1. 15. Export and Import Management

2. Chapter Overview Organizing for Exports Indirect Exporting
Mechanics of Exporting
Role of the Government in Promoting Exports
Managing Imports—the Other Side of the Coin
Mechanics of Importing
Gray Markets

3. Introduction
Exporting is the most popular way for many companies to become international.
Exporting is usually the first mode of foreign entry used by companies.
Selling to foreign markets involves numerous high risks, arising from a lack of knowledge about and unfamiliarity with foreign environments, which can be heterogeneous, sophisticated, and turbulent.
Furthermore, conducting market research across national boundaries is more difficult, complex, and subjective than its domestic counterpart.

4. Introduction
With every export transaction there is an import transaction.
Aside from differences between the procedure and rationale for exports and imports, both are largely the same the world over
For successful development of export activities, systematic collection of information is critical.

5. 1. Organizing for Exports
Research for Exports: First use available secondary data to research potential markets.
The identification of an appropriate overseas market involves the following criteria:
Socioeconomic characteristics
Political and legal characteristics
Consumer variables (lifestyle, preferences, culture, taste, purchase behavior)
Financial conditions

6. 1. Organizing for Exports
It is also noted that export research for markets such as China and the Commonwealth of Independent States must still be done largely in the field, because very little prior data exist, and even when available, they are often not reliable.
Export Market Segments
Homogeneous market segments and clusters
Geographical and psychographic segments
Issues of standardization vs. adaptation

7. 2. Indirect Exporting
Indirect exporting involves the use of independent middlemen to market the firm’s products overseas.
Combination Export Manager (CEM)
Export Merchants
Export Broker
Export Commission House
Trading Companies (sogoshosha) (See Exhibit 15-1.)
Piggyback Exporting

8. Exhibit 15-1: Major Types of Trading Companies and Their Countries of Origin

9. 3. Direct Exporting
Direct exporting occurs when a manufacturer or exporter sells directly to an importer or buyer located in a foreign market (Exhibit 15-2).
Export Department
Export Sales Subsidiary
Foreign Sales Branch

10. Exhibit 15-2: Comparison of Direct and Indirect Exporting

11. 4. Mechanics of Exporting
The Automated Export System (AES) on the Internet
In the U.S., the AES which was launched in October 1999, enables exporters to file export information at no cost over the Internet. AES is a nationwide system operational at all ports.
Legality of Exports- can be proactively dealt with
Export license (general or validated license)

12. Exhibit 15-3: U.S. Government Departments and Agencies with Export Control Responsibilities

13. 4. Mechanics of Exporting
Export Transactions
The terms of sale
Monitoring the transportation and delivery of the goods to the assigned party
Shipping and obtaining the bill of lading
Bill of lading
A straight bill of lading
A shipper’s order bill of lading
Commercial invoice
Freight forwarders

14. 4. Mechanics of Exporting
Terms of Shipment and Sale
INCOTERMS 2000 (International Commercial Terms)
Terms of Shipment (Exhibit 15-4):
Ex-Works (EXW) at the point of origin
Free Alongside Ship (FAS)
Free on Board (FOB)
Cost and Freight (CFR)
Carriage Paid To (CPT)
Cost, Insurance and Freight (CIF)

15. Exhibit 15-4: Terms of Shipment

16. 4. Mechanics of Exporting
Payment Terms (Exhibit 15-5)
Advanced Payment
Confirmed irrevocable letter of credit
Unconfirmed irrevocable letter of credit
Documents Against Payment (D/P)
Documents Against Acceptance (D/A)
Open account
Consignment
Currency Hedging
Done through a banker or the firm’s treasury to counter foreign risk in the export transaction.

17. Exhibit 15-5: Terms of Payment in an Export Transaction

18. 5. Role of the Government in Promoting Exports
Export promotion activities generally comprise:
1. Export service programs
2. Market development programs
Export Enhancement Act of 1992
Some governments encourage inward FDI as a way to increase their exports (e.g., Argentina)
Export - Import Bank (Ex-Im Bank)
Tariff Concessions
Foreign Trade Zone

19. 5. Role of the Government in Promoting Exports
American Export Trading Company
The Export Trading Company Act of 1982
Export Regulations
The Trade Act of 1974
The Foreign Corrupt Practices Act (FCPA) of 1977
COCOM (Coordinating Committee for Multilateral Exports)
U.S. Antitrust Laws
Tariffs and local laws of foreign governments which may include: tariffs, local laws relating to product standards and classification, and taxes.

20. 6. Managing Imports – the Other Side of the Coin
For organizations in the United States, importing is considerably easier than for most firms in the rest of the world.
About 60 percent of the world’s trade is still denominated in U.S. dollars.
Most of the time, a U.S. importer does not have to bother with hedging foreign exchange transactions or with trying to accumulate foreign currency to pay for imports.

21. Exhibit 15-6: Model of Importer Buyer Behavior

22. 6. Managing Imports – the Other Side of the Coin
Model of Importer Buyer Behavior
Stage 1. Need recognition and problem formulation (triggered by competition and
unavailability)
Stage 2. Search (guided by country characteristics, vendor characteristics, and information sources)
Stage 3. Choice (vendors evaluation and selection)

23. 7. Mechanics of Importing
Steps in Importing
Finding a bank that either has a branch in the exporter’s country or has a correspondent bank
Establishing a letter of credit with the bank
Deciding on the mode of transfer of goods from exporter to importer
Checking compliance with national laws of the importing country
Making allowances for foreign exchange fluctuations
Fixing liability of payment of import transactions and warehousing

24. 7. Mechanics of Importing
Import Documents and Delivery
Entry documents filed by the consignee:
The bill of lading
Customs form 7533
Customs form 3461
Packing list
Commercial invoice
Also accompanied by evidence that a bond is posted with customs to cover any potential duties, penalties, and taxes
For Special Permit for Immediate Delivery, use Customs form 3461 for fast release after arrival.

25. 7. Mechanics of Importing
Import Duties in the United States
Ad valorem duty
Specific duty
Compound duty
Antidumping import duty
Countervailing duty
Duty drawback:
Direct identification drawback
Substitution drawback
All countries have procedures allowing for the temporary of goods across their borders.

26. 8. Gray Markets
Gray market channel refers to the legal export/import transaction involving genuine products into a country by intermediaries other than the authorized distributors.
From the importer side, it is also known as parallel imports.
Three conditions are necessary for gray markets to develop:
Products must be available in other markets.
Trade barriers must be low enough for parallel importers.

27. 8. Gray Markets
Price differentials among various markets must be great enough to provide the basic motivation for gray marketers. Such price differences arise for various reasons:
Currency fluctuations
Differences in market demand
Legal differences
Opportunistic behavior
Segmentation strategy
The WWW’s information transparency

28. 8. Gray Markets (See Exhibit 15-7.) How to Combat Gray Market Activity
Reactive Strategies
Strategic Confrontation
Participation
Price cutting
Supply interference
Promotion of gray market product limitations
Collaboration
Acquisitions

29. 8. Gray Markets Proactive Strategies
Product/service differentiation and availability
Strategic pricing
Dealer development
Marketing information systems
Long-term image reinforcement
Establishing legal precedence
Lobbying

30. Exhibit 15-7: How to Combat Gray Market Activity

31. Exhibit 15-7: How to Combat Gray Market Activity, cont’d