Export and

Import Practices
 Learning
Objectives
L01 LO2 LO3
Identify the Discuss the Identify some
sources of export meaning of the sources of export
counselling and various terms of fi nancing
support sales known as
Incoterms

LO4 LO5 LO6

Describe the Outline the Identify import
activities of a export documents sources
foreign freight required
forwarder
 Locating Foreign
Markets and
Developing a Plan
-The fi rst step in locating foreign markets is to determine whether a market
exists for the fi rm’s products.
-Newcomers to exporting, especially smaller fi rms, may still be at a loss as to
how to begin their foreign market research. For them, a number of helpful
export assistance programs are available. Once the potential exporter has
established that there may be a market for the fi rm’s products, it’s time to
draft the export marketing plan.
LO1 - Identify the
sources of export
counselling and
support
 U.S. Federal Government Agencies (via
Export.gov)
Export.gov is the U.S. government’s trade portal, established by the Department
of Commerce. It brings together resources on exporting from a number of
government agencies, including:
• U.S. International Trade Administration
• U.S. Commercial Service
• Department of Commerce
• Export-Import Bank
• Agency for International Development
• Small Business Administration
• Department of State
• Overseas Private Investment Corporation

Export.gov is packed with helpful tools and links for small businesses
that have export success and announcement of foreign trade missions
and training programs that are open to small businesses.
 The International Trade
Administration (ITA)
For fi rms that already are exporting, The International Trade
Administration (ITA) off ers a wide range of export promotion
activities:

• Export counseling
• Analysis of foreign markets
• Assessment of industry competitiveness
• Development of market opportunity
• Sales representation through export promotion events
 Four departments within ITA
Market Access and Compliance (MAC) Manufacturing and Services

• Helps open foreign markets • Promotes the trade interests

to American products by of American industries by
developing strategies to helping to shape industry-
overcome obstacles faced by specifi c trade policy.
U.S. businesses in foreign • Develop export marketing
countries and regions. plans and programs.
• Monitor foreign country
• Trade Development experts
compliance with trade
also conduct executive trade
agreements.
missions, trade fairs, and
marketing seminars.
 Four departments within ITA
U.S. and Foreign Commercial Service
Import Administration
(USCS)

• Provide background • Enforces U.S. trade law and

information on foreign agreements to prevent
companies and assist in unfairly traded imports and
fi nding foreign to safeguard the
representatives, conducting competitiveness of U.S.
market research, and businesses.
• identifying trade and
Conduct export workshops
investment opportunities for
and keep businesspeople
American fi rms.
informed about domestic and
overseas trade events that
off er potential for promoting
 The Office of
The Offi ce of International Small Business Development
International Trade
Trade of the Small of the
Business Centers (SBDCs)
Small Business
Administration (SBA)
Administration (SBA) • Give export counseling, especially to
inexperienced newcomers
• SBA district offices: offers
assistance to current and
potential small business Centers for International
exporters through two programs Business and Research
that are provided in field offices (CIBERs)
around the country, Business • Assist firms with exporting
Development and Financial
Assistance.
• SCORE program: experienced U.S. Export Assistance
executives offer free one-on-one Centers
• one-stop offices ready to help small
counseling to small firms
and medium-size businesses with
local export assistance.
U.S. Once the existence of a potential market
Department of has been confirmed, the firm must
choose between:

Commerce
The Department of Commerce Export
Assistance Program (EAP) helps
potential exporters narrow down their
potential markets and off ers Indirect Exporting: Use
interviews, guidance, and next steps
intermediaries (trading
for new exporters.
Key Support Services: companies, piggyback,
• U.S. Census Bureau (Foreign Trade export management
Division): Provides export statistics. firms)
• Comprehensive guide on export
documentation, contacts, and markets.

Additional Support: Direct Exporting: Use

• Matchmaking Services via U.S. in-house staff and
embassies: includes briefings, market networks (trade
research, and partner introductions. associations, IBA,
• Foreign Agricultural Service: Similar Citibank, IMF).
support for agriculture exporters.
 SHOW AND SELLS
U.S. pavilions: Commerce selects Trade missions: Participants are
about 100 global trade fairs every given detailed marketing information,
year for which it recruits American advanced publicity, logistical support,
companies to participate at a U.S. and pre-arranged appointments with
pavilion. potential buyers and government
officials.
Product literature center: Reverse trade missions: The U.S. Trade
Commerce trade development Development Agency may fund visits to the
specialists represent U.S. United States by representatives of foreign
governments so that they can meet with
companies at various international
American industry and government
trade shows, where they distribute
representatives. The foreign officials
literature.
represent purchasing authorities interested
in buying U.S. equipment for specific
In addition to the federal government, other
sources of assistance available to the exporter
include:
• State governments: have export
development programs and many of which
have export fi nancing programs.
• World Trade Centers Association:
provides networking opportunities and an
online trading system.
• Industry-based trade groups
 Failure to obtain qualified export
counseling and to develop a master
international strategy and marketing
plan before starting an export
business.

• A company must start by establishing its

objectives and mapping out how to meet
them.
• If in-house export knowledge is limited,
external guidance from professionals may
be necessary.
Mistakes made by new Insufficient commitment by top
exporters management to overcome the initial
difficulties and financial requirements of
exporting.
• Entering international markets often
requires more time than establishing a
• domestic one. costs and setbacks,
Despite initial
exporters must stay patient, committed,
and monitor progress closely.
• With a solid foundation, the long-term
rewards of exporting can outweigh the
 Mistakes made by new
exporters
Insufficient care in selecting overseas Chasing orders from around the
world instead of establishing a basis
sales representatives and
distributors. for profitable operations and orderly
growth.
• Selecting the right foreign
distributor is necessary • To ensure active promotion,
exporters must train, support,
• Foreign operations often need
and monitor their distributors.
more autonomy due to
international communication and => This might require placing a
logistics challenges. company representative in the
• In new markets, customers often distributor's region.
• New exporters should focus on a
rely on the distributor ’s few areas to build a solid
reputation over the brand. foundation.
=> Once the core markets are
• Companies should personally established, they can gradually
evaluate: distributor ’s staff , expand to new areas.
facilities, management practices .
 Failure to treat international
distributors and customers on

MISTAKES an equal basis with their

domestic counterparts.
• Companies often run advertising
campaigns, off er discounts, sales
incentives, extended credit terms, and
warranties in their domestic markets—
Neglecting export business but fail to extend the same support to
when the home market their international
=> This distributors
oversight can seriouslyand
booms. customers.
weaken their overseas marketing
• Many companies begin exporting
performance.
only when sales decline in their
• home market.
Once the local market recovers,
they may abandon or deprioritize

MADE BY
their international trade
• This short-sighted approach can

NEW
harm global ties, cut export
revenue, and increase
vulnerability to local downturns.
 Mistakes made by new
exporters
Assuming that a given Unwillingness to Failure to provide
market technique and modify products to service, sales, and
product will meet regulations or warranty information
automatically be cultural preferences of in locally understood
successful in all other countries. languages.
countries.
• Strategies that • Even if many
• Adapting to local
succeed in one market understand English,
safety codes, import
it's safer to provide
may not be effective laws, and cultural
product info in the
in another. tastes is crucial.
local language.
 Mistakes made by new
exporters
Failure to consider the Failure to consider Failure to provide readily
use of an export licensing or joint venture available servicing for the
management company. agreements. product.

• If a company finds • Import restrictions, limited

that setting up its staff, funds, or product
• Without proper service
range may lead companies
own export support, a product can
to view international
department is too marketing as unfeasible. quickly gain a negative
costly, it should reputation, which may
• Many competitive domestic
consider working with hurt future sales
products can succeed
opportunities.
an export abroad through licensing or
management joint ventures.
company (EMC).
 • The company should start
working on its export marketing
plan as early as possible
• An export marketing plan is similar
to a domestic one. It should clearly
define:
+ The target markets
+ Outline marketing strategies and
tactics
=> It should illustrate what needs to
happen, when, who’s responsible, and
Export how much it will cost.

marketing
plan
LO2- Discuss the meaning off the various
terms of sale known as Incoterms
• For many new exporters, one of the key pricing challenges is
learning to quote international terms of sale, which differ from
those used domestically.
INCOTERMS
• Exporters must understand Incoterms - three-letter codes
developed by the International Chamber of Commerce that clarify
the responsibilities of buyers and sellers in global trade

• These terms, now

categorized based on
transportation mode: general
or water
=> Defi ne who handles
various tasks, pays for costs,
and bears risks
• FOB (free on board) means the seller loads the goods
on the buyer’s chosen ship, clears them for export,
and transfers cost and risk once the goods pass the
ship’s rail
Most foreign buyers will expect quotes using these international terms, which
are briefly outlined here and explained in more detail in Figure 14.1
 Pricing
• CIF (Cost, Insurance, Freight) and CFR (Cost and Freight) are preferred by foreign
buyers, as they simplify cost calculation

• New exporters should also account for additional expenses such as wharf fees,
freight forwarding, and consular charges when offering CIF pricing.

Surprisingly, CIF export costs are often lower than domestic prices due to
excluded marketing and admin overhead.
 Pricing
• Export pricing usually starts with the cost at the factory, without local marketing
or admin expenses.

To that, you add the actual costs of making the export sale, a fair share of
general admin costs, and a profit margin - which can be based on how much
effort pricing usually takes

• When researching foreign markets, if the local competition offers higher pricing,
exporters are free to align with those rates. But in price-sensitive markets, they
may need to lower prices (below FOB or CIF) or accept smaller profits to stay
competitive.
 Sale
agreements
• The sales agreement should be clearly defined, much like in domestic operations.
It should emphasize on the foreign representative’s responsibilities and handle
intellectual property concerns, particularly trademarks and patents.

• To ensure protection, companies should register relevant patents and trademarks

domestically and clarify legal responsibilities for intellectual property abroad

It's best to work with an experienced international lawyer, and if possible, make
sure legal cases happen in the company’s home country.
Payment and Financing Procedures
Export Payment Terms
• Payment terms, as every marketer knows, are often a decisive factor in
obtaining an order.
• Customers are generally willing to accept higher prices when payment
terms are more flexible, particularly in countries with limited access to
capital and high interest rates.
• The payment terms offered by exporters to foreign buyers are:

cash in open consignmen

advance account t

letters of credit documentary

drafts
Cash in
advance
• When the credit standing of the buyer is not known or is uncertain, cash in
advance is desirable.
Very few buyers will accept these terms,
because:
Part of their working capital will be tied up
Few customers
until
will pay cash in
the merchandise has been received and sold.
advance unless
the order is for a
They have no guarantee that they will
custom-made
receive
product.
what they ordered.
Open account
An open account is a type of trade arrangement in which goods are shipped
and delivered before payment is due, usually within 30, 60, or 90 days.

• The seller assumes all of the payment-related risk, and therefore such terms
should be offered only to reliable customers.
• The exporter’s capital is tied up until payment has been received.
• Exporters who demand safer payment methods - like letters of credit - might lose
customers to rivals who are willing to trade using open account terms.
Open account
Mercedes Benz do not accept the extra cost of
obtaining letters of credit. They give their business
to suppliers that will offer them open-account terms.
To confirm the buyer's ability to pay, the brand can
get credit reports and credit information on
foreign firms through agencies like Dun &
Bradstreet, Owens Online, and Asian CIS.
Consignment
Goods are shipped to the buyer
and payment is not made until
they have been sold.

All of the payment risk is assumed

by the seller, so this method should
only be used after thoroughly
evaluating the buyer and their
country - just like one would when
offering open-account terms.
Letter of credit (L/C)
Document issued by the buyer’s bank in which the bank promises to pay the
seller a specified amount under specified conditions.

• In an L/C, the bank acts as an intermediary between the seller and buyer
• Generally, the seller will request that the letter of credit be confirmed and
irrevocable. a correspondent bank in the seller’s country confirms that
confirmed L/C it
will honor the issuing bank’s letter of credit.

irrevocable once the seller has accepted the credit, the customer
L/C cannot alter or cancel it without the seller’s consent.
Letter of credit (L/C)
The issuing The correspondent
The buyer The seller
bank bank

• If the letter of credit is not confirmed, the correspondent bank (Merchants National Bank of
Mobile) has no obligation to pay the seller (Smith & Co.) when it receives the documents listed
in the letter of credit. Only the issuing bank (Banco Americano in Bogotá) is responsible.

• If sellers (Smith & Co.) wish to be able to collect from an American bank, they will insist
that the credit be confirmed by such a bank. Then, when the Merchants National Bank of Mobile
confirms the credit, it undertakes an obligation to pay Smith & Co. if all the documents
listed in the letter are presented on or before the stipulated date.

• The buyer only requires that an air waybill from the carrier be submitted as evidence of
shipment. Even if bank officials know that the plane had crashed after takeoff, they would still pay
Smith & Co. because banks focus solely on verifying documents, not the physical goods
involved.
Letter of credit (L/C)
Letter Air waybill: A bill of lading
issued by an air carrier.

of
credit
(L/C)
pro forma invoice: 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.

• Before opening a letter of credit, a buyer frequently requests a

pro forma invoice.
• Generally, the bank will use it when opening a letter of credit,
and in countries requiring import licenses or permits to
purchase foreign exchange, government officials will insist on
receiving copies.
Letter of credit (L/C)
A letter of credit transaction
between a U.S. seller and a
German buyer.:

After agreeing to the terms that

require a confirmed and
irrevocable letter of credit, the
German buyer goes to her bank to
arrange it. She provides the bank
with the necessary information
from the pro forma invoice,
specifies the required documents
for payment, and sets the
expiration date for the credit.
 Letter of credit (L/C)
After the exporter and buyer agree on the terms of a sale, the buyer arranges for

1 its bank to open a letter of credit that specifies the documents needed for
payment. The buyer determines which documents will be required.

2
The buyer’s bank issues, or opens, its irrevocable letter of credit includes all
instructions to the seller relating to the shipment.

The buyer’s bank sends its irrevocable letter of credit to a U.S. bank and requests

3
confirmation.
The exporter may request that a particular U.S. bank be the confirming bank, or
the foreign bank may select a U.S. correspondent bank.

The U.S. bank prepares a letter of confirmation to forward to the exporter along

4 with the
irrevocable letter of credit.
 Letter of credit (L/C)
The exporter reviews carefully all conditions in the letter of credit. The exporter’s
freight

5 forwarder is contacted to make sure that the shipping date can be met. If the
exporter cannot comply with one or more of the conditions, the customer is
alerted at once.

6
The exporter arranges with the freight forwarder to deliver the goods to the
appropriate port
or airport.

7
When the goods are loaded, the freight forwarder completes the necessary
documentation.

The exporter (or the freight forwarder) presents the documents, evidencing full

8 compliance with
the letter of credit terms, to the U.S. bank.
 Letter of credit (L/C)
The bank reviews the documents. If they are in order, the documents are sent to

9
the buyer’s bank
for review and then transmitted to the buyer.

1 The buyer (or the buyer’s agent) uses the documents to claim the goods.

A draft, which accompanies the letter of credit, is paid by the buyer’s bank at the

0 time specified
or, if a time draft, may be discounted to the exporter’s bank at an earlier date.

1
Documentary draft/ Export draft
is an unconditional order drawn by the seller on the buyer instructing the
buyer to pay the amount of the order on presentation (sight draft) or at
an agreed future date (time draft) and that must be paid before the buyer
receives shipping documents.

• Generally, the seller will ask its bank to send the draft and documents to a bank in
the buyer’s country, which will proceed with the collection as described in the
letter-of-credit transaction.
 Documentary Draft Confirmed Letter of Credit

Guarantees payment to the seller if all terms are

No guarantee of payment.
met.

Buyer can reject the draft and then bargain for • Payment is ensured by the confirming bank if
a lower price. The seller may have to: Accept a terms are fulfilled.
lower price → Find a new buyer → Pay high • Bank pays upon receipt of proper documents
freight to return goods → Abandon goods. regardless of buyer’s intentions.

Customs auctions the goods; original buyer

Payment is guaranteed.
may buy them cheaply. Seller receives nothing.

Risk to
Least
exporter Highest
risk confirmed irrevocable irrevocable letter bank collection bank collection risk
open
cash in advance
letter of credit of credit sight draft time draft account
Cost to
Highest
buyer Least
LO3: Export financing
 1. Private
source
a. Commercial bank
• A source of export fi nancing through
loans for working capitals and the
discounting of time drafts.
• A bank may discount an export time
draft, pay the seller and keep it until
maturity.
• If the bank is the one the draft is
drawn on, it will accept and commit to
pay at maturity. It may then buy the
draft at a discount. If not, the exporter
can sell it on the open market.
 1. Private
source
b. Factoring
• It is the sale of export account`s receivable
to a third party, which assumes the credit
risks. Factoring is essentially discounting
without recourse.
• A factor may be a factoring house or a
special department in commercial bank.
• The seller passes the order to the factor for
approval of the credit risk. The customer
pays the factor (the exporter ’s credit &
collection department).
• The period of settlement generally less than
180 days
 1. Private
source
c. Forfaiting
• It involves buying receivables from goods or
services sold, due in over 180 days. These are
often trade drafts or promissory notes
maturing in 6 months to 5 years.
• As forfeited debt is sold without recourse, it is
accompanied by bank security in the form of a
guarantee or aval.
• The forfaiter buys and discounts the bill for
the full credit term, allowing the exporter to
turn a credit sale into immediate cash.
• Banks now provide medium and long-term
fi nancing thanks to government-backed
 2. Public
source
• The US Export-Import bank (Ex-Im bank) is
the government agency responsible for
aiding the fi nancing of American exports,
through loan, guarantee and insurance
programs.
• Ex-Im bank’s programs are available to any
American export fi rm regardless of size.
2. Public
source
Ex-Im Bank provides 2 types
of loans
Direct loans Intermediary loans

Both programs cover up to 85% of the value of the

exported goods and services, with repayment terms
of one year or more.
 2. Public
source
• Ex-Im Bank’s Working Capital Guarantee
helps small businesses get export-related
loans by backing them with export inventory
or receivables, and protects lenders
off ering loans for U.S. capital goods and
services.
• Ex-im Bank also off er export credit
insurance to protect exporters against the
political and commercial risks
(comprehensive or political risk only)
• Since 1934, Ex-Im bank has supported more
than $456 billion in American exports,
mostly to developing markets.
3. Other public
incentives
a. The Overseas Private
Investment Corporation (OPIC)
• A corporation formed to stimulate private
investment in developing countries.
• It off ers investors insurance against
expropriation, currency inconvertibility and
damages from war or revolutions.
• OPIC also off ers specialized insurance for
American service contractors and exporters
operating in foreign countries.
• Exports of capital equipment and semi-
processed raw materials generally follow
these investments.
3. Other public
incentives
b. Foreign trade zones (FTZs)
• Foreign trade zones (FTZs) are duty-free
areas designed to facilitate trade by
reducing the eff ect of customs restrictions.
• There are 5 types: free ports, transit zones,
free perimeters, export processing zones
and free trade zones (most common).
• Imported goods can be brought without
payment of import duties
• There are hundred of FTZs areas in more
than 28 nations
3. Other public
incentives
b. Foreign trade zones (FTZs)
• FTZs also benefi t exporters by allowing
faster access to excise tax rebates and
customs drawbacks.
• The government collects the tax at
production and , the tax is rebated after
export (since putting goods into FTZs).
However, many fi rms don’t claim duty
drawbacks ($2 billion unclaimed).
• When manufacturing using imported
components inside FTZs areas, no duties
need to be paid when the fi nished product
is exported.
3. Other public
incentives
c. Free trade zone (FTZ)
• An enclosed area outside the customs
territory of a country.
• Foreign goods are brought into the zone for
eventual transshipment, reexportation or
importation into the country.
• No import duties need to be paid while in
the zone
• In the US, free trade zones are called
foreign trade zones (FTZ). They are growing
in popularity, and 250 of these zones are in
operation, at seaports and inland places.
 3. Other public
incentives
c. Free trade zone (FTZ)
• Goods brought into FTZ may be stored,
inspected, repackaged or combined with
American components.
• Due to diff erences in the import tariff
schedule, the fi nal product often incurs
lower duty than the disassembled parts. Eg.
Bicycles are assembled in Kansas city FTZ.
• Importers of machinery or automobiles
improve their cash fl ow by storing spare
parts in an FTZ, as no duty is not paid until
they are withdrawn.
LO4: Export
procedures

“Exports move on a sea of

documents”
Export
procedures
• Export novices may confront 5-6 times as many
documents compared with domestic market.
• Many fi rms give at least part of this work to a
foreign freight forwarder as an agent for the
exporter.
• They may prepare documents, book space with a
carrier, act as export traffi c department; off er
advice about markets, regulations, transportation
& packing; supply cargo insurance.
• After shipment, they forward documents to the
importers or the paying bank.
LO5: Outline 01 Shipping
Documents
the export .
documents 02 Collection

required
- Correct documentation is vital to
the success of any export
.
Documents

shipment.
- Error rates reported for export
and import documentation hover
between 50 - 70%, largely because 03 Export
Shipments
.
they are documents that come from
diff erent parties, yet their data
need to be consistent.
 1.Shipping
Documents
Prepared by exporters or their freight forwarders so that it can
pass through U.S. Customs, be loaded on the carrier, and be
sent to its destination.

• The domestic bill of lading

• The export packing list
• The shipper’s export declaration
• The export licenses
• The export bill of lading
• The insurance certifi cate
a. The
shipper’s
export
Required by The Department of Commerce
to control export shipment and record

declaration
export statistics. An SED includes:

• Names and addresses of the shipper

and cosignee
• U.S. port of exit and foreign port of
unloading
• Description and value of the goods
• Export lisence number and bill-of-lading
number
• Name of the carrier transporting the
merchandise
 a. The
shipper’s
export
Shippers of their agents/ foreign freight
forwards deliver the SED to the carrier,

declaration
which turns it into U.S. Customs with the
carrier ’s manifest (list of the vessel’s cargo)
before leaving the US.

AES (an automated export system) with

electronic fi lling was introduced in 2004.
As many errors can be fl agged, data entry on
the forms has been greatly reduced and
export processing has been sped up.
 01. A
validated
export
license 02. A
general
Issued by The
export
Department of
Commerce Offi ce of b. The lisenc
Export
Adminstration, export Used for goods that
do not require
license
which is required for
scarce materials, • Required for all exported validated lisence.
strategic goods and
goods except those going
technology,
from US possessions to
The Department of Canada.
State issues the
validated license for
• They can be validated ones
war materials. or general ones.
c. An export bill of lading
(B/L)
Serve three purposes:
• A contract for cariage between the shipper and the
carrier.
• A receipt from the carrier for the goods shipped.
• A certifi cate of ownership.
 A Straight An order
B/L B/L
• An order B/L is
• A straight B/L
negotiable.
is • It can be
nonnegotable.
• Only the c. An endorsed as a
check or left
person
stipulated in
export bill blank. With an

it may obtain of
B/Lslading
are either
order B/L, the
holder is the
the
straight owner of the
merchandise merchandise.
on arrival. or to order
 d. The insurance
certificate
• Is an evidence that claims the shipment is insured against loss/ damage while
in transit.
• Oceangoing steamship companies assume no responsibility for the
merchandise they carry unless the loss is caused by their negligence.
• Marine insurance is either issued by the exporter or importer , depending on
the terms of sale.
• It is required in some country according to the laws that importer buy such
insurance and protecting the local insurance industry and saving foreign
exchange.

If the exporter has sold on sight draft terms , the fi rm carries the risk
while transiting goods.
→ Exporter should buy contigent interest insurance to protect it in the
case that shipment is lost/ damaged and collection from the buyer is
not successful.
 There are three kinds of marine insurance
policies:
Basic named perils Broad named perils

01.
include perils of the sea,
fi res, jettisons, 02. include theft, pilferage,
nondelivery, breakage and
explosions, and leakade.
hurricanes.
All risks covers all

03. physical loss and damage

from external causes and
is more expensive.

01.
War risks are covered under a seperate
contract.
 2. Collection
Documents
• Required by the buyer before making payment.
• Collection documents may vary among countries and
customers, some of the most common are:

⚬ Invoices (Commercial and consular)

⚬ Certifi cates of origin
⚬ Inspection certifi cates
 a. Export
• Similar to domestic invoices.
invoices
⚬ Commercial invoice includes additional information (origin of the goods,
export packing marks, a clause stating that the goods will not be
transshipped to another country).

⚬ Invoices for letter - of - credit sales name the bank and the credit
numbers.

⚬ Some importing countries required invoices to be in their language and

be viased by the consul.

b. Inspection
certificates:
• Oftenly required by buyers of grain, foodstuff s, and live animals .

• Inspection certifi cates in the US are issued by the Department of

Agriculture.

• The EU requires the CE (Conformité Européene) mark is the EU trade

passport.
3. Export
Shipment
Containerization, LASH, RO-RO, size and air freight all off er increasingly
cheaper, faster and safer transportation globally.

a. Containers
• Containers help reducing both theft and handling costs.
• They are large boxes, 8 feet by 8 feet by 10, 20, or 40 feet. fi lled with
goods.
• After being packed, containers are sealed and they are only opened after
arriving at the destination.
• Containers are transported using trucks or rail from the warehouse to
shipside.
• From the port of entry, railroads or trucks deliver them to the buyer’s
warehouse.
• In most countries, customs offi cials visit the warehouse to examine the
shipment.
 3. Export
Shipment
b. LASH (Lighter aboad ship)
• Used for warehouse on a river that is too shallow for ocean
vessels.
• Sixty-foot-long bargers are towed to inland locations, loaded and
towed back to deep water.
 3. Export
Shipment
c. RO-RO (Roll on - roll off )
• Used to carry trailers and any equipment on wheels.

d. Ship size
• Continues to expand.
• The standard largest size is “Panamax” which fi t throught the
Panama Canal’s locks with only feet to spare.
• “Post-Panamax”, “Suezmax” or “capesize” are too big for the
canel (nearly 44 feet too wide and 200 longer than the canel can
accept).
 3. Export
Shipment
e. Air freight
A profound impact on international business: permits a 30-day required
shipments to arrive in 1 day
Carry payloads up to 200 000 pounds
Airlines guarantee overnight delivery from NY to any EU airports
Claim the time spent for loading and unloading : 45 mins
 3. Export
Shipment
d. Air freight vs Ocean freight
Newcomers claim that ocean freight is so much cheaper while comparison of
total costs might indicate otherwise.
 3. Export
Shipment
d. Air freight vs Ocean freight
Total cost components that may be lower for air
freight include:
• insurance rates: less chance of damage
during shipment
• packaging costs: does not need the heavier,
more costly export packing
• customs duties: such as import-export
duties, or tariffs; calculated on gross
weights.
• replacement costs for damaged goods:
reduced damaged risk
• inventory costs: rapid delivery exclude the
need for expensive warehouse
 3. Export
Shipment
d. Air freight vs Ocean freight
Even when the total shipping costs are higher for air freight, shipping by air may still be
advantageous for several reasons:
• Total cost may decrease: faster shipment-> customer satisfaction -> faster payment->
speed up ROI and cash flow
• Either the firm or the product may be air-dependent: Perishable food products being
shipped to all over the world, live animals (newly hatched poultry and prize bulls) and
fresh flowers.
• The market may be perishable: goods with short life cycles, such as high-fashion
products-> fashion fad dies-> its market goes with it
• competitive position may be strengthened: sales argument that spare parts and factory
technical personnel are available within a few hours is a strong one for an exporting
form competing with overseas manufacturers.
LO14-6: IMPORT
SOURCES
 1.Importing
• Importers vs. Exporters: Importers sell domestically and buy in foreign markets,
opposite to exporters.
• Similar Concerns: Despite differences, importers share concerns with exporters,
such as logistics and regulations.
• Business Scale: Importing ranges from small firms specializing in imports to
global corporations handling large-scale operations.
• Key Topics: Understanding import sources, the role of customhouse brokers, and
the payment of import duties.
 2. Sources for
imports
Before importing, a firm may have difficult determining whether the desired items
exist and, if so, where to find them. How does the prospective importer identify
import sources?

• First, similar products may already be in the market. Simple close examination -
> learn where and who made them.
• US law requires the country of origin be clearly marked on each product or on its
container if product marking is not feasible
• the consul or embassy of the country or origin can help with names of
manufacturers.
 2. Sources for
• One of the principal duties of all foreign government representatives

imports
is to promote exports, and they do this through newsletter, trades
shows industry shows, and collaborative events with their home
country chamber of commerce group and other organizations such as
JETRO ( japan external trade organization)
• Other sources of information are electronic bulletin boards such as
those of the World Trade Centers
• When going to a foreign country, fi nd a product that has similar
market at home. Finding one could put you in a business that makes
foregin travel tax-deductible
 3. Customhouse
brokers
As the agent for the importer, the customhouse broker brings the imported
goods through customs, which requires that they know well the many import
regulations and an extensive complex tariff schedule.
• Impact of Customs Classification: If officials categorize imports under
higher duty rates than expected, the importer might struggle to remain
competitive.
• Customs Evaluation Methods: Duties are typically levied based on units
shipped (specific duties) or invoice price (ad valorem duties).
• U.S. Customs Exception: Instead of standard valuation methods, U.S.
Customs uses the transaction price listed on the commercial invoice, plus
additional charges (e.g., royalty, license fees, packing costs).
 3. Customhouse
• Additional Services by Customhouse Brokers: They arrange transportation

brokers
for goods post-customs if the exporter hasn't done so.
• Import Quota Tracking: Brokers monitor which imports are subject to quotas
and how much has been used.
-> U.S. Customs immediately knows the quantity of goods regardless of their
arrival port
• Quota Restrictions: If the national quota is filled, goods awaiting clearance
cannot enter the country until the next fiscal year
-> Goods exceeding quotas can be stored in bonded warehouses or foreign
trade zones without paying duty, abandoned, or sent elsewhere.
E.g: high-fashion clothing have lost millions of dollars when quotas became
filled and they had a shipment that had not yet cleared. They could not sell
and have to wait the next year by which time it was out of fashion.
 3. Customhouse
brokers

High-fashion clothing have lost millions of dollars when quotas became filled
and they had a shipment that had not yet cleared. They could not sell and
have to wait the next year by which time it was out of fashion.
 3. Customhouse
brokers
The product classification system the Harmonized Tariff
Schedule of the United States ( HTSA or HTSUS) the American
version of the global tariff code, the Harmonized System, a
system for the more than 200,000 commodities traded
internationally
 3. Customhouse
brokers
In HTSA each product has its own unique
number. All member-countries use the same
system, so it is possible to describe the
product in any language by using the first six
digits. The four other digits are for use just in
the United States. The HTSA also shows the
reporting units, which US Customs uses in its
paperwork.
The last there columns have to do with the
rate of duty, which are broken down into 3
levels:
• general
• special
• a third-rate level for countries not
 3. Customhouse
• Disclose fully to the US Customs Service all foreign and

brokers
financial arrangements before pasing the goods through US
Customs ( penalties for fraud are high)
• Get advice of a customhouse broker before making a
transaction. A simple change in the product description can ADVICE
result in a much lower import duty e.g: jeans carry higher
duties if the label is outside in the back pocket instead of under
the belt. It the words n the label are stylized, the duties are
higher as well.
 3. Customhouse
brokers
• Any clothing that is ornamented has higher duty. e.g: one
importer brings in plain sports shorts and then sews on
an animal figure after the products are in the United
States.
 3. Customhouse
brokers
• Calculate carefully the landed price in advance. If you re not sure of th
import category, ask US Customs to determine the category in advance
and to put it in writing, just like advanced rulings from the Internal
Revenue Service. At the time of importation, customs inspectors must
respect this determination.
Thank you
very much!