Exporting and Trading info

Insurance In addition to the various methods of avoiding nonpayment, insurance against marine, commercial, and political risk also is available. Avoiding Shipping Risks.  Marine cargo insurance is an essential business tool for import/export. Generally, you purchase coverage on a warehouse-to-warehouse basis (i.e. from the sender's factory to the receiver's platform). Coverage usually ceases a specific number of days after the ship or plane is unloaded. You purchase policies on a per shipment or "blanket" basis. Freight forwarders usually have a blanket policy to cover clients who do not have their own policy. Most insurance companies base cargo insurance on the value of all charges of the shipment, including freight handling, etc., plus 10% to cover unseen contingencies. Rates vary according to product, client's track record, destination, and shipping method. Ocean cargo insurance costs about $.50 to $1.50 per $100.00 of invoice value. Air cargo is usually

Avoiding Bad Credit Pick your customer carefully. Just as in the domestic American market, bad debts are avoided more easily than rectified. If there are payment problems, keep communicating and working with the firm until you have settled the matter. Even the most valued customers have financial problems from time to time. If nothing else works, request tbat the Department of Commerce or tbe International Chamber of Commerce begin arbitration on your behalf. Information that is current and accurate is the food for good financing decisions. Basically, two types of international credit information exists: (1) the ability and willingness of importing firms to make payment, and (2) the ability and willingness of foreign countries to allow payment in a convertible currency. Following are several ways to obtain credit information about companies and their countries: Information about United States Firms. • Commercial Banks • Commercial credit services, such as Dun and Bradstreet

Getting Paid Ensuring prompt payment often worries exporters more than any other factor. The truth is that the likelihood of a bad debt from an international customer is less than from an American company. It might surprise some people that the foreign bad-debt ratio is less than half of the United States ratio. In the United States, the average bad-debt ratio often runs 1.25% or more of sales. In the experience of most international businessmen, overseas bad debts seldom exceed .5% of sales. The reason is that, in the United States, credit is a way of life. In overseas markets, credit is still something to be earned as a result of having a record of prompt payment. Use common sense in extending credit to overseas customers, but don't use tougher rules than for your American clients. The methods of payment, in order of the risk to the seller, are: open account, consignment, time draft, sight draft, authority to purchase, letter of credit, and cash in advance. Open Account.  

AVOIDING RISK Doing business across international borders always involves risks related to financial exposure. However, avoiding or controlling risks in global trade is an everyday occurrence for importers and exporters, and understanding the instruments available for avoiding risk is not difficult. Essentially four kinds of risks exist: BUSINESS or COMMERCIAL   Not being paid; nondelivery of goods; insolvency or protracted default by the buyer; competition; and disputes over product, warranty, etc. FOREIGN EXCHANGE       Foreign exchange fluctuations POLITICAL        War, coup d'etat, revolution, expropriation, expulsion, foreign exchange controls, or cancellation of import or export licenses SHIPPING Risk of damage and/or loss at sea or via other transportation Most risks allow for a method of avoidance. Of course, there is no insurance for such problems as disputes over quality or loss of markets due to competition, but there are avoidance instruments for three

FINANCING Why do we need financing in the import/export business? To start, expand, or take advantage of opportunities, all businesses need new money sooner or later. By new money, we mean money that we have not yet earned, but which can become the engine for growth. For the importer, financing offers the ability to pay for the overseas manufacture and shipment of foreign goods destined for the United States market. For the exporter, financing could mean working capital to pay for international travel and the marketing effort. New money also can be loans to foreign buyers so that buyers can purchase an exporter's goods. American importers seldom have problems finding financing. United States dollars are plentiful, and if you do the homework phase well and you have purchase orders for the product(s), banks or factors are waiting to assist. The Bank Commercial banking is the primary industry that supports the financing of importing and exporting. Selection of a banking partn

TRAVEL Mistrust across international borders can be a barrier to a successful import/export business. Therefore, visit the country and the people who offer goods for your importation or the agents or distributors who market your export products. These personal contacts remind us that we have more in common with people from other nations than differences. Traveling to exotic places is not only fun, it is a tax-deductible expense of international trade as well. The Internal Revenue Service will look closely at travel expenses to make sure you are actually doing business, and not indulging your travel hobby. For this purpose, keep a good record duringyour travels, and make sure you profit from your trips. Planning a Trip Though an agent will help you with your travel plans, don't turn over to the travel agent the initial planning of your trip. Using an Official Airlines Guide (OAGI and a map of the world, lay out your own trip. You know your itinerary, how long you can stay in e

COMMUNICATIONS Although nothing substitutes for personal contact when developing an international marketing structure, this might not always be possible. Therefore, the tone of initial written communications is critical. It often makes the difference between a profitable, long-term arrangement and a lost opportunity. The Introductory Letter or Telex Most often you can write your introductory letter or telex in English.With the exception of Latin America, English has become the language of international business,but use simple words. If you are translating or transmitting the letter or telex into a foreign language, make susre you have it translated back to English by a third before sending it.However proficient a person is in the other language, funny things can happen in translation. From the beginning, establish your company's favorable reputation, and explain the relationship that you seek. Describe the product you want to market (export) or to purchase (import). Propose

INTELLECTUAL PROPERTY RIGHTS "The Japanese stole my stuff! They just drove down the road, passed our factory, and copied our trademark. It took us two and a half years and $5000.00 to get it back," said one executive. Because this company had the trademark registered, no one else in the United States could use it, and the litigation against the guilty Japanese firm was considerably easier than had it not been properly registered. Intellectual property is a general term that describes inventions or other discoveries that have been registered with government authorities for the sale or use by their owner. Such terms as patent, trademark, copyright, or unfair competition fall into the category of intellectual property. You can obtain information about Patents and Trademarks from the United States Patent Office by calling (703) 557-HELP or writing PATENT AND TRADEMARK OFFICE Division of Patents and Trademarks Washington, DC 20231 You can order the booklet entitled Genera

NEGOTIATIONS Americans are accustomed to a fixed-price system. We usually pay what is advertised on the label or we don't buy at all. However, many countries are on the barter system, and most people of other nations understand bargaining much better than we do. For instance, when a trader receives a quote, it is just the beginning of negotiations. For most Americans, the quote is the end. Pay for it, or don't buy it. Bargaining Bargaining or negotiating is integral to international trade and an importer/exporter should be ready to offer or ask for alternatives using simple letters or the telex. In the highly-competitive international business world, a trader's ability to offer reasonable terms to customers might mean the difference between winning and losing a sale. Become thoroughly familiar with "terms of sale" as well as the other aspects of "Risk Avoidance" Agreeing to a Contract After obtaining the initial quotations as explained in chapt

Terms of Sale In the domestic United States market, it is customary to quote, Free On Board (F.O.B.) factory. But in international business, suppliers use entirely different pricing terms, called Terms of Sale. Either of two versions of these terms might be specified so long as both parties agree: INCOTERMS-1980; or Revised American Foreign Trade Definitions-1941. If, when drawing up the contract, buyer and seller specifically refer to INCOTERMS or to the Revised American Definitions, they can be sure of defining their respective responsibilities. In so doing, buyer and seller eliminate any possibility of misunderstanding and subsequent dispute. You can order a copy of INCOTERMS for about $10.00, from: The ICC Publishing Corporation, Inc., 125 East 23rd St. Suite 300, New York, NY 10010. You can order Revised American Definitions from The National Council of American Importers, the National Foreign Trade Council, or the Chamber of Commerce of the United States, 1615 H Street, N.W.

INITIAL QUOTATIONS Initial quotes begin with a "request for quotation" (RFP) sent by the importer to the exporter or with an unsolicited offer from the exporter. A simple letter or telex can be a request for a quotation. Figure 2-1 shows a sample letter of inquiry. A pro forma invoice is often the document you would use to respond to a request for pricing information. The pro forma invoice, a normal invoice document visibly marked "Pro Forma", is the method you would use most often to initiate negotiations. Its purpose is to describe in advance certain items and details. Once accepted by the purchaser, it becomes a binding sales agreement or legal contract, and the seller is bound to the terms stated. Carefully think through any terms entered on this document. Figure 2-2 is an example of a pro forma invoice. Pro forma Invoice A provisional invoice forwarded by the seller of goods prior to a contemplated shipment advising the buyer of the kinds and quantities of

MARKET RESEARCH Market research is vital to the success of your international import/export business. Is your product salable? Does anyone care? You must be able to sell enough of the product or service to justify undertaking the import/export project. If you are presenting a new product, you might have to create a market. A good rule of thumb for the new import/export business is: "If the market isn't there, get out of the project and find another product." International market research will save money and time. Unfortunately, too many newcomers plunge into import/export without determining whether they can sell the product at a profit. Following are checklists of research items for importers and exporters. Exporter Checklist    Is there already a market for the product?    What is the market price?    What is the sales volume for that product?    Who has market share, and what are the shares?    What is the location of the market; what's its size and p

MAKING CONTACTS Importers and exporters need contacts to get started. The exporter must convince a U.S. manufacturer of his or her ability to sell the manufacturer's product or service internationally. The importer, on the other hand, must find an overseas manufacturer or middleman from whom to buy the product or service. Contacts are classified in two categories: 1. Sourcing (finding) a manufacturer or provider of the product or service you wish import or export. 2. Marketing or selling that product or service. The two ways to make contacts overlap. You can use them to expand your import/export network. Sourcing Contacts If you are an exporter, any product or service you select falls into an industry classification, and that industry very likely has an association. Almost every United States industry has a publication—if not a magazine, at least a newsletter. Begin looking for manufacturers of your product or service in the appropriate industry publication. Under "

CHOOSING THE PRODUCT The question asked most often is, "What product should I select to import or export? Should it be rugs or machinery?" Keep it simple in the beginning. If your firm already manufactures merchandise or provides a service, that product or service is what you sell. But, for your own import/export business, your job will be to sell someone else's product or service. In other words, you will be the middleman. The Personal Decision Most people begin with a single product or service they know and understand, or have experience with. Others begin with a line of products, or define their products in terms of an industry with which they are familiar. Above all, product selection is a personal decision, but the decision should make common sense. For example, if you aren't an engineer, don't begin by exporting gas turbine engines. Or, if you are an electronics engineer, don't start with fashionable textiles. A good example is the established Am

Launching a Profitable Transaction: Introduction THE NEXT FIVE CHAPTERS EXPLAIN THE BASICS OF IMPORTING AND exporting. They apply to manufactured products as well as the growing service industries such as computer software, construction engineering, or insurance. These basics are the bridge from producer to buyer. This bridge has been in place for many years, and so has been tested by time. Nevertheless, it is possible to perceive the fundamentals as obstacles. Don't let the learning process deter you. Anyone can learn the nuts and bolts of international trade. This chapter addresses the first 7 commonalities of an importing or exporting transaction. If you understand these concepts, your import/export business will get off to an excellent start toward early profitability. 1. Terminology 2. Homework 3. The product 4. Contact making 5. Market research 6. Initial quotations 7. Pricing for the bottom line Don't mistakenly assume that the order presented in this

WHY GET INTO TRADE Three reasons exist for people to get into the trade game: 1. Imports: Everyone is buying foreign—it's in vogue. Imports are bringing big profits. 2. Exports: Some experts acknowledge that exports have been out of balance but they say that the tide has turned. These people believe that now is the time to make profits in exports. 3. Global Community: Americans are awakening to realize that the world is interdependent. People of each nation rely on people of other nations to exchange goods, services, and ideas. How Do You Take Advantage of These Opportunies? If Whalen is right, and international trade is a game with constantly changing rules, there will be surpluses in the future, just as before. Seen as a game, you, the participant in international trade, must do business within today's rules. In order to win the game, you must first understand the basics as presented in this book. Only then, with equal ingenuity as the governing elites, can you em

GLOBAL CHANGES The General Agreement on Tariff and Trade, a supra-international body, has entered into a complex period called the Uraguay Round, with the goal to change trade rules and reduce trade barriers by multilateral and bilateral negotiations. The result will be new markets worldwide. The total volume of international trade will grow even more. Things are happening! As a result of all the changes, many American businesses are making big profits in international trade. Millions of others are asking, "Is the time right for me to get into the import /export game?" To answer this question, let's look at the history of United States international trade. Our ex-colonial forefathers were in a trade deficit during most of the nation's early years. In fact, it wasn't until the 1880's that the balances became positive. Fifty years later, during the Great Depression, the balances shifted back to large deficits. Following WWII, America had unprecedented surp

INTERNATIONAL TRADE Exports are the goods and services sold by individuals or Millions. Imports are the goods and services purchased. By these methods, products valued at more than 2 trillion United States 11( >i lars are exchanged worldwide each year. By the mid-80's the I Inited States alone exchanged more than $600 billion in two-way trade, and sales volumes are increasing every year. When we, as consumers, enjoy fresh flowers from Latin America, tropical fruits in the middle of winter, or a foreign car, we are participants in, and beneficiaries of, international trade. We are living in the age of global interdependence—a time of increasing expectations brought about by the worldwide distribution of Hollywood movies, New York and London television, and speedy transportation systems. People all over the world want the same luxuries and standards of every other place. They see things and, naturally, they want them. Richard Whalen of the Center for Strategic and Internation

Appendix R Sample design and trademark licensing agreement THE FOLLOWING IS A SAMPLE DESIGN AND TRADEMARK LICENSING AGREEMENT between a U.S. manufacturer and a foreign licensee. THIS AGREEMENT, this day of , 19. hereinafter referred to as Licensor, and Licensee. , and between , , hereinafter referred to as WITNESSETH: WHEREAS, Licensor is engaged in business in the State of , United States of America, as a manufacturer under various names and in design and distri- bution of various products bearing the label an illustration of which is attached to Appendix , and WHEREAS, Licensor has spent substantial time, money, and talent creating and making known said trade names and the various products to which it is applied, and is owner of all right, title, and interest in and to the trademark or trade name , as used in connection with various consumer products, and WHEREAS, Licensee desires to acquire certain rights for the manufacture and sale of Licensor's