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Learning Objectives
Welcome to class of
Export Import Practices
Dr. Satyendra Singh
Learning Objectives
Objectives:

Explain why firms export and problem areas of exporting

Identify the sources of export counseling and support

Discuss the meaning of the various terms of sale

Identify some sources of export financing

Describe the activities of a foreign freight forwarder

Understand the kinds of export documents required

Identify import sources
Why Export?
• Reasons to export
– To serve markets where the firm has no or limited
production facilities
– To satisfy a host government’s requirement that
the local subsidiary have exports
– To remain price-competitive in the home market
– To test foreign markets and foreign competition
inexpensively
Reasons to export?
– To offset domestic market’s cyclical sales
– To achieve additional sales
– To extend a product’s life cycle
– To respond strategically to foreign
competitors
– To achieve the success the firm’s
management has seen others achieve
– To improve the efficiency of manufacturing
equipment
Reasons not to Export
• Two major reasons
– Preoccupation with the vast American market
– Reluctance to become involved in a new,
unknown and therefore risky operation
• Not active in international markets due to
– Lack of knowledge
• Locating foreign markets
• Payment and financing procedures
• Export procedures
Sources of Export Counseling
• Trade Information Center (TIC)
– The federal government has to set this up as a
first stop for information
– Visit http://www.edc.ca
• International Trade Administration (ITA)
– Offers a wide range of export promotion activities
that include
• Market Access and Compliance (MAC)
• Trade Development
• U.S. and Foreign Commercial Services (US&FCS)
Sources of Export Counseling
• Small Business Administration (SBA)
– The office of International Trade of the SBA works
through
•
•
•
•
Small Business Administration offices
Score Program
Small Business Development Centers
Centers for International Business Education and
Research (CIBERs)
Show and Sell
• Trade events to facilitate international trade
– U.S. pavilions
– Trade missions
– Product literature center
– Reverse trade missions
Export Marketing Plan
• Essentially same as domestic marketing
plan
• Specific about
– Markets to be developed
– Marketing strategy for serving them
– Tactics to make the strategy operational
Terms of Sale…
• INCOTERMS
– Universal trade terminology developed by
the International Chamber of Commerce
– Ex-Works
• Risk passes at factory door
• US equivalent: FOB (free on board)
Terms of Sale
– FAS
• Free alongside ship, port of call
– CIF
• Cost, insurance, freight, foreign port
– CFR
• cost and freight, foreign port
– DAF
• Delivered at frontier
Payment Procedures…
• Payment terms offered by exporters to foreign
buyers
– Cash in advance
• When credit standing of the buyer unknown or uncertain
– Open account
• When sale is made on open account
– Seller assumes payment risk
– Offered to reliable customers in economically stable
countries
Payment Procedures…
– Consignment
• Goods shipped to buyer; payment made when sold
• Payment risk assumed by seller
– Letter of credit (L/C)
• Document issued by buyer’s bank
– Promise to pay seller specified amount
when bank has received documents
stipulated in letter of credit
Payment Procedures
• Letter of credit
• Confirmed L/C
– Correspondent bank in seller’s country agrees to
honor issuing bank’s L/C
• Irrevocable L/C
– Once the seller has accepted L/C, buyer cannot alter
or cancel it without seller’s consent
CFR Cost, Freight, Foreign Port; FAS  Free Along Side  leave it there after clearing for export
FOB  Seller will load on board after clearing for export (Cost and risk shared INCOTERMS 2010)
FCA Free Carrier – clear for export and handover to named carrier
CPT Carriage Paid To – seller pays – named place of delivery
In 2010, eliminated!
DES, DAF, DEQ, DDU
DEQ/DES Delivered Ex Quay/Ship – named port of delivery
DDP/DDU  Delivered Duty Paid/unpaid ; EXW  Just keep outside/warehouse
CIF insurance for maritime; DES CIF + insurance for goods as well
Letter of Credit Transaction
Documents
• Air Waybill
– A bill of lading issued by an air carrier
• Pro Forma Invoice
– Exporter’s formal quotation: description of the
merchandise, price, delivery time, method of
shipment, ports of exit and entry, and terms of sale
Export Financing…
• Private Source – Commercial Banks
– Banker’s acceptance
• Time draft with maturity of less than 270 days that has
been accepted by the bank on which the draft was
drawn, thus becoming the accepting bank’s obligation;
may be bought and sold at a discount in the financial
markets like other commercial paper
– Factoring
• Discounting an account receivable without recourse
Export Financing…
– Forfeiting
• Purchasing without recourse an account receivable
whose credit terms are longer than the 90 to 180 days
usual in factoring; unlike factoring, political and transfer
risks are borne by the forfeiter
Export Financing
• Public Sources
– Export-Import Bank (Ex-Imbank)
• Principal government agency that aids American exporters by
means of loans, guarantees, and insurance programs
– Overseas Private Investment Corporation (OPIC)
• U.S. government corporation that offers American investors in
developing countries insurance against expropriation, currency
inconvertibility, and damages from wars and revolutions
Other Public Incentives
• Foreign Trade Zone
– Duty-free area designed to facilitate trade by
reducing the effect of customs restrictions
• Free Trade Zone
– An area designated by the government as outside
its customs territory
• Customs drawback
– Rebate on customs duties
Export Procedures
• Foreign freight forwarders act as agents for
exporters
– Prepare documents
– Book space
– Offer advice about
•
•
•
•
Markets
Regulations
Transportation
Packing
– Supply cargo insurance
Official Procedures for Importing and
Exporting
Shipping Documents…
• Shipper’s Export Declaration
– U.S. Department of Commerce form to control
export shipments and record export statistics
• Validated export license
– Document issued by the U.S. government
authorizing export of strategic commodity or
shipment to unfriendly country
• General Export License
– Covers export commodities for which validated
license not required; no formal application
required
Shipping Documents
• Export Bill of Lading
– Contract of carriage between shipper and carrier:
straight bill of lading is nonnegotiable; endorsed “to
order” bill gives holder claim on merchandise
• Insurance Certificate
Collection Documents
• Commercial invoice
• Include origin of goods, export packing marks, and
clause stating goods will not be transshipped
– Consular invoice
• Purchased from the consul and prepared in local
language
– Certificate of origin
• Issued by local Chamber of Commerce
– Inspection certificate
• Frequently required for grain, food, live animals
Export Shipments…
 Containers
 Reduce theft and handling costs
 LASH (lighter aboard ship)
 Barges for shallow inland waterways
 RO-RO (roll on-roll off)
 Can drive onto vessel
 Air Freight
 Can arrive in one day
Sea-Air Total Cost Comparison,
Shipment and Spare Parts
Air Freight
• Total cost may decrease
• Either the firm or the product may be airdependent
• The market may be perishable
• Competitive position may be strengthened
Importing
• Ways to identify import sources
– If similar imported products are already in the
market, visit a retailer and examine the product
label
– If the product is not being imported, call the
nearest consul or embassy of that country
– Use the electronic bulletin boards of the World
Trade Centers
Customhouse Broker
• Independent business that handles import
shipments
• Acts as agent for importer
– Customhouse broker brings goods through
customs
– May arrange transportation for goods after they
leave customs
– Need to know when imports are subject to
import quotas and how much of the quota has
been filled
Importing
• Bonded warehouse
– Area authorized by customs for storage of goods on which
payment of import duties is deferred until goods are removed
• Automated Commercial System (ACS)
– Used to track, control, and process all commercial goods
imported into U.S.
• Import Duties
– Importer must know how U.S./Canada calculates import duties
• The Harmonized Tariff Schedule of U.S.
(HTSUSA)
– American version of the Harmonized System used worldwide to
classify imported products