Post on 02-Apr-2015
transcript
Exports, Imports, CountertradeExports, Imports, Countertrade
Exports, Imports, CountertradeExports, Imports, Countertrade
Opportunities and risks of exportingSteps to improve export performanceInformation sources/programs on
exportingFinancing exportingCountertrade as an export facilitator
Exporting Opportunities and RisksExporting Opportunities and Risks Perception: Exports
– Offer huge revenue / profit opportunities overseas – Are “there for the pickings”
Large firms are more successful– Proactive about exporting to realize promise– Systematic effort backed by knowledge of overseas markets
Smaller firms are reactive – Overseas markets are an afterthought– Ad-hoc effort on an opportunistic and often naïve basis
Exports require volumes of specialized paperwork
US Export SupportUS Export Support
www.doc.gov
www.ita.doc.gov
Export Performance Improvement FactorsExport Performance Improvement Factors
Government information sources– US: various parts of the Dept. of Commerce– Other countries: similar entity– Embassies and consulates: commercial
sections Export management companies
– Act as the export department of firms– Experienced specialists– Not exclusive
Focused export strategy
Some Successful Export StrategiesSome Successful Export Strategies
Enter on a small scale to reduce risks
Add product lines after export
operations begin to be successful
Hire locals to promote the firm’s
products
Exporting StrategyExporting Strategy
It helps to hire an EMC or, at least, someone with experience.
Focus on one or a few markets. Enter markets on a fairly small scale until you ‘learn the
ropes’. Add new lines after initial success. Need to recognize the time and managerial commitment. Build strong and lasting relationships. Hire locals to help firm establish itself. Keep the option of local production in mind.
© McGraw Hill Companies, Inc., 2000
Export ProcessExport Process
Evaluate export potential
financial resources management capability/experience competitive advantages abroad
Steps in the Export ProcessSteps in the Export Process
Evaluate export potential
Do country analysis (more later) country receptiveness to imports
and investment trade barriers/requirements infrastructure
Steps in the Export ProcessSteps in the Export Process
Evaluate export potential
Do market analysis market size/product potential distribution channels needs for re-engineering etc. =
localization
Steps in the Export ProcessSteps in the Export Process
Determine entry method
goal of entry select distribution “partner” determine channel length assess risks determine costs
Steps in the Export ProcessSteps in the Export Process
Determine entry method
determine trade terms
(INCOTERMS: ex works, FOB, CIF, etc.)
determine tasks to be performed in the foreign market
Export/Import FinancingExport/Import FinancingAssures:
– Exporter of payment
– Importer of product
Banks offer financing intermediary service
– Letters of credit: bank guarantee of payment to exporter “bought” by the corresponding importer
– Draft or bill of exchange: instructions to bank to pay at a certain time based on certain documentation
Carriers provide to the exporter
– Bill of lading: receipt, contract and document of title
Sources of Exporter Sources of Exporter FinancingFinancing
Financing exporter credit to the importer:
- Bankers’ acceptance (of the draft)
- Factoring
- Forfaiting
- EXIM loans
Export/Import FinancingExport/Import Financing Letters of Credit (LOC)
– Bank guarantee on behalf of importer to exporter assuring payment when exporter presents specified documents
Drafts (Bill of Exchange)– Written order by exporter, telling an importer to pay a
specified amount of money at a specified time.
Bill of Lading– Issued to exporter, by carrier. Serves as receipt,
contract and document of title.© McGraw Hill Companies, Inc., 2000
Exporters’ Problems with Exporters’ Problems with Letters of Credit (L/C)Letters of Credit (L/C)
Shipment date or method required in L/C cannot be met.
Documents required by L/C cannot be obtained. Importer deliberately fills out L/C application
incorrectly (to stall or force a discount). Product description too detailed (exporter
compliance difficult).
Preference of the US ExporterPreference of the US Exporter
French Importer American Exporter
1. Importer Pays for Goods
2. Exporter Ships Goods After Being Paid
Preference of the French Preference of the French ImporterImporter
French Importer American Exporter
1. Exporter Ships the Goods
2. Importer pays after the Goods are Received
The Use of a Third PartyThe Use of a Third Party
French Importer American Exporter
1. Importer Obtains Bank’s Promise to Pay on Importers Behalf
5. Bank Gives Merchandise to Importer
Bank6. Importer Pays Bank
3. Exporter Ships “to the Bank.” Trusting Bank’s Promise to Pay
2. Bank Promises Exporter to Pay on Behalf of Importer
4. Bank Pays Exporter
A Typical International A Typical International TransactionTransaction
French ImporterAmerican Exporter
Bank of New York Bank of Paris
6. Goods Shipped to France7. Exporter
Presents Draft to Bank
10 and 11 Exporter Sells Draft to Bank
14. B of NY Presents Matured Draft and Gets Payment
12. Bank Tells Importer Documents Arrive
13. Importer Pays Bank
2. Exporter Agrees to Fill Order
1. Importer Orders Goods 3. Importer Arranges for LOC
8. B of NY Presents Draft to Bank of Paris9. Bank of Paris Returns Accepted Draft
4. Bank of Paris Sends LOC to B of NY
5. B of NY Informs Exporter of LOC
CountertradeCountertrade Structures an international sale when means
of payment are difficult, costly, or non-existent– No currency convertibility– Weak reserves prohibit access to hard
currency Barter-like agreements
– Trade goods and services for other goods and services
– 8-10% or world trade by value is in the form of countertrade (up from 2% in 1975)
CountertradeCountertradeMain attraction:
– way to finance an export deal – meet requirement of local government
to support exportsMain drawback:
– risk of disposal / sale of goods at less than full value
– disposal of imports may require resources other than those that the firm possesses
Types of CountertradeTypes of Countertrade
Barter
Counterpurchase
Offset
Switch Trading
Compensation or Buyback
BarterBarter
International Reciprocal Trade Association (IRTA) – the industry trade organization - almost a half a million small businesses use commercial barter exchanges every year.
Almost $10 billion in sales is transacted each year by the commercial barter industry.
Trades where no intermediary is used and the global barter market may be 10 times that amount.
BarterBarter
International Reciprocal Trade Association estimates that in 1998 over 470,000 companies actively participated in barter in the US for a total of over $16 billion in annual sales.
Over 65% of the corporations listed in the New York Stock Exchange are presently using barter to reduce surplus inventory, bolster sales, and ensure that production facilities run at capacity.
U.S. Department of Commerce estimates that 20 to 25% of world trade is now barter, and corporate barter is now a $20 billion industry.
BarterBarter Conserve cash -- preserve cash-flow Strengthen cash reserves -- use barter for the
goods & services most needed Increase buying power -- access to goods &
services for growth Increase customer base – may add new clients Move surplus inventory Finance -- new businesses can build credit
through barter Employee Incentives -- travel, entertainment, gifts, perks & bonuses
CompensationCompensation
Barter with a combination of goods and convertible currency
Less risk than in straight barter
Counterpurchase – Parallel Counterpurchase – Parallel BarterBarter
Parties pay cash of goods Seller agrees to buy products/services
unrelated to its business Seller then sells products to third parties
Offset PurchaseOffset Purchase
Usually large projects, often involving expenditure of buying government’s money
A % of the selling price is required to be purchased or sourced from the buying country
BuybackBuyback
The seller agrees to buy a negotiated quantity of the output from the buyer’s output
Clearing AgreementClearing Agreement
A third party brokers transactions between parties, maintaining accounts for all participants
Typically are legal documents which specify the details of the arrangements: Electrical power companies Stock brokers, on-line traders
Switch TradingSwitch Trading
Buyer pays hard currency for unwanted goods/services from seller
Broker buys unwanted goods Broker sells goods to third parties