BISNIS INTERNASIONAL INTERNATIONAL BUSINESS TRADE NEGOTIATION

1. INTERNATIONAL TRADE NEGOTIATION
By :
PUTRI ROUDINA MAS’UD 041411331084
ACCOUNTING / AEC 2015
ECONOMIC AND BUSINESS FACULTY
UNIVERSITAS AIRLANGGA
SURABAYA
2015

2. Background
The current industrialization and globalization of the economy increase more
widespread. This encourages a wide range of industry to perform exporting to various
countries. Trade goods happen between different countries due to the need for goods or
services in one country to acquire goods with cheaper price and better quality on appeal by
another country.
The interesting thing about exports is the goods sold in some countries,
accompanied by the risk because the company no longer depends on the sales at its home
country only. Exports also have a tendency to reduce the impact of declining domestic
sales caused by commodity export market life cycle which is running slowly. Export
activities have an economic value that is important both for the development of the
industry itself as well as for the Government.
The benefits that from the existence of international trade for a country are, it will
encourage those countries to spur the export transactions out of the home country, to
enhance economic growth and national income of the home country. In addition the
country will push to spur export transactions out of its country so that they can sell their
goods abroad. Export transactions is essential to increase the country's foreign exchange
reserves and reducing the unemployment rate because of rising productivity and
employment.
For the companies which want to expand their company abroad by using export
strategies, they need to determine what kind of export marketing plan they will use, such as
payment procedures and method and the shipping procedures.
There are several type of payment in exporting, (1) Cash-in-Advance, (2) Letters
of Credit, (3) Documentary Collections, (4) Open Account, and (5) Consignment. In this
section, I will only explain about Letters of Credit.
Letters of Credit
Letters of credit (LCs)
are one of the most secure
instruments available to
international traders. An LC is a
commitment by a bank on
behalf of the buyer that payment
will be made to the exporter,
provided that the terms and
conditions stated in the LC have
been met, as verified through
the presentation of all required
documents. The buyer
establishes credit and pays his or her bank to render this service. An LC is useful when
reliable credit information about a foreign buyer is difficult to obtain, but the exporter is
satisfied with the creditworthiness of the buyer’s foreign bank. An LC also protects the
buyer since no payment obligation arises until the goods have been shipped as promised.

3. CV. TITON GARMENT & CRAFT, YOGYAKARTA
CV. Titon was established on 4 August 1997 with the visions are able to develop
into the largest export companies, become the cheapest, the best, the strongest and become
a trend among exporters of furniture.
After run for 11 years, CV. Titon has a 6000 m2 warehouse which is divided into 2
warehouses of production and 3 warehouses of showroom. Products that are produced by
CV Titon include clothes and furniture. While the materials used consist of water hyacinth,
bamboo, wood, leather, stone, leather, rattan, and others. CV. Titon has had total assets of
Rp. 20.000.000.000 fare with huge debts in bank amounting to Rp. 2.500.000.000.
CV. Titon first starts their exports in 1998 to the French State. Then they extend
their export routes into various country of the world such as Malaysia, Singapore, Japan,
United Kingdom, France, Ireland, Belgium, Sweden, the Netherlands, Spain, Costa Rica,
Miami, Lebanon, Saudi Arabia, Australia, Egypt, and many more. CV. Titon not only
produces the goods by themselves but they take craft products from the outside supplier or
commonly referred to as outsourcing. The products taken comes from suppliers in different
regions such as Yogyakarta, Solo, Klaten, starch, Bali, and Lombok.
Marketing strategy used by CV. Titon was showcased their products through
exhibitions, became a supplier to the distributor who are following the exhibition inside
and outside the country, through the internet and catalogs are published.
CV. Titon is applying the international payment system in the form of Letters of
Credit and the Advance Payment. But in practice, CV. Titon prefers to use Advance
Payment, due to more effective and efficient.
An advance payment is a sum of money that is provided in advance of the date that
it is contractually due, or in advance of delivery of the products or services that the
payment is intended to pay for. Such payments may be structured into a contract or offered
to address a specific hardship situation. In some cases, the full amount due will be paid in
advance, while in others, part of the money will be offered in advance and the other part
will be paid later.
Procedures ofPayment
The procedure of international payments is, CV. Titon form the deals which they
offered via email and showroom to the buyer. After buyer gives orders then the company
makes the Performa invoice and passed to the processing order that would start the process
of production or designate a supplier has experts in their respective fields to complete the
order.
If the goods are ready to be sent, the company will contact the buyer came back to
let them know the schedule delivery and pay off the rest of the payment. Then the CV
sends the goods as well as a copy of CV. Titon documents after the buyer pay off the
payment of export documents, such as the original form of COO (Certificate Of Origin),
B/L (Bill Of Lading), PEB (notification of the export of Goods), and etc.

4. 1. Procedure of Letter of Credit used by CV. Titon
a. The importers that interested in their product will send the inquiry. They also
confirm to CV. Titon that they want to use Letter of Credit in conducting trade
transactions.
b. CV. Titon sends the offer sheet, as reply.
c. Importers learned the offer sheet and reply with order sheet.
d. Exporters send the sales contract (based on offer sheet, order sheet, and other
data) to be signed as the sales agreement with two original copy.
e. Following an agreement between the buyer and CV. Titon, Importers demand
the Bank Devisa to open L/C as the payment of their liabilities towards CV.
Titon
f. Foreign Exchange Bank then contacted his correspondence bank in Indonesia.
Furthermore the bank contact the exporter to immediately prepare the goods
ordered by the buyer as well as the terms and conditions of the L/C. Usually
the buyers choose their shipping agency themselves, so CV. Titon just follow
the desires of the buyer and then adjust the schedule departure of the goods.
g. Sometime after the goods were sent, exporters require payment to the bank by
showing evidence that the item has been shipped as b/l, invoices, COO and
others in accordance with the request of L/C.
h. To take on export goods at the port, the buyer should pay off payments L/C at
the Bank Devisa and then get the letters of proof of shipment of the original.
2. Procedure Of Advance Payment used by CV. Titon
a. The exporter sends offer sheet to the prospective buyers.
b. If the buyers are interested, they will send back a pro forma amounts motivated
invoice.
c. The invoice submitted to the pro forma amounts motivated the Purchase Order
to immediately prepare the order goods.
d. After the entire stuff ready, they create an invoice and then ask for payment to
the buyer down.
e. The goods shipped along with a copy of PL, invoice, B/L, COO, and FEB.
After the rest of the payment is due by the buyer, all original documents will be
submitted to buyer

5. REFERENCES
Ball, Donald A & Company. 2008. International Business: The Challenge of Global
Competition. New York. McGraw-Hill Companies.
Futihasari, Ashrina. 2009. Sistem Pembayaran Internasional. http://eprints.uns.ac.id/6825/ .
Accessed May 2015.
Methods of Payment in International Trade.
http://www.export.gov/tradefinanceguide/eg_main_043221.asp . Accessed May 2015.
What is an Advance Payment. http://www.wisegeek.com/what-is-an-advance-payment.htm
Accessed May 2015.