Chapter 8 International Sales Negotiation

To achieve satisfying results in a sales negotiation, one must consider a variety of factors: quality, quantity, packing, shipment, quotation, offer and counter offer, insurance, payment, inspection, claim and arbitration… Knowing these terms well will assist in clearly stating what specifications and conditions the counterpart must offer during the negotiation.

In this chapter you will learn: the contents of international sales negotiation the process of international sales and purchases negotiation strategies and applications

8.1 The contents of international sales negotiation There are unlimited numbers of items that could be listed as factors to be considered for setting targets and objectives for any given negotiation. However, most factors can generally be derived from the following categories:

8.1.1Quality In international trade, buyers and sellers usually live far from each other and this creates a problem. It is impossible for the buyers to examine the quality of the imported goods. Thus there needs to be some means for the sellers to inform the buyers of the quality.

In international trade, four means are generally used to express the quality of products. They are sales by sample, sales by specification, grade or standard, sales by trademark or brand, and sales by description.

8.1.2 Quantity Since quantity plays a very important part in foreign trade, it is necessary to find out the units of measurement to be adopted in foreign trade. That is because different products require different kinds of measurement and different countries may use their own units of measurement. Some of the units of measurement commonly used in foreign trade are as follows:

Weight: metric ton, long ton, short ton, kilogram, pound, ounce, gram, etc. Numbers: piece, pair, set, dozen, gross, ream, etc. Length: meter, foot, yard, mile, inch, etc. Area: acre, square yard, square foot, square inch, etc, Volume: cubic meter, cubic foot, cubic yard, etc. Capacity: liter, gallon, bushel, quart, etc.

8.1.3 Packing On the whole, packing is not only designed as a form of protection to reduce the risk of goods being damaged in transportation, but also designed to facilitate loading, unloading, storage, to prevent pilferage, and finally to aid marketing. It is essential to see that not only the right type of packing is provided, but also the correct packing materials are used.

In negotiating the packing clauses of a sales contract, both the seller and the buyer should pay attention to the following items: As the packing material and packing method are generally provided for in the packing clauses of a contract, the use of some less than clear terms such as “seaworthy packing” and “customs packing” should be avoided. Packing cost is usually included in the price, but it can be provided for in the contract that the cost is to be paid by the buyer if the buyer makes special request with regard to packing. According to international trade practices, the shipping markings are designed and determined by the seller. However, they can also be supplied by the buyer within a period of time before the date of shipment if the contract so stipulates.

8.1.4 Shipment When shipping goods by ocean freight, people must take into account two things: 1) To arrange the port of shipment and the port of destination. Commonly, sellers choose the port of shipment, whereas buyers decide the port of destination on the basis of mutual agreement. 2) To arrange the time of shipment. To avoid future dispute in international trade, the time of shipment must also be settled clearly between buyers and sellers. When settling the time of shipment, the exporter should take every possibility into consideration, such as the supply of goods, internal transport conditions, and external market quotations. The time of shipment should be made suitable to both sellers and buyers.

8.1.5 Quotation In response to an enquiry, Quotations may be given. A satisfactory quotation will include the following: Details of prices, discounts and terms of payment. A statement or clear indication of what the prices cover (e.g. freight and insurance, etc.). An undertaking as to the date of delivery or time of shipment. The period for which the quotation is valid. When a buyer rejects a quotation, he would thank the seller for his trouble and explain the reason for rejection.

8.1.6 Offer and counter offer An offer is different from a quotation. The latter is just an indication of price without contractual obligation, while the former is a definite commitment on the part of a supplier. A firm offer is made when a seller promises to sell goods at a stated price within a stated period of time. It can develop into a contractual obligation. Therefore, once it is accepted by a buyer, the seller cannot revoke it.

A satisfied offer will include the following: Name of commodities, quality, quantity and specifications. Unit price and type of currency. Terms of payment and discounts. Indication of what the price covers. Packing conditions and date of delivery. The term of validity of the offer.

8.1.7 Insurance Every experienced exporter knows that cargo insurance is important in international trade. The purpose of insurance is to provide compensation for those that suffer from loss or damage. When a trader purchases insurance, he should sign an insurance contract called a policy.

8.1.8 Payment The most generally used method of payment in financing international trade is the letter of credit (L/C), which is reliable and safe for both sellers and buyers. Sometimes, the buyer requests payment to be made by collection through banks under the terms of documents against payment (D/P) or documents against acceptance (D/A). As far as the seller’s benefit is concerned, L/C is better than D/P. D/P at sight is better than D/P after sight, whereas D/P is better than D/A.

8.1.9 Inspection Commodity inspection is an indispensable part of international trade. It guarantees buyers the quality and quantity of the goods as required. It makes it possible that sellers get payment from the negotiating bank upon presentation of the certificates together with other shipping documents. Commodity inspection is also the basic evidence for solving future trade disputes.

Claiming for damages and arbitration Claims offer the opportunity to discover and correct defects existing in the goods and services. In making a claim, one of the major jobs is to keep negatives from worsening the situation. When making a direct claim, observe the following points: Make clear what the claim is. Don’t let anger show and at the same time avoid sarcasm. Give the facts calmly, specifically, thoroughly. Request the action: A replacement, repair, refund or compensation.

Arbitration is different from amicable consultation. Arbitration is a means of settling a dispute between two parties through the medium of a third party whose decision on the dispute is final and binding. As a rule, the negotiators should specify the place of arbitration. This is of primary importance and a matter of great concern to both parties. They should also specify the number of arbitrators and their selection, how the cost of the arbitration is to be divided and, quite often, the scope of arbitration, in case the parties may wish to limit the scope to a specific aspect of a particular dispute.

8.2 The process of international sales and purchases negotiation There are three types of negotiations in the international trade: 1)Win-Win type: both the seller and the buyer gain (both sides involved can bring home beneficial or handsome outcomes). 2)Win-Lose type: the seller gains at the buyer’s expense (the aim of both sides is at maximizing their own benefit by sacrificing the other). 3)Lose-Win type: the seller sacrifices, letting the buyer win (to help him out of difficulty, or to step up a longer-term objective ).

8.2.2 The negotiation process The process of international sales and purchases negotiation is divided into three different stages: Planning negotiation. Face –to-face negotiation. Closing a deal.

8.3 Strategies and applications

III. Practical Sentences Talk about the Price Your price is higher than we can accept. Could you come down a little? Considering the high quality, our price is very reasonable. 3. Raw material prices have risen, so we can’t sell our product at that price 4. Can we meet each other halfway? 5. I am convinced that our prices are very competitive. 6. The present price is the best we can offer. 7. I think my offer is reasonable and realistic. 8. With that condition, we won’t be able to order from you. 9. Your payment terms are acceptable to us, but the new quotation, I think, is still on the high side. 10.Still the price is rather low. But considering the friendship and the further cooperation between us, we accept it.

2. Answer the following questions 1. How many means are needed for the sellers to inform the buyers of the quality? What are they? 2. When selling some mechanical and electrical products, what means are generally used to express their quality? 3. When negotiating on the packing, what aspect should the buyers pay attention to besides the right type of packing? 4. When goods are sold on a CIF basis, who is under obligation to present a marine insurance policy or an insurance certificate at the time of negotiation, the seller or the buyer? 5. Which method is safer and better for the seller, D/P or D/A?

Keys to the questions: There are four means. They are sales by sample, sales by specification, grade or standard, sales by trademark or brand, and sales by description. Sales by description. They should also pay attention to the packing materials. The seller. For the seller D/P is safer and better than D/A.

6. Why is commodity inspection indispensable in international trade? 7. What’s the first step in a successful sales negotiation? 8. Is it necessary for the seller to make an equal concession when the buyer grants him or her a concession? 9. At the beginning of the negotiation, should the sellers open high or modest? 10. When you meet with negotiators who harshly bargain with you, will you cancel the negotiation or continue? 11. If a negotiator says: “I don’t have the authority to grant you that concession.”, does it really mean that he or she hasn’t such authority or is it only negotiating tactics?

Because it guarantees buyers the quality and quantity of the goods as required. It makes it possible that sellers get payment from the negotiating bank upon presentation of the certificates together with other shipping documents. Commodity inspection is also the basic evidence for solving future trade disputes. Planning. No. The seller needn’t base the level of his or her concession on the level of the buyer’s concession. The sellers should open high. Continue the negotiation patiently, because this indicates that they really want to buy your goods. 11) Most possibly, it is tactics. The negotiator uses this tactic to evade pressure situations.

5. Translate the following into English 为了我们的友好关系，我方可以接受你方价格，不过你方应提前交货。 Key: For our good relationship, we may accept your price, but you should make earlier shipment. 我们的报价已是最低价，不能再多给折扣了。 Key: As we have quoted you our rock-bottom price, we cannot give you any more discounts. 很抱歉，我方不能接受你方建议的付款条件。 Key: We are sorry that we cannot accept the payment conditions you suggested. 我们希望你方在包装上能改进一下。 Key: We hope that you can make some improvement in the packing. 让我们讨论一下装船时间和装运方式。你认为即期装运怎么样？ Key: Let’s discuss the time and mode of shipment. What would you say about prompt shipment?

一收到你方信用证，我们立即安排装船。 We’ll arrange to ship the goods immediately after receipt of your L/C. 这批货是以 FOB 条件成交的，所以应由你方投保。 Key: The business is concluded on an FOB basis, so the insurance should be effected by you. 货物一旦装运，我方就立即投保。 Key: We will have the goods insured as soon as they are shipped. 对不起，我们无法接受你的赔偿要求。 Key: We are sorry, but we cannot allow your claim. 这批货在装运前将由中国商检局进行检验。 Key: The goods will be inspected by China Commodity Inspection Bureau before shipment.

6.True or false: 1) The win-lose strategy is the best that every negotiator can pursue. 2) An experienced negotiator talks much and rarely pauses to listen. 3) Persons who firmly maintain the desired objectives to the end can get the best deal. 4) Without information, you can’t make effective strategies and tactics. 5) Quotation is an indication of price with contractual obligation. 6) Arbitration is just amicable consultation between the seller and the buyer. 7) The first step in most successful sales negotiation is effective planning. 8) Once your plan is made, you needn’t modify it. 9) Your targets should not be exposed to your counterpart at the beginning of a negotiation. 10)When designing strategies, you should only think about your strengths without taking care of your weaknesses.

1) The win-lose strategy is the best that every negotiator can pursue. F 2) An experienced negotiator talks much and rarely pauses to listen. F 3) Persons who firmly maintain the desired objectives to the end can get the best deal. T 4) Without information, you can’t make effective strategies and tactics. T 5) Quotation is an indication of price with contractual obligation. F 6) Arbitration is just amicable consultation between the seller and the buyer. F 7) The first step in most successful sales negotiation is effective planning. T 8) Once your plan is made, you needn’t modify it. F 9) Your targets should not be exposed to your counterpart at the beginning of a negotiation. T 10)When designing strategies, you should only think about your strengths without taking care of your weaknesses. F