Chapter 15

Exporting and Logistics: Special Issues for Business

McGraw-Hill/Irwin

2005 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Learning Objectives

1. How the Canadian government helps exporters

2. The additional steps necessary to move good across country borders 3. How various import restriction are used politically

Chapter Learning Objectives

1. How the Canadian government helps exporters 2. The additional steps necessary to move good across country borders 3. How various import restriction are used politically

4. Means of reducing import taxes to remain competitive

5. The main instruments of foreign commercial payments 6. The mechanics of export documents and their importance 7. The logistics and problems of the physical movement of goods

Introduction Exporting is an integral part of all international business Goods manufactured in one country and destined for another must be moved across borders to enter the distribution system of the target market It is important to be knowledgeable about the export and import documents, tariffs, quotas, and other barriers to the free flow of goods between countries The rules and regulations that cover the exportation and importation are discussed in this chapter

Import Restrictions
Import regulations may be imposed to protect health, conserve foreign exchange, serve as economic reprisals, protect home industry, or provide revenue in the form of tariffs

The most frequently encountered trade restrictions include:

Tariffs Exchange Permits Quotas Import Licenses Standards Boycotts Voluntary Restrictions

Import Restrictions
1. Tariffs:

Custom duties are based on value or quantity or a combination of both and are classified as follows:

ad valorem duties, which are based on a percentage of the determined value of the imported goods; specific duties, a stipulated amount per unit weight or some other measure of quantity; and a compound duty, which combines both specific and ad valorem taxes on a particular item, that is, a tax per pound plus a percentage of value

2.Exchange Permits

To conserve scarce foreign exchange many countries impose restrictions on the amount of their currency they will exchange for the currency of another country Countries may also impose limitations on the quantity of certain goods imported during a specific period As a means of regulating the flow of exchange and the quantity of a particular imported commodity, countries often require import licenses

3. Quotas:
4. Import Licenses:

Import Restrictions (contd )

Health standards, safety standards, and product quality standards are necessaryto protect the consuming public from imported A boycott is an absolute restriction against trade with a country, or trade of specific goods Countries may themselves impose restrictions on firms exporting to specific countries

5. Standards:

6. Boycotts: 7. Voluntary Restrictions:

Terms of Sale
1. CIF (cost, insurance, freight) to a named overseas port of import. It includes the costs of goods, insurance, and all transportation and miscellaneous charges to the named place of debarkation

2. C&F

(cost and freight) to a named overseas port. It includes the cost of the goods and transportation costs to the named place of debarkation. The cost of insurance is borne by the buyer

3. FAS

(free alongside) at a named U.S. port of export. The price includes cost of goods and charges for delivery of the goods alongside the shipping vessel. The buyer is responsible for the cost of loading onto the vessel, transportation, and insurance

Terms of Sale (contd ..)

4. FOB (free on board) at a named inland point, at a named port of exportation, or at a named vessel and port of export. The price includes the cost of the goods and delivery to the place named

5. EX

(named port of origin). The price quoted covers costs only at the point of origin (example, EX Factory). All other charges are the buyers concern.

Getting Paid: Foreign Commercial Payments

The five basic payment arrangements for exported goods include:

1. Letters of Credit
2. Bills of Exchange 3. Cash In Advance 4. Open Accounts 5. Forfaiting

Export Documents
Each export shipment requires many documents to satisfy government regulations controlling exporting as well as to meet requirements for international commercial payment

The most frequently required documents are:

1. 2. 3. 4. 5. 6.

Export Declarations Consular Invoices or Certificates of Origin Bill of Lading Commercial Invoice Insurance Policy or Certificate, and Licenses

Foreign Freight Forwarder

The foreign freight forwarder arranges for the shipment of goods as the agent for an exporter

The forwarder is an indispensable agent for an exporting firm that cannot afford an in-house specialist to handle paperwork and other export trade mechanics

A freight forwarder double-checks all assumptions made on the export declaration, such as commodity classifications, and will check the list of denied parties and end uses