Global Business ch 13
The typical trade transaction involves ____ steps.
14
Step 5 of a typical trade transaction: Exporter Company's bank __________ the exporter of the opening of a __________ ___ __________ in his favor.
Advises, letter of credit
When a time draft is drawn on and accepted by a bank, it is called a __________ __________. When it is drawn on and accepted by a business firm, it is called a __________ ___________.
Banker's acceptance, trade acceptance
Definition: The direct exchange of goods and/or services between two parties without a cash transaction.
Barter
What are the five types of countertrade?
Barter, counterpurchase, offset, switch trading, compensation
The International Trade Administration and the United States and Foreign Commercial Service provide potential exporters with a "________ ________" list of markets and a "__________ __________ ___________" for 14 countries that are major markets for US exports.
Best prospects, comparison shopping service
Definition: An order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time.
Bill of exchange
Definition: A document issued to the exporter by the common carrier transporting the merchandise; it serves as a receipt, a contract, and a document of title.
Bill of lading
Definition: When a firm builds a plant in a country and agrees to take a certain percentage of the plant's output as partial payment for the contract.
Buyback
Losses due to __________ risk result from the buyer's insolvency or payment default. __________ losses arise from actions of governments that are beyond the control of either buyer or seller.
Commercial, political
Definition: A reciprocal buying agreement.
Counterpurchase
Switch trading occurs when a third-party trading house buys the firm's __________ _________ and sells them to another firm that can better use them.
Counterpurchase credits
Definition: The trade of goods or services for other goods or services.
Countertrade
The Export-Import Bank has a _________ __________ operation under which it lends dollars to foreign borrowers for use in purchasing US exports.
Direct lending
A bill of exchange is also known as a __________.
Draft
Step 10 of a typical trade transaction: Exporter Company's bank tells EC that it has received the accepted bank _________, which is payable in 90 days.
Draft
Step 13 of a typical trade transaction: In 90 days, Importer Company's bank receives IC's payment, so it has funds to pay the maturing __________.
Draft
Step 9 of a typical trade transaction: Importer Company's bank returns the accepted _________ to Exporter Company's bank.
Draft
Step 8 of a typical trade transaction: Exporter Company's bank sends the _________ and _________ ___ __________ to Importer Company's bank. IC's bank accepts the draft, taking possession of the documents and promising to pay the _________ in 90 days.
Draft, bill of lading, draft
Step 11 of a typical trade transaction: Exporter Company sells the __________ to EC's bank at a discount from its face value and receives the discounted __________ value of the draft in return.
Draft, cash
The chances of exporting successfully can be increased by: (1) hiring an _______; (2) initially focusing on a ________ number of markets; (3) entering a market on a ________ scale; (4) _________ additional personnel to oversee exporting; (5) devoting attention to building _________ with local distributors; (6) hiring local personnel to help the firm _________ itself; (7) being _________ about seeking opportunities; and (8) retaining the option of _________ production.
EMC, small, small, hiring, relationships, establish, proactive, local
What is the Export-Import Bank sometimes referred to as?
Ex-Im Bank
The Small Business Administration's ___________ ___________ ____________ __________ is a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters.
Export Legal Assistance Network
Definition: Export specialists who act as the export marketing department for client firms.
Export management company
Definition: Agency of the US government whose mission is to provide aid in financing and facilitate exports and imports.
Export-Import Bank
Prospective US exporters can get government help by (1) getting financing aid from the __________-__________ __________ and (2) getting export credit insurance from the __________ __________ __________ ___________.
Export-Import Bank, Foreign Credit Insurance Association
True/False: A company would generally prefer countertrade over simply receiving payment.
False
True/False: Medium-sized and small firms are typically more proactive than large firms about finding export opportunities.
False
The US Department of Commerce has 2 departments that provide businesses with intelligence and help entering foreign markets: the ____________ _____________ ____________ and the ___________ ___________ ____ ____________ ____________ ___________.
International Trade Administration, United States and Foreign Commercial Service
What is the abbreviation for a letter of credit?
L/C
Definition: Issued by a bank, indicating that the bank will make payments under specific circumstances.
Letter of credit
Step 3 of a typical trade transaction: Importer Company applies to its bank for a _________ ___ _________ to be issued in favor of Exporter Company for the merchandise that IC wants to buy.
Letter of credit
Importer Company and Exporter Company are going to use a third party for their transaction. IC gets a ________ __ ________ from the bank, so EC ships their product. EC gives the bank a ________ __ ________, and then presents the bank with a ________ to get its money. The bank gives the IC the ________ to the product, and IC pays the bank back.
Letter of credit, bill of lading, draft, title
Step 2 of a typical trade transaction: Exporter Company agrees to ship under a __________ ___ __________ and specifies relevant information like prices and __________ terms.
Letter of credit, delivery
Step 4 of a typical trade transaction: Importer Company's bank issues a __________ ___ _________ in IC's favor and _________ it to Exporter Company's bank.
Letter of credit, sends
Step 14 of a typical trade transaction: In 90 days, the holder of the __________ acceptance presents it to Importer Company's bank for payment. IC's bank __________.
Matured, pays
Time drafts are __________ instruments, meaning that once the draft is stamped with an acceptance, the maker can sell the draft to an investor at a discount from its face value.
Negotiable
___________ implies that the exporter may not be paid in his or her home country.
Nonconvertibility
Definition: A buying agreement where the exporting country can then fulfill the agreement with any firm in the country to which the sale is being made.
Offset
A short-term spike in the volume of countertrade can follow __________ financial crisis.
Periodic
Step 1 of a typical trade transaction: Importer Company _________ ___ _________ with Exporter Company and asks EC if he will ship under a __________ ___ __________.
Places an order, letter of credit
Step 12 of a typical trade transaction: Importer Company's bank notifies IC of the arrival of the documents. IC agrees to pay its bank in 90 days. Ic's bank releases the documents so the importer can take ____________ of the shipment.
Possession
A bill of lading serves as a ________, a _________, and a _________ ___ _________.
Receipt, contract, document of title
The Export-Import Bank guarantees ____________ of medium and long-term loans US commercial banks make to foreign borrowers for purchasing US exports.
Repayments
The FCIA provides coverage against commercial and political __________.
Risks
The Small Business Administration helps potential exporters with its ___________ (abbreviation) program, 850 volunteers who give individual ___________, and the __________ (abbreviation) group.
SCORE, counseling, ELAN
An exporter may _______ a time draft immediately if he needs the funds to finance merchandise in transit and/or to cover cash flow shortfalls.
Sell
Step 6 of a typical trade transaction: Exporter Company __________ the goods to Importer Company on a _________ _________. An official of the carrier gives the exporter a _________ ___ _________.
Ships, common carrier, bill of lading
Definition: A draft payable on presentation to the drawee.
Sight draft
What are the two categories of drafts?
Sight, time
There are two problems with bartering: (1) If goods are not exchanged _____________, one party ends up financing the other for a period; and (2) Firms engaged in barter run the risk of having to accept goods they do not __________, cannot __________, or have difficulty __________.
Simultaneously, want, use, reselling
A government organization, the ___________ ____________ ____________, helps potential exporters through its Service Corps of Retired Executives program and 850 volunteers who provide one-on-one counseling to businesses.
Small Business Administration
Definition: Japan's great trading houses.
Sogo shosha
The masters of countertrade are Japan's giant trading firms, the _________ _________.
Sogo shosha
Countertrade arose in the 1960s as a way for the __________ __________ and __________ states of Eastern Europe to purchase imports. During the 1980s, it became popular in ___________ nations that lacked the foreign exchange reserves required to purchase necessary imports.
Soviet Union, Communist, developing
Export management companies (a) __________ export operations for a firm that the firm will take over after they are established or (b) perform start-up services that the EMC will _________ to manage.
Start, continue
Definition: The use of a specialized third-party trading house in a countertrade agreement.
Switch trading
Definition: A promise to pay by the accepting party at some future date.
Time draft
Step 7 of a typical trade transaction: Exporter Company presents a 90-day ________ ________ drawn on Importer Company's bank in accordance with its letter of credit and the bill of lading to EC's bank. EC endorses the ________ ___ ________ so title to the goods is transferred to EC's bank.
Time draft, bill of lading
True/False: Almost every state and many large cities maintain active trade commissions whose purpose is to promote exports.
True
True/False: Countertrade is most attractive to large, diverse multinational companies.
True
True/False: The great promise of exporting is that large revenue and profit opportunities are to be found in foreign markets for most firms in most industries.
True
The problem with beginning an exporting relationship is that there can be a lack of _________. This can be solved by using a third party that serves as an _________.
Trust, intermediary
Small firms can overcome ignorance of export opportunities by consulting the US's most comprehensive source of information, the ______ ____________ ______ ____________.
US Department of Commerce
First-time exporters tend to ______estimate the time and expertise needed to cultivate business in foreign countries.
Under
Smaller firms are not proactive about finding exporting opportunities because (a) they are __________ with foreign market opportunities, (b) they are ___________ by the complexities of exporting to foreign countries, and/or (c) they have significant problems with their ___________ attempt at doing business abroad.
Unfamiliar, intimidated, initial
