A Report

on
Export Import Practices



Learning Objectives
Identify some sources of export financing

The activities of a foreign freight forwarder

The kinds of export documents required

Identify import sources


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 export

To serve markets where the firm has no or
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
DEQ/DES Delivered Ex Quay/Ship named port of delivery
DDP/DDU Delivered Duty Paid/unpaid ; EXW Just keep outside/warehouse
CIF insurance for maritime; DES CIF + insurance for goods as well
In 2010, eliminated!
DES, DAF, DEQ, DDU
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 longe r 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