Mechanisms have evolved over centuries to ensure that goods and payments can be exchanged by parties that hardly know each other. Documents are prepared and used throughout the process which are recognized internationally. The paperwork and fees can add substantially to the cost of goods, but they remain an accepted part of international trade. In many international trade transactions, the buyer and seller do not know each other well, and they have not developed a relationship based on trust and a history of shipment of goods and payment for those goods. The buyers and sellers turn to banks as intermediaries, but banks do not want to handle merchandise. Documents and intermediaries have evolved over centuries to facilitate trade and financing. Buyers and sellers must understand the steps and sequences that occur to be able to trade successfully.
The exchange of goods, paperwork, and payment is complicated in the exporting process. Arrange the items in the right sequence.
a. Goods ordered: An importer that does not know the exporter orders merchandise for use or resale
b. Bank Interact: The exporter's bank and importer's bank verify conditions have been met by the documentation and payment is authorized
c. Good Shipped : The exporter's bank notify the exporter that payment will be made by according the terms of the letter of credit and exporter ships the goods
d. Importer pays his bank: once documentation is completed and recives merchandise then pays the bank
e. Exporter present papers to bank: Exporter present the bill of lading and other paperwork to the bank
f. Exporter receives bill of lading: Exporter receives paperwork from the common carrier that will ship the goods to foreign firm
g. Exporter sells draft: Exporter sells the draft at a discount to the bank to expedite it cash flow
h. Importer secures L/C: The bank agrees to make payments once certain conditions are met, and later collect payment from the importer
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