Learning Objectives

Welcome to class of

Export Import Practices

Dr. Satyendra Singh

 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

 Why Export?
Reasons to export
To serve markets where the firm has no or limited
production facilities
To satisfy a host governments requirement that
the local subsidiary have exports
To remain price-competitive in the home market
To test foreign markets and foreign competition
inexpensively
 Reasons to export?
To offset domestic markets cyclical sales
To achieve additional sales
To extend a products life cycle
To respond strategically to foreign
competitors
To achieve the success the firms
management has seen others achieve
To improve the efficiency of manufacturing
equipment
 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
 Sources of Export Counseling
Trade Information Center (TIC)
The federal government has to set this up as a
first stop for information
Visit http://www.edc.ca
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)
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)
 Show and Sell
Trade events to facilitate international trade
U.S. pavilions
Trade missions
Product literature center
Reverse trade missions
 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
 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)
 Terms of Sale

FAS
Free alongside ship, port of call
CIF
Cost, insurance, freight, foreign port
CFR
cost and freight, foreign port
DAF
Delivered at frontier
 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
 Payment Procedures
Consignment
Goods shipped to buyer; payment made when sold
Payment risk assumed by seller
Letter of credit (L/C)
Document issued by buyers bank
Promise to pay seller specified amount
when bank has received documents
stipulated in letter of credit
 Payment Procedures
Letter of credit
Confirmed L/C
Correspondent bank in sellers country agrees to
honor issuing banks L/C
Irrevocable L/C
Once 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 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 In 2010, eliminated!
DEQ/DES Delivered Ex Quay/Ship named port of delivery DES, DAF, DEQ, DDU
DDP/DDU Delivered Duty Paid/unpaid ; EXW Just keep outside/warehouse
CIF insurance for maritime; DES CIF + insurance for goods as well
Letter of Credit Transaction
 Documents

Air Waybill
A bill of lading issued by an air carrier

Pro Forma Invoice

Exporters formal quotation: description of the
merchandise, price, delivery time, method of
shipment, ports of exit and entry, and terms of sale
 Export Financing
Private Source Commercial Banks
Bankers 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 banks 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

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
 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
 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
 Export Procedures
Foreign freight forwarders act as agents for
exporters
Prepare documents
Book space
Offer advice about
Markets
Regulations
Transportation
Packing
Supply cargo insurance
Official Procedures for Importing and
Exporting
 Shipping Documents
Shippers 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

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
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
 Export Shipments
Containers
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
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
 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
 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
 Importing
Bonded warehouse
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