Chap 015

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I n t e r n a t i o n a l M a r k e t i n g

Exporting

and Logistics:

Special IssuesFor Business

Chapter 15

1 4 t h E d i t i o n

P h i l i p R. C a t e o r a

M a r y C. G i l l y

J o h n L . G r a h a m

McGraw-Hill/IrwinInternational Marketing 14/e Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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What Should You Learn?

How the U.S. government helps exporters

The steps necessary to move good acrosscountry borders

How various import restrictions are usedpolitically

Means of reducing import taxes to remain

competitive

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What Should You Learn?

The mechanics of export documents and theirimportance

The main instruments of foreign commercial

payments The logistics and problems of the physical

movement of goods

The impact of antiterrorism regulations on theexport-import process

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Global PerspectiveAn Export Sale: From Trade Show to Installation

Specific export mechanics occur when goodsare shipped from one country to another

The Internet has helped speed up process

Most countries control the movement of goodscrossing their bordersimports and exports

The international marketer must meet the legal

requirements involved in moving goods from onecountry to another

Export regulations

Import regulations

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The Exporting Process

Exhibit 15.1

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Export Restrictions

Controlled by the Bureau of Industry andSecurity (BIS) of the Department of Commerce

Export Administration Regulations

Serve the national security, foreign policy, and

nonproliferation interests

Includes some export controls to protect the U.S. from

the adverse impact of the unrestricted export of commodities

in short supply

NLR (no license required)

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Determining Export Requirements

Exporter must determine the appropriatelicense for the product (general or validated)

Export Control Classification Number (ECCN)

Commerce Control List (CCL)

End-use restrictions

Determination of ultimate end customer and ultimate end

uses of the product

Details of exporting must be followed to the

letter

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Illustration of Commerce Control ListRequirements for ECCN 0A984

Exhibit 15.2

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Commerce Country ChartReasons for Control (Selected Countries)

Exhibit 15.3

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Red Flags

Exhibit 15.4

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Examples of Violationsand Penalties of BIS Export Controls

Exhibit 15.5

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ELAIN, STELA, ERIC, and SNAP

ELAIN ( Export License Application andInformation Network)

STELA (System for Tracking Export License

Applications) ERIC (Electronic Request for Item Classification)

SNAP (Simplified Network Application Process)

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Import Restrictions

Tariffs

Exchange permits

Quotas

Import licenses

Standards

Boycotts

Voluntary agreements

Other restrictions

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Terms of Sale

CIF (cost, insurance, freight)

C&F (cost and freight)

FAS (free alongside)

FOB (free on board)

EX (named port of origin)

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Whose Responsiblefor Costs under Various Terms?

Exhibit 15.6

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Getting PaidForeign Commercial Payments

Letter of credit

Afford the greatest degree of protection for the seller

Can be revocable or irrevocable

Not a guarantee of payment to the seller

Bills of exchange

Also known as dollar drafts

The seller assumes all risk until the actual dollars are received

Sight draft

Arrival draft

Date draft

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A Letter-of-Credit Transaction

Exhibit 15.7

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Getting PaidForeign Commercial Payments

Cash in advance

Places unpopular burdens on the customer

Open accounts

Not generally made in foreign trade

Leaves sellers at a disadvantage

Forfaiting

Seller makes a one-time arrangement with a financial institution

to take over responsibility for collecting the account receivable

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Principal Export Documents

Exhibit 15.8

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Packing and Marking

Export packaging must consider:

Protection against rough handling, climate, pilferage

Effect of gross weight on import fees

All countries regulate the marking of importedgoods and containers

All markings must conform exactly to the data on the

export documents

Preparing shipment to (Country)details: Necessary export documents

Regulations for labeling, marking, packing, and customs

procedures

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Customs-Privileged Facilities

Customs-privileged facilities Areas where goods can be imported for storage and/or

processing with tariffs and quota limits postponed until the

products leave the designated areas

Foreign trade zones (FTZs)

Drawback

Offshore assembly (Maquiladoras)

Originated in Mexico in the early 1970s

NAFTA

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Logistics

Logistics management

Total systems approach to management of the distribution

process

Physically moving raw material

In-process inventory Finished goods inventory from the point of origin to the point of use or

consumption

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Interdependence of PhysicalDistribution Activities

Physical distribution system

Physical movement of goods

Location of plants and warehousing (storage)

Transportation mode

Inventory quantities

Packing

Interdependence of the costs of each activity

A decision involving one activity affects the cost and efficiency ofone or all others

Sum of each of the different activity costs entails an infinite

number of total costs

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Real Physical Distribution Costs betweenAir and Ocean FreightSingapore to the United States

Exhibit 15.9

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Benefits of a PhysicalDistribution System

Cost advantages

Optimal inventory levels

Optimal production capacity

More dependable delivery service to the market

Can render natural obstructions created bygeography less economically critical formultinational marketer

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Export Shipping and Warehousing

Common shippingmodes

Ocean shipping

Airfreight

Air express

Parcel post

Containerization

Intermodal services

Intermodal marketingcompanies (IMCs)

Rail transportation

Complete logisticsmanagement services

UPS

FedEx

Merge-in-transit

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Foreign Freight Forwarder

Licensed by the Federal Maritime Commission

Arranges for the shipment of goods as the agentfor an exporter

Arranges for complete shipping documentation

Provides information and advice on routing and scheduling,

rates and related charges, consular and licensing requirements,

labeling requirements, and export restrictions

Offers shipping insurance, warehouse storage, packing and

containerization, and ocean cargo or airfreight space

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International Logisticsand Supply Chain Management

Information technology now allowscommunication with participants in real time viaa single connection point

NetLinx Descartes

3PL providers or integrators

UPS Logistics Group

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Terrorism and Logistics

Cargo and Container Security Initiative (CSI) 24-hour rule

Customs-Trade Partnership against Terrorism(C-TPAT)

Augments the 24-hour rule by extending security procedures throughout thesupply chain Only applies to U.S. importers

Electronic tracking (C-TPAT-Plus) RFID GPS

Cellular Satellite Ultra-wide-band Bluetooth Bar codes Optical character recognition

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Radio frequency Identification

Exhibit 15.10

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Summary

The mechanics of exporting require little roomfor interpretation or improvisation

Nature of regulations and restrictions

surrounding importing and exporting can lead tofrequent and rapid change

The manufacturer must keep abreast of all foreign and domestic

changes in requirements and regulations

Foreign-freight-forwarders can handle manydetails for a nominal fee

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Summary

Transportation mode affects total product cost

Physical distribution system

Determines everything from plant location to final customer

delivery in terms of most efficient use Capital investment Resources

Production

Inventory

Packaging

Transportation

Continuous innovations in IT, the Internet, andsoftware programs can minimize much of theburden associated with global marketing