Export and Import Practices Chapter 14 Export and Import Practices McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives LO1: Identify the sources of export counseling and support. LO2: Discuss the meaning of the various terms known as Incoterms. LO3: Identify some sources of export financing. LO4: Describe the activities of a foreign freight forwarder. 14-2

Learning Objectives LO5: Outline, the export documents required. LO6: Identify import sources. 14-3

Reasons Companies Hesitate to Export Preoccupation with vast U.S. market Reluctance to assume risk of unknown Identification of foreign markets Payment and financing procedures Export procedures 14-4

Sources of Export Counseling Federal and state depts. of commerce Banks Small Business development centers Private consultants 14-5

Develop Marketing Plan Does a market exist for product? Sources of export information, counseling and support Export.gov – Dept. of Commerce International Trade Administration World Trade Centers Association—private sector 14-6

Export Marketing Plan Similar to domestic marketing plan Specific about Markets to be developed Marketing strategy and tactics 14-7

Common Mistakes made by New Exporters Don’t obtain export counseling. Lack top management’s commitment. Careless selection of sales rep and distributors. Chasing orders, not following a plan. Neglect exports when home market booms. Don’t treat international as equal to domestic. 14-8

Common Mistakes made by New Exporters 7. Generalize one successful technique acr. mkts. 8. Unwilling to localize (regulations and culture). 9. Failure to provide after sale in local language. 10. Won’t use export mgmt co. 11. Won’t consider licensing or JVs. 12. Don’t provide servicing. 14-9

Incoterms General transportation Incoterms Ex Works: Goods available at named factory FCA: Free carrier at named place CPT: Carriage paid to named destination CIP: Carriage and insurance paid to named place DAT: Delivered at terminal DAP: Delivered at place named DDP: Delivered, duty paid 14-10

Incoterms Water transport Incoterms FAS: Free alongside ship FOB: Free on board CFR: Cost and freight to destination port CIF: CFR plus insurance to destination port 14-11

Incoterms 14-12

Payment Procedures Payment Terms Cash in advance—adv to seller Open account—adv to buyer Consignment—mjr adv to buyer 14-13

Letter of Credit (L/C) Document issued by buyer’s bank Promise to pay seller specified amount when bank has received stipulated documents confirmed—Seller’s bank agrees to honor Irrevocable—once sellers accepts, not changeable 14-14

L/C 14-15

Export Documents Air Way Bill Pro Forma Invoice Export draft Bill of lading issues by air carrier Pro Forma Invoice Exporter’s formal quotation Export draft Unconditional order drawn by seller on buyer (sight or at future time) that must be paid before buyer receives shipping documents 14-16

L/C Transaction 14-17

Payment Risk/Cost Trade-Off 14-18

Export Financing, private Banker’s acceptance Commercial paper Factoring Discounting account receivable Forfaiting Purchasing account receivable; risk born by forfaiter 14-19

Export Financing, public Ex-Im Bank Overseas Private Investment Corporation Discounting account receivable 14-20

Other Export incentives Foreign trade zones Free trade Zones Customs drawbacks 14-21

Export procedures Foreign freight forwarders Agents for exporters Prepare documents Book space Advise on markets, regulations, transport, packing Supply cargo insurance 14-22

Export documents Shipper’s export declaration Validated/general export license Export bill of lading Insurance certificate 14-23

Collection documents Commercial invoice Consular invoice Certificate of origin Inspection certificate CE 14-24

Export shipments Container LASH RO-RO Air freight 14-25

Sea-Air Cost Comparison 14-26

Ways to Identify Import Sources Similar imported products are in the market Inquiry at consulate or embassy World Trade Centers’ electronic bulletin board 14-27

Customs House Broker Similar to foreign freight forwarders, for imports Brings goods through customs Tracks import quotas 14-28