International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module B
Module B: Export and Import Practices
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YOUR CONTENT
Summary
Learning Objectives
Key Terms & Key Terms with Definitions
Content Outline
CONNECT TOOLS FOR CLASS PREPARATION
SmartBook
What is SmartBook?
How Does SmartBook Help You/Students?
How to assign SmartBook to ensure students come to class prepared?
ENGAGEMENT & APPLICATION (FACE TO FACE & ONLINE & HYBRID)
BOXED TEXT DISCUSSION QUESTIONS WITH SUGGESTED ANSWERS
IB IN PRACTICE
GLOBAL DEBATE
GET THAT JOB! FROM BACKPACK TO BRIEFCASE
Critical Thinking Questions
Global Edge Research Task
MiniCase
Bonus Activities
Video Suggestions
Team Exercises
Supplemental Lecture
Tools & Tricks
Controversial Issues
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Teaching Suggestions
ASSESSEMENT OF LEARNING
Interactive Applications
Assigning Interactives
Time-Saving Hints:
Connect Content Matrix
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Instructor Guide to Module B
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YOUR CONTENT
SUMMARY
Exporting is an important facet of international business for both large and small firms. No
company can afford to have local production facilities in every one of its overseas markets. Some
markets must be supplied by exporting from either the home plant or from a foreign subsidiary.
In spite of the fact that exporting can be profitable, only a small percentage of the U.S. GDP is
exported. The major hurdles for non-exporters to entering the export market are (1) finding
markets, (2) payment and financing procedures, and (3) export procedures.
The terms of payment employed in the export market are (1) cash in advance, (2) open account,
(3) consignment, (4) letters of credit, and (5) documentary drafts. A number of private and public
sources of financing are available.
Export procedures are considered problematic because of the documentation involved. In
addition to the usual domestic documents, goods for export require export licenses and export
bills of lading. Marine insurance is necessary because ocean going steamship companies assume
no responsibility for their cargo. The documents for collection generally include (1) commercial
invoices, (2) consular invoices, (3) certificates of origin, and (4) inspection certificates.
Importing is in one sense the reverse of exporting, but many of the concerns of importers and
exporters are similar.
LEARNING OBJECTIVES
LO B-1 Identify sources of export counseling and support.
LO B-2 Explain the Incoterms, pricing, terms of sale, and payment.
LO B-3 Describe sources of export financing.
LO B-4 Describe export documentation.
LO B-5 Identify import sources.
KEY TERMS AND DEFINITIONS
Air waybill (p. 455)
A bill of lading issued by an air carrier.
Banker’s acceptance (p. 457)
A time draft with a 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.
Bonded warehouse(p. 465)
An area authorized by customs authorities for storage of goods on
which payment of import duties is deferred until their removal.
Confirmed L/C (p. 454)
A confirmation made by a correspondent bank in the seller’s country
by which it agrees to honor the issuing bank’s letter of credit.
Conformité Européene (CE) mark
EU mark that indicates that merchandise confirms to European
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Instructor Guide to Module B
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(p. 460)
health, safety, and environmental requirements.
Customhouse brokers (p. 463)
Independent businesses that handle import shipments for
compensation.
Customs drawbacks(p. 458)
Rebates on customs duties.
Export bill of lading (B/L) (p. 459)
Document issued by the carrier that is a contract for the shipment, a
receipt for the goods shipped, and a certificate of ownership.
Export draft (p. 456)
An unconditional order drawn by the seller that instructs the buyer
to pay the draft on presentation (sight draft) or at an agreed future
date (time draft) and that must be paid before the buyer receives
shipping documents.
factoring (p. 457)
The sale of an exporter’s accounts receivable on ordinary goods, with
the balance of the payment due upon delivery or soon after.
forfaiting(p. 457)
The sale of an exporter’s accounts receivable on capital goods,
commodities, and other high-value goods, with the payment due at
least 180 days out.
Free trade zone (FTZ) (p. 458)
An area designated by a government as outside its customs territory.
Harmonized Tariff Schedule of
the United States (HTSA or
HTSUS) (p. 465)
U.S. version of the Harmonized System, the global tariff code, used
worldwide.
Incoterms (p. 451)
Universal trade terminology developed by the International Chamber
of Commerce.
Irrevocable L/C(p. 454)
A stipulation that the L/C cannot be canceled without the seller’s
consent.
Letter of credit (L/C) (p. 453)
Document issued by the buyer’s bank in which the bank promises to
pay the seller a specified amount under specified conditions.
Overseas Private Investment
Corporation (OPIC) (p. 457)
A government corporation that offers U.S. investors in developing
countries insurance against expropriation, currency inconvertibility,
and damage from wars and revolutions.
Exporter’s formal quotation, containing a description of the
merchandise, price, delivery time, method of shipping, terms of sale,
and points of exit and entry.
U.S. Department of Commerce form used to control export
shipments and record export statistics.
Conditions of a sale that stipulate the point at which costs and risks
are borne by the buyer.
Government agency that provides loans, guarantees, and insurance
programs to support American exporters.
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Geringer, McNett, Minor, Ball
Instructor Guide to Module B
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This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
LO B-1
Identify sources of export counseling and support
• Sources of export information, counseling, and
support
• Mistakes made by new exporters
• Export marketing plan
Key Terms:
•
Lecture Outline and Notes:
I. Introduction
Sources of Export Information, Counseling and Support
1. Two main reasons companies do not export
a. Preoccupation with home market
b. Reluctance to embark on a new & unknown operation
i.Lack knowledge on identifying foreign markets, payment & financing procedures,
and export procedures
Sources of Export Information, Counseling and Support
3. U.S. Small Business Administration (SBA)
4. U.S. Department of Education CIBER program
5. Other Sources of Assistance: State governments, World Trade Centers Association,
industry associations
2. Insufficient commitment by top management to overcome initial difficulties
3. Poor choice of overseas sales representatives
4. Chasing orders rather than establishing basis for profitable and orderly growth
6. Failure to treat international on equal basis with domestic customers
7. Assuming that a given marketing technique and product will work in all countries
8. Unwillingness to modify products to meet regulations or cultural preferences of other
countries
9. Failure to provide sales, service and warrantee information in local language
10. Failure to consider use of export management company
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Instructor Guide to Module B
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1. The plan, like the domestic plan, must state what must be done when, who should do
it, and how much money will be spent. See the Appendix for a sample plan outline
LO B-2
Explain the Incoterms, pricing, terms of sale, and payment
I. Incoterms, pricing, terms of sale, and payment
A. Incoterms
B. Pricing
C. Terms of sale
D. Export payment procedures
Key Terms:
• Terms of sale
• Incoterms
• Letter of credit (L/C)
• Confirmed L/C
• Irrevocable L/C
• Air waybill
• Pro forma invoice
• Export draft
Lecture Outline and Notes:
I. Incoterms, Pricing, Terms of Sale, and Payment
Incoterms
1. A series of 11 internationally standardized terms for international trade transactions.
2. Describe which party does which tasks, which party covers the costs, and which party
bears the risk
3. Responsibilities for various types of foreign sales are described in Table B.2.
Pricing
1. CIF and CFR terms of sale are more convenient for foreign buyers
1. Export sales agreements need to specify as simply as possible the duties of both buyer
and exporter
2. Two areas require special attention:
a. responsibilities for patent and trademark registration
b. designation of country and state or province whose laws will govern any contractual
dispute.
c. Consignment: Seller assumes all risk.
d. Letters of Credit: Document issued by buyer’s bank which promises to pay the seller
a specified amount when the bank has received certain documents specified in the
letter by a specified time.
i. Confirmed and irrevocable: letter will usually be confirmed and irrevocable.
When letter is confirmed by a bank in the seller’s country, that bank is
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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module B
ii. A pro forma invoice (looks like an invoice but is really a quotation) frequently
requested by buyer before order is placed. Bank will use it when opening letter
of credit.
iii. Letter of credit transaction (Figure B.2)
e. Documentary Drafts
i. An export draft is an unconditional order drawn by seller on buyer instructing
buyer to pay amount of draft upon presentation (sight draft) or at an agreed
future date (time draft).
ii. No guarantee that buyer will accept and pay a documentary draft whereas a
confirmed letter of credit will be paid if documents are in order.
LO B-3
Describe sources of export financing
• Export financing
Key Terms:
• Banker’s acceptance
• Factoring
• Forfaiting
• U.S. Export-Import
Bank (Ex-Im Bank)
• Overseas Private
Investment
Corporation (OPIC)
• Free trade zone
(FTZ)
• Customs drawbacks
Lecture Outline and Notes:
I. Export Financing
The competition forces exporters to offer credit. They must be familiar with private and public
sources of export financing.
1. Private Sources
a. Private banks
b. Factoring–discounting export accounts payable without recourse.
2. U.S. Export-Import Bank provides direct loans, intermediary loans, and guarantees.
3. Other Government Incentives
These are other government incentives to trade which are not strictly a part of export
offers investors insurance against expropriation, currency inconvertibility and
damages from wars or revolutions.
b. Foreign Trade Zones (FTZ)–the American version of a free trade zone. Goods may be
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module B
i. No import duties need be paid while goods are in the FTZ
ii. Customs drawbacks – rebates on customs duties that exported good may qualify
for
LO B-4
Describe export documentation.
• Export procedures and export documents
o Export shipments
Key Terms:
• Shipper’s export
declaration (SED)
• Export bill of lading (B/L)
• Conformité Européen
(CE) mark
Lecture Outline and Notes:
I. Export Procedures and Export Documents
Exporters are confronted with five or six times as many documents as are domestic shippers
(Table B.3 summarizes export documentation for major locations and the U.S.). However,
foreign freight forwarders will handle much of this work.
Foreign Freight Forwarders
1. Act as agents for exporters.
2. Prepare documents, book space with carriers and will supply marine insurance if asked.
Export Documents
1. Shipping documents include domestic bill of lading, export packing list, export licenses,
export bill of lading, export packing list, export licenses, export bill of lading, insurance
certificates, and Shipper’s Export Declaration.
c. Export Licenses
All goods except those going to U.S. possessions or Canada require either a general
export license or a validated export license.
d. General export license requires no special authorization.
e. Validated export license requires special authorization for a specific shipment and is
needed for strategic materials and all shipments to communist countries.
f. Export bill of lading-service three purposes: 1) contract for carriage between shipper
protect shipment from loss or damage while in transit. There are three kinds of
marine insurance: (1) basis perils, (2) broad named perils, and (3) all risks.
h. Along with the export invoice, many governments require a certificate of origin
i. An inspection certificate (e.g., EU CE mark) is required frequently by buyers of grain,
foodstuffs, and live animals
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module B
containerization, RO-RO and LASH, provide cost savings and enables exporters to reach new
markets.
Containers
Containers are large boxes 8′ x 8′ in cross section by 10, 20 or 40 feet in length which seller
fills in its own warehouse. They are sealed and not opened until goods arrive at final
destination. Materials handling time is reduced and the risks of damage and theft are
minimized.
RO-RO (Roll On-Roll Off) ships permit anything on wheels to be driven on and off. Loaded
trailers can be driven off in ports that do not have lifting equipment to unload containers.
LASH (Lighter Aboard Ship) vessels carry 60-foot long barges that are unloaded in deep
water and towed to shallow river ports where they are filled with cargo. The barges are
then brought back to the anchored LASH ship and loaded aboard.
Air Freight
1. Air freight has had a profound effect on international business because shipments
which required 30 days for delivery by ocean freight are now delivered in 24 hours.
2. Huge freight planes can carry 200,000 pounds of cargo.
3. Although airfreight rates are higher than ocean rates, the total cost of shipping by air is
frequently less expensive. Even when total costs for airfreight are higher, it may still be
advantageous to ship by air when production and opportunity costs are considered.
Also the firm may be air-dependent, the products may be air-dependent and airfreight
may enable the exporter to compete with overseas manufactures.
LO B-5
Identify import sources
• Importing
• Sources for imports
• Customhouse brokers
• Import duties
Key Terms:
• Customhouse brokers
• Bonded warehouse
• Harmonized Tariff
Schedule of the
United States (HTSA
or HTSUS)
Lecture Outline and Notes:
identifies import sources in a number of ways:
Sources for imports
1. If similar products are already in the market, inspect them at a retailer who sells them
to see where they are made. Imported products are required by law to have country of
origin clearly marked. Then call the country’s embassy and ask for names of
manufacturers. Also call foreign chambers of commerce that are in major American
cities. Once you have names and addresses, write for quotations.
2. If product not being imported, try the sources in point 1 and try international
department of banks as well. Try the electronic bulletin board of the World Trade
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Geringer, McNett, Minor, Ball
Instructor Guide to Module B
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Centers. You can put your name in their data banks that are seen around the world. The
Internet has many sites where exporters from other countries are offering their
products to importers.
3. When you visit foreign countries, look for articles to import.
Customhouse Brokers
1. Help importers import. They are to importers what foreign freight forwarders are to
exporters. They can provide such services as arranging transportation for the goods
after they leave Customs and advising clients as to import quotas. They can arrange to
place goods in a bonded warehouse when necessary.
Import Duties
Every importer should know how Customs calculates import duties and the importance of
product classification.
1. The Harmonized System–is an important classification system used by all developed
nations. A firm that feels it is paying excessive import duties can take the matter to
court if it cannot reach an agreement with customs officials.
a. HTSUSA is U.S. version
2. Advice to new importers: fuly disclose to the U.S. Customs Service all foreign and
financial arrangements before passing goods through U.S. Customs. Penalties for fraud
are high.
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