chapter seventeen Export and Import Practices McGraw-Hill/Irwin International Business, 11/e Copyright © 2008 The McGraw-Hill Companies, Inc All rights reserved Learning Objectives 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 17-3 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 the Harmonized Tariff Schedule of the United States (HTSUSA) 17-4 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 17-5 Reasons to export? cont’d – – – – – 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 17-6 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 17-7 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.export.gov/exportbasics/ticredirect.asp • 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) 17-8 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) 17-9 Show and Sell • Trade events to facilitate international trade – U.S pavilions – Trade missions – Product literature center – Reverse trade missions 17-10 Export Financing cont’d • 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 17-24 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 17-25 Export Procedures • Foreign freight forwarders act as agents for exporters – Prepare documents – Book space – Offer advice about • Markets • Regulations • Transportation • Packing – Supply cargo insurance 17-26 Official Procedures for Importing and Exporting 17-27 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 17-28 Shipping Documents, cont’d • 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 17-29 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 17-30 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 17-31 Export Shipments • Containers – Reduce theft and handling cost • 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 17-32 Sea-Air Total Cost Comparison, Shipment and Spare Parts 17-33 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 17-34 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 17-35 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 17-36 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 calculates import duties • The Harmonized Tariff Schedule of U.S (HTSUSA) – American version of the Harmonized System used worldwide to classify imported products 17-37 Page from the HTSUSA 17-38 ... problem areas of exporting Identify the sources of export counseling and support Discuss the meaning of the various terms of sale 17- 3 Learning Objectives Identify some sources of export financing... 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. .. achieve the success the firm’s management has seen others achieve – To improve the efficiency of manufacturing equipment 17- 6 Reasons not to Export • Two major reasons – Preoccupation with the vast