.760
have to take care of the insurance and freight
up to Singapore port you have to care so ins

00:11:48.880 --> 00:11:55.840
always calculate and always take care of all
these costs when you quote these incoterms clear

00:11:57.360 --> 00:12:02.480
incoterms in the shipment when do the risks pass
on to one party to another I have explained to you

00:12:02.480 --> 00:12:06.880
who is responsible for the shipment of
insurance it is my responsibility fob

00:12:07.440 --> 00:12:14.160
cif whose responsibility incoterms clears
everything what mode of transportation sea or air

00:12:15.600 --> 00:12:20.160
who is responsible for import clearance 
At destination port inspection of goods

00:12:20.160 --> 00:12:26.800
obligation and respective limitations what exact
location of delivery of the goods everything

00:12:26.800 --> 00:12:33.120
is incoterm covers however it does not cover
the transfer of ownership and payment obligation

00:12:33.120 --> 00:12:39.200
and consequences of breach of contract so it
covers everything except transfer of ownership

00:12:39.200 --> 00:12:45.600
and payment of obligation and consequences of any
breach of contract it does not cover but it covers

00:12:45.600 --> 00:12:51.760
the any shipment terms of shipment data questions
it covers everything so incoterm you as an

00:12:51.760 --> 00:12:56.960
international manager you have to understand
incoterm thoroughly and each of these incoterms

00:12:56.960 --> 00:13:01.840
specifically where your responsibility starts
up to which point is your responsibility

00:13:01.840 --> 00:13:04.960
and which point onwards is your
sellers or buyers responsibility 

00:13:04.960 --> 00:13:17.600
You have to clearly understand incoterms here
on this in this mode as I said as explained to

00:13:17.600 --> 00:13:25.600
ex works fca free carrier cpt carrier paid to
cip carriage insurance paid to dat delivery at

00:13:25.600 --> 00:13:32.720
terminal dap as I mentioned all and group two I
have said that fas fob cft cif these are all these

00:13:32.720 --> 00:13:41.840
I have discussed and typically sea and inland
we use fas fob cif all these are typically we

00:13:42.400 --> 00:13:47.840
are use in sea and inland transportation
okay so these are typically known as this

00:13:50.400 --> 00:13:56.960
methods of payment so now comes the how we make
the payment so the payments are most important in

00:13:56.960 --> 00:14:03.200
the business as you know you are selling the goods
your main basic objective is to get the money the

00:14:03.200 --> 00:14:08.080
payment so that is the basic objective
now imagine you are you have worked in

00:14:08.080 --> 00:14:13.440
The domestic market you have sold some goods
from your company x to company one of your

00:14:13.440 --> 00:14:21.600
client company y you agreed that the you
suppose the order was for hundred rupees

00:14:22.720 --> 00:14:29.120
you agreed that pay me the sales contract
you agreed in the quotation you say that pay

00:14:29.120 --> 00:14:36.640
me twenty five percent advance and balance
after delivery and balance after delivery

00:14:36.640 --> 00:14:43.120
and installation okay so it was typically terms
you agreed so hundred rupees then the customer

00:14:43.120 --> 00:14:49.440
agreed customer said no you you take twenty to
thirty percent twenty five percent advance and

00:14:49.440 --> 00:14:55.200
then take another forty percent or fifty percent
at the time of delivery rest after you do the

00:14:55.200 --> 00:15:02.240
installation and satisfactory installation okay
now the you you as a company abc private limited

00:15:02.240 --> 00:15:08.560
sold to xyz private limited you have sold 
The contract has been signed you have signed

00:15:08.560 --> 00:15:12.400
and the buyer has also signed seller
and buyer both signed that contract

00:15:13.200 --> 00:15:18.800
and they paid you twenty five percent advance okay
and then you shipped that goods to that customer

00:15:19.600 --> 00:15:24.960
and then after delivery they paid you say balance
forty percent they paid or maybe fifty percent

00:15:24.960 --> 00:15:28.880
they paid you got seventy five percent already
twenty five you got previously along with the

00:15:28.880 --> 00:15:34.080
order fifty percent you got after you delivered
the equipment to xyz company private limited

00:15:35.040 --> 00:15:40.160
balance twenty five percent you have not got it in
your hand then you send your technician or service

00:15:40.160 --> 00:15:45.120
engineer to install the equipment on it and then
they install they demonstrate and the customer

00:15:45.760 --> 00:15:48.720
has to pay you back balance twenty
five percent your customer is 

00:15:48.720 --> 00:15:54.800
Not making payment customer is telling I will pay
you little later I will I will come one for one

00:15:54.800 --> 00:16:00.640
again demonstration my company is not doing
well and all these problems starts and you

00:16:00.640 --> 00:16:07.600
slowly in good cases in ideal cases he pays you
twenty five percent immediately in some cases he

00:16:07.600 --> 00:16:14.080
pays you ten percent then pays another after three
3 months pays another ten percent and this way he

00:16:14.080 --> 00:16:20.480
delays the payment and then you as a manager your
main responsibility is not the selling selling

00:16:20.480 --> 00:16:28.080
is not the main important thing in in sales and
marketing selling is a contract where you agree

00:16:28.080 --> 00:16:35.680
to sell the sale completes only when you collect
the payment so the sale process is not completed

00:16:35.680 --> 00:16:41.760
if you do not collect the payment so when you sold
from abc private limited to xyz private limited

00:16:41.760 --> 00:16:46.880
They made seventy five percent payment
but you could not recover say maybe

00:16:47.600 --> 00:16:52.320
they paid ninety five percent but last five
percent they did not pay so you lost five percent

00:16:53.360 --> 00:16:58.000
that five percent who has lost your company abc
private limited has lost it has gone from your

00:16:58.000 --> 00:17:02.560
profit so you wanted to make thirty percent gross
margin in that product you finally made twenty

00:17:02.560 --> 00:17:07.760
five percent gross margin in the product you lost
so the payment is very very crucial so remember

00:17:08.560 --> 00:17:14.640
for the managers practicing managers we normally
become very excited when you get a sales order

00:17:14.640 --> 00:17:19.520
when you get an order we are very happy we
celebrate the order we have a big order we

00:17:19.520 --> 00:17:24.400
have received but this has got no meaning to
the company because the celebration is good

00:17:24.400 --> 00:17:30.640
that we got an order and we will execute 
The order now it is good that we will generate

00:17:30.640 --> 00:17:36.320
some revenue we will generate some profit but the
most important part is that collect the payment

00:17:36.880 --> 00:17:43.760
so most of the sales people the successful sales
people who are highly admired is not the selling

00:17:44.560 --> 00:17:51.200
apart from selling collecting the payments last
payment of even five percent payment by submitting

00:17:51.200 --> 00:17:55.280
a bank guarantee if it is a clause you have
to collect that now you understand this is the

00:17:55.280 --> 00:18:00.640
complications in a domestic business now imagine
you are selling something in an international

00:18:00.640 --> 00:18:06.240
market where the customer is in Philippines
or customer is in Malaysia you have sold

00:18:06.240 --> 00:18:09.600
and the customer has given you
have sold some this type of fifteen

00:18:09.600 --> 00:18:17.120
percent advance and then balance documents through
bank and all those things say agreed and

00:18:17.120 --> 00:18:21.520
The customer is not making payment what you
will do you will go to Malaysia ten times

00:18:22.080 --> 00:18:27.680
to collect that payment follow up that payment
it is a huge cost for you so there are certain

00:18:27.680 --> 00:18:32.960
mechanisms as an international manager you have to
negotiate and you have to see you have to protect

00:18:32.960 --> 00:18:36.560
safeguard you and there are several
ways how to protect your payment

00:18:38.000 --> 00:18:42.160
so the major factors associated with the
settlement of overseas payments are security

00:18:42.160 --> 00:18:47.360
speed cost of processing level of mutual
trust which is very important how I trust my

00:18:48.240 --> 00:18:54.240
buyer or the buyer trust seller credit
worthiness of the buyer country risk

00:18:54.240 --> 00:18:59.040
import export regulation these are all
crucial factors so our discussion should

00:18:59.040 --> 00:19:04.880
revolve around how and when money should
be sent to sellers account buyer and 

00:19:04.880 --> 00:19:10.080
Seller must agree negotiation the terms
of payment manner of settlement of dues

00:19:12.640 --> 00:19:19.600
method two of the payment paper moves cargo this
is very important that is why I put it red for the

00:19:19.600 --> 00:19:26.400
sake of understanding let us divide the top two
broad groups group one who trade operations do not

00:19:26.400 --> 00:19:31.440
involve routing shipping documents through
bank this is a group one segment of customers

00:19:31.440 --> 00:19:36.720
so they trade operation do not involve routing
of shipping documents through the bank group two

00:19:36.720 --> 00:19:42.240
where the shipping documents are routed through
the bank that means when I ship I will send the

00:19:42.960 --> 00:19:49.200
shipping in the invoice copy of the invoice
packing list airway bill or the shipping bill

00:19:50.000 --> 00:19:55.600
along with this the warranty certificate all the
documents and the quality control check all 

00:19:55.600 --> 00:20:02.080
The documents I will send it through the bank
so I will send from my bank to the buyers bank

00:20:02.080 --> 00:20:08.320
and buyers bank will receive that document hand it
over to the seller and then seller makes a payment

00:20:08.320 --> 00:20:13.920
sorry to the buyer and the buyer makes a payment
to the seller that is documents through the bank

00:20:13.920 --> 00:20:19.200
in the first channel there is no documents
through the bank okay so every shipment I send

00:20:19.200 --> 00:20:26.000
the document directly to the seller assuming that
and then buyer receives all the documents like the

00:20:26.000 --> 00:20:32.640
invoice airway bill all the shipping documents
packing list quality control certificate all these

00:20:32.640 --> 00:20:37.520
certificates I receive as per the terms
of the sales contract and then I make the

00:20:37.520 --> 00:20:42.480
payment to the seller so that is the group one
segment which is not through the bank and 

00:20:42.480 --> 00:20:47.680
The group two is through the bank every shipment
requires various documents to satisfy government

00:20:47.680 --> 00:20:52.400
regulations amongst them the following are
important export declaration certificate of origin

00:20:53.200 --> 00:20:59.360
which I have said bill of lading or airway bill
bill of lading is called the shipping bills are

00:20:59.360 --> 00:21:04.640
known as bill of lading that means the shipping
the documents which shows the how much is the

00:21:04.640 --> 00:21:11.200
shipping charges the shipping dock the ship of
the air and the shippers the shipping companies

00:21:12.000 --> 00:21:18.160
charges are known as the or the bill for that is
known as a bill of lading in case of air it is

00:21:18.160 --> 00:21:24.240
known as airway bill awb commercial invoice
raised by the seller insurance certificate

00:21:24.240 --> 00:21:29.680
packing list inspection loads list and health and
sanitation certificate fumigation certificate 

00:21:29.680 --> 00:21:35.360
If it is required by the customer seller
buyer faulty documents could lead to the

00:21:35.360 --> 00:21:41.360
delays of payment and confiscation if that is
that document is mandatory for export you have

00:21:41.360 --> 00:21:46.720
to send that if you do not send that that
might good might get confiscated as per the

00:21:46.720 --> 00:21:52.640
rules of that country paperwork is considered a
strong non tariff barrier because you need to be

00:21:52.640 --> 00:21:59.280
absolutely correct because here you are submitting
certain papers only and these documents needs to

00:21:59.280 --> 00:22:04.960
be absolutely correct if the documents are not
correct you will not get paid there is a risk also

00:22:04.960 --> 00:22:10.400
if you cannot submit certain documents as per
the regulatory rules of that country your goods

00:22:10.400 --> 00:22:15.120
might get confiscated also by the customs
okay so that is very important for you  

00:22:16.800 --> 00:22:21.600
Payment common option group one shipment
documents to the importer commercial

00:22:21.600 --> 00:22:26.320
banks are not used in this negotiation
group one no commercial bank is involved

00:22:26.320 --> 00:22:31.440
goods are consigned direct to the buyer so
I am selling the goods directly to the buyer

00:22:31.440 --> 00:22:36.800
in Philippines or in Malaysia commercial banks
are used only for remittance that means a buyer

00:22:37.680 --> 00:22:44.480
will make the payment through his bank to my
bank in India so by bank is only here are used

00:22:44.480 --> 00:22:50.720
for the remittance of money the payment terms
are considered as under advanced cash in advance

00:22:50.720 --> 00:22:57.200
I might ask a cash in advance you need to pay
me some advance open account so the importer

00:22:57.200 --> 00:23:04.160
receives the goods without making any payment
and dues are settled periodically suitable for

00:23:04.160 --> 00:23:09.440
intercompany transaction or with longstanding
Relationship if my buyer and seller is having a

00:23:09.440 --> 00:23:14.160
longstanding relationship you can have an open
account every time you do not have to make

00:23:14.160 --> 00:23:19.520
advance money there is open account so this is
known as typically the customers where there

00:23:19.520 --> 00:23:26.160
is very frequent transactions escrow transactions
involve the independent third party who regulates

00:23:26.160 --> 00:23:30.800
the payment process there is a fee for this
transaction this is known as escrow transaction

00:23:32.640 --> 00:23:39.280
group two the documents through bank so here
I will not send the documents directly to the

00:23:39.280 --> 00:23:44.880
buyer in the previous case all the required
documents I have send it directly to the

00:23:44.880 --> 00:23:50.160
buyer in this case I will route it through the
bank through the commercial bank which acts as

00:23:50.160 --> 00:23:54.720
intermediaries so I will submit
the set of documents to

00:23:54.720 --> 00:24:01.600
My bank my bank will send the documents
to the customers bank or the buyers bank

00:24:01.600 --> 00:24:07.600
buyers bank will get the documents and then will
make the payment so some commonly used method

00:24:08.480 --> 00:24:15.360
bill of collection or site so that is there bill
of collection on acceptance of the issuance bill

00:24:15.360 --> 00:24:21.280
of acceptance deferred payment letter of credit
bank payment guarantee standby letter of credit

00:24:21.280 --> 00:24:25.920
these are the commonly various methods
through bank when I am opting through bank

00:24:27.120 --> 00:24:33.520
that means customers the buyers bank I have an
arrangement with a buyers bank so let me explain

00:24:33.520 --> 00:24:38.480
each one may be a little confusing at this point
but I will clear you once you go through the next

00:24:38.480 --> 00:24:46.880
few sections buyers sale agreement there is a
sale agreement between buyer and importer and 

00:24:46.880 --> 00:24:53.280
Seller and exporter so documents delivered to
buyer after the debiting his account and after

00:24:53.280 --> 00:24:57.840
some period as agreed in the contract okay
and the shipment documents I will come to

00:24:57.840 --> 00:25:06.320
this little later on the next one next slide the
process can be broadly classified non lc bills

00:25:06.320 --> 00:25:09.680
and then letter of credit bills so
there are two different types of

00:25:10.320 --> 00:25:16.720
bills one is non letter of credit that the last
one that is documents through the bank another

00:25:16.720 --> 00:25:20.720
is letter of credit so what is letter of credit
we have to understand what is letter of credit

00:25:21.440 --> 00:25:28.080
letter of credit is governed by international
chamber of commerce uniform customs practice

00:25:28.080 --> 00:25:34.240
for documentary credit so you will remember
this is known as ucpdc so the letter of credit

00:25:35.360 --> 00:25:41.200
is governed by the international 
Chamber of commerce under uniform customs

00:25:41.200 --> 00:25:47.280
practice for documentary credits currently rules
under publication number six hundred referred as

00:25:47.280 --> 00:25:53.280
ucp 600 six hundred applies meaning of
bills set of commercial and financial

00:25:53.280 --> 00:25:58.000
document generally used for claiming the
payment from a buyer so letter of credit

00:25:59.120 --> 00:26:06.400
is an arrangement which ensures your payment
and guarantees your payment by the banker so I

00:26:06.400 --> 00:26:11.840
will explain to you in my next session details
about the various types of letter of credit

00:26:11.840 --> 00:26:18.400
and how you can use this and what type of letter
of credit you typically should use in while you

00:26:18.400 --> 00:26:23.440
sell or while you export your products what type
of letter of credit all these are very important

00:26:23.440 --> 00:26:27.760
for you to understand to protect your payment
I have given you an example in the domestic

00:26:27.760 --> 00:26:33.760
Business where abc has a private limited has
sold to xyz private limited he did not get paid

00:26:33.760 --> 00:26:38.560
an hypothetical examples say last five or ten
percent is a loss cash loss for the company that

00:26:38.560 --> 00:26:46.160
made the loss in the business here in the others
in international business the risk is much higher

00:26:46.160 --> 00:26:51.440
at least hundred times more the risk is higher
because it is very far and then the you cannot get

00:26:51.440 --> 00:26:57.040
the money you have to travel ten times if you do
not get money you have to go to the international

00:26:57.040 --> 00:27:02.960
court of law and it is a huge legal fees and
other things it does not make any sense for you

00:27:02.960 --> 00:27:09.280
so you need to protect your payment so as I said
most important for for a domestic sales manager

00:27:09.280 --> 00:27:15.200
or an international sales manager is not the sales
it is a completion of the sale and remember

00:27:15.200 --> 00:27:20.320
Completion of the sale will only happen once
you collect the money and bring to your own

00:27:20.320 --> 00:27:25.440
company then the sale circuit is complete
otherwise this circuit is incomplete sale is

00:27:25.440 --> 00:27:31.360
not complete there is no meaning of collecting
an order without collecting a payment I might

00:27:31.360 --> 00:27:36.960
have collected a huge order I have delivered to
my customer I got I could not collect the full

00:27:36.960 --> 00:27:43.600
hundred percent payment so it is not a correct
sale similarly this is very important in domestic

00:27:43.600 --> 00:27:49.200
equally important in international market how you
protect your payment and is much more challenging

00:27:49.200 --> 00:27:53.920
in international market how you protect so
what are the ways you do not know the customer

00:27:54.560 --> 00:27:59.840
you do not have any relationship with a foreign
client and you are trying to sell it in a highly

00:27:59.840 --> 00:28:03.680
competitive situation and 
You might agree for some terms

00:28:04.400 --> 00:28:10.000
due to the looking at the attractiveness of the
order and profitability you might accept some

00:28:10.000 --> 00:28:17.760
terms and sell it at at a very low price but you
never guarantee your payment so what has happened

00:28:17.760 --> 00:28:22.480
you might have sent the documents to his bank or
you might have sent the documents directly in the

00:28:22.480 --> 00:28:28.080
group one directly to him and he decides not to
pay you your total loss for you you have supplied

00:28:28.080 --> 00:28:34.400
already and you could not get paid so guys it is
very important for you to protect your payment

00:28:34.400 --> 00:28:39.760
in international business equally in domestic
business domestic risk is less because you can

00:28:39.760 --> 00:28:45.920
file a legal suit you can go you can visit ten
times not much of cost but internationally the

00:28:45.920 --> 00:28:51.600
payment collection is a huge huge risk because 
You cannot travel ten times to Philippines or ten

00:28:51.600 --> 00:28:56.800
times to Singapore to collect the cost or collect
your the payment okay that is all time being from

00:28:56.800 --> 00:29:02.160
me and we will come in the next session on more
on letter of credit thank you very much