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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
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
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! DES, DAF, DEQ, DDU 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
Documents
Air Waybill
A bill of lading issued by an air carrier
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
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
Shipping Documents
Shippers Export Declaration
U.S. Department of Commerce form to control export shipments and record export statistics
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 Barges for shallow inland waterways Can drive onto vessel
Air Freight
Total cost may decrease Either the firm or the product may be airdependent 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
Import Duties
Importer must know how U.S./Canada calculates import duties