International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
Bonus B-1
Module B: Export and Import Practices
YOUR CONTENT
Summary
Learning Objectives
Key Terms and Definitions
Content Outline
ENGAGEMENT & APPLICATION
Boxed Text Discussion Questions with Suggested Answers
End of Module Exercises
Critical Thinking Questions
globalEDGE Research Task
MiniCase
Bonus Activities
Video Suggestions
CONNECT TOOLS FOR ASSESSEMENT OF LEARNING
Connect Content Matrix
Connect Activities
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
Bonus B-2
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
LEARNING OBJECTIVES
LO B-1 Identify sources of export counseling and support.
KEY TERMS AND DEFINITIONS
air waybill (p. 473)
A bill of lading issued by an air carrier.
banker’s acceptance (p. 476)
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. 482)
An area authorized by customs authorities for storage of
goods on which payment of import duties is deferred until
their removal.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
Bonus B-3
confirmed L/C (p. 472)
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 (p. 479)
EU mark that indicates that merchandise confirms to
European health, safety, and environmental requirements
customhouse brokers (p. 482)
Independent businesses that handle import shipments for
compensation
customs drawbacks (p. 477)
Rebates on customs duties
export bill of lading (B/L) (p.
478)
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. 475)
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. 476)
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. 476)
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. 477)
An area designated by a government as outside its customs
territory
Harmonized Tariff Schedule of
the United States (HTSA or
HTSUS) (p. 484)
U.S. version of the Harmonized System, the global tariff code,
used worldwide
Incoterms (p. 470)
Universal trade terminology developed by the International
Chamber of Commerce
irrevocable L/C (p. 472)
A stipulation that the L/C cannot be canceled without the
seller’s consent
letter of credit (L/C) (p. 472)
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. 476)
A government corporation that offers U.S. investors in
developing countries insurance against expropriation,
currency inconvertibility, and damage from wars and
revolutions
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
Bonus B-4
pro forma invoice (p. 474)
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
shipper’s export declaration
(SED) (p. 478)
U.S. Department of Commerce form used to control export
shipments and record export statistics
terms of sale (p. 470)
Conditions of a sale that stipulate the point at which costs and
risks are borne by the buyer
U.S. Export-Import Bank (Ex-
Im Bank) (p. 476)
Government agency that provides loans, guarantees, and
insurance programs to support American exporters
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
Bonus B-5
CONTENT OUTLINE
The following section provides the flow of information using the LEARNING OBJECTIVES as a
guide, KEY TERMS learners will need to take away from the course, and LECTURE NOTES to drive
home teaching points.
LO B-1
Identify sources of export counseling and support.
• Sources of Export Information, Counseling, and
Support
o Mistakes Made by New Exporters
o Export Marketing Plan
I. Sources of Export Information, Counseling, and Support
1. Two main reasons companies do not export: Preoccupation with home market and
reluctance to embark on a new and unknown operations.
a. Lack knowledge on identifying foreign markets, payment, financing procedures,
and export procedures.
2. Dept of Commerce, U.S. government’s trade portal, export.gov, and EU’s Export
Helpdesk and Japan’s METI.
4. U.S. Department of Education CIBER program.
5. Other Sources of Assistance: State governments, World Trade Centers Association,
industry associations.
1. Failure to get qualified counseling and develop export strategy.
3. Poor choice of overseas sales representatives.
4. Chasing orders rather than establishing basis for profitable and orderly growth.
5. Neglecting exports when home market booms.
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
9. Failure to provide sales, service and warrantee information in local language.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
11. Failure to consider joint ventures and licensing.
12. Failure to provide readily available servicing for the product.
D. Export Marketing Plan
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.
• Incoterms, Pricing, Terms of Sale, and Payment
o Incoterms
o Pricing
o Terms of Sale
o 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
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.1.
Pricing
1. CIF and CFR terms of sale are more convenient for foreign buyers.
Terms of Sale
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
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
1. These may be (1) cash in advance, (2) open account, (3) consignment, (4) letters of
credit, and (5) documentary drafts (Figure B.4 shows the risk/cost trade-off of each).
a. Cash in Advance: Few customers will pay cash in advance.
b. Open Account: Seller assumes all risk so these terms must be offered only to reliable
customers in economically stable countries.
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
obligated to pay if exporter conforms to letter’s terms. (Figure B.2 shows a
sample.)
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.3).
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
LO B-3
Describe sources of export financing
• Export Financing
Key Terms:
• banker’s acceptance
• factoring
• forfaiting
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
I. Export Financing
A. 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.
c. Forfeiting—purchase of obligations arising from sale of goods and services which fall
due at some date generally between 90-180 days, without recourse.
2. U.S. Export-Import Bank provides direct loans, intermediary loans, and guarantees.
3. These are other government incentives to trade which are not strictly a part of export
financing.
a. Overseas Private Investment Corporation (OPIC)—a government corporation which
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 brought into an FTZ and stored, inspected, repackaged or combined with
American components.
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)
I. Export Procedures and Export Documents
Exporters are confronted with five or six times as many documents as are domestic
shippers (Table B.2 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.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
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.
a. Export Licenses—All goods except those going to U.S. possessions or Canada require
either a general export license or a validated export license.
b. General export license requires no special authorization.
c. Validated export license requires special authorization for a specific shipment and is
needed for strategic materials and all shipments to communist countries.
d. Export bill of lading-service three purposes: 1) contract for carriage between shipper
and carrier, (2) receipt from the carrier for the goods shipped, (3) certificate of
ownership. Bills of lading for foreign shipments are called air waybills (air shipments)
health, safety, and environmental requirements.
II. Export Shipments
The tremendous advance in materials handling techniques over the past two decades such
as containerization, RO-RO and LASH, provide cost savings and enables exporters to reach
new markets.
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.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
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 manufacturers.
LO B-5
Identify import sources.
• Importing
o Sources for Imports
o Customhouse Brokers
o Import Duties
Key Terms:
• customhouse brokers
• bonded warehouse
• Harmonized Tariff
Schedule of the
United States (HTSA
or HTSUS)
I. Importing
a. Many of the concerns of exporters and importers are similar. The prospective importer
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
Centers. You can put your name in their data banks that are seen around the world. The
3. When you visit foreign countries, look for articles to import.
Customhouse Brokers
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
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
Bonus B-11
1. Every importer should know how Customs calculates import duties and the importance
of product classification.
2. 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.
3. Advice to new importers: fully disclose to the U.S. Customs Service all foreign and
financial arrangements before passing goods through U.S. Customs, as penalties for
fraud are high.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module B
ENGAGEMENT & APPLICATION
BOXED TEXT DISCUSSION QUESTIONS WITH SUGGESTED ANSWERS
IB IN PRACTICE: Bottles of Australia: A Small Company Pursuing Export Opportunities
This box feature is about Bottles of Australia (BOA), a manufacturer of custom-printed sports
bottles in Australia. It describes how they started in 1989 with just $5,000 and now export to 22
nations. One of the managers of BOA explains that they started with “accidental exports,”
1. Many companies engage in “accidental” exporting. Should companies avoid this practice?
Why or why not?
Some students will suggest that a firm should not waste its time filling orders that come in from
unfamiliar countries and that, instead, they select key strategic international markets and only
2. What actions, besides those listed by Pemmer, could a company use to better understand a
potential export market and improve the likelihood of success in entering that market?
GLOBAL DEBATE: The Ethics of Exporting: Do Home Values Apply?
The focus of this feature explores issues about the ethics of exporting. To what degree are
ethics domestic and to what degree are they universal? Another way to phrase the question is,
Should exports have ethics embedded in them? The focus is on Australian regulations on the