Managing global trade operationsIntroduction The two main countries involved in the transaction are Australia and Japan. Japan has been importing copper and Aluminium from Australia. Exportation and importation of commodities between different countries involves various steps to ensure that the transaction is secure and successful. Exporting merely involves selling; in order to ensure that trade is well facilitated, there are set rules that must be met. Many of these rules have been put in place by the World Trade Organization. The procedure used in exportation includes: The product selection: entering a trade requires an understanding of the product to be traded.
In this case the main product is copper and aluminium exported from Australia to Japan. The exportation involves registration of the exporting firm. Exportation of copper and aluminium. The first main step is to get make an application for an exportation license, this mainly occurs where the destination country imposes an importation license. As indicated by Greg (2005), before making exportation, the seller must be able to get an analysis of the economic position of the destined country.
In this case Australia is the exporter of copper and Aluminium to Japan, therefore, Australia must understand well the stability of Japan economically. The size of the market is also a crucial aspect to put into consideration, the growth of the market, the price of the product as well as the location of the target market. After the selection of the product to export, the seller must determine or quote a particular price, this involves various considerations among them; the price to be charged so as the seller (Firm from Australia) is seen to be competitive abroad, while determine the cost of the product, the firm has to make an inclusion of, packing fee, credit, insurance, commissions for the agents, fee for the documentation, export duties and transportation charges.
Comparison cost for similar products have to be made to ensure that there exists a very good mark up and the price quoted will yield profit. When the price that is quoted is accepted by the country or the destination firm of copper and aluminium to be exported, then the firm supplying these commodities a contract is then signed, making this deal legal or binding. This contract includes: The exporters name, the importers name, the commodity transacted, cost per unit, the quantity exported.
The contract also has to state the terms of delivery. This is the point where incoterms is involved; dealing with the aspect of delivering copper to Japan. It involves the how this copper will be carried, responsibility clearance of the export, it as well include who has to pay for the copper and Aluminium delivered, the risk bearer during the entire process of transportation.
Also when the copper and Aluminum price are quoted payment terms must be put into consideration, either by a direct fund transfer with exclusion of a credit facility. In some instances the payment may be done before the shipment of the merchandise, this is what is referred to as cash against documents (William 1999). The other payment term that can be used in this particular transaction is via a letter of credit, this is a condition where the bank of the customer (Japan) will provide a letter of credit promising to make payment to Australia exporting firm provided that all the terms in the contact are met.
This payment option involves immediate payment or at later fixed date. Price quotation for these commodities must include, the shipment mode, for this case the mode of transport will be through the sea. The currency of transaction, period valid for this contact as well as the clause for arbitration have to be included in the contract that have to be signed between the seller (Australia) and buyer (Japan).