The document outlines the essential aspects of export and import practices, including reasons for exporting, sources of export financing, and necessary export documentation. It explains the roles of various institutions like the International Trade Administration and the Small Business Administration in providing support and counseling for exporters. Furthermore, it details payment procedures, shipping documents, and the use of foreign freight forwarders to facilitate international trade.

1. Export Import Practices

2. Learning Objectives
 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 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:

3. Why Export?
• Reasons to export
– To serve markets where the firm has no or limited
production facilities
– To satisfy a host government’s requirement that the local
subsidiary have exports
– To remain price-competitive in the home market
– To test foreign markets and foreign competition
inexpensively

4. Reasons to export?
– To offset domestic market’s cyclical sales
– To achieve additional sales
– To extend a product’s life cycle
– To respond strategically to foreign competitors
– To achieve the success the firm’s management has
seen others achieve
– To improve the efficiency of manufacturing equipment

5. 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

6. 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)

7. 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)

8. Show and Sell
• Trade events to facilitate international
trade
– U.S. pavilions
– Trade missions
– Product literature center
– Reverse trade missions

9. 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

10. 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)

11. 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

12. 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

13. Payment Procedures…
– Consignment
• Goods shipped to buyer; payment made when sold
• Payment risk assumed by seller
– Letter of credit (L/C)
• Document issued by buyer’s bank
– Promise to pay seller specified amount when bank
has received documents stipulated in letter of credit

14. Payment Procedures
• Letter of credit
• Confirmed L/C
– Correspondent bank in seller’s country agrees to
honor issuing bank’s L/C
• Irrevocable L/C
– Once the seller has accepted L/C, buyer cannot alter
or cancel it without seller’s consent

15. 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

16. Letter of Credit Transaction

17. Documents
• Air Waybill
– A bill of lading issued by an air carrier
• Pro Forma Invoice
– Exporter’s formal quotation: description of the
merchandise, price, delivery time, method of shipment,
ports of exit and entry, and terms of sale

18. Export Financing…
• Private Source – Commercial Banks
– Banker’s 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 bank’s obligation; may be bought and sold
at a discount in the financial markets like other commercial paper
– Factoring
• Discounting an account receivable without recourse

19. 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

20. 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

21. 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

22. Export Procedures
• Foreign freight forwarders act as agents for exporters
– Prepare documents
– Book space
– Offer advice about
• Markets
• Regulations
• Transportation
• Packing
– Supply cargo insurance

23. Official Procedures for Importing and
Exporting

24. Shipping Documents…
• Shipper’s 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

25. 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

26. 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

27. 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

28. Sea-Air Total Cost Comparison,
Shipment and Spare Parts

29. 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

30. 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

31. 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

32. 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