Buying from an overseas supplier

SITUATION

Nicole Vernay also sells her clothes in the United States. Karen Shersteen is a fashion buyer for Skopje's, a big department store in Los Angeles. She wants to order the new clothes from Nicole's spring collection, but because Fashionpark has the exclusive rights to manufacture Nicole Vernay designs, Karen must order from Korea. We look at how the supplier organises the goods to be shipped from the factory to California and how they are paid for by the customer.

CHARACTERS

Nicole Vernay  
Park Kyu Hun  
Karen Shersteen is the fashion buyer for Skopje's Department Store, Los Angeles. She is American.

LANGUAGE

Vocabulary International trade; finance and documents.
Skills Offering and receiving congratulations and commiserations.
Documents Covering letters; documentary credits; letters of agreement; bill of lading; bill of exchange.

Placing an order

18.1 Listen and read

Karen Shersteen is in Paris, where she has just been watching the showing of Nicole Vernay's spring collection. What is Karen worried about? Why is Nicole not worried?

KAREN Nicole, the dresses are wonderful, and my customers on the West Coast are going to love them.
NICOLE Thank you. There were one or two tricky moments, but I think it all worked out in the end.
KAREN One thing in the show did bother me, though.
NICOLE Really? What was that?
KAREN All those so-called fashion correspondents with their sketch books see the meaning, sketching everything that came through the door. I don't see them here at the reception.
NICOLE Oh, they've gone off to file their stories for tomorrow's newspapers. see the meaning
KAREN Some of them, maybe, but a lot of them are busy faxing those sketches back home to the sweatshops. see the meaning By tomorrow they'll be turning out see the meaning Nicole Vernay exclusives see the meaning ready to ship see the meaning - and they’ll have you all stitched up. see the meaning
NICOLE Well, I've signed a deal with a very respectable firm in South Korea. They already have my designs, so I hope that the pirates won't be able to compete. see the meaning
KAREN Great idea! Does that mean I have to order from Korea as well?
NICOLE Yes, I'm sorry, Karen - Skopje's will have to place its orders with Fashionpark just like everyone else. Even I have to get my stock from them - for my own little boutiques here in Paris.
Key

18.2 Speaking practice: congratulations

Listen to this conversation. Then listen again and speak the part of the man.


WOMAN Congratulations on the presentation you gave this morning. I must say, I thought it was really excellent.
MAN Oh! Well, it's very kind of you to say so. I hope it achieves something.
WOMAN I particularly liked the way you handled the questions at the end.
MAN Thank you. Some of them were a bit tricky, but I think it all worked out OK.

18.3 Find the word: documentary credits - 1

Read the text below on documentary credits. Write a word from the box to fill each of the gaps.

charges charges cost credit credit place
documentary forwarders insured irrevocable
letter premium pro-forma shipped

Selling your goods overseas is never as simple as selling them at home. But the exporter has plenty of professional help to call on. The business of transporting the goods is usually entrusted to a firm of freight a , They will arrange for the goods to be b by sea or by air and for all freight c to be paid. They handle all the necessary documentation and arrange for the shipment to be d against all risks.
Banks also offer many services which make life easier and more secure for exporters and importers. Among these are e credits, which facilitate payment. Suppose your overseas customer says that he wishes to f an order with you. You calculate the total g of the goods, add on the insurance h (fixed by the insurance company) and freight i (fixed by the freight forwarder), and send him a j invoice. He instructs his bank to open a k in your favour for the amount of the invoice and to inform your bank, who in turn will advise you of the details. The l of m (L/C for short) is normally n : that is, the customer cannot recall or cancel it.

Key

18.4 Listen and read

Karen Shersteen contacts Park on the telephone. Listen to what they say. Do you think Fashionpark is an efficient business? Why?

KAREN Oh hello - is that Mr Park?
PARK Speaking.
KAREN Hello, Mr Park. My name is Karen Shersteen and I'm interested in your products. I'm the buyer for Skopje's, that's a big store over here in LA.
PARK Yes, of course. I know Skopje's well.
KAREN You've heard of it, good. Now, Mr Park, I was in Paris last week and I saw some dresses by Nicole Vernay and I was just swept off my feet.
PARK They are good, aren't they? I'm very pleased to have the exclusive rights to manufacture Mademoiselle Vernay's spring collection.
KAREN Yes, that's what she told me. That's why I'm calling you now, Mr Park.
PARK I expect that you would like to see our catalogue and price list?
KAREN A catalogue and price list, that's precisely what I want.
PARK In fact, we have already sent them to you by air mail - you should receive them in a day or two.
KAREN Oh, have you? Oh well, in that case I guess all I have to do is sit back and wait.
Key

18.5 Document study

When Karen faxed her order to Fashionpark, she sent the covering letter below. What do Fashionpark have to do? They acknowledged Karen's letter. What does Karen have to do?

1001 Pacific Boulevard
Los Angeles

Overseas Sales Manager
Fashionpark Corporation
PO Box 12236
Seoul

18 December 1991

Dear Sir

Following my recent telephone conversation with Mr Park, I enclose our order no. 5529. Please inform me immediately if any items in it are not available, as I have to plan our spring promotions see the meaning and fashion display within the next three weeks. It would be greatly appreciated if you could airfreight a sample of each garment at once, so that we can model them for our own photographs.

We understand that your terms are payment at 90 days, documents against acceptance see the meaning, and that you require documentary credit see the meaning to be opened with the Korean Trading Bank. Our bankers are First California Commercial, Albuquerque Plaza, Los Angeles. Please also ask your freight forwarders see the meaning to advise us of their expected delivery date.

Youra faithfully

Karen Shersteen
Chief Buyer

PO Box 12236
Seoul

Miss Karen Shersteen
Chief Buyer
Skopje's Department Store
Los Angeles

19 December 1991

Dear Miss Shersteen

Thank you for your message of 18 December and order no. 5529. I am happy to say that we can supply every item that you require. A parcel has been dispatched to you via Delivery Express, and will reach you within three days. I hope very much that you will find everything in it completely to your satisfaction; your comments will be welcomed.

We enclose our pro-forma invoice for the complete shipment, which you will see totals US$117,000, c.i.f. San Francisco. see the meaning Please make arrangements for an irrevocable credit to be opened in our favour with the Korean Trading Bank for this amount. As soon as we are advised by the bank that this has been done, the consignment will be shipped.

We are pleased to have this opportunity of doing business with you, and we hope that there will be many more.

Sincerely

for Fashionpark
Key

Arranging credit

18.6 Document study

These two documents are part of the arrangements between Skopje's and Fashionpark. For each document: who sends it, and to whom? What action will be taken by the company that receives it?

853921 SKOPJE’S CAL

CONS. NO. 2324 01.20.92

1.20.92

FASHIONPARK CORPORATION
FTAO: OVERSEAS SALES

FROM: SHERSTEEN
             SKOPJE’S DEPT STORE

WE INFORM YOU THAT WE HAVE TODAY OPENED AN IRREVOCABLE LETTER OF CREDIT IN YOUR FAVOUR WITH THE FIRST CALIFORNIA COMMERCIAL BANK.
THE CREDIT IS ON THE ACCOUNT OF SKOPJE'S DEPARTMENT STORE AND IS TO THE AMOUNT OF US$117,000 (ONE HUNDRED AND SEVENTEEN THOUSAND UNITED STATES DOLLARS), VALID UNTIL FEBRUARY 28 1992. YOUR DRAFT FOR THE ABOVE AMOUNT WILL BE ACCEPTED IF ACCOMPANIED BY:
1. INVOICE (4 COPIES, SIGNED)
2. CERTIFICATE OF ORIGIN see the meaning AUTHENTICATED see the meaning BY CHAMBER OF COMMERCE see the meaning
3. FULL SET OF CLEAN ON-BOARD SHIPPING COMPANY'S BILLS OF LADING see the meaning MARKED 'FREIGHT PAID' AND 'NOTIFY SKOPJE'S LOS ANGELES' (3 COPIES).
4. INSURANCE CERTIFICATE (2 COPIES) COVERING MARINE AND WAR RISKS TO BUYER'S WAREHOUSE see the meaning, FOR INVOICED VALUE PLUS 10%. see the meaning

REGARDS
KAREN SHERSTEEN
853921 SKOPJE’S CAL
Key

18.7 Document study

The freight forwarder writes to Skopje's to say that the goods have been shipped. Read the letter carefully, and check the details against the bill of lading in 18.8. Are the details correct?

EASTERN STAR SHIPPING AGENCY
PO Box 78, Pusan, South Korea

Chief Buyer
Skopje's Department Store

10 February 1992

Dear Sir/Madam

Shipment from Fashionpark Corp

We write to advise you that we have today packed and shipped a consignment of garments on board MV Pacific Centaur. The ship will sail from Pusan on 12 February and is due in San Francisco on 25 February.

The garments are in ten wooden packing cases, numbered 1 to 10 and marked SKO LA 1/92.

A full set of clean on-board shipping company's Bs/L in triplicate, endorsed see the meaning and marked as per instructions see the meaning, together with certificate of origin, invoice (4 copies) and insurance certificate (2 copies) have been sent to the Korean Trading Bank, who will forward them to First California Commercial Bank in Los Angeles for payment.

We trust you will find everything in order.

Yours faithfully
Key

18.8 Document study

You work as a clerk in the buying department of Skopje's. A customs official rings, asking for particulars of the bill of lading. Read the official's part of the conversation, and write down the clerk's replies using the details from the bill of lading (click to view) and the letter in 18.7. Then listen to the conversation and check what you wrote.

OFFICIAL OK. What's the serial number?
CLERK a
OFFICIAL And is there a reference number for the forwarding agent?
CLERK b
OFFICIAL OK. Consignee's name and address, please.
CLERK c
OFFICIAL And the name of the ship?
CLERK d
OFFICIAL Loading Inchon, is that right?
CLERK e
OFFICIAL And where's she discharging?
CLERK f
OFFICIAL Now, I need the details of marks and numbers on the cases.
CLERK g
OFFICIAL Right, now the number and description of the packages.
CLERK h
OFFICIAL Gross weight?
CLERK i
OFFICIAL Any measurements?
CLERK j
OFFICIAL Now give me the place and date of issue of the bill of lading.
CLERK k
OFFICIAL And the number of bills in the set.
CLERK l
OFFICIAL OK, thank you.
CLERK You're welcome. Have a nice day!
Key

18.9 Find the word: documentary credits - 2

Read the text below on documentary credits. Write a word from the box to fill each of the gaps.

bills certificate chamber expiry freight full
insurance invoice lading origin payment ship

Your customer has opened an irrevocable credit on his account and in your favour. You can now go ahead and a the goods. You must not delay too long; the credit is only valid until its b date. As soon as the goods are on board ship, the bill of c is signed and sent to your freight forwarder. You can now send it to your bank with the other documents which will enable d to be made. The first is the e , showing the total cost 'c.i.f.' - cost of goods, plus f , plus g . This must be accompanied by the insurance h , and often by a certificate of i , to show where the goods, and the raw materials in them, originated. This often has to be authenticated by your local j of commerce. If the goods are going by sea, you must also enclose the k set of clean l of lading.

Key

Collecting the money

18.10 Document study

Fashionpark start the process of collecting their money from Skopje's letter of credit. First, Skopje's must 'accept', or sign, a bill of exchange. The text of this standard covering letter is stored on a word processor and the secretary only needs to key in a few words and figures. Which ones?

PO Box 12236, Seoul

The Chief Buyer
Skopje’s Department Store
1001 Pacific Boulevard
Los Angeles

13 February 1992

Your ref.: Order no. 5529
dated 18 December 1991

Dear Miss Shersteen

The goods which you ordered have been dispatched to you via our freight forwarders, the Eastern Star Shipping Agency. They will notify you that shipping documents have been sent to your bank in accordance with instructions.

We now enclose our bill of exchange see the meaning, drawn in US dollars at 90 days, which we ask you to accept and return to us as soon as possible so that the documents may be released to you.

We are confident that the goods will reach you in perfect condition, and we trust that you have found our service satisfactory.

Sincerely
Nam-Hoon Chun
for Fashionpark Corp

18.11 Document study: a bill of exchange

Bills of exchange originated nearly 300 years ago, and their wording is still rather old-fashioned. Read the example below. Are the details correct?

18.12 Listen and read

Park, Nicole and Karen meet, months later, in Paris. Listen to what they say. Why does Karen complain about delivery times? What solution does Park have?

KAREN see the meaningOne thing strikes me about the rag trade nowadays: see the meaning delivery times are too long, and that's one area where we can still make significant savings. Next time I order from you, Mr Park, I want at least thirty per cent of the shipment sent by air freight.
PARK Fine. If you want, I'll charter a jumbo and send the whole lot by air. see the meaning
KAREN Two other stores in LA were selling Nicole Vernay dresses before I was - and that can't happen again.
NICOLE I am surprised that Fashionpark doesn't start up a North American subsidiary to handle its distribution.
PARK Well, this is off the record see the meaning, you understand, but I think we may do that quite soon. Also in Europe.
KAREN Well, now, Mr Park, if you're looking for someone who knows the fashion business on the West Coast inside out... see the meaning
PARK Oh, I shall know where to come!
NICOLE It will certainly be a great help to have your warehouse somewhere close to Paris. The ordering will be so much more flexible - we can respond more quickly to the market.
KAREN And we can just write a dollar check instead of all those letters of credit and banker's drafts.
Key

18.13 Listen and read

Park, Nicole and Karen continue their discussion. Listen to what they say. Are Park and Nicole enthusiastic about Karen's proposed 'vertical integration'?

KAREN What do you do with those bills of exchange, Park? Wait for ninety days and then change the dollars into Korean won?
PARK It depends on the state of the currency market. Once the bill has been accepted, it's negotiable - I can sell it for cash anywhere I like, at a discount of course. see the meaning Right now I'd probably get it discounted in Tokyo.
NICOLE Aren't you going to have problems, setting up inside the European Community?
KAREN Yeah, and in the United States - we're very protectionist, you know.
PARK Well, there are ways to overcome problems like that.
NICOLE Something like a joint venture, perhaps?
KAREN Hey, how about that? The three of us. An international marketing consortium! see the meaning Vertical integration see the meaning - designer, manufacturer, distributor, all under one umbrella.
NICOLE No thank you!
PARK Three companies under one umbrella - all get wet.
Key

18.14 Reading for key words

Find the words or phrases in 18.12 and in 18.13 that tell you the following:

1 I'll hire a Boeing 747 to make a special trip.
2 To look after the sale of your corporation's products.
3 Please don't tell anyone I told you this.
4 Someone who knows everything about this business.
5 When there's a sudden demand, we shall be able to meet it.
6 The relative values of different currencies.
7 I would probably exchange the bill for cash.
8 We don't encourage foreign goods or businesses to enter our country.
9 I think that's a very good idea.
10 A group of companies which act together, though they may not be formally linked.
Key

18.15 Find the word: documentary credits - 3

Read the text below on documentary credits. Write a word from the box to fill each of the gaps.

against discount exchange negotiable released
cash credit shipping sight signing warehouse

Once the shipment is safely on its way, the a documents are sent to your customer's bank, while your own bank notifies you that everything has been done in accordance with your instructions. The documents will only be b to the customer 'c payment'. The customer, however, doesn't want to hand over the money yet, because it will be several days or weeks before the goods are delivered to his d . You, the supplier, therefore send him a bill of e and ask him to accept it by f it.
Some bills are payable as soon as the bank sees them - these are called g bills. Most are payable at 30, 60 or 90 days; this gives the customer time to receive and use or re-sell the goods before the money is transferred from his letter of h . But an accepted bill is a guarantee of payment, and it is therefore i ; it can be bought and sold. In fact, it is almost as good as j , except for the delay in payment. As the supplier, you will probably sell it to a bank, which will k it - that is, deduct interest from the total amount.

Key


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