Chapter 16

Exporting,
Importing and
Countertrade
EXPORTIN
G
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Exporting
Exports are goods and services that are
produced in one country and sold to
buyers in another. Exports, along with
imports, make up international trade

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•More than 90 percent of all companies engaged in
the global marketplace export
•Low commitment
•Preferred by many small and medium-sized
enterprises
•Increased volume of exporting is facilitated by:
•A decline in trade barriers and increase in regional
economic agreements
•Advances in technology and communication
•But the prospect of exporting is intimidating for
some firms 4
THE PROMISES AND RISK ASSOCIATED WITH
EXPORTING

Exporting
•Large revenue and profit opportunities in foreign
markets for most firms
•Economies of scale
•Large firms tend to be proactive about exporting;
medium-sized and small firms reactive
•Unfamiliar or intimidated by foreign market
opportunities, etc.
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IMPROVING EXPORTS PERFORMANCE

International Comparisons
● One big impediment to exporting is the simple lack of
knowledge of the opportunities available.
● Need to collect information on how different countries
operate

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Information Sources
• U.S. Department of Commerce (U.S. Export Assistance
Centers, USEAC)
• U.S. and Foreign Commercial Service and International Trade
Administration (ITA)
• District Export Councils
• Small Business Administration (SBA)
• Small Business Development Centers (SBDC), Service Corps
of Retired Executives (SCORE), and Export Legal Assistance
Network (ELAN)
• Centers for International Business Education and Research
(CIBERs)
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Service Providers

● Freight forwarders
● Combine smaller shipments into a single large shipment to
minimize the shipping cost
● Documentation, payment, and carrier selection
● Export management companies
● Deal with export documents and operate as the firm’s agent
and distributor
● Export trading companies
● Provide comprehensive exporting services, including export
documentation, logistics, and transportation

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Service Providers continued

● Export packaging companies

● Advise companies on appropriate design and materials for the
packaging of their items
● Assist companies in minimizing packaging to maximize the number
of items to be shipped
● Customs brokers
● Offer a firm a complete package of services that are essential in
dealing with potential pitfalls when a firm is exporting to a large
number of countries
● Confirming houses (buying agents)
● Represent foreign companies that want to buy your products
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Service Providers continued

● Export agents and merchants

● Buy products directly from the manufacturer and package and relabel the
products
● Piggyback marketing
● One firm distributes another firm’s products
● Usually requires complementary products and the same target market of
customers
● Economic processing zones
● Include foreign trade zones (FTZs), special economic zones, bonded
warehouses, free ports, and customs zones

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IMPORTIN
G

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What is the importance of
Importing?
By Importing goods and services bought by a
company or government from businesses in the
other countries can get involve in international
trade.
It can create a new sales or expand sales with
existing customers.
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Why do we import?
• To obtain natural resources that are not available in
the country. Eg. oil
• We have an unsuitable climate for certain foods like
in U.S such as bananas, coffee…..
• To avail of services not in the country.
• To have variety and choice of goods & services.
 “
Reasons why companies
involved in Importing
● Product Demand
● Lower Costs
● Production Inputs
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 Four Steps in Importing
Activities
1. Determine Demand
2. Contact Supplier
3. Finalize Purchase
4. Receive Goods
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 Export and Import Financing
Letter of Credit
-Issued by a bank, indicating that the bank will make payments under specific
circumstances.

Draft (Bill of Exchange)

-An order written by an exporter instructing an importer, or an importer’s agent, to
pay a specified amount of money at a specified time.
2 Categories of draft
1. Sight Draft
2. Time Draft
When a time draft is drawn on and accepted by a bank, it is called a banker’s
acceptance. When it is drawn on and accepted by a business firm, it is called a
trade acceptance. 16
Export and Import Financing
Bill of Lading
-A document issued to an exporter by a common carrier
transporting merchandise. It serves as a receipt, a contract, and
a document of title.
3 Purposes:
A receipt
A contract
A document of title

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COUNTERTRADE

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Countertrade
is a reciprocal form of international trade in which
goods or services are exchanged for other goods or
services rather than for hard currency. This type of
international trade is more common in developing
countries with limited foreign exchange or credit
facilities.

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The Popularity of Countertrade
● Popular among developing nations that lack the
foreign exchange reserves required to purchase
necessary imports
● World trade covered by some sort of countertrade
agreement range from highs of 8 and 10 percent by
value to lows of around 2 percent

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Types of Countertrade
● Barter

● Counter purchase

● Offset

● Switch trading

● Compensation or buybacks

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Pros and Cons of Countertrade
Pros
● Can give a firm a way to finance an export deal when
other means are not available
● A countertrade agreement may be required by the
government of a country to which a firm is exporting
goods orservices.
● Can be a strategic marketing weapon

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Pros and Cons of Countertrade continued
Cons
● Firms would normally prefer to be paid in hard currency.
● May involve the exchange of unusable or poor-quality goods
that the firm cannot dispose of profitably
● Most attractive to large, diverse multinational enterprises that
can use their worldwide network of contacts to dispose of
goods acquired in countertrading

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THANKYOU!
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