International Marketing
14th Edition P h i l i p R. C a t e o r a M a r y C. G i l l y John L. Graham
Exporting and Logistics: Special Issues For Business
Chapter 15
McGraw-Hill/Irwin International Marketing 14/e
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
What Should You Learn?
How the U.S. government helps exporters The steps necessary to move good across country borders How various import restrictions are used politically Means of reducing import taxes to remain competitive
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What Should You Learn?
The mechanics of export documents and their importance The main instruments of foreign commercial payments
The logistics and problems of the physical movement of goods
The impact of antiterrorism regulations on the export-import process
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Global Perspective
An Export Sale: From Trade Show to Installation Specific export mechanics occur when goods are shipped from one country to another The Internet has helped speed up process Most countries control the movement of goods crossing their borders imports and exports The international marketer must meet the legal requirements involved in moving goods from one country 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 and Security (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 appropriate license 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 List Requirements for ECCN 0A984
Exhibit 15.2
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Commerce Country Chart
Reasons for Control (Selected Countries)
Exhibit 15.3
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Red Flags
Exhibit 15.4
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Examples of Violations and Penalties of BIS Export Controls
Exhibit 15.5
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ELAIN, STELA, ERIC, and SNAP
ELAIN ( Export License Application and Information 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 Responsible for Costs under Various Terms?
Exhibit 15.6
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Getting Paid Foreign 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 Paid Foreign 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 imported goods 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 Physical Distribution 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 of one 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 between Air and Ocean Freight
Singapore to the United States
Exhibit 15.9
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Benefits of a Physical Distribution System
Cost advantages Optimal inventory levels Optimal production capacity
More dependable delivery service to the market
Can render natural obstructions created by geography less economically critical for multinational marketer
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Export Shipping and Warehousing
Common shipping modes
Ocean shipping Airfreight Air express Parcel post
Rail transportation Complete logistics management services
UPS FedEx
Containerization Intermodal services Intermodal marketing companies (IMCs)
Merge-in-transit
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Foreign Freight Forwarder
Licensed by the Federal Maritime Commission Arranges for the shipment of goods as the agent for 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 Logistics and Supply Chain Management
Information technology now allows communication with participants in real time via a 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 the supply 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 room for interpretation or improvisation Nature of regulations and restrictions surrounding importing and exporting can lead to frequent and rapid change
The manufacturer must keep abreast of all foreign and domestic changes in requirements and regulations
Foreign-freight-forwarders can handle many details 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, and software programs can minimize much of the burden associated with global marketing
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