module 4 exim trade
TRANSCRIPT
-
8/6/2019 Module 4 EXIM Trade
1/19
Module 4
EXIM Trade
-
8/6/2019 Module 4 EXIM Trade
2/19
2
Trade - Trade is the voluntary exchange ofgoods, services, or
both. Trade is also called commerce.
Market - A mechanism that allows trade is called a market.
Barter system - The original form of trade was barter, the directexchange of goods and services.
Money Medium of exchange money.
Earning - As a result, buying can be separated from selling, or
earning.
Promotion of Trade - The invention of money (and later credit,
paper money and non-physical money) greatly simplified and
promoted trade.
Trade ?
-
8/6/2019 Module 4 EXIM Trade
3/19
3
Specialization - Due to specialization and division of labor, most
people concentrate on a small aspect of production, trading for other
products.
Competitive Advantage - Trade exists between regions becausedifferent regions have a competitive advantage in the production of
some tradable commodity, or because different regions' size allows
for the benefits ofmass production. A
Price Differences - As such, trade at market prices between
locations benefits both locations.
Why trade exists?
-
8/6/2019 Module 4 EXIM Trade
4/19
4
International Trade
International trade is exchange ofcapital, goods, and services acrossinternationalborders orterritories.
International trade is a major source of economic revenue for any
nation that is considered a world power.
It represents a significant share ofGDP.
It has been present throughout much ofhistory, its economic, social,and political importance has been on the rise in recent centuries.
Industrialization, advanced transportation,globalization,MNCs, and
outsourcingare all having a major impact on the international tradesystem.
Increasing international trade is crucial to the continuance of
globalization.
Without international trade, nations would be limited to the goods and
services produced within their own borders.
-
8/6/2019 Module 4 EXIM Trade
5/19
5
Difference b/w International trade and
domestic trade
Points ofDifference International Trade Domestic Trade
Usage of differentCurrencies
Same type of currencyused
Different countries used differentcurrencies
Mobility in FactorOf Production
Quite restricted Free to move and entrepreneurshipfrom one state to another within thesame country
Restrictions More No
Movement ofGoods
Restricted due tocomplicated custom
procedures and tradebarriers like tariff,quotas or embargo
Easier to move goods without muchrestrictions. Maybe need to pay salestax,
BroaderMarkets Yes. Broader markets Limited market due to limits inpopulation
Language AndCultural Barriers
Communicationchallenges due tolanguage and cultural
barriers
Speak same language and practicesame culture
-
8/6/2019 Module 4 EXIM Trade
6/19
6
Export Strategy
Export as an entry mode to a foreign market
Export strategy an entry mode depends on ownership
advantages of the company, the location advantages of the market,
and the internalization advantages.
Firms with low levels of ownership advantage either do not enter
foreign market of if they do, enter through low-risk modes such as
exporting.
The choice of exporting as an entry mode is not just a function of
ownership, location and internalization advantages. It also must fit
the companys strategy. Companies consider some questions in
evaluating the export option.
-
8/6/2019 Module 4 EXIM Trade
7/19
7
Evaluating Export Option
What do we want to gain from exporting?
Is exporting consistent with our other goals?
What demands will export place on our key resources?
How will we meet the demands? Does export help us leverage our core competency without undue
risk of diffusion?
Does export fit into the current configuration of our value chain?
Can our existing coordination methods also deal with the managerial
demands created by export transaction?
Are the projected benefits of export worth the costs, or would our
resources be better used for developing new domestic business?
-
8/6/2019 Module 4 EXIM Trade
8/19
8
Strategic Advantages of Exports
Expands sales
Diversification
Economies of scale
Less risky than FDI Potential of greater profitability
Ways of Exports
Directly to customers
Export to companies
Export semi-finished goods that are used as inputs in
their manufacturing
-
8/6/2019 Module 4 EXIM Trade
9/19
9
Phases of Export Development
Pre-engagement
Companies selling goods and services solely in the domestic market
Those companies considering but not currently exporting
Initial Exporting
Companies that do periodic, marginal exporting
Companies that see lots of potential in export markets
Companies unable to cope with exporting demands
Advanced
Companies become regular exporters
Companies gain extensive overseas experience
Companies may use other strategies for entering markets
Phase 1
Phase 2
Phase 3
-
8/6/2019 Module 4 EXIM Trade
10/19
Problems faced by New Exporters
Failure to obtain qualified export counseling in developing a plan
to guide export expansion
Insufficient commitment by the top management to overcome
the initial difficulties and financial requirements of exporting.
Misestimating the complexity and costs of ocean shipping and
customs clearance to export transactions
Poor selection of overseas agents or distributors
Chasing orders from around the world instead of establishing a
base of profitable operations and manageable growth
Neglecting export markets and customers when the domestic
market booms
10
-
8/6/2019 Module 4 EXIM Trade
11/19
Problems faced by New Exporters
Failure to treat international distributors on an equal basis with
their domestic counterparts
Unwillingness to modify products to meet other countries regulations
or cultural preferences. Failure to print service, sales, and warranty messages in locally
understood languages.
Failure to consider use of an export management company or other
marketing intermediary (if company does not have personnel to direct
specialized export functions)
Failure to prepare for disputes with customers
11
-
8/6/2019 Module 4 EXIM Trade
12/19
12
1. Request for goods
2. Receipt of order and commodity production Credit check of buyer
2a. Export - intermediaries customers brokers freight forwarders
3. Inland shipping A. Truck B. Rail C. Air D. Water
4.Seaport/airport (export): A. Warehouse, B. Insurance, C. Customs, D. Loading, E. Port Authority / Control
5. Shipping
6. Seaport/airport (Import): A. Unloading, B. Port Authority / Control
7. Financial transaction: A. Buyers bank receives shipping invoice, B. Money is credited to sellers bank
8. Import intermediary customs broker
9. Customs release
10. Inland shipping: A. Truck B. Rail C. Air D. Water
11. Receipt of goods by buyer: A. Immediate sale, B. Warehousing, C. Further refinement / incorporation into other goods
International business transaction chain
-
8/6/2019 Module 4 EXIM Trade
13/19
Exporter
(US)
ExporterBank of NY
Importer
(India)
ImporterSBI -Bank
6 Goods Shipped to Importer
7 Exporter
Presents
Draft to
Bank
10 and 11
Exporter
Sells Draft to
Bank
14 Bank of NY presents Matured Draft
and gets payment
8 Bank of NY presents Draft to SBI
13
Importer
Pays
Bank
12 SBI Bank
tells Importer
DocumentsArrive
3 Importer
Arranges for
LoC
4 SBI sends LoC to Bank of NY
9 SBI Returns Accepted Draft
2 Exporter agree to fill Order
1 Importer Orders Goods
5 Bank of
NY Informs
Exporter ofLoC
13
-
8/6/2019 Module 4 EXIM Trade
14/19
14
Export Trade Procedure
1. Registration
2. Register with Export Promotion Council
3. Dispatching Samples
4. Appointing Agents
5. Specimen Copy of Agreement
6. Acquire an Export License7. Acquire Export Credit Insurance
8. Arranging Finance
9. Rates of Interest
10. Understanding Foreign Exchange Rates & Protect Against Their Adverse
movement11. Forward Contracts
12. Procuring/Mfg. Goods for Export and their Inspection by Govt. Authorities
13. Labeling, Packaging and marking Goods
14. New Excise procedure
-
8/6/2019 Module 4 EXIM Trade
15/19
15
Common Export Documents
1. Shippers Export Declaration
2. Commercial invoice
3. Certificate of Origin
4. Bill of Lading
5. Temporary Import Certificate / ATA CARNET6. Insurance certificate
7. Export Packing List
8. Import License
9. Consular Invoice
10. Air Way Bill
11. Inspection Certification
12. Dock Receipt and Warehouse Receipt
13. Destination Control Statement
-
8/6/2019 Module 4 EXIM Trade
16/19
16
Shippers Export Declaration (SED)- The SED is the most common of all
export documents. It can be electronically filed using the AESDirect online
system.
Commercial Invoice - A bill for the goods from the seller to the buyer.
These invoices are often used by governments to determine the true value of
goods when assessing customs duties. Governments that use the commercial
invoice to control imports will often specify its form, content, number of
copies, language to be used, and other characteristics
Certificate of Origin - The Certificate of Origin is only required by some
countries. In many cases, a statement of origin printed on company
letterhead will suffice. Special certificates are needed for countries with
which the Countries have special trade agreements.
-
8/6/2019 Module 4 EXIM Trade
17/19
17
Bill of Lading - A contract between the owner of the goods and the carrier (as
with domestic shipments). For vessels, there are two types: a straight bill of
lading which is non-negotiable and a negotiable or shipper's order bill of lading.
The latter can be bought, sold, or traded while the goods are in transit. The
customer usually needs an original as proof of ownership to take possession of
the goods.
Temporary Import Certificate / ATA CARNET - An ATA Carnet (a. t. a.
"Merchandise Passport") is a document that facilitates the temporary importation of
products into foreign countries by eliminating tariffs and value-added taxes
(VAT) or the posting of a security deposit normally required at the time of
importation.
Insurance Certificate - Used to assure the consignee that insurance will cover
the loss of or damage to the cargo during transit. These can be obtained from
freight forwarder.
-
8/6/2019 Module 4 EXIM Trade
18/19
18
Export Packing List - Considerably more detailed and informative than a
standard domestic packing list, it itemizes the material in each individual
package and indicates the type of package, such as a box, crate, drum, or
carton. Both commercial stationers and freight forwarders carry packing list
forms.
Import License - Import licenses are the responsibility of the importer.
Including a copy with the rest of other documentation, however, can
sometimes help avoid problems with customs in the destination country.
Consular Invoice - Required in some countries, it describes the shipment of
goods and shows information such as the consignor, consignee, and value of
the shipment. If required, copies are available from the destination countrys
Embassy.
-
8/6/2019 Module 4 EXIM Trade
19/19
19
Air Way Bills - Air freight shipments are handled by air waybills, which can
never be made in negotiable form.
Inspection Certification - Required by some purchasers and countries in
order to attest to the specifications of the goods shipped. This is usually
performed by a third party and often obtained from independent testing
organizations.
Dock Receipt and Warehouse Receipt - Used to transfer accountability
when the export item is moved by the domestic carrier to the port of
embarkation and left with the ship line for export.
Destination Control Statement - Appears on the commercial invoice, and
ocean or air waybill of lading to notify the carrier and all foreign parties that
the item can be exported only to certain destinations.