Chapter 8 EXPORTS and IMPORT FINANCING

Transcription

1 Chapter 8 EXPORTS and IMPORT FINANCING Form of Trade Financing Direct form Loan to finance purchases Prepayment by buyers (sometimes in the form of red clause L/C) Delayed payment by sellers Indirect form Insurance Guarantee Lending with A/R as collateral Commercial Banks Commercial Bank (for export) 1. Advising Letter of credit 2. Confirming Letter of credit 3. Transferred Letter of credit 4. Export Bills Negotiation (receive advance payments from the bank while payments are resolved with the buyer s bank; in terms of S T loans from the bank) 5. Export Bills purchased (banks purchase bills (Bankers acceptance) before hand, transfer money to exporter s account, collect payment(s) according to the export document) 6. Export Bills collections (Banks collect payments according to export documents) 7. Packing Credit (export loan (S T) to fund working capital inorder to prepare export process) Preshipment (upon presentation of LC or PO) Postshipment (upon presentation of BE) 8. Export Advice 9. Forward Exchange sold Commercial Bank (for import) 1. Issuance of Letter of credit 2. Outward Remittance (for advance payment)

2 3. Import Bills collections (when importer agrees to pay the seller against D/P or D/A, bank acts as middleman and collect payments for the seller and pay for the merchandise according to importer s order) 4. Trust Receipt (enables importer to take possession of the goods for an agreed period of time; apply for loans by using imported goods) 5. Shipping Guarantee (is a bank guarantee to the shipping company that importer to take delivery of goods prior to receipt of shipping documents) 6. Import Advice 7. Forward exchange sold Criteria in selecting bank 1. A strong international department 2. Speed in handling transactions 3. Relationship with overseas banks 4. Credit policy Factoring Factors is an agent who will buy account receivable (A/R) at discount. Banks and private specialist can perform factoring. Factor can make profit on the collection and provides a source of cash flow for the seller. Your invoices are sent to the factor who typically advances up to 80 to 90% of the invoice amount to you. Importer benefits from having the cash to reorder products from overseas. Exporter benefits from cash flow available for increased or new production.

3 Chapter 9 Global Transportation Global Transportation Vital to a firm s competitive position is its logistic platform determined by a location s ease and convenience of market reach under favorable cost circumstances. Transportation Mode Selection Accessibility the ability of the transportation provider to move the freight between origin and destination Capability the ability of the carrier to provide the special service demanded by the shipper. Security Cost Usually priced on the basis of cost of the service provided and value of the service to the shipper. High priced items can absorb transportation costs more easily than lowpriced items. Non economic factors Government preferential policies (the use of national carrier though more economical alternative exists) Landbridge: is a generic term meaning use the land freight as a means of transport connection. Minilandbridge (minibridge): Shipment from a country s port to another country s port with overland journey in the first country. Microbridge: Shipment from a country's port to another country's inland destination and vice versa. This service provides door to door service rather than port to port transportation.

4 Dry Port is an inland intermodal terminal directly connected by rail or road to one or more container seaports. Dry ports are for transit of goods from one transport mode to another, such as from rail to road. A container freight train runs between the seaport and the dry port. Freight Forwarder or Consolidators Freight consolidator: an individual or firm who accept less than container load (LCL) shipments from individual shippers and then combines them for delivery to the carrier in full container load (FCL) shipment. Packing for Overseas Shipment Packing must be as light or as compact aspossible to keep freight costs low. Packing should meet any specifications laid down in the customer s country and should carry certain marking. Cargo unitization includes 1. Containerization 2. Palletization 3. Roll on, roll off vessels 4. Barge carrying vessels Containerization: Freight Containers Containers can be divided into 3 main types: 1.1 General purpose (dry cargo) container Standard container 20 ft (footer) L20 x W8 x H8.6 and 40 ft (footer) L40 x W8 x H8.6 Suitable for general merchandises (cargo). - High cube container hicube H Half height container H4.25 or 4.3

5 1.2 Specific purpose container The maximum gross mass (weight) : maximum permissible weight of a container plus its contents. Open Top Container: similar to dry cargo container except that it has no rigid roof, but has a movable or removable cover. 1.3 Specific cargo container is normally for fresh produce, mainly fruit and vegetables. Items such as dairy products, eggs, seafood, meat and poultry as well as chemicals are most commonly shipped by Reefer as well.

6 Chapter10 Export and Import Insurance Cargo (Marine) Insurance Proof of insurance is contained in a document known as policy or insurance policy. Policy must be issued and signed by an insurance company or agent, insurer. Insurance Policy 1. Open policy, blanket policy, floating policy Is issued once by the insurer under contract to cover all shipments made by the exporter over a period of time subject to renewal, rather than to one shipment only. Is more often used by large exporter, assured. 2. Specific policy, voyage policy For one shipment only Principle of Insurable Interest FOB: insurable interest transfer from exporter to importer at the time the goods pass over the ship s rail CIF: insurable interest transfer from exporter to importer at the time the goods have been delivered on board the shipping vessel. CIP: at the time goods are loaded on truck or container, rail care or airplane at the name port of departure. DDU/DDP: exporter is responsible for the risk up to the importer s premises as such the insurable interest in goods does not transfer from the exporter to the importer in the shipment. Export Credit Risk Insurance Risk of non payment due to buyer s insolvency or refusal to pay or take the delivery of goods (business risk), government blockage of currency transfer, war, revolution or outbreaks (political risk).

7 Chapter 11 Export / Import Marketing Configuring the Marketing Mix Standardization versus customization is not an all or nothing concept. Most firms standardize some things and customize others. Product Attributes A product is like a bundle of attributes Products sell well when their attributes match consumer needs If consumer needs were the same everywhere, a firm could sell the same product worldwide Pricing Strategy Firms must consider price discrimination strategic pricing government mandated price controls Distribution Strategy A firm s distribution strategy (the means it chooses for delivering the product to the consumer ) is a critical element of the marketing mix. Communication Strategy Communication channels available to a firm include direct selling sales promotion direct marketing advertising

8 Chapter 12 Setting up Export Import Policy and Strategy Setting up export- import strategy 1. PEST and SWOT analyses 2. Who are your competitors? Globally & Locally. 3. Their SWOT & Your SWOT 4. How can you compete? Setting up your strategy. Cost factors of export import goods 1. Materials, labor and overhead Custom packaging Inspection fees Licensing fees Royalties 2. Buying agent's commissions Trader's markups 3 Bank charges and commissions Overseas agent's commissions Freight forwarder's charges Documentation charges Insurance premiums Export license fees Certification fees Consular fees Advertising