S.O.P is described in two different forms as S.O.P is also followed for fundamental programmatic operations by any organization and operated differently between parties during trade.
S.O.P is a useful business tool as it communicates and makes assurance to follow systematic procedures. S.O.P in an organization is generally an integral part of a successful quality system as it has set of guided information to perform and facilitate quality assurance of a product, project plan, environmental programs, quality management plan, as well as procedure to be followed during trade matters. It may vary according to company’s rules and regulations or understanding between parties during trade.
The S.O.P we will be discussing today is for trade matters, it is a set of operating procedure/ guidance which will help you to understand basic steps that need to be followed during trade procedures for a safe and secure trade deal.
Following are the basic steps or procedure that needs to be followed during an international trade between the domestic seller/exporter and international buyer/importer.
- L.O.I (LETTER OF INTENT)
This is a document issued by the buyer to the exporter/supplier which states the intension of the buyer to procure the material either in raw form or personal packaging (branding purposes), packaging type, quantity, for reselling purposes or self use and shipping terms for perusal.
- R.Q. (ROUGH QUOTATION)
When the intentions of the importer is known and requires the cost of the material, exporter sends a rough quotation for discussing the cost, this isn’t the final quotation but a rough for further negotiation
- SCO/FCO
(S.C.O- Soft Corporation Offer) (F.C.O- FULL CORPORATION OFFER) the names itself intend their meaning which says both parties when discuss and come to a settlement point where they need each other’s corporation for the further deal to proceed, whatever their decisions may be they share with each other for cooperating with each other with s.c.o. / f.c.o terms for further process. In this process if both parties commit for an F.C.O, buyer or his representative is eligible to visit the exporters warehouse or at the allocation of goods for verification, which also includes for the quality standards of products and certifications required for the product.
- SHIPPING TERMS
After having a clear picture for the cooperation for the deal the shipping of goods are also discussed such as from where the goods can be shipped, who will bear the transportation cost (buyer or seller), up to what point will it be feasible for the seller to ship goods, (EX-FACTORY), (F.O.B- free on board), (CIF –cost insurance and freight), (CNF- cost and freight) these terms are majorly used in the international trade.
- P.O.F / B.C.L
Proof of Funds (P.O.F) OR Bank Credit Letter (BCL) is either asked by the supplier/exporter or given by importer to check the credit rating or to rest assure of the cost to be bearded by the importer after the shipment of goods leaves the exporters jurisdiction.
- P.O (PURCHASE ORDER)
Once the rates and quality of the product is finalized this document order is issued by the buyer with the details of the product buying quantity to the exporter to confirm the order needed.
- P.I (PERFORMA INVOICE)
Once the proof of funds is rest assured by the exporter and the rough quotation has been examined and approved for the rates of the material, the exporter sends a P.I. to the importer stating the final rates negotiated and agreed for the final deal to proceed.
- N.C.N.D.A
Non Circumvention And Non Disclosure Agreement (NCNDA) is an agreement in which several claws are to be interpreted in case there is any mediator or many mediators who has worked hard and communicated between the buyer and the seller for the deal and needs a proof for his/her commission for that particular deal. This agreement makes sure that the mediator gets their commission if at all the buyer or seller fails to provide their commission they can appeal to the high authority bodies for justice. If there isn’t any mediator this document isn’t required.
- S.P.A (SALES PURCHASE AGREEMENT)
This document is written on either a letterhead of a company or bonds for the points agreed by both importer and exporter for the final deal settlement with regards to shipping terms, payment terms, expenses, all the major points which needs to be interpreted for proof as agreed by both parties or if any mediator, Failing to which the Interpol can be addressed by informing the representative governments.
Following an s.o.p also has its benefits and disadvantages to be aware of for a system to work smoothly; we have listed down some advantages as well as disadvantages to be kept in mind.
BENEFITS
- Easy steps to be followed as per guided information
- Step by step Systematic operations
- Easy to rectify lope holes
- Covers risk management
DISADVANTAGES OF S.O.P
- Excessive paper work
- Takes a lot of time for several higher authority approvals
- Reduced creativity
Following the above steps carefully and having a healthy discussion between both parties before getting a deal done will help you to have a successful trade as well as to establish a successful long term relation in business.
