Importing and Exporting International Business David J Boggs

Importing and Exporting International Business David J. Boggs, Ph. D. Eastern Illinois University

Overview n n n Review of entry modes Overview of exporting and importing Government involvement Websites for help and information Paying and collecting payment International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Risk, Control, Experience Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall International

Exporting and Product Characteristics Value density Product’s value relative to its weight and volume The lower a product’s value density, the more localized is its distribution system International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Export Research Trade shows and missions Interviews and focus groups Surveys Environmental scanning International

Trade Shows n http: //www. globalspeak. com/html/exportgov/webcasts. asp International Business 5 e, Copyright ©

Avoiding Export Blunders Conduct market research Obtain export advice Consider a freight forwarder International

Freight Forwarders n n n Exporter-importer agent Can arrange to move cargo “dock-to-door" Advise on transport modes, packing, and costs (freight, port, consular, documentation, insurance, handling) Handle paperwork Reserve cargo space on a vessel, aircraft, train, or truck www. forwarders. com International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Degree of Export Involvement Direct exporting Indirect exporting (sell to buyers) (sell to intermediaries) • Sales representatives • Distributors • Agents • Export management companies • Export trading companies International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

U. S. States Go Global International Business 5 e, Copyright © 2010 Pearson Education,

Government Agreements n n WTO Most Favored Nation (MFN) status Generalized System of Preferences (GSP) Caribbean Basin Initiative (CBI) Andean Trade Preference Act (ATPA) International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

USA Free Trade Agreements n n n North American FTA Central American FTA U. S. – Israel FTA U. S. – Jordan FTA The U. S. – Chile FTA The U. S. – Singapore FTA (NAFTA) (CAFTA-DR) (ILFTA) (JFTA) (US-CFTA) (US-SFTA) International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Embargoed Countries n n n Cuba Iran North Korea Sudan Syria Burma International Business

Customs & Border Protection n n Government agency Collects taxes/tariffs/duties Clears or restricts imports and exports Protects health and security www. cbp. gov International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Restricted or Prohibited Goods n What do you think are goods that the USA

Restricted or Prohibited Goods n n n n n Cosmetics and prescription drugs Food and agricultural products Cuban cigars and Mexican marijuana Alcoholic beverages and firearms Radioactive materials and explosives Wildlife products (animals, furs, skins, shells) Obscene books Cultural Artifacts Matches, bongs, switchblades, lottery tickets, and more. . . International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Quotas n What do you think are goods that the USA restricts through the

Products with Quotas n n n n Olives, anchovies and tuna Brooms Ethyl alcohol Lamb Line pipe Milk and cream Cotton Wire rod International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Customs Paperwork n n n Commercial or pro forma invoice Entry manifest or packing list Certificate of origin Evidence of right to make entry Consider using a customs broker International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Choose USPS for Value < $2000 n n n Ease in clearing shipments Applicable duties collected by the letter carrier Small packages ship inexpensively No need to clear shipments personally Value < $250 for some goods (e. g. purses, gloves, footwear, toys, pillows) A courier can also provide seamless delivery International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Helpful Websites n n n Export. gov DOC. gov Fedstats. gov USITC. gov Trade. gov http: //www. globalspeak. com/html/exportgov/webcasts. asp International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Export/Import Financing International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as

High-Risk Approaches Advance payment Importer pays exporter for merchandise before it ships Open account Exporter ships merchandise and later bills importer International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Documentary Collection Bank acts as intermediary without accepting financial risk Draft (bill of exchange) Document that orders an importer to pay an exporter a specified sum of money at a specified time Bill of lading Contract between an exporter and shipper specifying destination and shipping costs for merchandise International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Documentary Collection Process International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing

Letter of Credit Importer’s bank issues a document stating that the bank will pay the exporter when exporter fulfills document’s terms è Irrevocable è Revoca ble è Confirm ed International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Letter of Credit Process International Business 5 e, Copyright © 2010 Pearson Education, Inc.

Forms of Countertrade Barter Direct exchange without money Counterpurchase Sale to a country in return for promise of future purchase from it Offset agreement Offset a hard-currency sale to a nation with future hard-currency purchase Switch trading Sale by a company of an obligation to purchase from a country Buyback Export of industrial equipment in return for products the equipment produces International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Review n n n Review of entry modes Overview of exporting and importing Government involvement Websites for help and information Paying and collecting payment International Business 5 e, Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

n n n n n n n n n Customs brokers are licensed (e. g. power of attorney) to conduct customs transactions on behalf of others Bill of lading Airway bill Common carriers transport or take responsibility for transporting goods for the public and are typically liable for goods under their control Important Issues Merchandise description and tariff classification Country of origin Valuation Intellectual property violation Compliance with agency requirements (e. g. FDA, DOT, FTC, EPA) Policies that Constrain Imports Antidumping And Countervailing Duties Embargoes Other Notes Personal vs. Commercial Use Most commercial imports must be conspicuously and durably marked in English with the country of origin Foreign Trade Zones Avoid tariffs Assemble or reassemble products Hold stock for delivery Manufacture, ship, and tranship products Exporting Payment procedures Export restrictions Import legality Top 20 Metropolitan Area Exporters Ranked by First Half 2008 Export Value (in Millions of U. S. Dollars) Rank Metropolitan Area Fact sheets 2007 FH 2008 1 New York-Northern New Jersey-Long Island, NY-NJ-PA 80, 852 39, 721 49, 955 2 Houston-Sugar Land-Baytown, TX 62, 815 29, 894 40, 199 3 Los Angeles-Long Beach-Santa Ana, CA 54, 433 25, 985 29, 946 4 Seattle-Tacoma-Bellevue, WA 53, 893 25, 056 27, 058 5 Detroit-Warren-Livonia, MI 49, 165 24, 262 23, 123 6 Chicago-Naperville-Joliet, IL-IN-WI 30, 635 14, 818 17, 667 7 Miami-Fort Lauderdale-Miami Beach, FL 26, 197 12, 325 16, 189 8 San Jose-Sunnyvale-Santa Clara, CA 28, 210 13, 945 14, 042 9 Minneapolis-St. Paul-Bloomington, MN-WI 21, 628 9, 954 12, 901