Chapter 14 reading

According to calculations by the United Nations, the amount of time associated with the vast documentation required to export to Brazil can amount to _____ of the final value of the exported goods.

10 percent

Recent statistics from the Small Business Administration show that about _____ of U.S. firms with fewer than 500 employees are involved in exporting.

5 percent

The bill of lading serves what three purposes? (Check all that apply.)

A document of title A receipt A contract

What is considered the most restrictive form of countertrade?

Barter

______ is the direct exchange of goods between two parties without a cash transaction.

Barter

Why did many Asian countries turn to countertrade following the 1997 currency crisis?

Because of a lack of hard currency

Which document indicates that the carrier has received the merchandise described in the document?

Bill of lading

Exports only account for a small percentage of U.S. business for which two reasons?

Companies are unfamiliar with opportunities. Companies are intimidated by language, culture, and currency differences.

What are two problems associated with bartering?

Companies may have to accept goods that they don't want. Goods have to be exchanged simultaneously or else one company may be subsidizing another.

What two things are generally needed for successful piggyback marketing?

Complementary products Same target market

Manuel has been hired by a clothing distributor based in Ireland. It is his job to travel to U.S. clothing manufacturers and try to purchase denim products at the lowest price possible. He then receives a commission based on his results. Which type of export service provider does Manuel work for?

Confirming house

______ occurs when a company agrees to purchase a certain amount of product back from a country to which a sale is made.

Counterpurchase

What is a reciprocal form of international trade in which goods or services are exchanged for other goods or services, rather than for hard currency?

Countertrade

Phase Two Athletics is located in the United States. The company would like to export to Italy but preliminary meetings with representatives from Italy have proven difficult. The representatives don't understand the value of the company's fitness gear because they feel most Italians prefer to exercise at a health club where the gear is provided. What impediment to exporting is Phase Two Athletics facing?

Culture

Mega Data International wants to export into South America but has no knowledge of the laws or documentation required to do so. Which of these agents can help the company with this problem?

Customs broker

Which department of the U.S. federal government provides the most comprehensive source of information regarding export opportunities?

Department of Commerce

As a result of their lack of foreign exchange reserves, countertrade has grown in popularity among which type of countries?

Developing

What three impediments would make it difficult for some companies to gain knowledge of opportunities available in foreign countries? (Check all that apply.)

Distance Language Time

Connor runs a small business and is interested in exporting his product to Ireland, but he needs some advice on the legal issues this would entail. Which organization would provide him with a free initial consultation for his legal questions?

ELAN

Sunny Soups has never exported their products before but would like to start. What company can provide Sunny Soups with a full menu of services to handle all aspects of their exporting needs?

EMC

What firms are export specialists that act as an export department for their clients?

Export management companies

Jiffy Bicycle has had trouble exporting in the past due to the bulky boxes their products require. Which type of company could assist Jiffy Bicycle with this issue?

Export packaging company

Carolina Sailboat contracts with a company that identifies businesses in foreign countries that will market and sell their line of sailboats. This company also provides all the documentation for the exports, coordinates logistics, and transportation. What type of company does Carolina Sailboat contract with?

Export trading company

Novice companies have significant problems when trying to do business abroad. What are three pitfalls these companies often run into which makes them hesitant to export in the future? (Check all that apply.)

Failure to customize product to foreign customer Difficulty securing financing Poorly executed promotional campaign

Which company is taking steps to minimize risk as it enters the export market?

Instead of trying to spread itself too thin by going after 22 foreign markets, Natalie's company focused on three potential foreign markets.

What are the two negatives associated with a letter of credit?

It could limit the importer's ability to borrow since it is a liability. The importer has to pay the bank's fee for the letter of credit.

If a payment is made before products are shipped, an importer may be concerned about what two things?

Receiving a defective product Not receiving the product

Which type of export service provider buys a product directly from the manufacturer and then packages and labels the product based on its own specifications and sells the product under its own name?

Remarketer

Which type of draft should a company use if it wants immediate payment from the drawee upon receipt?

Sight draft

After the exporter presents the draft to the bank in a typical international trade transaction, what happens next?

The exporter's bank presents the draft to the importer's bank.

In what way are time drafts negotiable?

The maker can sell the draft to an investor at a discount from face value.

Kevin works at a company in Ohio and is in charge of researching available export opportunities. Which two organizations should he initially contact to learn more? (Check all that apply.)

U.S. and Foreign and Commercial Service International Trade Administration

Exquisite Jewelery Company, based in New York, isn't sure it wants to start exporting to Europe. The company is concerned that it won't be paid unless it receives it upfront and the European companies don't want to pay until they receive the products. This situation demonstrates how _____ can affect exporting.

a lack of trust

Exporters involved in international trade would prefer to ship the goods ____ (before or after?) payment is received.

after

Importers involved in international trade prefer to pay ____ (before or after?) the goods are received.

after

A letter of credit is issued by a(n) ______ and can be used to handle payments in a business transaction.

bank

What type of company is normally used as a trusted intermediary for exporting situations?

bank

A ______ is a business tool provided by the U.S. Department of Commerce which provides the name, address, and basic business information of potential distributors in foreign markets.

best prospects list

German and Japanese firms are viewed as having a _____ advantage in exporting compared to U.S. firms.

bigger

The draft, sometimes called the _____, is used in international commerce to effect payment.

bill of exchange

The ______ is a document issued to the exporter by the common carrier transporting the merchandise and acts as a receipt of goods.

bill of lading

Ulan works for a trucking company that ships products all over the United States. She verifies the merchandise she receives from various companies against the receipt included with the materials. This receipt is a

bill of lading.

Company XYZ has an arrangement with Company Ohai in Argentina. XYZ has contributed funds to build 14 hemp processing farms. In return, Ohai agrees to supply XYZ with a certain amount of hemp for 15 years (as partial payment). This is an example of a(n) ______ agreement.

buyback

When a firm agrees to build a plant in a country or supplies technology, equipment, and/or training, and then agrees to take some of the plant's output as partial payment, the firm is engaging in a(n) ______.

buyback

Offset is superior to straight counterpurchase because a(n)

company can choose the goods it wants.

For a small fee, the Department of Commerce provides a company with a market research survey on a product of its choice. This is called a(n) ______.

comparison shopping service

A reciprocal buying agreement whereby a firm agrees to buy a specific amount of goods back from a country to which a sale is made is called ______.

counterpurchase

A drawback of ______ is that unusable or poor quality goods may be exchanged in place of payment of currency.

countertrade

A major disadvantage of ______ is that firms might be paid in unsaleable or shoddy products instead of hard currency, which the firm would prefer.

countertrade

Boeing often enters into agreements in which the company has to purchase certain components parts from the country in which it hopes to do business. This arrangement is an example of _____.

countertrade

The main reason a company would consider ______ is that it provides a firm with a way to finance its export deal when other methods of financing are not available.

countertrade

When conventional means of payment are difficult in an international sale, ______ is an alternative means of structuring the sale and allows for the trade of goods and services.

countertrade

An order written by an exporter that instructs an importer to pay a specified amount of money at a specified time is called a _____.

draft

An exporter writes a draft on the Bank of Italy to Mercury Corp. In this case, Mercury Corp. is the

drawee

While a maker initiates a draft, the party to whom the draft is presented is called the ______.

drawee

True or false: Small- and medium-sized businesses are very proactive in identifying opportunities to export.

false

True or false: The United Nations has verified that Brazil is one of the easiest and most cost effective countries to export into.

false

Compared to 20 years ago, exports play a _____ role in the U.S. economy.

greater

A letter of credit is issued by a bank after being requested by an _____.

importer

If an ____ (importer or exporter?) makes payment before shipment of a product, they risk receiving a defective product.

importer

In a typical international trade transaction, after the importer arranges for a letter of credit, the next step is that the

importer's bank sends a letter of credit to the exporter's bank.

Nora's company plans to export a line of boots to a French wholesaler. Since this is a new export, her company wants to be paid for the boots prior to shipping them; however, the wholesale company in France refuses to pay for the boots until they are received. To solve this problem, the companies could rely on a trusted third party such as a bank, which acts as a(n) ______.

intermediary

A(n) _____ has two drawbacks: the fee paid by the importer to the bank and since this is a financial liability, it may affect the importer's ability to borrow for other transactions.

letter of credit

The main advantage of the ________ is that both parties are likely to trust a reputable bank even if they do not trust each other.

letter of credit

A document issued by a bank at the request of an importer that directs the bank to pay money to the exporter upon presentation of specified documents is called a

letter of credit.

When a company is able to expand its operations by exporting globally, it can often achieve greater economies of scale which results in ______.

lower unit costs

The ______ is the person or business who initiates a draft or bill of exchange during the exporting process.

maker

The person or business who initiates the draft that instructs an importer how much and when to pay is called the ______.

maker

When a time draft is accepted, the maker can then sell the draft to an investor at a discount. This demonstrates how time drafts are _____.

negotiable

When considering the international marketplace, small- and medium-sized firms tend to

not pay attention to foreign markets; rather they focus on their energies on local market.

One of the biggest concerns an exporter has is not receiving ______ when shipping a product to customers.

payment

A(n) ____ draft is payable on presentation to the drawee. (Enter one word in the blank.)

sight

Corcoran Computers entered into an agreement with the Belgian government in which the company received a number of counterpurchase credits to be used to purchase goods from Belgium. The company did not need any of these goods so it sold the credits to a third-party trading house at a discount. This trading house then sold the credits at a profit to another company that wished to purchase them. This transaction is an example of _____.

switch trading

Getting a specialized third-party trading house involved in a countertrade arrangement to purchase the counterpurchase credits and sell them to another firm is called

switch trading.

A(n) _____ draft allows the drawee to delay payment—normally for 30 or more days.

time

When the warehouse manager received the draft with the shipment of textiles, he noticed that payment for the materials was not due for 60 days. This is an example of a transaction using a ______ draft.

time

The Export Legal Assistance Network is comprised of international ______ who provide free initial consultations to small businesses on export-related matters.

trade attorneys

True or false: An offset is similar to a counterpurchase except the party can fulfill its obligation with any firm in the country where the sale is made.

true

True or false: Companies new to exporting are more likely to underestimate the time and expertise needed to cultivate relationships in foreign countries.

true

True or false: In order to reduce the risks associated with exporting, it makes sense for a company to initially focus on one market.

true

True or false: Since the international market is significantly larger than the domestic market, exporting is nearly always a way to increase a company's revenue.

true

Due to a lack of ______, special mechanisms for financing exports and imports have been created to deal with conducting transactions with strangers.

trust

XYZ Company asked an international trade partner to pay for goods prior to delivery. XYZ Company was not fully aware of the company's background and wanted to be sure that it got paid. This is an example of why the lack of ______ has resulted in the development of special mechanisms for financing exports and imports.

trust

The CIBER network provides a link between the human resource and technology needs of a company with the research capacities and language training found at _____.

universities

The United States CIBER initiative fosters exporting needs by bringing together U.S. companies and _____.

universities