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Recyclers here on the West Coast are fortunate to have direct access to a wide range of buyers in the Far East. When working with exporters it is important to understand what issues are important to them and what information they need. The following document contains information about Working with Plastic Exporters: Credit Decisions with Suppliers and Customers, Bank and Trade References, Credit Reporting Services, Shipping Terms, Using a Freight Forwarder, and Letter of Credit to assist suppliers of plastic packaging scrap with the export market.
The Exporter wants the most accurate information available about your material so they can determine the proper price.
For example:
What type of resin do you have?
Is it mixed or colored?
Are there bottles and containers or just bottles?
Indicate the quality of the product being offered.
Is there any form of contamination?
If so, what is the content of contamination? For example, was there a coating of paper on the plastic before it was ground?
Indicate the quantity of the plastic available and the origin.
How often can the supplier generate a load? (Meaning 1x40' high cube ocean export container for baled material and a standard container for industrial scrap that is boxed or on pallets). A 40' HC container can hold 40,000 lbs., which is a minimum requirement for an exporter.
Give the exporter the origin of the resin being offered (the City and State). This will enable the exporter to calculate the freight rate, which often is included in the price offered to the supplier.
Packaging is important. Letting the exporter know the form (bales, rolls, boxes....) of the product will help them to calculate the weight and size of the shipment. Exporters often request small samples of the plastic that is being offered to get a better idea of what kind of plastic they are dealing with. They may also require photographs of the plastic that is being purchased.
It is very common for exporters to make inspection requests at the time of loading. The exporter will stand by at the time of loading. Unfortunately, exporters often find that the quality and quantity of the plastic being loaded is inconsistent with the suppliers' sample.
Be sure to obtain a weight ticket; this is the only means of justifying your invoice to the exporter. This is done before (scaling empty) and after (scaling loaded). Again, minimum is 40,000 lbs. There will be price deductions for underweight containers. Pallets, skids, cores from rolls, boxes and strapping must be deducted to obtain the net weight of the resin.
Working with Plastic Exporters: Credit Decisions with Suppliers and Customers
Whether you plan to sell domestically or to export, as a merchant, you will have to decide between taking the risk of selling on credit (or letter of credit) and losing sales by insisting on payment in cash. It is common for export buyers to pay 1/3 deposit and 2/3 upon inspection or presentation of a certified scale ticket. Letters of Credit are also common. If the exporter has established regular credit, the term is normally net-30 days. In order to make credit decisions, you must know how to obtain and use credit information.
Bank and Trade References
The least expensive way to check on the credit worthiness of a domestic or foreign firm is to ask for bank and trade references.
To check a prospective customer's bank reference, give your bank (in writing) the company's name and address, it's bank's name and address, and it's account number. You should receive a report that tells you how many years the company's account has been open, the average balance, the amount of it's credit line, and in general terms how satisfactory the account has been to the bank.
To check a prospective customer's trade references, send each reference a letter or fax that asks for the following:
Number of years you have dealt with this vendor;
Size of order supplier can fill;
Adherence to shipping schedules;
Accuracy in filling orders;
Any problems experienced;
Other comments;
Your name, title, and the date.
Credit Reporting Services
The credit reporting business in the United States is growing and changing rapidly. Unfortunately, in most foreign countries it is less well developed. Still, you can almost always get some information.
The primary credit-reporting agency in the United States is the Dunn & Bradstreet Corporation (D&B)—800/234-3867. TRW has also gained importance in this field—800/682-7654. Both provide domestic reports only on a subscription basis that makes them too expensive for most of us. D&B also supplies information on foreign firms, but the cost is high. A growing number of plastic industry related businesses are using the services of Tarnell for credit history and reports— XXX/XXX-XXXX. This service is exclusive to the plastic trade.
Finally, a visit to the potential buyer, supplier or customer can be very useful in making credit decisions. Sometimes you will be given access to the accounting statements and/or can assess for yourself the quality of the company's offices, factory, equipment, and personnel. Whenever it seems that a company is trying to hide something, it probably is, and you should be wary of dealing with it.
Shipping Terms
The American standard foreign trade definitions and the international commercial terms, better known as incoterms, specify which party makes arrangements for shipping the goods, which party has title to them at each point in their journey, and which party is responsible for loss or damage at any point. The terms most often used:
EXW: Ex-Workers—buyer is responsible for pick-up of the cargo at the specific factory.
FAS: Free Alongside Ship—seller must place the goods by the side of a ship, ready to be loaded, and pay all the costs to that point.
FOB: Freight on Board—seller must take care of any paperwork or expenses necessary to remove goods from his country and place them on an international carrier.
CFR: Cost and Freight—buyer is responsible for paying the freight bill
CIF: Cost, Insurance and Freight— buyer must pay for the freight bill and insurance
Using a Freight Forwarder
A Forwarder can help you by:
Supplying costs needed to prepare C.I.F. quotations;
Booking space on vessels;
Taking charge of cargo at the port;
Arranging for packing if this is needed;
Preparing export documents;
Making sure the cargo is loaded on the vessel;
Collecting or assembling the documents and sending them to you or your bank, and;
Tracking shipments that do not arrive as scheduled.
These are very valuable services and can save an exporter a lot of time. Foreign freight forwarders are listed in Telephone Directories, Port Handbooks, and some Trade Magazines. You will want to pick a forwarder who has offices near the ports or airports you use, experience with the kinds of cargo you will be shipping and with destinations to which you will be shipping.
Letter of Credit
You can think of a Letter of Credit (LC) as a letter that is written by the buyer's bank to the seller, and communicated to the seller through banking channels. The buyer's bank is telling the seller that when the seller presents specified documents containing stipulated information, he or she will be paid for a shipment. It guarantees payment if executed correctly.
The seller wants to be sure of being paid and therefore asks the buyer for a LC. If the buyer agrees, the buyer must apply to his or her bank (the issuing bank) to open a LC in favor of the seller. This means that the bank is pledging to pay the seller if he or she does exactly what the LC specifies. A LC normally specifies that the seller provides documentary evidence, that he or she has shipped the merchandise ordered, by the time and in the matter stated in the LC, including fulfilling any other specified obligations such as purchasing insurance. There are generally eight steps to a letter of credit:
The buyer and seller agree on terms including price, quality, transportation, freight and insurance. Also, as a seller you should request that the buyer use your bank as the advising bank. Be sure to inform your buyer of all your needs before he or she applies for a LC.
The buyer applies to the issuing bank for the LC.
The issuing bank sends the LC to the advising bank in the seller's country.
At this point the advising bank's purpose is to authenticate that the LC is genuine. It then informs the seller of the LC.
The seller is advised of the LC and receives a copy, he or she should study it carefully to make sure that each of its terms and conditions can be met. Otherwise, there will be a problem that may cause the payment to be delayed until the discrepancy is waived or otherwise resolved. If anything will cause the seller a problem, the applicant must be contacted immediately and an amendment requested.
The seller ships the goods, assembles the required documentation such as a bill of lading and a weigh ticket. The seller makes sure that these documents conform exactly to all the terms and conditions set down in the letter of credit.
The seller presents the documents to the advising bank which checks the documents and, if they are in order, pays the seller immediately. The documents are then sent on to the issuing bank.
The issuing bank checks them again and, if they are in order, the issuing bank will pay the advising bank and pass the documents to the applicant (buyer) who uses the documents to receive the goods from the carrier.
The seller should ask for a faxed copy of the application, so he or she can check that all the terms and conditions can be met within the specified time frame. Be sure to check the expiration date of credit, the latest shipping date and the maximum time allowed between shipment and presentation of documents. As a seller you do not have to accept all the terms that are proposed to you. You can come back with a counter offer and negotiate. The other party may accept your terms.
Nearly all LC's are irrevocable, which means that they can not be changed or canceled without the consent of the beneficiary. In other words, once a buyer opens a LC and the seller is advised of it, they can't back out unless the seller agrees to let them.
There are numerous variations of Letters of Credit. Some operate like revolving lines of bank credit, and others permit partial payment for parts of an order, others allow a trading company to use its customer's credit to guarantee payment to its supplier. Your bank can advise you on the appropriate type for each situation.
A Letter of Credit is a complex form of international payment. There are at least four documents involved as follows:
1) Application for Letter of Credit - The application for a Letter of Credit must be completed by the buyer and given to the opening bank. It is fairly complicated, and should definitely be completed only with help from your banker.
2) Letter of Credit - The actual letter of credit (LC) is transmitted to the opening bank's branch or correspondent in the seller's country. It tells the seller exactly which functions to perform, and which documents to provide, in order to get paid.
3) Advice of Letter of Credit - The advice of a Letter of Credit is a simple form that is sent to the seller by a bank in his country. It says that a credit has been opened in his favor, and it is followed by the actual Letter of Credit. It gives the seller notice that they can begin preparing the goods for shipment.
4) Drafts drawn on a bank payment - Finally, the seller must present drafts for collection to the paying or negotiating bank. For example, if you receive a Letter of Credit that is payable upon presentation of documentary evidence that you have shipped as instructed, you can go directly from the port to the bank, with a draft for collection and the required documents. More likely, you will ask your freight forwarder to do this for you.
Still other documents will be involved in more complicated Letter of Credit transactions, for example, when partial shipments are allowed or a credit is transferred or assigned from one beneficiary to another. There are also special documents for the seller to request, and the buyer to grant amendments to the Letter of Credit.
For more information on Letters of Credit, contact your bank. To obtain Shipper's Export Declarations (SEDs) and additional information about export requirements, contact the US Customs Service at your local port or on-line at www.customs.treas.gov.
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