Download - Export Import Countertrade
![Page 1: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/1.jpg)
International Economics
Chapter 13Exporting, Importing,
and Countertrade
![Page 2: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/2.jpg)
Why Export?
Profits
Growing markets and lower costs
![Page 3: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/3.jpg)
Factors to Consider
• Financing• Insurance• Currency Exchange Risk
![Page 4: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/4.jpg)
Countertrade
• Trading stuff for stuff
![Page 5: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/5.jpg)
Case Study - 3M
• FIDO - First In defeats others• Make a little sell a little• Hire local
![Page 6: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/6.jpg)
EMCExport Management
CompanyExport Specialist who act as the
marketing department for
client firms
![Page 7: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/7.jpg)
Export Strategy• Hire EMC• Focus on one market• Enter on small scale• Added time & resources• Build relationships• Hire local• Seek opportunities to learn• Consider local production
![Page 8: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/8.jpg)
TrustShip Goods
Send Payment
ImporterExporter
What happens first?Shipment or payment?
![Page 9: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/9.jpg)
Three Instruments
Letter of Credit - L/C
Bill of Exchange - Draft
Bill of Lading
![Page 10: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/10.jpg)
Financing
Importer
1. Importer obtains bank’s promise to pay on importer’s behalf
2. Bank promises exporter to pay on importer’s behalf
3. Exporter ships to the bank
4. Bank pays the exporter
5. Bank gives good to the importer
6. Importer pays the bank
Exporter Bank
Letter of Credit
LC0.5% to 2%
Loan to extend payment
![Page 11: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/11.jpg)
Advantages
May not trust each other but do trust a reputable bank
![Page 12: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/12.jpg)
Bill of Exchange Draft
An order written by an exporter instructing the importer, or importer’s
agent, to pay the specified amount of money at a
specified time.
![Page 13: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/13.jpg)
Parties to the Draft
Maker - Exporter
Drawee - Who the draft is presented to (Bank)
![Page 14: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/14.jpg)
Sight Draft
Payable on presentation
![Page 15: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/15.jpg)
Time Draft
Payable at a future date30, 60, 90, or 120 days
![Page 16: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/16.jpg)
Banker’s Acceptance
Once a draft has been accepted by a bank Trade Acceptance
Once a draft has been accepted by a business firm
![Page 17: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/17.jpg)
Time Draft
NegotiableCan sellDiscount
9% for 120 days = 3%
![Page 18: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/18.jpg)
Time DraftWhat would a $100,000
draft at 90 days be worth at 8%?
90 ÷ 360 = 1/4 8% ÷ 4 = 2%
$100,000 x 98% = $98,000
![Page 19: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/19.jpg)
Bill of LadingA document issued to the exporter by the common carrier transporting the
merchandise.
It serves as a receipt, a contract, and a document of
title
![Page 20: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/20.jpg)
Bill of Lading
NegotiableI can sell to a bank
![Page 21: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/21.jpg)
1. Importer orders goods
Exporter
2. Exporter agrees to fill order
3. Importer arranges letter of credit
4. Saudi bank send L/C to U.S. Bank5. U.S. bank informs exporter of L/C
6. Goods shipped to Saudi
7. Exporter presents draft to bank
8. U.S. bank presents draft and bill of lading to Saudi bank
9. Saudi bank accepts draft and returns to U.S. bank
10. U.S. bank informs Exporter of acceptance
11. Exporter sells acceptance draft to bank at discount
12. Saudi bank informs importer of arrival of documents.
13. Importer agrees to pay bank in 90 days
Importer
ExporterBank
ImporterBank
14. U.S. bank collects payment from Saudi bank in 90 days
![Page 22: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/22.jpg)
Import-Export Banks
Provides aid in financing
![Page 23: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/23.jpg)
Manage Risk
L/CExport Credit Insurance
![Page 24: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/24.jpg)
Countertrade
Trade goods for goodsNo cash in transaction
BarterNo foreign exchange
currency
![Page 25: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/25.jpg)
Boeing sells ten 747s to Saudi Arabia for crude oil
![Page 26: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/26.jpg)
Countertrade
BarterCounterpurchase
Offset Coupons or CreditsSwitch Trading - Buying
couponsBuybacks - Take percent as
payment
![Page 27: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/27.jpg)
Countertrade - AdvantagesCreates an option
Government requiresCreative Competition
![Page 28: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/28.jpg)
Countertrade - DisadvantagesCash is always preferred
Inferior quality goodsHave to resell the traded
goods
![Page 29: Export Import Countertrade](https://reader033.vdocuments.us/reader033/viewer/2022052315/54bf114e4a7959354e8b4575/html5/thumbnails/29.jpg)
Countertrade
Good for large multinationals
Japan - sogo shosha