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International Business
David J. Boggs, Ph.D.Eastern Illinois University
Importing and ExportingImporting and Exporting
OverviewOverview Review of entry modes Overview of exporting and importing Government involvement Websites for help and information Paying and collecting payment
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International Business 5e Chapter 13 - 3
Risk, Control, ExperienceRisk, Control, Experience
Exporting and Product Exporting and Product CharacteristicsCharacteristics
ValueValuedensitydensityValueValuedensitydensity
Product’s value relativeto its weight and volumeProduct’s value relativeto its weight and volume
The lower a product’s valuedensity, the more localizedis its distribution system
The lower a product’s valuedensity, the more localizedis its distribution system
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Export ResearchExport ResearchExport ResearchExport Research
Trade shows and missionsTrade shows and missionsTrade shows and missionsTrade shows and missions
Interviews and focus groupsInterviews and focus groupsInterviews and focus groupsInterviews and focus groups
SurveysSurveysSurveysSurveys
Environmental scanningEnvironmental scanningEnvironmental scanningEnvironmental scanning
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Trade ShowsTrade Shows http://www.globalspeak.com/html/export-
gov/webcasts.asp
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Avoiding Export BlundersAvoiding Export BlundersAvoiding Export BlundersAvoiding Export Blunders
Conduct market researchConduct market researchConduct market researchConduct market research
Obtain export adviceObtain export adviceObtain export adviceObtain export advice
Consider a freight forwarderConsider a freight forwarderConsider a freight forwarderConsider a freight forwarder
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Freight ForwardersFreight Forwarders Exporter-importer agent Can arrange to move cargo “dock-to-
door" Advise on transport modes, packing, and
costs (freight, port, consular, documentation, insurance, handling)
Handle paperwork Reserve cargo space on a vessel, aircraft,
train, or truck www.forwarders.com
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Degree of Export Degree of Export InvolvementInvolvement
Direct exportingDirect exporting(sell to buyers)(sell to buyers)
Indirect exportingIndirect exporting(sell to intermediaries)(sell to intermediaries)
• Sales representatives
• Distributors
• Sales representatives
• Distributors
• Agents• Export management companies• Export trading companies
• Agents• Export management companies• Export trading companies
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
U.S. States Go GlobalU.S. States Go Global
Government AgreementsGovernment Agreements WTO Most Favored Nation (MFN) status Generalized System of Preferences (GSP) Caribbean Basin Initiative (CBI) Andean Trade Preference Act (ATPA)
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
USA Free Trade AgreementsUSA Free Trade Agreements North American FTA (NAFTA) Central American FTA (CAFTA-DR) U.S. – Israel FTA (ILFTA) U.S. – Jordan FTA (JFTA) The U.S. – Chile FTA (US-CFTA) The U.S. – Singapore FTA (US-SFTA)
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Embargoed CountriesEmbargoed Countries Cuba Iran North Korea Sudan Syria Burma
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Customs & Border Customs & Border ProtectionProtection Government agency Collects taxes/tariffs/duties Clears or restricts imports and exports Protects health and security www.cbp.gov
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Restricted or Prohibited Restricted or Prohibited GoodsGoods What do you think are goods that the USA
Restricts? Prohibits?
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Restricted or Prohibited Restricted or Prohibited GoodsGoods Cosmetics and prescription drugs Food and agricultural products Cuban cigars and Mexican marijuana Alcoholic beverages and firearms Radioactive materials and explosives Wildlife products (animals, furs, skins, shells) Obscene books Cultural Artifacts Matches, bongs, switchblades, lottery
tickets, and more...
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
QuotasQuotas What do you think are goods that the USA
restricts through the use of quotas?
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Products with QuotasProducts with Quotas Olives, anchovies and tuna Brooms Ethyl alcohol Lamb Line pipe Milk and cream Cotton Wire rod
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Customs PaperworkCustoms Paperwork Commercial or pro forma invoice Entry manifest or packing list Certificate of origin Evidence of right to make entry Consider using a customs broker
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Choose USPS for Value < Choose USPS for Value < $2000$2000 Ease in clearing shipments Applicable duties collected by the letter
carrier Small packages ship inexpensively No need to clear shipments personally Value < $250 for some goods (e.g.
purses, gloves, footwear, toys, pillows) A courier can also provide seamless
delivery
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Helpful WebsitesHelpful Websites Export.gov DOC.gov Fedstats.gov USITC.gov Trade.gov http://www.globalspeak.com/html/export-
gov/webcasts.asp
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Export/Import FinancingExport/Import Financing
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
High-Risk ApproachesHigh-Risk Approaches
Advance paymentAdvance payment
Importer pays exporterImporter pays exporter for merchandisefor merchandise before it shipsbefore it ships
Advance paymentAdvance payment
Importer pays exporterImporter pays exporter for merchandisefor merchandise before it shipsbefore it ships
Open accountOpen account
Exporter shipsExporter ships merchandise andmerchandise and later bills importerlater bills importer
Open accountOpen account
Exporter shipsExporter ships merchandise andmerchandise and later bills importerlater bills importer
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Documentary CollectionDocumentary Collection
Draft (bill of exchange) Bill of lading
Bank acts as intermediary without accepting financial risk
Document that orders an importer to pay an exporter a specified sum of money at a specified time
Contract between an exporter and shipperspecifying destinationand shipping costsfor merchandise
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Documentary Collection ProcessDocumentary Collection Process
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Letter of CreditLetter of Credit
Importer’s bank issues a document stating that the bank will pay the exporter when
exporter fulfills document’s terms
Irrevocable Revocable Confirmed
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Letter of Credit ProcessLetter of Credit Process
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Forms of CountertradeForms of Countertrade
Barter
Counterpurchase
Offset agreement
Switch trading
Buyback
Direct exchange without money
Sale to a country in return for promise of future purchase from it
Offset a hard-currency sale to a nationwith future hard-currency purchase
Sale by a company of an obligation to purchase from a country
Export of industrial equipment in return for products the equipment produces
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
ReviewReview Review of entry modes Overview of exporting and importing Government involvement Websites for help and information Paying and collecting payment
International Business 5e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall
Customs brokers are licensed (e.g. power of attorney) to conduct customs transactions on behalf of others Bill of lading Airway bill Common carriers transport or take responsibility for transporting goods for the public and are typically liable for goods under their control Important Issues Merchandise description and tariff classification Country of origin Valuation Intellectual property violation Compliance with agency requirements (e.g. FDA, DOT, FTC, EPA) Policies that Constrain Imports Antidumping And Countervailing Duties Embargoes Other Notes Personal vs. Commercial Use Most commercial imports must be conspicuously and durably marked in English with the country of origin Foreign Trade Zones Avoid tariffs Assemble or reassemble products Hold stock for delivery Manufacture, ship, and tranship products Exporting Payment procedures Export restrictions Import legality Top 20 Metropolitan Area Exporters Ranked by First Half 2008 Export Value (in Millions of U.S. Dollars) Rank Metropolitan Area Fact sheets 2007 FH2007 FH2008 1 New York-Northern New Jersey-Long Island, NY-NJ-PA 80,852 39,721 49,955 2 Houston-Sugar Land-Baytown, TX 62,815 29,894 40,199 3 Los Angeles-Long Beach-Santa Ana, CA 54,433 25,985 29,946 4 Seattle-Tacoma-Bellevue, WA 53,893 25,056 27,058 5 Detroit-Warren-Livonia, MI 49,165 24,262 23,123 6 Chicago-Naperville-Joliet, IL-IN-WI 30,635 14,818 17,667 7 Miami-Fort Lauderdale-Miami Beach, FL 26,197 12,325 16,189 8 San Jose-Sunnyvale-Santa Clara, CA 28,210 13,945 14,042 9 Minneapolis-St. Paul-Bloomington, MN-WI 21,628 9,954 12,901 10 Boston-Cambridge-Quincy, MA-NH 21,031 10,356 11,548 11 Dallas-Fort Worth-Arlington, TX 22,079 10,657 11,473 12 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 18,882 9,071 11,133 13 San Francisco-Oakland-Fremont, CA 20,081 9,988 10,382 14 Portland-Vancouver-Beaverton, OR-WA 15,784 7,615 9,978 15 Cincinnati-Middletown, OH-KY-IN 15,359 7,255 8,781 16 San Juan-Caguas-Guaynabo, PR 14,642 6,958 8,720 17 San Diego-Carlsbad-San Marcos, CA 14,342 6,947 7,995 18 Atlanta-Sandy Springs-Marietta, GA 12,551 5,982 7,038 19 Peoria, IL 11,222 5,332 6,805 20 New Orleans-Metairie-Kenner, LA 8,449 3,710 6,693 http://ita.doc.gov http://export.gov
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