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- GUIDE TO IMPORTING AND EXPORTING -
INTRODUCTION
This guide is designed to assist you in understanding some of the important issues, products,
services and documentation associated with international trade. If you have never been involved
in dealing with overseas customers or suppliers, you should find this guide particularly useful.
This guide is not comprehensive. It offers pointers, places for further information and brief
summaries of products and services. Should you require further assistance, Bank of Queensland
Limited (BOQ) is ready to help.
WE HAVE THE SOLUTIONS FOR YOUR NEEDS
BOQ offers a wide range of solutions and products to importers and exporters as well as
providing access to our specialists to discuss your individual requirements and circumstances.
You might need to:
• Finance your shipments of goods
• Establish documentary letters of credit and monitor their progress
• Have a bank collect bills of exchange and documents from your suppliers bank
• Make payments overseas
• Arrange for the processing of your export documentation, letters of credit or collections
and receipts
• Take out protection against exchange rate movements
• Manage your cash flows in foreign currency
A BOQ branch manager or business banking manager is ready to meet with you and discuss
how we can help you grow your importing or exporting business. He or she has access to all our
international trade and foreign exchange specialists and can call on this expertise to assist you
further.
Call us on 1300 55 72 72 today to arrange an appointment or email us via the following
link – https://www.boq.com.au/ContactUs/CU_IntBanking.aspx if you would like any further
information or to discuss your individual requirements.
IMPORTANT INFORMATION
The information contained in this guide is general in nature and has been prepared for business
customers by BOQ, for information purposes only. The products and services described are only
available to approved customers. Terms and conditions, fees and charges may apply. For further
information, contact BOQ.
Any advice contained in the document has been prepared without taking into account your
personal objectives, financial situation or needs. You should consider the appropriateness of
any advice before acting on it. You should obtain and consider any relevant Product Disclosure
Statement, terms and conditions and Financial Services Guide before making any decision
about whether to acquire or continue to hold any products referred to in this guide. All products
referred to in this guide are issued by Bank of Queensland Limited (ABN 32 009 656 740).
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GETTING STARTED
WHAT DO I DO FIRST?
Like any situation, you first need to consider the marketplace for the products you are looking
to import or export. Consider the following:
• Is your product unique or new to the potential market? Will it have appeal?
• Analyse the costs? What is the cost of the product? Where are the competing products
priced at? Is there a sufficient margin for you, the wholesaler and the retailer?
• Are there any legal, tax or regulatory issues or restrictions with the product or where it
comes from or where it is going to?
• Is the market growing for this product? Do you have to create a new market?
• Is there a reliable supply of the product? Is the quality consistent?
GO TO SCHOOL
Apart from some of the obvious issues discussed above, there are some additional ones that
are specific to importing and exporting.
• Learn about import duties, customs procedures, regulation and compliance, particularly
quarantine.
• Gain an understanding of the documentation involved.
• Learn about the time goods are in transit and relevant costs.
• Learn about the country you are looking to do business with, local customs, and business
practices.
Some of the support groups listed below are very useful sources of information in relation to
these issues.
USE SUPPORT NETWORKS AND GOVERNMENT AGENCIES
Most overseas countries have embassies, high commissions or other representation in Australia
and provide links to trade organisations that promote international trade between Australia and
their respective countries. These organisations can be an excellent source of information and advice.
You would also be well served by speaking to other business people with experience in importing
or exporting, particularly those dealing with the same countries you are considering dealing
with. There are also a number trade and industry associations that provide useful forums for
discussion and ideas. These include:
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- GUIDE TO IMPORTING AND EXPORTING -
The Australian Trade Commission (Austrade)
www.austrade.gov.au
The Australian Institute of Export
www.aiex.com.au
International Chamber of Commerce
www.iccwbo.org
World Chambers Network
www.worldchambers.com
Sea Freight Councils
www.seafreightcouncils.com.au
Australian Industry Group
www.aigroup.asn.au
Australian Federation of International Forwarders
www.afif.asn.au
Customs Brokers & Forwarders Council of Australia
www.cbfca.com.au
RISK ISSUES
International trade involves a number of risks you would not need to consider if doing business
solely in Australia. These include the consequences of economic or political instability, less
control over quality, more complicated transportation processes and exchange rate fluctuations.
The reality is that these risks are effectively managed every day by thousands of businesses.
In order to successfully manage the risks, you need to have a strategy that is built around taking
sensible precautions. Most risks can be effectively managed by knowing your customers and
suppliers, insurance and by selecting the most appropriate payment method.
TYPES OF RISKS
Transfer or Payment Risks
Many countries have government regulations that can prevent or restrict payments or receipts
in foreign currencies (or their own currency).
Sometimes these regulations can be changed without warning, meaning that transactions already
agreed to may not be able to be completed, resulting in financial loss to either or both parties.
Mitigants
Always try to deal with suppliers or customers in countries with stable political environments or
where the risk of unforseen government regulation that restricts trade is unlikely.
Exporters or the bank may also be able to insure some of these risks via entities such as Atradius
Credit Insurance NV (www.atradius.com/au/).
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Country Risk
Country risk is the ultimate risk of dealing with a foreign country. If there is a significant event
such as war, terrorism, failure of government, government bankruptcy or economic embargoes,
payments or goods may not be able to leave a country. Sometimes these circumstances can
change without warning, meaning that transactions already agreed to may not be able to be
completed, resulting in financial loss to either party.
Business laws in certain countries also require close scrutiny. This should include the likelihood
that they may change and their compatibility with laws in Australia.
Mitigants
Exporters or the bank may be able insure some of these risks via entities such as Atradius Credit
Insurance NV (www.atradius.com/au/).
Importers and exporters can also consult the various trade and industry associations mentioned
on page (3) for assistance in evaluating these risks.
Transport Risk
Goods should always be insured during transit. Who pays for insurance and how the goods are
insured is a matter of negotiation between the two parties involved. Make sure this is very clear.
It is essential to understand what the insurance covers and if there are gaps. For example, in an
import transaction, and if the supplier has paid for the insurance, you may not be covered after
the goods arrive at an Australian port. You should also ensure you are satisfied in relation to the
issue of where claims are payable.
Mitigants
Various commercial insurance companies and insurance brokers can assist with insurance
requirements.
Exchange Rate Risks
Movements in exchange rates can significantly affect the profit margin you expect to retain
on your international trade transaction. Once you have ordered goods from overseas or have
received an order from a buyer overseas that requires a payment in foreign currency, you have
an exchange rate risk.
Mitigants
If you like to have more certainty around the exchange rates you will transact at, you may elect
to enter into a forward exchange contract. (www.boq.com.au/business_international_hedging.htm).
This contract is where you agree to purchase (or sell) a fixed amount of foreign currency at a
fixed exchange rate on an agreed future date, a date which aligns with a scheduled payment
you need to make to a supplier or expect to receive from a customer. By entering into a forward
exchange contract, you will know how many Australian dollars you will need to pay for a fixed
amount of foreign currency on that future date or conversely how many Australian dollars you
will receive in exchange for a fixed amount of foreign currency.
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Non Delivery / Performance
When dealing with any suppliers there is always a risk of non-performance and this is heightened
when dealing with people overseas. Non performance may mean delivering inferior product, not
delivering at all or not at the agreed time. Sometimes these events may be the result of things
outside the control of the supplier, like industrial action, shipping availability or in an extreme
case, acts of war or other violence.
The non-performance, whatever the cause, may have an adverse effect on your business; you
may lose customers or miss sales as a result.
For the exporter, the major risk is the risk of not being paid in terms of the sales contract. Efforts
to recover unpaid monies can be costly and time consuming.
Mitigants
There are no guaranteed ways of eliminating all these risks, but they can be managed using
appropriate document control and payment methods.
Note: This is not a comprehensive list of all of the risks that may apply and other risks may be
relevant depending on your individual circumstances.
MAKING AND RECEIVING INTERNATIONAL PAYMENTS
Making and receiving payments is integral in overseas trade. This section covers the main
payment and control methods available.
There are three main ways of making and receiving international payments and controlling the
document flow and access to goods.
• Clean payments
• Documentary collections
• Letters of credit
Each is explained in more detailed below, and the key points of each are set out in a table format.
CLEAN PAYMENTS
What are clean payments?
Clean payments are characterised by trust. Either the exporter sends the goods and trusts the
importer to pay once the goods have been received, or the importer trusts the exporter to send
the goods after payment is effected.
In the case of clean payment transactions, all shipping documents, including title documents,
are handled directly by the trading parties. The role of banks is limited to clearing funds as
required.
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The diagram below highlights the flow of goods and the flow of payment.
EXPORTER
IMPORTER
GOODS
PAYMENT
Types of clean payments
There are two types of clean payments.
Open Account
• The importer is trusted to pay the exporter after receipt of the goods.
• The exporter ships the goods and the documents directly to the importer and waits for the
Importer to send payment.
Payment in Advance
• An arrangement whereby the exporter is trusted to ship the goods after receiving payment
from the Importer.
• The importer sends payment directly to the exporter and waits for the exporter to send the
goods and documents.
The following table and diagram highlight the key points in relation to these two payment methods.
OPEN ACCOUNT
PAYMENT IN ADVANCE
IMPORTER
• Assumes fewer risks
• Delays use of cash reserves
• Assumes greater risks, including
the risk of not receiving the goods
• More financing requirements
EXPORTER
• Assumes greater risk of not
being paid
• May help clinch sale by offering
this option
• Assumes fewer risks
• Assists in cash flow by receiving
payment in advance
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The following diagram compares the risks of each type of clean payment.
Highest risk to exporter
Least risk to importer
OPEN ACCOUNT
Least risk to exporter
Highest risk to importer
PAYMENT
INAVANCE
DOCUMENTARY COLLECTIONS
WHAT ARE DOCUMENTARY COLLECTIONS?
A documentary collection is a method of payment used in international trade whereby the
exporter entrusts the handling of commercial and often financial documents to banks and gives
the banks instructions concerning the release of these documents to the importer.
Documentary collections are subject to the Uniform Rules for Collections published by the
International Chamber of Commerce. The last revision of these rules came into effect on 1st
January 1996 and is referred to as the URC 522.
TYPES OF DOCUMENTARY COLLECTIONS
Documentary collections may be processed in two ways:
Documents against payment
• Documents are released to the importer only against payment.
• This is known as a sight collection or cash against documents (CAD).
Documents against acceptance
• Documents are released to the importer only against acceptance of a draft (bill of exchange)
• This is known as a term collection.
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