Importing, Exporting, and Trade Relations

6-1 Importing Procedures6-2 Exporting Procedures

6-3 Importance of Trade Relations6-4 The Nature of Competition

CHAPTER 6

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LESSON 6-1

Importing Procedures

GOALS • Explain the importance of importing.

• Identify the four steps for importing.

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Importance of Importing

• Importing provides a wide variety of products and services for U.S. consumers. Exporting creates jobs and expands business opportunities. Importing and exporting are primary international business activities.

• Imports-are services or products bought by a company or government from businesses in other countries.

• Companies get involved in importing for one of three reasons:– Consumer demand for products unique to foreign countries– Lower costs of foreign-made products– Sources of parts needed for domestic manufacturing

Product Demand

• Some goods are available only from other countries• Almost all bananas, cocoa, and coffee consumed in the United

States are imported

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Lower Costs

• Costs are changing all the time• Electronic products manufactured in Asian countries are

frequently less expensive than similar items produced elsewhere

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Production Inputs

• Companies regularly purchase raw materials and components for processing or assembly from other countries– Ex: Radios, engines, transmissions, and windshield washer systems for

many cars assembled in the United States come from companies in Canada, Mexico, Japan, Brazil, Korea, and other countries

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Importing Activities

STEP 1: Determine demandSTEP 2: Contact suppliersSTEP 3: Finalize purchaseSTEP 4: Receive goods

Step 3: Finalize Purchase

• -Purchase Agreement-the importing company must come to an agreement with the supplier on specific terms for the purchase. The agreement must include the price the importer will pay for the goods and the following:

1. Who will pay for shipping?2. When will the items be delivered? 3. How will payment be made?4. Will payment be made in advance, during shipping, or after

the receipt of purchase?

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Step 4: Receive Goods

-Customs Official-is the government employee authorized to collect the duties levied on imports.

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Government Import Assistance

• Customs and Border Protection (CBP)• Food and Drug Administration (FDA)• U.S. Department of Agriculture (USDA)

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LESSON 6-2

Exporting Procedures

GOALS • Identify the steps of the exporting process.

• Describe the exporting of services.

Indirect vs. Direct

Indirect Exporting-occurs when a company sells its products in a foreign market without actively seeking out those opportunities

Direct Exporting-actively seeking export opportunities

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The Exporting Process

STEP 1: Find potential customersSTEP 2: Meet the needs of customersSTEP 3: Agree on sales termsSTEP 4: Deliver products or servicesSTEP 5: Complete the transaction

STEP 1: Find potential customers

-Trade leads are provided for businesses; trade leads-listing export opportunities for companies planning to do business overseas

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STEP 2: Meet the needs of customers

Some popular products do not need to change to meet the needs of people; however some products need to change for personal tastes in that particular country

Example: Think of a product that is universal (cameras) not universal (coke flavors)

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STEP 3: Agree on sales terms

• Transportation can be a major cost in exporting • Free on Board-means the selling price of the product includes

the cost of loading the exported goods onto transport vessels at the specified place

• Cost, Insurance, and Freight-means that the cost of the goods, insurance, and freight are included in the price quoted

• Cost and Freight-indicates that the price includes the cost of the goods and freight, but the buyer must pay for insurance separately

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STEP 4: Deliver products or services

• Freight Forwarder-is a company that arranges to ship goods to customers

• Bill of Lading-document stating the agreement between the exporter and the transportation company

• Certificate of Origin-document that states the name of the country in which the shipped goods were produced

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STEP 5: Complete the transaction

• Electronic Payments are common • *Successful exporting can help a nation expand its economic

activities and create additional jobs

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Obstacles to Exporting

• The United States Department of Commerce estimates that thousands of small and medium sized businesses could easily get involved in international business but do not.

• For the following reasons:– No company representatives in foreign countries– Products not appropriate for foreign consumers– High costs of doing business in other countries – Difficulty understanding foreign business procedures – Difficulty obtaining payment from foreign customers

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Commonly Exported Services

• A major portion of U.S. exports involves intangible items-services.

• Service industries account for about 70 percent of GDP in the United States.

• The most common exported services by the United States are:– Hospitality (hotels and food service)– Entertainment (movies, music, television, and production)– Financial services (real estate and insurance)