1. Export Import Practices
Learning Objectives
Welcome to class of
Export Import Practices
Dr. Satyendra Singh Professor, Marketing and International Business University of Winnipeg Canada

2. 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

3. 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

4. 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

5. 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

6. Sources of Export Counseling
Trade Information Center (TIC)
The federal government has to set this up as a first stop for information
Visit
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)

7. 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)

8. Show and Sell Trade events to facilitate international trade
U.S. pavilions
Trade missions
Product literature center
Reverse trade missions

9. 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

10. 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)

11. Terms of Sale FAS CIF CFR DAF Free alongside ship, port of call
Cost, insurance, freight, foreign port
CFR
cost and freight, foreign port
DAF
Delivered at frontier

12. 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

13. Payment Procedures… Consignment Letter of credit (L/C)
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

14. 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

15. FCA Free Carrier – clear for export and handover to named carrier
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
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
In 2010, eliminated!
DES, DAF, DEQ, DDU

16. Letter of Credit Transaction

17. Documents Air Waybill Pro Forma Invoice
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

18. 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

19. 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

20. 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

21. 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

22. Export Procedures
Foreign freight forwarders act as agents for exporters
Prepare documents
Book space
Offer advice about
Markets
Regulations
Transportation
Packing
Supply cargo insurance

23. Official Procedures for Importing and Exporting

24. 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

25. Shipping Documents Export Bill of Lading Insurance Certificate
Contract of carriage between shipper and carrier: straight bill of lading is nonnegotiable; endorsed “to order” bill gives holder claim on merchandise
Insurance Certificate

26. Collection Documents Commercial invoice Consular 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

27. Export Shipments… Containers LASH (lighter aboard ship)
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

28. Sea-Air Total Cost Comparison, Shipment and Spare Parts

29. 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

30. 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

31. 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

32. Importing Bonded warehouse Automated Commercial System (ACS)
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