Learning ObjectivesWelcome to class of

Export Import Practices

Dr. Satyendra Singh

*

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 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

Objectives:

*

Why Export?Reasons to exportTo serve markets where the firm has no or limited production facilitiesTo satisfy a host governments requirement that the local subsidiary have exportsTo remain price-competitive in the home marketTo test foreign markets and foreign competition inexpensively

*

Reasons to export?To offset domestic markets cyclical sales To achieve additional salesTo extend a products life cycleTo respond strategically to foreign competitorsTo achieve the success the firms management has seen others achieveTo improve the efficiency of manufacturing equipment

*

Reasons not to ExportTwo major reasonsPreoccupation with the vast American market Reluctance to become involved in a new, unknown and therefore risky operation

Not active in international markets due toLack of knowledgeLocating foreign marketsPayment and financing proceduresExport procedures

*

Sources of Export CounselingTrade Information Center (TIC)The federal government has to set this up as a first stop for informationVisit http://www.edc.caInternational Trade Administration (ITA)Offers a wide range of export promotion activities that includeMarket Access and Compliance (MAC)Trade DevelopmentU.S. and Foreign Commercial Services (US&FCS)

*

Sources of Export CounselingSmall Business Administration (SBA)The office of International Trade of the SBA works throughSmall Business Administration officesScore ProgramSmall Business Development CentersCenters for International Business Education and Research (CIBERs)

*

Show and SellTrade events to facilitate international tradeU.S. pavilionsTrade missionsProduct literature centerReverse trade missions

*

Export Marketing PlanEssentially same as domestic marketing plan

Specific aboutMarkets to be developedMarketing strategy for serving themTactics to make the strategy operational

*

Terms of SaleINCOTERMS Universal trade terminology developed by the International Chamber of CommerceEx-WorksRisk passes at factory doorUS equivalent: FOB (free on board)

*

Terms of SaleFASFree alongside ship, port of callCIFCost, insurance, freight, foreign portCFRcost and freight, foreign portDAFDelivered at frontier

*

Payment ProceduresPayment terms offered by exporters to foreign buyersCash in advanceWhen credit standing of the buyer unknown or uncertainOpen accountWhen sale is made on open accountSeller assumes payment riskOffered to reliable customers in economically stable countries

*

Payment ProceduresConsignment Goods shipped to buyer; payment made when soldPayment risk assumed by sellerLetter of credit (L/C)Document issued by buyers bankPromise to pay seller specified amount when bank has received documents stipulated in letter of credit

*

Payment ProceduresLetter of creditConfirmed L/CCorrespondent bank in sellers country agrees to honor issuing banks L/CIrrevocable L/COnce the seller has accepted L/C, buyer cannot alter or cancel it without sellers consent

*

CFR Cost, Freight, Foreign Port; FAS Free Along Side leave it there after clearing for exportFOB 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 carrierCPT Carriage Paid To seller pays named place of deliveryDEQ/DES Delivered Ex Quay/Ship named port of deliveryDDP/DDU Delivered Duty Paid/unpaid ; EXW Just keep outside/warehouseCIF insurance for maritime; DES CIF + insurance for goods as wellIn 2010, eliminated!DES, DAF, DEQ, DDU

*

Letter of Credit Transaction

*

DocumentsAir WaybillA bill of lading issued by an air carrier

Pro Forma InvoiceExporters formal quotation: description of the merchandise, price, delivery time, method of shipment, ports of exit and entry, and terms of sale

*

Export FinancingPrivate Source Commercial BanksBankers acceptanceTime 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 banks obligation; may be bought and sold at a discount in the financial markets like other commercial paperFactoringDiscounting an account receivable without recourse

*

Export FinancingForfeitingPurchasing 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 FinancingPublic SourcesExport-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 IncentivesForeign Trade ZoneDuty-free area designed to facilitate trade by reducing the effect of customs restrictionsFree Trade ZoneAn area designated by the government as outside its customs territoryCustoms drawbackRebate on customs duties

*

Export ProceduresForeign freight forwarders act as agents for exportersPrepare documentsBook spaceOffer advice aboutMarketsRegulationsTransportationPackingSupply cargo insurance

*

Official Procedures for Importing and Exporting

*

Shipping DocumentsShippers Export DeclarationU.S. Department of Commerce form to control export shipments and record export statisticsValidated export licenseDocument issued by the U.S. government authorizing export of strategic commodity or shipment to unfriendly countryGeneral Export LicenseCovers export commodities for which validated license not required; no formal application required

*

Shipping DocumentsExport Bill of LadingContract of carriage between shipper and carrier: straight bill of lading is nonnegotiable; endorsed to order bill gives holder claim on merchandiseInsurance Certificate

*

Collection Documents

Commercial invoiceInclude origin of goods, export packing marks, and clause stating goods will not be transshippedConsular invoicePurchased from the consul and prepared in local languageCertificate of originIssued by local Chamber of CommerceInspection certificateFrequently required for grain, food, live animals

*

Export ShipmentsContainersReduce theft and handling costsLASH (lighter aboard ship)Barges for shallow inland waterwaysRO-RO (roll on-roll off)Can drive onto vesselAir FreightCan arrive in one day

*

Sea-Air Total Cost Comparison, Shipment and Spare Parts

*

Air FreightTotal cost may decreaseEither the firm or the product may be air-dependentThe market may be perishableCompetitive position may be strengthened

*

ImportingWays to identify import sourcesIf 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 BrokerIndependent business that handles import shipments Acts as agent for importerCustomhouse broker brings goods through customsMay arrange transportation for goods after they leave customsNeed to know when imports are subject to import quotas and how much of the quota has been filled

*

ImportingBonded warehouseArea authorized by customs for storage of goods on which payment of import duties is deferred until goods are removedAutomated Commercial System (ACS)Used to track, control, and process all commercial goods imported into U.S.Import DutiesImporter must know how U.S./Canada calculates import dutiesThe Harmonized Tariff Schedule of U.S. (HTSUSA)American version of the Harmonized System used worldwide to classify imported products

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*