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148 Cards in this Set
- Front
- Back
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Foreign Commercial Service helps companies...
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export
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Given a shortage, should a company prioritize domestic buyers over international buyers?
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No...build loyalty.
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Exporting at a lower price makes sense because...
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...we already have the extra capacity, so this spreads out fixed costs.
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We can’t differentiate our prices within the U.S. because...
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U.S. law requires we sell to all customers who will use the product for the same purpose under the same conditions.
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Companies charge transfer prices higher than prices to third parties as a way to...
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repatriate more profits
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Two conditions for a complete domestic sale...
One more for an int'l sale... |
customer receives goods, invoice is paid
and exporter has received funds in the agreed upon currency |
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The most significant potential internal company problem related to exports is...
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insufficient commitment from top mgmt.
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Four common errors of exporters are...
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-lack of human capital with export knowledge;
-poorly selected partners, suppliers, buyers -no discipline to choose a focused area of exports -neglecting export business when the US market booms -failure to treat int'l partners on an equal basis with domestic counterparts -unwilling to modify products for regulations of cultural preferences; failure to print product info in locally understood languages |
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indirect exporting is ideal for...
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company with no exporting experience or restricted investments. they can still expand in future. exporting is often an initial step to direct investment
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piggybacking is...
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an example of indirect export marketing.
a good way for a small company to get its names out there. |
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the best way to organize all export departments is...
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whatever way fits your needs and organization. product based or geographic based. geographical more common, but product good for specialized products.
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which kind of exporting has greater foreign credit exposure?
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direct exporting
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T/F: an Export Manager could be responsible for logistics of shipping / documentation, etc.
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T. depends on INCOTerms
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Sales rep commissions are usually based on this value...
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FAS or FCA
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We use "sales rep" instead of "agent" because agency implies...
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more legal authority than we might want to give him/her.
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When a sales rep brings about a sale for an exporter, the customer is invoiced by...
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the exporter.
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The foreign sales rep does not get to choose these
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prices
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Sales rep doesn't receive commission until...
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the exporter physically receives the money.
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Five methods of indirect export marketing are...
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1. domestic brokers/traders: sell to third parties who then export it
2. foreign buyers with domestic buying office: e.g. if Hyundai has an office in NY that buys American parts and sends to Korea 3. domestic companies for foreign affiliates: you buy it and sell to affiliate. can repatriate profits this way. 4. piggybacking: a company with small product line markets abroad with another org's sales and distribution. very common. 5. export mgmt / trading company: specialize in global trade and sell the product |
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the big difference between a sales rep and a distributor is..
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a distributor takes title of goods and has final buyer credit risk.
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clause that can be added to a sales rep agreement for a satisfactory route to settle disputes...
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arbitration clause
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primary responsibilies of a FFF
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to export: handles documentation, transpo, and often brokerage services. virtual wwarehousing, track shipments. can handle shipments by land, sea, and air.
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primary responsibility of a customs house broker
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handle imports. is an agent of the importers.
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FFFs should be...
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bonded and insured
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FFFs can help an exporter (3):
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1. find cheapest / competitive routes
2. advise on packing and marking 3. info on import license requirement |
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when would an exporter need a customs house broker?
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when selling DDP (e.g. if the FF is importing into the country)
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five sources of income for FFFs
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commission from carriers
insurance sales warehousing packaging fee to exporters |
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general average loss means...
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all the property must share the loss of that which was sacrificed, including the ventures as well as the vessel. loss will be shared in proportion to each value represented.
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T/F all-risk ocean marine insurance covers damage from all causes.
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False. it has exceptions. (war, acts of God, strike, riots)
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is it always necessary for the exporter to obtain individual insurance policy?
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no. under FAS, FOB, CFR, CPTY, not necessary. still desirable though.
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"warehouse to warehouse" is
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a type of ocean marine insurance that covers shipment during land portion of export shipment
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a franchise is...
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...like an insurance deductible which the purchaser is required to pay
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ocean marine insurance policy covers these types of shipments...
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air, water, land, mail
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export shipments made via water are typically covered for...
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110% of the CIF value unless otherwise noted
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T/F it is only possible to insure an export shipment while it is on the water or in the air under an OPEN CARGO policy
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false. open cargo policies cover the majority of import and export shipments because:
1. automatic protection from the time the goods leave warehouse until final destination 2. goods are insured even if the policyholder forgets to report the shipment 3. exporter doesn't need to arrange coverage for each shipment. 4. pay as you go, not in advance. |
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T/F imports and exports can be insured under the same policy
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true
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ocean marine insurance protect cargo against...
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loss or damage in transit
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who completes the insurance certificate for a shipment?
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export or its agent (FF)
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three types of Ocean Marine Insurance are...
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open cargo policy, blanket policy, special insurance policy (open cargo is most common)
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aside from protecting the insured party from financial loss due to loss or damage, ocean marine insurance also...
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is essential to financial transactions of world trade.
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six things INCOTerms don't cover:
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1. payment terms
2. packaging requirements 3. commission rates 4. licenses required 5. method of transportation 6. credit terms |
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INCOTerms must include...
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a geographic destination (e.g. FAS London)
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INCOTerms define...
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the terms of sales and divide transaction costs and responsibilities between buyer and seller
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under which INCOTerm does exporter have greatest involvement?
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DDP. seller pays all the costs and includes them in the price.
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why might a local government control the INCOTerms for importers?
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to build up local industry and control foreign exchange
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the only INCOTerm where the buyer is responsible for the export license
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EXW (the INCOTerm that places the most responsibility on the buyer)
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four INCOTerms where vessel loading charges are responsibility of the seller
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all except EXW, FAS, FCA, DAF
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T/F a parent company is responsible for debts of its subsidiary
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false. subsidiaries have separate books and record, are distinct legal entities and differ from divisions.
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two types of risks when extending credit
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country (economic and political) and company. need to consider credit worthiness of both.
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payment terms cover...
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trust and time relative to payments. with cash in advance, buyer is financing. with open account terms, the seller is financing.
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what is the difference between credit and financing?
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credit = trust
financing = time |
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under which two payment terms does an exporter extend credit?
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documentary collections / open account
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when a draft related to a documentary collection is accepted by the drawee, this is created...
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trade acceptance
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all drafts must be signed by the...
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drawer / maker / seller
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drafts can only be written for...
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money. any currency. thus cannot be used in barter.
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when a bank transmits documents related to a documentary collection, it is responsible for...
not responsible for... |
following the seller's instructions in forwarding and releasing the documents against payment or acceptance.
not responsible that the product is what is stated in the documents. |
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to honor a...
sight draft, you: time draft, you: |
sight: pay the draft (D/P)
time: accept the draft (D/A) |
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T/F an importer can examine shipment under DC before honoring the draft
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False. DCs are meant to allow seller to retain control of shipment under draft has been honored.
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Does "beneficiary" apply to LC, DC, or both?
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LC
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two steps of document release under DC
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1. bank presents draft to drawee as soon as the bank receives it.
2. bank releases documents (Order Bill of Lading, SBOL) to drawee after drawee makes the payment or accepts the draft |
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if a customer has not named a collecting bank under DC, then...
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the negotiating bank is free to select the collecting bank
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does the bank guarantee payment with DC? LC?
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with DC, no.
with LC, yes. |
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what is tenor?
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the time at which the draft matures (when payment is due)
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what is the main reason for using DC for export?
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the seller retains possession of the goods until draft has been honored
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under DC, who is the drawee?
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the buyer. (the funds come out of his account)
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who is the drawer under DC?
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exporter, seller
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how can an exporter retain control of shipment under DC until draft has been honored if the country does not allow order bills of lading?
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shipper consigns merchandise to third party (import broker, e.g.) on a Straight Bill of Lading. shipper than writes a "delivery order" which is sent to buyer's bank with a draft and other docs as well as instructions for the bank to release the original delivery order only after buyer honors or accepts draft
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under DC, payee is the person who...
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gets paid. opposite of the drawee.
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who is the beneficiary of a LC?
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normally: the seller
standby LC: the buyer |
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exporters can accept confirmation from any bank in...
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any country. it has to be satisfied with both.
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are LC used in domestic trade also?
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yes. its basically a risk mitigation tool, though less than 20% of global trade uses them today.
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does a bank transmitting docs for an LC have any responsibility for the product conforming to the documents?
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NO
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what does it mean for a bank to honor draft of an LC?
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the bank has examined the docs submitted and found them to be in order. it will PAY (sight) or ACCEPT (time) as promised in the LC.
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can an importer examine shipment under LC before draft is honored?
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no. draft has to be honored before access is granted.
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what should a confirming bank do after advising the exporter of discrepancies in LD documents?
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instruct the confirming/advising bank to request that the buyer waive the discrepancies.
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the purpose of an order bill of lading is to...
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retain control over goods until draft has been honored
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a banker's acceptance is when...
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date drafts are issued under LCs.
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can irrevocable LC be amended?
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only with the agreement of all parties.
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importers under DC and LC typically can't check goods before honoring draft. how does he protect himself?
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inspection certificate.
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if you receive an LC with which you cannot comply, what should you do?
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ask applicant (buyer, importer) to make amendments
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with a confirmed LC, which party is usually the drawee?
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confirming bank
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three uses for standby LC:
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1. protect buyer from possible losses due to supplier's failure to perform according to contract
2. for open accounts, to guarantee payments 3. bid bonds |
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beneficiary of LC is
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the party who can draw the draft (normally seller, exporter, shipper)
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what is the main fxn of an LC?
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substitute the credit worthiness of the bank for that of the buyer
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two reasons a banker's acceptance is more valuable than a trade acceptance?
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1. banker's acceptance is a guarantee of payment from a bank, so greater assurance to the exporter
2. banker's acceptance typically used with LC, while trade acceptance is used with DC. For an exporter, LCs are preferable to DCs |
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should we include the value of money in the price of an export offer?
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yes. money costs money.
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should we include the forwarding fees, pier charges, and insurance expenses in the export selling price?
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yes, even though they're small.
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what are break bulk shipments?
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cargo loaded individually in bags (not loose in the hold of a vessel)
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do proforma invoices need to be sent to the customer for every export sales offer made?
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not unless request by the buyer.
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when are proforma invoices sent?
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before the shipment is made and before an order is received.
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T/F proforma invoices contain all the information that needs to be given to a customer when making an offer of sale for an export transaction.
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False. just need the basic information.
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a cargo of liquid product packages in steel drums that is then loaded into containers is called..
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containerization
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proforma invoices are not a satisfactory way to make the complete offer for an export sales to a foreign customers because it provides nothing about...
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materials.
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unitized loads are used for
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materials that are packed in bags, boxes, pallets, or other easily handled loads
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four methods to load export shipments:
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1. break bulk (packages individually handled)
2. unitized loads (pallets, boxes, etc.) 3. containerization (individual packages or loads loaded into ocean containers) 4. bulk shipment (materials loosely loaded and handled) |
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three reasons a buyer may need a proforma invoice
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1. apply for an import license
2. apply for license of foreign currency 3. apply for LC |
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what is the stated purpose of steamship conferences?
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provide dependable service between the ports of the world.
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T/F costs of shipping are the same regardless of the port through which the shipment is made
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F. some ports more expensive than others.
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what is the "long form" bill of lading?
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it has all the details of the contract between shipper and carrier whose name is printed on the BL
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common carriers such as Liner Service Companies must...
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treat all customers equally. cannot choose to whom they provide service.
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every Bill of Lading has two purposes:
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contract and receipt
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what is the fxn of a "stevedoring company"
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handle movement of cargo from ship to shore and vice versa
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who handles the documentation for the exporter for a shipment which has been made as a charter movement?
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Foreign Freight Forwarder
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the commercial invoice is customarily completed by the...
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Freight Forwarder
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T/F an intermodal carrier shipping your goods from Phoenix to Singapore will give you an inland BL and an ocean BL.
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F. not necessary. intermodal substitutes the inland BL, ocean BL, and doc receipt
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an air waybill cannot be consigned to "order of shipper." under ocean bill, can you always consign to order of shipper?
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no. some countries don't allow this.
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the purpose of a dock receipt is to...
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effect delivery to an export pier
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forwarding instructions are only ever sent to...
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freight forwarders
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the freight charges on the Ocean BL are the...
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ACTUAL (not estimated) charges to be paid.
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does a packing list confirm the materials furnished by an exporter are the materials the exporters says were furnished?
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no.
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the certificate of origin...
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shows the origin of the products being exported
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when you create a commercial invoice, should you correct the spelling of something spelled wrong in the LC?
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no. they must be spelled the same (under UCP 500)
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consular invoices are required in...
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only a few countries
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proforma invoices are required in connection with export sales offers if...
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requested by the importer
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if we are exporters and have an open cargo ocean marine insurance policy, would be prefer to purchase imports on CIF or FOB/CFR terms?
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FOB/CFR, because we already have the insurance the insurance to protect the imports against loss or damage in transit
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most countries use this value to determine dutiable value of an import
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CIF (not FAS or FOB)
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what are the two bases for assessment of import duties?
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specific (per unit)
ad valorem (according to value) |
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is an importer required to use a customs house broker to clear imports into the country?
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no. they can help in the process of clearing imports, but the importer can do this himself if desired
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what are countervailing duties?
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assessed to offset subsidies granted to exporters in their countries.
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the most common customs entry is the
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consumption entry
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do all countries use the FAS or FOB foreign port value to determine dutiable value of an import?
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no. some countries use the CIF.
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where are FTZs?
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many countries across the world.
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T/F countertrade is only carried out with military items?
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false.
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what is the single most important activity allowed in a FTZ but not allowed in a bonded warehouse?
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manufacturing
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barter trades require...
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that some relative value be placed on each product to be traded. you cannot use a draft with this because a draft can only be written for money.
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one word to describe barter:
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countertrade
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one word to describe countertrade:
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reciprocity
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into whose custody are imports into a country shipped?
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custody of importing countries' customs authorities
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what is "landed cost"
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the cost inside the importing country after shipment has passed through customs. like DEQ + duty
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three reasons to import
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1. impossibility of production of certain items (tropical fruits)
2. absolute advantage or comparative advantage 3. due to currency fluctuations, more economical to purchase from abroad 4. to drive countertrade |
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who can hep you buy imports from another country?
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sales representative
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reasons to export
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1. learning experience
2. growth, survival 3. increase product life cycle 4. lower product cost 5. tax advantages 6. learn of new technologies 7. preempt competition |
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drafts are also called
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"bills of exchange"
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to be a negotiable instruments, something must be
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-in writing
-signed by maker/drawer (person requesting payment) -for money only -specific amount -unconditional -fixed maturity date -named drawee (payer - the bank) |
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difference between order B/L and straight B/L?
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Order B/L requires customer to have delivery order from the shipper
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in L/C draft we need to include at the bottom the
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"drawn under L/C #" clause
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commissions generally calculated using the...
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FAS value
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in FOB, CFR, and CIF, the risk passes to the buyer when?
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upon loading. if the ship sinks, the buyer still responsible to pay. if the buyer doesn't pay, the seller's ocean cargo policy does.
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tramps are...
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common in charter movement. they'll go where cargo is available for pickup "on inducement"
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with air transpo, we call the B/L an...
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air waybill
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Customs Valuation types
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transaction value - actual price paid minus transport, insurance, and related services related to interest. applies to about 95% of goods coming into the country. (most closely the FAS value)
-TV-identical -TV-similar -deductive value (deduced from price at which merchandise is sold in country, adjusted for commissions, importer's profits, etc.) -computed value: cost of production plus various other -derived value: catch all - the best deal you can make with the customer |
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you need a S.E.D. for...
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all items valued $2,500+ unless you're shipping to Canada, in which case you need one only if the item you're exporting requires it)
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who requests the LC
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the exporter / purchaser. he needs it to take it to his suppliers and purchase raw materials (packing credit)
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ExIm Working Capital Guarantee Program
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90% govt guarantees on foreign A/R - helps U.S. exports
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3 types of LC discrepancies that cannot be fixed
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1. shipping later than latest ship date
2. presentation date 3. expiration date |
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why store goods in a bonded warehouse?
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so you don't have to pay duties on it because you either want to wait to do this or because you're going to re-export anyway.
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what does a ship's agent do?
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the agent for the ship's owner - signs the B/L
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what does a ship's broker do?
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get into deals before there is a shipment. they match the shipper and the ship. thus really an agent for the ship's owner.
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