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Export and Import Management

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Chapter Overview
1. Organizing for Exports
2. Indirect Exporting
3. Direct Exporting
4. Mechanics of Exporting
5. Role of the Government in Promoting Exports
6. Managing Importsthe Other Side of the Coin
7. Mechanics of Importing
8. Gray Markets
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Introduction
Exporting is the most popular way for many
companies to become international.
Exporting is usually the first mode of foreign entry
used by companies.
Selling to foreign markets involves numerous high
risks, arising from a lack of knowledge about and
unfamiliarity with foreign environments, which
can be heterogeneous, sophisticated, and turbulent.
Manufactured goods accounted for almost 60
percent of the exports of developing countries (see
Exhibit 17-1).
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Introduction (contd.)
Because of every export transaction, there is, by
definition, an import transaction as well.
Aside from differences between the procedure and
rationale for exports and imports, both are largely
the same the world over.
For successful development of export activities,
systematic collection of information is critical.
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1. Organizing for Exports
Research for Exports: The first step is to use
available secondary data to research potential
markets.
The identification of an appropriate overseas
market involves the following criteria:
1. Socioeconomic characteristics
2. Political and legal characteristics
3. Consumer variables (lifestyle, preferences,
culture, taste, purchase behavior)
4. Financial conditions
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1. Organizing for Exports (contd.)
Export Market Segments
Homogeneous market segments and clusters
Geographical and psychographic segments
Issues of standardization vs. adaptation

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2. Indirect Exporting
Indirect exporting involves the use of independent
middlemen to market the firms products overseas.
Combination Export Manager (CEM)
Export Merchants
Export Broker
Export Commission House
Trading Companies (sogoshosha; see Exhibit
17-1)
Piggyback Exporting
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3. Direct Exporting
Direct exporting occurs when a manufacturer or
exporter sells directly to an importer or buyer
located in a foreign market (see Exhibit 17-2).
Export Department
Export Sales Subsidiary
Foreign Sales Branch
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4. Mechanics of Exporting
The Automated Export System (AES) on the
Internet
In the U.S., the AES which was launched in
October 1999, enables exporters to file export
information at no cost over the Internet. AES is
a nationwide system operational at all ports.
Legality of Exports
Export license (general or validated license)
Export Transactions
The terms of sale
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4. Mechanics of Exporting (contd.)
Monitoring the transportation and delivery of
the goods to the assigned party
Shipping and obtaining the bill of lading
Bill of lading
A straight bill of lading
A shippers order bill of lading
Commercial invoice
Freight forwarders
Terms of Shipment and Sale
INCOTERMS 2000 (International Commercial
Terms
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4. Mechanics of Exporting (contd.)
Terms of Shipment (see Exhibit 17-5):
Ex-Works (EXW) at the point of origin
Free Alongside Ship (FAS)
Free on Board (FOB)
Cost and Freight (CFR)
Carriage Paid To (CPT)
Cost, Insurance and Freight (CIF)
Payment Terms (see Exhibit 17-6)
Advanced Payment
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4. Mechanics of Exporting (contd.)
Confirmed irrevocable letter of credit
Unconfirmed irrevocable letter of credit
Documents Against Payment (D/P)
Documents Against Acceptance (D/A)
Open account
Consignment
Currency Hedging
It is done through a banker or the firms
treasury in case there is a foreign risk in the
export transaction.
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5. Role of the Government in
Promoting Exports
Export promotion activities generally comprise:
1. Export service programs
2. Market development programs
Export Enhancement Act of 1992
Export - Import Bank (Ex-Im Bank; see Exhibit
17-7)
Tariff Concessions
Foreign Trade Zones
Foreign Sales Corporation (FSC)
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5. Role of the Government in
Promoting Exports (contd.)
American Export Trading Company
The Export Trading Company Act of 1982
Export Regulations:
The Trade Act of 1974
The Foreign Corrupt Practices Act (FCPA) of
1977
COCOM (Coordinating Committee for
Multilateral Exports)
U.S. Antitrust Laws

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5. Role of the Government in
Promoting Exports (contd.)
Tariffs and local laws of foreign governments
which may include: tariffs, local laws relating
to product standards and classification, and
taxes.

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6. Managing Imports the Other
Side of the Coin
For organizations in the United States, importing
is considerably easier than for most firms in the
rest of the world.
About 60 percent of the worlds trade is still
denominated in U.S. dollars.
Most of the time, a U.S. importer does not have
to bother with hedging foreign exchange
transactions or with trying to accumulate foreign
currency to pay for imports.

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6. Managing Imports the Other
Side of the Coin (contd.)
Model of Importer Buyer Behavior (see Exhibit
17-8):
Stage 1. Need recognition and problem
formulation (triggered by competition and
unavailability)
Stage 2. Search (guided by country
characteristics, vendor characteristics, and
information sources)
Stage 3. Choice (vendors evaluation and
selection)
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7. Mechanics of Importing
Steps in Importing:
Finding a bank that either has a branch in the
exporters country or has a correspondent bank
Establishing a letter of credit with the bank
Deciding on the mode of transfer of goods from
exporter to importer
Checking compliance with national laws of the
importing country
Making allowances for foreign exchange
fluctuations
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7. Mechanics of Importing (contd.)
Fixing liability of payment of import
transactions and warehousing
Import Documents and Delivery
Entry documents filed by the consignee:
The bill of lading
Customs form 7533
Customs form 3461
Packing list
Commercial invoice
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7. Mechanics of Importing (contd.)
Also accompanied by evidence that a bond is
posted with customs to cover any potential
duties, penalties, and taxes
For Special Permit for Immediate Delivery, use
Customs form 3461 for fast release after
arrival.
Import Duties in the United States:
Ad valorem duty
Specific duty
Compound duty
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7. Mechanics of Importing (contd.)
Antidumping import duty
Countervailing duty
Duty drawback:
Direct identification drawback
Substitution drawback
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8. Gray Markets
Gray market channel refers to the legal
export/import transaction involving genuine
products into a country by intermediaries other
than the authorized distributors.
From the importer side, it is also known as
parallel imports.
Three conditions are necessary for gray markets to
develop:
1. Products must be available in other markets.
2. Trade barriers must be low enough for
parallel importers.

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8. Gray Markets (contd.)
3. Price differentials among various markets
must be great enough to provide the basic
motivation for gray marketers. Such price
differences arise for various reasons:
Currency fluctuations
Differences in market demand
Legal differences
Opportunistic behavior
Segmentation strategy
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8. Gray Markets (contd.)
How to Combat Gray Market Activity (see Exhibit
17-9):
Reactive Strategies:
Strategic Confrontation
Participation
Price cutting
Supply interference
Promotion of gray market product
limitations
Collaboration
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8. Gray Markets (contd.)
Acquisitions
Proactive Strategies:
Product/service differentiation and
availability
Strategic pricing
Dealer development
Marketing information systems
Long-term image reinforcement
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8. Gray Markets (contd.)
Establishing legal precedence
Lobbying
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