Lecture International business (11/e) - Chapter 17: Export and import practices

The main goals of this chapter are to: 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,…

Export and Import Practices

McGraw­Hill/Irwin

International Business, 11/e Copyright © 2008 The McGraw­Hill Companies, Inc. All rights reserved.

chapter seventeen

Learning 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

Learning Objectives

 Identify some sources of export financing

 Describe the activities of a foreign freight forwarder

 Understand the kinds of export documents required

 Identify import sources

 Explain the Harmonized Tariff Schedule of the United States (HTSUSA)

Why Export?

• Reasons to export

limited production facilities

that the local subsidiary have exports

market

competition inexpensively

Reasons to export? cont’d.

competitors

management has seen others achieve

equipment

Reasons not to Export

• Two major reasons

market

unknown and therefore risky operation

• Not active in international markets due to

Sources of Export Counseling

– The federal government has to set this up as a first

stop for information

– Visit http://www.ita.doc.gov/td/tic/

– Offers a wide range of export promotion activities

Sources of Export Counseling

• Small Business Administration (SBA)

works through

Education and Research (CIBERs)

Show and Sell

• Trade events to facilitate international

trade

Export Marketing Plan

• Essentially same as domestic marketing

plan

• Specific about

Terms of Sale

• INCOTERMS

the International Chamber of Commerce

Terms of Sale, cont’d.

• When sale is made on open account

– Seller assumes payment risk– Offered to reliable customers in economically

stable countries

Payment Procedures, cont’d.

• Document issued by buyer’s bank

when bank has received documents stipulated in letter of credit

Payment Procedures, cont’d.

• Letter of credit

agrees to honor issuing bank’s L/C

buyer cannot alter or cancel it without seller’s consent

Sample Letter of Credit

Letter of Credit Transaction

Documents

• Air Waybill

• Pro Forma Invoice

the merchandise, price, delivery time,

method of shipment, ports of exit and entry, and terms of sale

Export Payment Documents

• Export draft

– Unconditional order drawn by the seller that

instructs buyer to pay the draft’s amount on

presentation (sight draft) or at an agreed future date (time draft) and that must be paid before

buyer receives shipping documents

Payment Risk/Cost Trade-Off

Export Financing

• Private Source – Commercial Banks

• 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, cont’d

• 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 cont’d.

– 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

by reducing the effect of customs

restrictions

• Free Trade Zone

outside its customs territory

• Customs drawback

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, cont’d.

• 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

Export Shipments

 Containers

 LASH (lighter aboard ship)

 RO-RO (roll on-roll off)

 Air Freight

Export Shipments

• Containers

• LASH (lighter aboard ship)

• RO-RO (roll on-roll off)

• Air Freight

Sea-Air Total Cost Comparison,

Shipment and Spare Parts

Air Freight

• Total cost may decrease

• Either the firm or the product may be

air-dependent

• The market may be perishable

• Competitive position may be

strengthened

– 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

shipments

– 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

– Area authorized by customs for storage of goods on which

payment of import duties is deferred until goods are removed

– Used to track, control, and process all commercial goods

imported into U.S.

– Importer must know how U.S calculates import duties

(HTSUSA)

Page from the HTSUSA