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1. Export Import Practices

2. Payment Procedures…
•Payment terms offered by exporters to foreign
buyers
–Cash in advance
•When credit standing of the buyer unknown or uncertain
–Open account
•When sale is made on open account
–Seller assumes payment risk
–Offered to reliable customers in economically stable countries

3. Payment Procedures…
–Consignment
•Goods shipped to buyer; payment made when sold
•Payment risk assumed by seller
–Letter of credit (L/C)
•Document issued by buyer’s bank
–Promise to pay seller specified amount when bank
has received documents stipulated in letter of credit

4. Payment Procedures
•Letter of credit
•Confirmed L/C
–Correspondent bank in seller’s country agrees to
honor issuing bank’s L/C
•Irrevocable L/C
–Once the seller has accepted L/C, buyer cannot alter
or cancel it without seller’s consent

5. CFR Cost, Freight, Foreign Port; FAS  Free Along Side  leave it there after clearing for export
FOB  Seller will load on board after clearing for export (Cost and risk shared INCOTERMS 2010)
FCA Free Carrier – clear for export and handover to named carrier
CPT Carriage Paid To – seller pays – named place of delivery
DEQ/DES Delivered Ex Quay/Ship – named port of delivery
DDP/DDU  Delivered Duty Paid/unpaid ; EXW  Just keep outside/warehouse
CIF insurance for maritime; DES CIF + insurance for goods as well
In 2010, eliminated!
DES, DAF, DEQ, DDU

6. Letter of Credit Transaction

7. Documents
•Air Waybill
–A bill of lading issued by an air carrier
•Pro Forma Invoice
–Exporter’s formal quotation: description of the
merchandise, price, delivery time, method of shipment,
ports of exit and entry, and terms of sale

8. Export Financing…
•Private Source – Commercial Banks
–Banker’s acceptance
•Time draft with 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; may be bought and sold
at a discount in the financial markets like other commercial paper
–Factoring
•Discounting an account receivable without recourse

9. Export Financing…
–Forfeiting
•Purchasing without recourse an account receivable
whose credit terms are longer than the 90 to 180 days
usual in factoring; unlike factoring, political and transfer
risks are borne by the forfeiter

10. Export Financing
•Public Sources
–Export-Import Bank (Ex-Imbank)
•Principal government agency that aids American exporters by means of
loans, guarantees, and insurance programs
–Overseas Private Investment Corporation (OPIC)
•U.S. government corporation that offers American investors in
developing countries insurance against expropriation, currency
inconvertibility, and damages from wars and revolutions

11. Other Public Incentives
•Foreign Trade Zone
–Duty-free area designed to facilitate trade by reducing the effect
of customs restrictions
•Free Trade Zone
–An area designated by the government as outside its customs
territory
•Customs drawback
–Rebate on customs duties

12. Export Procedures
•Foreign freight forwarders act as agents for exporters
–Prepare documents
–Book space
–Offer advice about
•Markets
•Regulations
•Transportation
•Packing
–Supply cargo insurance

13. Official Procedures for Importing and
Exporting

14. Shipping Documents…
•Shipper’s Export Declaration
–U.S. Department of Commerce form to control
export shipments and record export statistics
•Validated export license
–Document issued by the U.S. government
authorizing export of strategic commodity or
shipment to unfriendly country
•General Export License
–Covers export commodities for which validated
license not required; no formal application required

15. Shipping Documents
•Export Bill of Lading
–Contract of carriage between shipper and carrier:
straight bill of lading is nonnegotiable; endorsed “to
order” bill gives holder claim on merchandise
•Insurance Certificate

16. Collection Documents
•Commercial invoice
•Include origin of goods, export packing marks, and clause stating goods will not be
transshipped
–Consular invoice
•Purchased from the consul and prepared in local language
–Certificate of origin
•Issued by local Chamber of Commerce
–Inspection certificate
•Frequently required for grain, food, live animals

17. Export Shipments…
Containers
Reduce theft and handling costs
LASH (lighter aboard ship)
Barges for shallow inland waterways
RO-RO (roll on-roll off)
Can drive onto vessel
Air Freight
Can arrive in one day

18. Sea-Air Total Cost Comparison,
Shipment and Spare Parts

19. Air Freight
•Total cost may decrease
•Either the firm or the product may be air-
dependent
•The market may be perishable
•Competitive position may be strengthened