This chapter covers:

16

Why firms export and

problem areas
Sources of export
counseling
Terms of sale

Export and Import Practices

Sources of export
financing
Foreign freight
forwarders
Export documents
Materials handling
Import sources
HTSUSA

International Business
by Ball, McCulloch, Frantz,
Geringer, and Minor

Chapter Objectives
Explain why firms export and problem areas of
exporting
Identify the sources of export counseling
Describe the main elements of the export sales

assistance program of the US Department of

Commerce
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
Explain the Harmonized Tariff Schedule of the
United States (HTSUSA)
16-02

Why Export?
Reasons to export

To serve markets where

the firm has no

production facilities.
the local plant does
not produce the firms
complete product mix
To satisfy a host
governments
requirement that the
local subsidiary export

To remain competitive

16-03

in the home market

To test foreign markets
and foreign
competition
inexpensively
To meet actual or
prospective customers
requests for the firm
to export
To offset cyclical sales
of the domestic market

Why Export?

16-04

To achieve additional sales

To extend a products life
cycle
To distract foreign
competitors that are in the
firms home market by
entering their home
markets
To partake in the kind of
success the firms
management has seen
others achieve by
exporting
To improve equipment
utilization rates

Most Common Mistakes

for New Exporters
Failure to develop an
international marketing plan
Insufficient commitment by
top management
Insufficient care in selecting
overseas distributors
Chasing orders from around
the world
Neglecting export business
when the home market
booms
Failure to treat international
distributors on an equal
basis with domestic
16-05

Assuming automatic
success
Unwillingness to modify
products
Failure to print service,
sale and warranty
messages in local language
Failure to consider use of
an export management
company
Failure to consider
licensing or joint venture
Failure to provide readily
available service for the
product

Why not export?

Two major reasons

U.S. firms give for

not exporting
Preoccupation
with the vast
American market
A reluctance to
become involved
in a new and
unknown
operation

16-06

Problem Areas

Locating foreign markets

Payment and financing procedures

Dont know where to start

Fear the complexity

Export procedures
Dont know that information and
government support are available
Small Business Administration, Small
Business Development Centers, private
consultants

16-07

Show and Sell

Four kinds of trade events that facilitate

international trade
U.S. pavilions

Trade missions

Focus on industry sector

Product literature center

Organized by the Dept. of Commerce

Trade specialists distribute at trade shows

Reverse trade missions

16-08

Visits to U.S. by foreign governments

Export Marketing Plan

Essentially the same as

the domestic marketing
plan
The plan should be
specific about
The markets to be
developed
The marketing
strategy for serving
them
The tactics required to
make the strategy
operational

16-09

Marketing Mix
Foreign customers may

insist on one of the

following 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)

Sales Agreement

16-10

Should specify the

duties of the
representative and the
firm
Designation of
responsibilities for
patent and
trademark
registration
Designation of
whose laws will
govern contractual
dispute

Payment and Financing Procedures

Types of payment terms offered by exporters
to foreign buyers
Cash in advance
Open account
Consignment
Letter of credit
Documentary drafts

16-11

Export Payment Terms

Cash in Advance

When credit standing

Consignment

Goods are shipped to

of the buyer is not

known or is uncertain

Open Account

When a sale is made

on open account
The seller assumes
all of the risk
Terms should be
offered only to
reliable customers
in economically
stable countries
16-12

the buyer and payment

is not made until they
have been sold
All the risk is assumed
by the seller

Letters of Credit

This document is issued

by the buyers bank
which promises to

pay the seller a

specified amount
when the bank has
received certain
documents stipulated
in the letter of credit

Export Payment Terms

Letters of Credit
Confirmed
Act of a

correspondent bank
in the sellers
country by which it
agrees to honor the
issuing banks letter
of credit
Irrevocable
Once the seller has
accepted the credit,
the customer cannot
alter or cancel it
without the sellers
consent

Air Waybill
Issued by carrier to
be presented as
proof the shipment
has been made
Pro Forma Invoice
exporters formal
quotation containing
a description of the
merchandise, price,
delivery time,
proposed method of
shipment, ports of
exit and entry, and
terms of sale

Export Payment Terms

Documentary Drafts
An export draft
is an unconditional

order drawn by the

seller on the buyer
instructing the buyer
to pay the amount of
the order on
presentation (sight
draft) or at an
agreed future date
(time draft)

16-14

Export Financing

Private Source Commercial Banks

Bankers acceptance
Factoring

Factoringis afinancial transactionin which a

businesssellsitsaccounts receivable(i.e.,invoices to a third party
(called afactor) at adiscount
Provides working capital to manufacturers short of cash.
Is essentially discounting without recourse.

Forfaiting
Denotes the purchase of obligations that arise from the
sale of goods and services and fall due at some date
beyond the 90 to 180 days that is customary of factoring

16-15

Export Financing

Forfaiting

Forfaiting is a method of trade finance that allows exporters to

obtain cash by selling their medium and long-term foreign
accounts receivable at a discount on a without recourse
basis. A forfaiter is a specialized finance firm or a department
in a bank that performs non-recourse export financing through
the purchase of medium and long-term trade receivables.
Without recourse or non-recourse means that the forfaiter
assumes and accepts the risk of non-payment.

Denotes the purchase of obligations that arise

from the sale of goods and services and fall due
at some date beyond the 90 to 180 days that is
customary of factoring

16-16

Export Financing

Export-Import Bank
The U.S. Export Import
Bank (Eximbank)
Government agency
responsible for
aiding the export of
American goods and
services

16-17

Variety of loan,
guarantee, and
insurance programs

Available to any
American export firm
regardless of size

Two types of loans

available from the
Eximbank
Direct loans to
foreign buyers of
American exports
Intermediary loans to
responsible parties

Foreign government
lending agency that
relends to foreign
buyers of capital
goods and related
services

Export Procedures

Foreign freight
forwarders act as agents
for exporters
Prepare documents
Book space
Offer advice about

16-18

Markets
Regulations
Transportation
Packing

Supply cargo insurance

After shipment,
forward documents

Shipping Documents

Shippers Export
Declaration
This document is
required by the
Department of
Commerce to control
exports and supply
export statistics
Export License
General for most
products
Validated for scarce
materials, strategic
goods, technology, or
war materials

16-19

Export bill of Lading

Serves three purposes
a contract for
carriage between
the shopper and the
carrier.
a receipt from the
carrier for the
goods shipped.
a certificate of
ownership
Insurance Certificate
Evidence shipment is
insured

Collection Documents

The most common documents for collection

Commercial invoices

Consular invoices

Purchased from the consul and prepared in

local language

Certificates of origin

Add origin of goods, export packing marks, and

a clause stating good will not be diverted

Issued by local Chamber of Commerce

Inspection certificates

16-27

Frequently required for grain, food, live animals

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
Accidental importing also takes place

16-21

Import Rules
Disclose fully to the
US Customs Service
all foreign and
financial
arrangements
Ask advice of a
customhouse broker
before making the
transaction
Calculate carefully
the landed price in
advance

16-22

EXPORTS, IMPORTS,
and TRADE BALANCE

ExIm Bank

Ex-Im Bank Highlights:

www.exim.gov/index.cfm
Russia Portal:
Ex-Im Bank Opportunities in Russia
Mexico: web portals for U.S. exporters
y los compradores de Mexico
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