Chapter 14 – Export and Import Practices
Answers to Questions
1. In exporting, to what point does the seller pay transportation and delivery costs?
Where does the responsibility for loss or damage pass to the buyer? Use Incoterms in
your response.
2. Explain the various export payment terms that are available and the protection they
offer the seller.
Cash in Advance offers most protection to the seller because the seller receives payment
before the good ship. Open Account, Consignment (payment made when good sold),
3. What is the procedure for a letter-of-credit transaction?
4. The manager of the international department of the Cape Cod Five Bank learns on the
way to work that the ship on which a local exporter shipped some goods to Spain,
Wellfleet oysters in salt water tanks, has sunk in high seas. She has received all the
documents required in the letter of credit and is ready to pay the exporter for the
shipment. In view of the news about the ship, the manager now knows that the
Spanish customer will never receive the goods. Should the manager pay the exporter,
or should she withhold payment and notify the overseas customer?
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Chapter 14 – Export and Import Practices
5. What is a foreign trade zone? Check with a customhouse broker or a U.S. Customs
official or do some online research to determine the advantages of a foreign trade
zone over a bonded warehouse.
Foreign Trade Zone is the name given to the American version of a free trade zone.
6. What are the purposes of an export bill of lading?
The export bill of lading serves three purposes: (1) contract for carriage between the
7. An importer brings plain sports shirts into the U.S. because the import duty is lower
than it is for shirts with adornments. In New Jersey, the importer sews on a figure of a
fox. Could the importer do this operation in a foreign trade zone?
No, the importer should not do this in an FTZ because the shirts are not considered to
8. How would you find sources for a product that you want to import?
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Chapter 14 – Export and Import Practices
9. What does a customhouse broker do?
A customhouse broker assists the importer pass its goods through Customs. The
10. What does a freight forwarder do?
Minicase:
State Export Manufacturing Sales Price
If Jim Mason chooses to reduce his price in order to secure the bid, he could deduct the all or a
portion of sales expense and the advertising and promotional expense from the $21,500.
Deduction of research and development would not be prudent. The price for the goods from the
factory door is as follows:
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Chapter 14 – Export and Import Practices
globalEDGE
Exercise One
You own a small business, and for the first time, are considering exporting. As a new
exporter, you want to consult several resources that offer guidance on how to export.
Locate the “Trade Tutorials” category on globalEDGE and identify three sources that you
could use to learn more about exporting. Provide a description of the services available
for new exporters through each of these sources.
Answer
http://globaledge.msu.edu
Go to Resource Desk: http://globaledge.msu.edu/ResourceDesk/
Exercise Two
Your company is planning to expand its operations to Spain. Since countries have
different import requirements, top management has requested a report on Spain’s
procedures and regulations for imports. Utilize FedEx Country Profiles provided by the
FedEx International Resource Center to find the information requested.
Answer
http://globaledge.msu.edu
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