International Marketing chapter 14,15,16,18&19
international transactions: political risk
-AKA sovereign risk -the inability of your customer to pay the receivable in full and on time due to government action -unlike domestic sales, international transactions always come with some element of political risk -level of risk generally associated with political stability and out look of government foreign buyer -also includes the risk of expropriation
nonnegotiable bill of landing
-AKA straight bills -carrier can only deliver goods to consignee
EXW costs
-Raw or processed products -standard packaging -pallets, banding, shrink wrap, slip sheets, slings, one-ton big bags -special labeling -translation and printing -inspection certificates -bracing or inspecting a container -export packaging -can also include shipping, freight forwarder fees, documentation fees and banking fees
What are the benefits of containerism?
-Reduced costs -reduced damage to products -reduction of shipping risk -more likely to arrive at destination faster and on time
Letters of credit (irrevocable)
-Risk of seller: little to none -risk to buyer: little- no shipment... no payment -buyer receives goods: can be before or after payment -cost: can be high, related to value transaction
types of L/C
-UCP 600 -sight draft -time draft
international trade document: electronic export information (EEI) filing through AES direct
-US exports only (except to Canada) -issued by seller and accompany shipment -mandatory if shipment value of a single commodity is at least $2,500 -use to be known as Shippers Export Declaration (SED) -exporter is legally responsible for this not the forwarder although forwarders usually prepare them -common mistake is using wrong harmonized code -if exporter license is required then EEI is required too
international transactions: foreign exchange risk (FX risk)
-a change in the foreign exchange rate from the time the sales price was established and accepted to when payment is made -best known risk specifically associated with international sales
expectations of your customers
-a product that works and a service that meets needs * foreign buyers expect to know the truth about glitches and quirks and want the tools to deal with the problem -good communication and service *treat foreign buyer like an extension of your domestic office -lack of discrimination *international customers will keep you honest. They will notice if your campaign/ pricing favors domestic market significantly over foreign market -great prices *may need to lower foreign prices more than domestic prices due to international price escalation.
modification to domestic advertising
-add modification to domestic advertisements which might catch attention of foreign marketers who will contact you -highlight any modifications or technical considerations that are an outcome of your international activities
FCA costs
-all in EXW -inland transportation to the port of exit -insurance cost for inland transport -additional freight forwarders and documentation fees
trade shows: business cards
-always bring plenty -translate business card into local language on one side and english on the other
methods to manage distribution channel
-appreciating the unique role of foreign distributors -a product that works -good communication -lack of discrimination -great prices
trade shows: visual aids
-bring visual aids that communicate product features and benefits -be considerable about potential import duties
horizontal trade mission
-brings together participants from many industries with a common desire to increase trade with the target market -more likely to be headed by prominent dignitaries such as government officials because the opportunities and political paybacks are greater -more common internationally
negotiable bill of landing
-can be bought, sold or traded while goods are in transit -means exporter endorse bill over to bank, bank edorses bill to foreign bank, foreign bank endorse bill to foreign buyer
air cargo pallet
-cargo is secured to pallet with plastic nets or straps -doesnt offer security of a sealed container it is often the only option on smaller aircraft
international payment methods
-cash in advance -letters of credit (irrevocable) -collections -open account
basics of trade mission
-categorized as either vertical or horizontal
guideline for cooperative advertising
-co-op rate: rate at which your foreign buyer accrue advertising co-op dollars -match requirement: to increase effectiveness be sure to require some local match for each co-op accrued -allowable expenses: be sure to spell out exactly which marketing expenses are allowable and which are not -claim process: have a clearly written procedure including what evidence of marketing expense must be submitted
direct international advertising
-companies do this when publication is either too broad or too expensive for the foreign buyer -or pre conference journals or exhibition guides that can be particularly expensive and benefit more than one distributor
risks contained in the company's financials
-companies that offer unsecured open accounts to foreign buyers clearly have more financial risk than those that offer only cash-in-advance -company that is overly reliant on one international country or region or has a sporadic international sales pattern will have higher risk -banks would rather rely on domestic success -US Small Business Administration and ExIm bank's Export Working Capital Program, provide government backed guarantees to banks to counter their international financial risk concerns
US state department of state/ the directorate of defense trade control (DDTC)
-controls the exports of defense, military and munitions articles -international traffic in in arms regulations (ITAR) *set of regulations that control products under DDTC -commodity jurisdiction
considerations when selecting trade missions
-cost -the right trade show? -last minute opportunities
Air cargo containerization
-cost saving -increases speed of loading and unloading -minimizes exposure of cargo to potential damage or theft -ensures efficient use of cargo area
information seller needs to include in an international quotation
-costs of goods -cost of export packaging in cases where special packaging of pallets is required -cost of special labeling, translation or printing if required -inland freight if the freight forwarder is not arranging the transportation to the port of exit -handling charges, inspection or other certificates or any specific charges important to your quotation -other factors to consider: taxes, warranty, expiration, other limitations
establish global brand guidelines
-create advertising kits of support materials to give to your foreign buyers *should include electronic clip art of your brand logo and artwork. state rules for how these clips can be used -help foreign representative achieve advertising and PR goals *be sure marketing staff has good relationship with overseas buyers so issues such as brand usage and advertising themes are more easily coordinated
what are the international financial risks?
-credit reporting can be slow, incomplete and expensive -no common currency -incomplete international data -greater likelihood of procedural errors -events outside the company's control (currency devaluation) -company financials contain risk
trade shows: USA and state pavilions
-dedicated group of booths -have your own booth but it is adjoined with other firms -can save money -can increase profile and credibility because pavilions are generally in the middle of the trade show
what are the different lists to check in concern of BIS
-denied persons list -unverified list -debarred list
modifications to marketing materials
-depending on industry some foreign buyers prefer materials created by the manufacturer because they seem more dependable -in some cases modifications to marketing materials will be minor and are best done by the manufacturer -product specifications sheets, warranty statements and competitive comparisons are best modified or produced by your foreign buyer especially if the changes are exclusive to a particular market and foreign language
key information contained in standard documents for international trade (11)
-description of the goods -mode of transport -terms of sale (which party pays for what) -value of goods -country of origin for the goods -identity of the seller/shipper -identity of the buyer -terms of payment -shipping instructions -evidence of shipment -compliance with related trade controls
details you need before contacting a freight forwarder
-description of the goods to be shipped -packaging details (dimensions, weight) -value of shipment -destination -shipping terms
export working capital program
-designed exclusively to assist exporters with cash flow constraints due to international growth or orders -offered by small business administration and ExIm Bank *SBA used for deals less than $1 million. ExIm bank used for over $1 million. loan guarantee that SBA or ExIm will pay back up to 90% of loan if company cant
What are incoterms used for
-determines who is responsible for what between parties -Is part of international law -Establishes the geographic location at which the buyer becomes responsible for the goods
follow up forms
-develop forms to classify visitors as end-users, distributors or agents
Problems with L/C
-discrepancies -date of shipment -partial shipments -costs
trade shows: pricing
-dont hand out pricing info -be sure to have at least estimated landing costs for your products for meeting with potential buyers
US department of the treasury/ Office of foreign assets control (OFAC)
-enforce US trade sanctions -apples to not only US exporter but to agents and distributors as well
typical applications of an FX risk management strategy to occur
-exporting products or services and the established sales price is in foreign currency -importing equipment or materials and the establishment purchase price is in foreign currency -receiving dividends or royalties from overseas subsidiares or investments that are denominated in foreign currency -funding an overseas investment, acquisition or expansion
Commerce Control list (CCL)
-find if an ECCN exist for your product
Incoterms first letter
-first letters matter -E, F, C, D- Order matters; starts with the least responsibility to the greatest
cooperative advertising
-for every dollar of product purchase by your foreign agent or distributor it earns co-op dollars that can be applied toward marketing expenses -motivates foreign buyers to localize marketing efforts for your product -allows manufacturer to prioritize the particular expenses preferred -forces partnership between the manufacturer and the foreign buyer while empowering the foreign buyer to act locally in making marketing decisions
corporate risk management policy phase 3
-fully involved global company -FX management is fully integrated into all business aspects including tax, accounting and finance
international trade document: packing list
-generally issued by seller and accompany shipment -should include weights and measurements and type of package -if packing list is required it is a good idea to affix a signature
international trade document: commercial invoice
-generally issues by seller and accompany shipment -essentially sales documents -number of elements to this invoice that require information supplied from outside the company -forms the basis for various decisions along the way -if terms of payment are a letter of credit make sure to read L/C and highlight any specific requirements for the invoice -research must be done to determine if the destination country has any specific requirements -for US exports should have an export control statement at the bottom -may act as a certificate of origin
netting
-has low cost -fits phase 1, 2 and 3 -fits all transaction size
forward contract
-has low cost -fits phase 1, 2 and 3 -fits all transaction sized -a contract with another party (typically a bank) to deliver a fixed amount of one currency in return for a fixed amount of another currency at an agreed on future date -available for trading currencies 30, 60 ,90 and 180 day deliveries -more flexible
futures contracts
-has low to moderate cost -fits phase 2 and 3 -fits transactions over $1 million -forward contracts trade on financial exchange -highly inflexible -come in fixed amounts with standard deliver duties
currency options
-have moderate to high costs -fits phase 2 and 3 -fits transactions over $1 million -the right but not the obligation to deliver a fixed amount of one currency in return for a fixed amount of another currency by an agreed future date -does not have to be exercised -downside: brokerage fee and premium must be paid either way
US customs and boarder protection
-helps maintain AES direct along with US census and other federal agencies -help protect from illegal import of goods meaning if someone violated your trademark or patent with a product they would stop them from entering US
transaction risk
-if sales price is in US dollars the risk is on the foreign buyer -if sales price is in local currency of foreign buyer then risk is placed on US seller
ATA carnets
-if traveling to multiple countries consider ATA carnet -passport for products -allow free passage of goods in over 50 countries
simplified network application process redesign (SNAP-R)
-if you need a valid export license you request it through SNAP-R
CIP costs
-includes those of EXP, FCA, and FOB -ocean freight or air freight -war risk (ocean) -harbor maintenance fee -fuel adjustment factor (FAF) -bunker surcharge or bunker adjustment factor (BAF) -currency adjustment factor (CAF) -destination delivery charge (DDC) or container service charges (CSC) -cargo insurance
FOB costs
-includes those of EXW and FCA -port charges -costs of loading goods on board ship -heavy lifting charges
other documents that might be required
-inspection certificates -shipper's letter of instruction
services offered by freight forwarders (17)
-international freight quotations -booking inland and international freight movements -containerization and consolidation of freight -providing scheduling of carriers -transshipments -export and import documentation -applying for export licenses -overseas documentation and foreign government requirements -pre shipment inspections -marine and air insurance -warehousing -export packing -supervising freight movements -assisting with insurance claims -overseas logistics strategies such as free trade zones and warehousing -computerized tracking of international freight movements -import customs clearance/brokerage
international trade document: bill of landing
-issued by carrier -issued by trucking, railroad and shipping lines -when issued by airlines bill is called air waybill -two types of document: negotiable, nonnegotiable
international trade document: quotations
-issued by seller before sale is confirmed 1. confirms the selling price of the goods to the buyer 2. clarifies the various costs that the buyer will have to pay in addition to the product costs
international trade document: certificate of origin
-issued by seller but not always required -required to determine import tariff treatment -used to establish the country of origin so when the good reaches its foreign destination local customs can determine the appropriate import duty or other applicable taxes -depending on country a generic form is acceptable -some cases origin must be certified by chamber of commerce -some cases very specific formats are required
international trade document: drafts
-issued by sellers bank but not always required -an unconditional order (instruction) in writing from one party to another party
international trade documents: pro forma invoice
-issued by the seller before sale is confirmed -confirms to the interest buyer the cost of goods and all other related cost items -importers will request this to open a letter of credit -help foreign buyers obtain necessary import documents -may take the place of a quotation -difference is pro forma is a document and quotation is a letter, email or fax
international trade document: insurance certificate
-issued by various parties -important seller ensures insurance has been arranged even if buyer is paying *often buyer will expect seller to arrange insurance and add it to the invoice -certificate may be issued by seller, freight forwarder or insurance company
during foreign visits try to investigate:
-key accounts *go with agent to key account and observe how they sell your product -blind sales calls *visit a retail shop or customer of your agent to see if it is truly carrying your product -media visits *if you are traveling with a key executive plan a visit to an industry magazine or local business press -training events *keep training agents so they are increasingly effective in representing your company
Ex-Works (EXW)
-least responsibilities for the exporter -price includes only those costs agreed upon -foreign buyers responsibility to clear goods for export
translation risk
-losses or gains that can result from restating the values of these assets and liabilities -encompass all of the company'f foreign exchange risk exposure both assets and liabilities -significant to outside users of the financial statements such as lenders and shareholders
What are the two categories of air cargo containers
-lower deck containers -air cargo pallet
trade shows: develop potential buyer database
-maintain database of contact developed during months leading up to exhibition and send pre- exhibition materials to them before the show
difference between editorial staff and advertising staff
-maintain distinction between advertising and editorial staff
placing international advertising
-maximize purchase power -negotiate the price -last minute placement -use your foreign buyers
International AD copy
-may have translation issues -AD's that work in US probably wont work in other countries -creating an international AD can be plan and expensive
NAFTA certificates of origin
-most complicated -designed so that products shipped between NASFTA countries only receive benefits if the product is actually manufactured in US, Canada or Mexico
Delivered duty paid (DDP)
-most responsibilities for the seller -mostly used for samples or warranty repairs -seller responsible for all freight charges, insures shipment to named place, all import customs fees and duties in foreign country
when to move to nonexclusive contract
-moving to nonexclusive is primarily an issue of market maturity -going nonexclusive after being exclusive can backfire but as companies grow and become more involved in their foreign markets they will usually move from exclusive to nonexclusive
how to prepare documents
-no set format for international trade documents -layout doesnt matter as long as structure is the same and information is easy to locate -consistency and accuracy is essential -best not to use abbreviations
format of an international quotation
-no standard format
foreign trade shows
-offer unique opportunity to meet with potential representatives and visit competitors all in one location and product offerings -opportunity to collect literature and compare representation lists
Third party logistics (3PLS)
-offers ability to outsource logistics with another company -provide complete global solutions, including product shipping, warehousing, sales fulfillment and customer support functions
list to check
-official to search for companies or parties that are of concern of BIS
obtain foreign receivables insurance
-one most powerful techniques -offered by Export-import bank (ExIm)
reasons for incomplete international data
-one of the main reasons is decisions often must be made using incomplete information -Dun and Bradstreet (dnb.com) and Coface (coface-us.com) offer credit information on international buyers -overnight currency devaluation
PR activities for small to midsize companies
-only advertising cost dollars (editorials and press are free) -meeting with editorial staff -plan public relations events -press releases -global consistency -deal with problems -know the difference between editorial staff and advertising staff
PR activities: planning public relations events
-participate in events -have representative plan events around your visits
why participate in trade missions
-power in numbers -increased exposure to government industry and country experts -potential cost savings of non travel expenses -peer-to peer learingn
Export Control Classification Number (ECCN)
-products that are controlled under EAR are given ECCN -strictly used in context of US export controls -under BIS
machine translation
-professional translation rates rage from 20 to 30 cents per work -machine translation is an alternative -has proven track record to improve relationship with global customers and increase revenue
minimizing commercial risk
-relatively easy to identify -require payment in advance -require letter of credit -open account -obtain foreign receivables insurance
corporate risk management policy phase 1
-represents companies in initial global expansion -only involved in exporting -adverse -rely heavily on outside assistance -pricing in US dollars- payment in secure forms
minimizing political risk
-research on government and political environment of the foreign buyer -expot.gov and GlobalEdge offer political risk information on countries -euler hermes (eulerhermes.ub) offers country specific reports and a global report on political and economic risk -if risk is high enough payment options should be adjusted -prepayment is best to avoid political risk
economic risk
-results from the potential for an international company to become noncompetitive due to changes in the exchange rate between its base of operations and that of its customers -when dollar strength increases it takes more of a foreign currency to purchase same amount of dollars
cash in advance
-risk to seller: none -risk to buyer: very high, relies solely on god faith of seller to ship -buyer receive goods: after payment -cost: low, not related to value of transaction -most common international payment method -payment by foreign buyer typically sent by wire (AKA Society of Worldwide Interbank Financial Telecommunications (SWIFT transfer))
collections
-risk to seller: potentially high if foreign bank or forwarder is unreliable -risk to buyer: similar to L/C; low buyer receives goods: after fulfilling payment terms cost: low -AKA documentary collection, cash against documents and payment against documents -when product is shipped seller forwards the documents to the foreign buyers bank which holds the documents until the payment term is met -at sight
open account
-risk to seller: potentially very high -risk to buyer: little to none -buyer receives goods: immediately -cost: low -shipping "on credit" -method is simple and inexpensive for both seller and buyer -all risk that buyer will pay seller
information required on EEI
-shipment information: origin state, country of destination, departure date, conveyance name -USPPI: US Principal Party in Interest -ultimate consignee -commodity line -when all information is entered in AES system will generate a International Transaction Number (ITN)
minimizing commercial risk: open account
-shipments with no guarantee in place other than stopping future shipments if payment is not paid -used when company wants to move beyond first two option
Free on Board (FOB)
-signifies a precise ship and ocean port location where the product is loaded on an ocean carrier -only applies to sea or water transportation -should only be used with "roll-on, roll-off"
Carriage and Insurance Paid to (CIP)
-signifies seller clears the goods for export, arranges and pays the ocean or air freight and other freight charges to a named place in the foreign country -sellers insures shipment to named place -seller not responsible for any import customs fees or duties
considerations when terminating an agent/ distributor
-some distributors just do not have the experience or infrastructure to take sale beyond a certain point -even if contract allows for dissolution by either party, local laws may not -legal issues associated vary from country to country -nonlegal issues; inventory considerations, public relations and choosing new distributor
lower deck containers
-specifically designed to fit the dimensions of the lower deck of a wide body jet and lock directly into the planes structure -typically metal and can be sealed -another version are box-type containers
social media
-strong international presence is important -you should control your social media tools
international transactions: commercial risk
-the ability or inability of your customer to pay the receivable in full and on-time -most often recognized with any transaction -no credit risk associated with a transaction if no credit is extended -also risk that foreign buyers break contract
elements of a pro forma invoice
-the goods -terms of sale -terms of payment -validity date -shipping date -documentation -weight/ dimensions -mode of transportation -banking charges or information -country of origin -other terms -sellers correct name and address -sellers pro forma reference number and any buyer references -any specific inclusions -any type of packaging -the request for partial shipments and/or transshipments
who solves all the problems in foreign markets
-they do -this puts more pressure on manufacturer to provide adequate materials and tools to empower the importer so it can duplicate functions conducted by manufacturer
why importers want exclusive contracts
-they put a lot of work into campaign for your product and they want protection against another company sweeping in and reaping the benefits of their hard work
DDP costs
-those included in EXW, FCA, FOB and CIP -all imported costs including customs fees and duties
corporate risk management policy phase 2
-tolerant -company begins to expand global activities -offer foreign currency pricing and less restrictive payment terms like open accounts -develop international expertise to manage FX risk
vertical trade mission
-trade mission is focused on one or two particular industry or related industries -Benefit: all of the foreign events, visits and dignitaries are all related to the common theme of the target industry -most familiar in US
trade shows: language issues
-translate essential product materials in local language -invest into a local translator
PR activities: meeting with editorial staff
-you will have ore access to international press than domestic press -call prior to departure, explain reason for visit, suggest a short meeting -once representation has been established continue meeting with editorial staff
what are the 4 US government agencies tht play huge role in export controls
1. bureau of industry and security (BIS) bis.doc.gov 2. US department of the treasury/ office of foreign assets control (OFAC) treasury.gov 3. US state department of state/ the directorate of defense trade controls (DDTC) pmddt.state.gov 4. US customs and boarder protection cbp.gov
What two ways can the 11 incoterms be grouped in?
1. by the freight cost items that are included in the term 2. by the appropriate mode of transportation for their usage.
3 risks that should concern company's going global
1. commercial risk 2. political risk 3.foreign exchange risk (FX risk)
bureau of industry and security has 2 primary goals
1. control the export of technology and nonmilitary products that if improperly exported could pose a threat to national security 2. control the exports to specific individuals or companies for which BIS has a concer
NAFTA preference criteria
1. goods wholly obtained or produced entirely in the territory 2. transformation 3. good produced entirely in territory 4. special circumstance when product is not transformed because of harmonized codes 5. certain automatic data processing goods and their parts not originate become originated upon importation into territory 6. used in special circumstance in the agricultural industry
when to participate in trade missions
1. new to market 2. support existing market activities 3. networking
What are the 9 essential international trade documents
1. quotations 2. pro forma invoice 3.commercial invoice 4. packing list 5. electronic export information (EEI) 6. bill of landing or air waybill 7. certificate of origin 8. insurance certificate 9. drafts
bill of landing will be issued by carrier to serve what purposes
1. receipt for the cargo 2. as a contract for transportation goods 3. as a document of title (possession)
products qualify for NAFTA benefits by
1. the product itself originates within the territory 2. product transformed within the territory 3. product assembled using only originating materials
types of FX risk
1. transaction risk 2. economic risk 3. translation risk
Free Carrier (FCA)
1. used when exporter wants least responsibilities but takes on the responsibility of clearing goods for export 2. used when goods are loaded on board an inland carrier at a location beyond the factory -terms of sale can include delivery of goods to a freight forwarder, railway terminal, or container yard in a city beyond the exporter -signifies a precise location where the product is turned over to a carrier or person who will ensure freight
what are the three main US export control concerns
1. who imports 2. what is exported 3. where exports are going
who are your international finance partners
1. your bank- will do most of the work 2. your local trade resource- can train and assist you through the initial steps 3. the federal government- has the financial strength to offer products such as foreign credit insurance
What is the freight capacity of containers?
2,376 cubic feet
Containers are generally how many feet long?
20 or 40 feet. *40 feet are most popular
What is the weigh limit of containers?
60,350 lbs *mat be lower if container is transported by truck
how to state CIP
CIP named place, state/province/country
you must confirm that your product is not on what list?
Commerce Control List (CCL) *if it is you need a license
Which terms should you avoid quoting and why?
D terms because of risks
how to state DDP
DIP named place, country
in US every export has to file what?
Electronic Export Information record (EEI)
How to state EXW
Ex-Works town, state/province/country
how to state FCA
FCA named place state/province/country
how to state FOB
FOB ship's rail ocean port of exit, state/province/country
Who are US freight forwarders regulated and certified by?
Federal Maritime Commission
FX management is not limited to what kind of companies
Fortune 500 companies
Port-to-port service (LCL)
LCL= less than container loads goods from one shipper is combined with goods from another *done by forwarders, consolidators or the carrier *less cost effective and does not offer same product protection
what organizations are many freight forwarders apart of?
National customs brokers and Forwarders association of america, Inc. (www.ncbfaa.org)
Containers were first used
Post WW2 for military to transport family goods
What company was the first to use containers commercially?
Shipping line Sea-Land
T/F Exporters and importers don't usually own containers
True usually they just use them for shipment and return them to a pool to be used by others
C-TPAC and CSI are managed by who?
US Customs and Border Protection
Who adopted containers as a standard and what did they call them?
US military. Called them conex containers which were smaller than todays
Customs Trade Partnership against Terrorism (C-TPAC)
a voluntary program available to US manufacturers to certify their commitment to best practices in supply chain security *can lower the number of cargo inspection when importing goods
High cube containers
additional foot in height and typically 48 feet long
open top containers
allows products to be loaded from the top. may or may not have a top
box-type containers
another version of lower deck containers -made of wood, fiberglass, plywood, fiberboard, metal or a combination.
trade missions
any coordinated international travel where individuals from various companies make joint visits to foreign markets
How were goods shipped before containers?
as breakbulk cargo *goods were exposed to outside elements
PR activities: press releases
be sure to coordinate both domestically and internationally about press releases
documents against acceptance
buyer must accept the agreement to pay invoice within a certain amount of time
L/C is a commitment by who?
by bank to pay amount of L/C if certain conditions are met by seller
regional value content
calculation used to determine in dollars the percentage of originating materials in a product compared to nonoriginating materials
with exclusive contracts you have the ability to
cancel or not renew contract
board bill of landing
certifies cargo has been placed on board a certain vessel and is signed by the master
fourth rule when using incoterms
charges omitted in the quotation come out of the sellers pocket. otherwise the seller must re-invoice which would probably not be accepted by buyer. seller will seem inexperienced
if advertising sells products then public relations sells
companies
Export Management System (EMS)
companies participating in compliance with export control document policies and procedures to remain compliant with export control
FX management is what kind of tool?
competitive and strategic
Door-to-door service
container will be delivered directly from your door to the door of your foreign buyer *this option is most desirable
If your shipment can fill up at least 1/2 a container it is better to
contract a full container
SWIFT transfer
cost of transfer low- around $50 ea.
parties
countries that signed NAFTA
minimizing foreign exchange risk
create corporate risk management policy (3 phases)
foul bill of landing
damages or shortages are discovered by the carrier
Foreign buyer can only open L/C account by
depositing full amount invoiced or existing credit line meaning buyer may still need to come up with the amount weeks before they receive the product
C/D incoterms
do include main international freight
seventh rule when using incoterms
do not assume anything
fifth rule when using incoterms
do not assume buyer knows all the regulations
E/F incoterms
do not include main international freight
each shipment has a certain number of what
documents *such as commercial invoice, packing lists, certificate of origin, inspection certificate
advising
domestic bank verifies that foreign bank actually did issue L/C
combining containerization and intermodalism has had a major impact on what service?
door to door
when exchange rate is changed it impacts who?
either the buyer or the seller
integrated marketing communication
ensuring your sales, marketing, public relations, social media, brand, staff and corporate culture are all unified and consistent to support your corporate strategies and goals
include your international activities in your company's
entire advertising strategy so international and domestic activities are sync
transformation
final product made up of other products which are turned into a final project
confirmed letter of credit
foreign bank pays a fee to guarantee L/C payment as long as goods are shipped and documents are provided
when order of (negotiable) bills of landing
foreign buyer are typically unable to obtain possession of goods before payment is made
forward rate
foreign exchange rate quoted between 2 currencies for delivery in the future. Typically quoted for 30, 60 and 90 days delivery. calculation based on known factors mostly using bond rates
spot rate
foreign exchange rate quoted between two currencies for transactions that require either immediate delivery or delivery within two days
territory
geographical boundaries of the parties to the agreement
international trade shows
good opportunities to meet with important industry contacts and assess competitors
currency devaluation
government imposed currency controls and hyperinflation can all affect a foreign buyers ability to pay
expropriation
government takes over the assets of a private company
Global shipping costs have become increasingly affordable because
growing use of containerization and intermodalism combined with technology
international agen/ distributor meetings
have an annual international meeting for all of your distributors/ agents
side loading containers
have door on the side when end loading is not easy Ex: containers on rail cars
flate rack containers
have two or more sides missing for transporting machinery, vehicles, bulky items, lumber and mill products
You should ask the freight forward what?
how freight is calculated
most countries offer temporary
import bonds- pay for products when enter country and get money back when you leave as long as you still of the products with you
combining containerization and intermodalism has
increased efficiency and lowered the costs of shipping globally
URR525
international agreement covering how international reimbursements are made -one way to avoid L/C problems
ocean bill of landing
issued by an ocean carrier for sea freight
clean bill of landing
issued when shipment is received by carrier with no indication of damage or shortages
minimizing international financial risk
key is to first identify risk then take steps to minimize
trade missions and trade shows are not just for
large companies
UCP 600
law that made L/C irrevocable
what payment terms should be used when obtaining an international freight quote
letter of credit (L/C) or collections c
you must confirm that your buyer is not on what list?
list to check *if they are you need a license
Uniform customs and practices for documentary credit number 600 (UCP600)
lists a number of rules and understandings that apply in case of misunderstandings, disputes of mistakes. -one way to avoid L/C problems
Commerce Country Chart
lists each country and indicates when an export license is required
time draft L/C (usance L/C)
longer period payment is negotiated between seller and buyer
PR activities: global consistency
maintain image and message
US forms the second largest category of
marketing expenditure. *second to advertising
FX management must always be linked to other aspects of a company's operation including
marketing, logistics, tax and finance
exclusive contracts put you in a better position to
motivate and mange your agents and distributors
intermodalism
moving containerized freight between different modes of transport such as truck to rail to ocean to rail and then truck
containerization
moving freight in standard containers
incoterms must have ?
named place Ex: EXW Dallas, TX
trade shows: marketing materials
need at least one inexpensive marketing handout to give to visitors
non containerized cargo
not all cargo can be containerized. some need to be transported in specialized vessels that are fitted for particular products. These are sometimes referred to as "ro-ro" or "roll on; roll off"
direct marketing
one of the most powerful tools to increase international sales -goal is to not make the sale but create n environment that generates sales -requires less infrastructure -can use to manage distribution network
Can file EEI through
online portal callad AES direct (aesdirect.gov) *portal administered by US census and US customs and border protection *no cost to file EEI
incoterms mode of transportation matters
out of the 11 terms, 4 are for ocean and inland waterway: FAS, FOB, CFR, CIF
annex 401
part of NAFTA that describes how a product can qualify for NAFTA benefits
nonoriginating materials
parts, raw materials, components or finish products not from a NAFTA country
originating materials
parts, raw materials, components or finish products that have been determined to be from a NAFTA country
sight draft L/C
payment made to seller as soon as the documents verifying shipment are presented to bank
what certificates are needed for agricultural products of animals?
phytosanitary or health certificates
if bringing product samples check for
potential import custom duties
insulated containers
prevent fluctuations in temp through ventilation or use of heating system
hedging
process of protecting against the potential of foreign exchange loss due to currency exchange rate fluctuations
denied parties screening/ restricted parties screening
process of searching for companies or parties on BIS list check
preferential treatment
product being allowed into NAFTA country at a lower tariff
a export license will be required if
product is deemed sensitive to security, political and related concerns of US government
qualify for preferential treatment
product mets requirements in annex 401 so it qualifies for benefits
Refrigerated containers (reefers)
refrigeration features for perishable goods
commodity jurisdiction
request a formal decision from DDTC about their product
dont judge success of trade shows/ missions based off of
sales. based it off of market knowledge gained, competitive information uncovered and relationships developed with potential buyers
Container Security Initiative (CSI)
seeks to identify potentially high-risk freight in foreign ports prior to arriving into the US
sixth rule when using incoterms
seller is ultimately responsible for ensuring the inclusion of costs, timely shipping, compliance, documentation and payment
first rule when using incoterms
seller must clearly define terms and conditions for shipment, payment, which port, time frame and all other issues
third rule when using incoterms
seller must determine what charges are included in the quotation as based upon terms of sale and geographical location
Export Administration Regulations (EAR)
set of authorizing regulations under which BIS operates
incoterms
set of transportaion temrs set by the International Chamber of Commerce (ICC)
domestic trade shows
should participate in US trade shows too
exclusive contracts =
single most powerful motivational tool
Containers are usually how many feet in width and height?
slightly more than 7 1/2 feet
inspection certificates
some shipments require inspection of goods before they leave the manufacturers or exporters facility
effective public relations can be an important tool to
successfully expand globally even for small companies
obvious benefit to trade show
that hundreds/ thousands of potential buyers all come under one roof
at sight
the buyer must pay prior to taking possession of goods (known as documents against payments)
It is legally who's responsibility to make sure documentation for exports is done correctly?
the exporters
incoterms are from who's prospective?
the exporters *describes what the exporter is responsible for
second rule when using incoterms
the farther the geographical place is from warehouse (EXW) the higher the costs of getting the product to the site
customers of foreign agent or distributor will few who as manufacturer?
the foreign agent or distributor
what is one of the most power features of direct market entry?
the wealth of market feedback available from your agents and distributors
$5000= 50,000 pesos if peso weakens from 10 peso/ per dollar to 12 peso/ per dollar
then company would only receive $4,167 (50,000/12)
incoterms and title transfer
title transfer is determined by contract between exporter and importer
why do companies eventually increase their international involvement?
to include foreign direct investment which gives them more control and feedback and additional financial risk
many trade missions are planned around
trade shows. but the do not need to be
freight forwarder
trained and equipped to handle the entire process from the initial freight cost quotation and shipping arrangements to related documentation and customs clearance
red flags
used so companies can have staff trained to recognize these flags which may indicate the buyer is attempting to circumvent US export controls
shipper's letter of instruction
used to convey key information about shipment including all the fields required on the EEI
ventilated containers
ventilation through one or both ends may include powered air- circulation fans *used for cargo that generates heat or is susceptible to sweating
General average act
when a vessel in danger the ship's master has the right to sacrifice property and/or incur reasonable expenditure
when does financial risk start increasing
when companies move to direct exporting
deemed exports
when technology otherwise covered by EAR is released to foreign nationals while in US *it is considered an export and must have a license to do so
