Fast Cargo Services Ltd. is working very well in the market of garments as well as other diversified business sectors. Here in my internship program, I am happy to understand about the import and export activities.
My job responsibilities of internship were to analysis of import export through EPZ in Bangladesh. In the report. I have quota Ted-all the necessary information that is regarding to the import & export of pacific group with EPZ. So, the analysis of EPZ through pacific group had a visualization of entire EPZ activities indeed.
In next discussion we will find out all the relevant activities of EPZ through the analysis of experts in pacific group.
My internship topic is “FAST CARGO SERVICES LTD.” So in my Intemship report it is resort it is very important to analysis the domestic and international transaction, both government and private sector, between two or more countries indeed.
International business is all commercial transaction- private and government, between two or more countries. Private companies undertake such transactions for profit, governments may or may not do the same in their transactions. These transactions include sales, investments, and transportation.
Exporting is sending goods from one country to another and importing is bringing goods and services into one country from another. Export result in the receipt of money or claim on money, and imports result in the payment of money or claims.
Exporting to Foreign Market And its strategy by the analysis of pacific group
A company’s choice of entry mode to a foreign market depends on different factors, such as-pacific group works like;
Ownership advantages of the company.
Location advantages of the market. and
The internationalization advantages that result from integrating transactions within the company.
– Ownership advantages are specific assets, international experience and the ability to develop differentiated products.
– Location advantages of the market are a combination of market potential and investment risk.
– Intemationalization advantages are the benefits of holding on to specific assets or skills within the company and integrating them into its activities rather then licensing or selling them.
In general, companies that have low levels of ownership advantages either do not enter foreign markets or use low risk entry modes such as exporting. Perhaps the simplest mode of internationalizing a demoting business is exporting the most common form of international business activity. The strong emphasis on exporting in the multinational firms indicates that exporting is a vital part of international business. Exporting is the process of sending goods or services from one country to other countries for use or sale there.
Exporting offers a firm several advantages. First, the firm can control its financial exposure to the host country market as it deems appropriate. Little or no capital investment is normally needed as long as the firm closer to hire a host country firm to distribute its products. In this case the firm’s financial exposure is often limited to start up costs associated with market research, locating & choosing its local distributor and/or local advertising plus the value of the goods and services involved in any given overseas shipment.
Second, exporting permits a firm to enter a foreign market gradually, thereby allowing it to asses local conditions fine – tune its products to meet the idiosyncratic needs of host country consumers. If its exports are well received by foreign consumers, the firm may use this experience as a basis for a more extensive entry into that market.
Firms may have proactive or reactive motivations for exporting. Proactive motivations are those that pull a firm into foreign markets as a result of opportunities available there.
Reactive motivations for exporting are those that push a firm into foreign markets, often because opportunities are decreasing in the domestic market. However the choice of exporting as an entry mode is not just a function of these ownership, location and internationalization’s advantages. It also must fit the companies overall strategy. Companies consider there questions before deciding to export.
What does the company want to gain from exporting?
Is exporting consistent with the company goals?
What demand will exporting place on its key resources management and personnel, production capacity and financing and how will there demands be met?
Are the expected benefits worth the costs or would company resources be
better used for developing new domestic business?
These are strategic questions that must take into account global concentration, synergies & strategic motivations.
Characteristics of Exporters from the view point of Fast Cargo Services Ltd.:
Research conducted on the characteristics of exporters has resulted in two basic conclusions, and the analyst of Fast Cargo Services Ltd. figured out that,
The probability of being an exporter increases with company size, as defined
Export intensity, the percentage of total revenues coming from exports, is not positively correlated with company size. The greater the percentage of exports to total revenues, the greater the intensity.
The first conclusion is based on the idea that small companies can grow in the domestic market without having to export if they are to increase sales. Firm size is not the most important factor in determining the propensity to export, the number of countries served and export intensity. Factors such as the risk profile of management and industry factor is as important as size. In other words, managers who are more likely to take a risk are also more likely to engage in exporting and companies are more likely to engage in exporting if they are operating in industries in which the leading companies are exporters. The large companies, such as General Electric, Boeing, and General Motors are still the biggest exporters. But small companies are expanding the export capability. Small business now makes up 88 percent of U.S. exporters and it accounts for one-fifth of the value of U.S exports.
Companies export goods and services for several reasons, such as-
1. Expanding Sales:
Companies export primarily to increase sales revenues. This is true for services companies as well as manufacturers. Many of the former such as accountants, advertisers, lawyers and consultants, export their services to meet the needs of clients working abroad.
2. Achieves Economics of Scale in Production:
Companies that are capital and research intensive such as Bio-technology, Pharmaceutical companies
must export to achieve economies of scale by spreading their R&D expenditures over a large sales area.
3. Less risk then FDI: Some companies export rather than invest abroad because of the perceived high risk of operating in foreign environments.
4. Allows the company to diversify sales locations: Finally many companies exports to a variety of markets as a diversification strategy. Economic growth is not the same in every market, export diversification can allow a company to take advantage of strong growth in one market to offset weak growth in another.
Forms of Exporting:
Exporting activities may take several forms including-
1. Direct Exporting.
2. Indirect Exporting.
3. Intracorporate Transfers.
Direct Exporting: Direct exporting involves sales to customers either distributors or end-users located outside the firms home country. Research suggests that in one third cases a firms initial direct exporting to a foreign market is the result of an unsolicited order. However, its subsequent direct exporting typically results from deliberate efforts to expand its business internationally. Through direct exporting activities, the firm gains valuable expertise about operating internationally and specific knowledge concerning the individual countries in which it operates.
Direct Export Through The Internet & E-Commerce: Electronic commerce is an important way for companies to export their products to end-users. E-Commerce will be specially important for SMEs (Small & Medium Size Enterprises) that can’t afford to establish an elaborate sales network internationally.
Through Internet exporting companies can establish homepages in different languages to target audiences.
Indirect Exporting:` Indirect exporting are sold to an intermediary in the domestic market, which then sells the goods in the export market. In other words indirect exporting occurs when a firm sells its product to a domestic customer, which in turn exports the product in either its original form or a modified form. A firm may sell goods to a domestic wholesaler who then sells them to an overseas firm. A firm also may sell to a foreign firm’s local subsidiary, which then transports the first firm’s products to the foreign country.
Intracorporate Transfers: A third form of export activity is theintracorporate transfer which has become more important as the sizes of MNCs have increase. An intracorporate transfer is the selling o` goods by a firm in one country to an affiliated firm in another.
Intracorporate transfers are an important part of international trade. They account for about 40 percent of all U. S merchandise exports & imports.
CONSIDERATIONS OF EXPORTE.
In considering exporting as its entry mode, a firm must consider many other factors besides which form of exporting to use, including –
1. Government Policies. 2. Marketing Concerns.
3. Logistical Considerations.
4. Distribution Issues.
1) Government Policies: Government policies may influence a firm’s decision to export. Export promotion policies, export financing programs, and other forms of home country subsidization encourage exporting as an entry mode.
2) Marketing Concerns: Marketing concerns, such as Image, distribution, and responsiveness to the customer, may also affect the decision to export. The choice of exporting is also influenced by a firm’s need to obtain quick and constant feedback from its customers. On the other hand, producers of goods such as personal computers must continually monitor the marketplace to ensure that they are meeting the rapidly changing needs of their customers. For example- Korean manufacturer Hyundai shifted its production of personal computers from Korea to united States because it needed to be closer to its U.S. customer base.
3) Logistical Considerations: Logistical considerations also enter into the decisions to export. The firm must consider the physical distribution costs of warehousing, packaging, transporting. and distributing its goods as well as its inventory carrying costs and those of its foreign customers.
4) Distribution Issues: A final issue that may influence a firm’s decision to export is distribution. A firm experienced in exporting may choose to establish its own distribution networks in its key markets. For example- Japanese consumers electronics manufacturers like Sony, Minolta and Hitachi typically rely on wholly owned host country subsidiaries to distribute their products to wholesalers and retailers in the Quad countries.
A firm- particularly a smaller business or one just beginning to export- often lacks the expertise to market its products abroad, so it will seek a local distributor to handle its products in the target market. The distributor must have sufficient expertise and resources to successfully market the firm’s products.
Stages of Export Development:
Many companies begin exporting by accident rather than by design. Consequently, they tend to encounter a number of unforeseen problems. They also may never get a chance to see how important export can be. For this reasons, developing a good export strategy is important.
Export procedures of Fast Cargo Services Ltd. through EPZ
When non exporters complain about the complexity of export procedures, they generally are referring to documentation. Instead of the two documents- freight bill and bill of lading, to which they are accustomed when shipping domestically, they suddenly are confronted by five to six times as many documents for a foreign shipment. “Fast Cargo Service Ltd.” is a popular saying in the industry. Although the extra burden may be handled by the traffic department, many firms give all or at least part of the work to a foreign freight forwarder.
Foreign freight forwarder
Foreign freight forwarders act as agents for exporters. They prepare documents, book space with a carrier, and in general act as the firm’s export traffic department. If asked, they will offer advice about- markets, import and export regulations, the best mode of transport, and export packing and will supply cargo insurance.
Correct documentation is vital to the success of any shipment. For discussion purposes, we shall divide them into two categories:
A. Shipping documents; and
B. Collection documents.
A. Shipping documents
Shipping documents are prepared by exporters or their freight forwarders so that the shipment may pass through the exporting countries’ customs, be loaded on the carrier, and sent to its destination. They include:
1.The domestic bill of lading;
2. Export packing list;
3. Export licenses;
4. Export bill of lading;
5. Insurance certificates.
Inasmuch as the first two documents are nearly the same as those used in domestic traffic, we shall limit our discussion to the export licenses, export bill of lading, insurance certificates.
All exported goods require either
General license; or
Validated Export license.
a. General license
Most products can be exported under the General license for which no special authorization is necessary. The correct general license symbol is merely written in the Shipper’s Export Declaration. This documents indicate that there is an authorization to export and also provides the statistical information.
b. Validated Export license
For strategic materials and all shipments to communist countries, a validate export license is mandatory. This is a special authorization for a specific shipment and is issued only up on formal application to the Office of Export Administration.
Export bill of lading
The export bill of lading serves a dual purpose:
## It is a contract for carriage between the shipper and the carrier.
## It is evidence of title to the merchandise.
Bill of lading are generally called
– Ocean bills
– Ocean bill of lading may be either:
** Straight; or
** To Order.
**A Straight Bill of Lading is nonnegotiable, and the person only stipulated in it may obtain the merchandise upon arrival.
** An Order Bill of Lading, however is negotiable. It can be endorsed like a check or left blank. In this case, the holder of the original bill of lading is the owner of the merchandise.
Sight draft or letter of credit shipments require `to order” bills marked “Clean on Bard” by the steamship company, which means that there is no apparent damage to the shipment and it has actually been loaded n the vessel.
The insurance certificate is evidence that insurance coverage has been obtained to protect the shipment from loss or damage while in transit. Unlike domestic carriers, ocean – going steamship companies assume n responsibility for the merchandise they carry unless the loss is caused by their negligence. Marine insurance on an international transaction may be arranged by either – the exporter or the importer, depending on the terms of sale. Frequently, the laws of a country require the importer to buy the insurance in order to protect the local insurance industry, and to save foreign exchange.
Broadly speaking, there are three kinds of marine insurance:
1. Basic Named Perils- include perils of the sea, fires, jettisons, explosions, and hurricanes.
2. Broad Named Perils- include theft, pilferage, no delivery, breakage, and leakage in addition to the basic named perils.
3.All Risks- cover all physical loss or damage from any external cause and is more expensive than those previously mentioned.
4. War Risks-are covered under a separate contract.
The occasional exporters, for fire sake of convenience, will ask the forwarder to arrange for insurance, but when shipments begin on a regular basis, the shipper can economize by going directly to a marine insurance broker. The broker, acting as the shipper’s agent, will draw up a contract to fit his needs from among the hundreds of clauses that are available. Because neither the policies nor the premiums are standard, it is highly recommended that the exporter obtain variouss quotations.
B. Collection documents.
These are the documents that the seller is required to provide the buyer in order
to receive payment. For:
** A letter of credit transaction, the collection documents must be submitted to a bank.
** A documentary draft, anyone may be designated to act on the seller’s behave. A few exporters send their drafts overseas to a representative or bank for collection, but it is preferable to have a bank in the exporter’s country forward them to their bank in the city of destination.
** First of all, the collection costs are less because the correspondent bank charges the exporter’s bank less than it would charge the exporter.
** Second, because the correspondent relationship between the banks, the foreign bank will generally exert a greater effort to collect the money on time. The documents required for collection vary among countries and among customers, but some of the most common are:
3.Certificates of origin;
5. Bill of Exchange.
Commercial invoices for export orders are similar to domestic invoices but include additional information such as:
The goods’ origin;
Export packing marks; and
The clause stating that the goods will not be diverted to another country.
Invoices for letter of credit sales will name the bank and the credit numbers. Some importing countries require the commercial invoices to be in their language and be visaed by their local consul.
2. Consular Invoice
A few countries require both the commercial invoice and a special form called the consular invoice. These forms are purchased from the consul, prepared in the local language of the country, and then visaed by the consul.
3.Certificates of Origin
Despite the fact that the commercial invoice carries a statement regarding the origin of the merchandise, a number of foreign governments require a separate certificate of origin. This document is commonly issued by the local chamber of commerce and visaed by the consul.
-Inspection certificates are frequently required by buyer of grain, food stuffs, and live animals.
Designing an Export Strategy
Designing an export strategy can help managers avoid making the costly mistakes mentioned above.
Figure, given below, shows an International Business Transaction Chain.
1. Request for goods
2. Receipt of order and
2.a. Export intermediary’s customs brokers freight forwards.
3. Inland Shipping. A Truck B. Rail. C. Air. D. Water.
4. Seaport/Airport (export)
A. Warehouse B. Insurance. C. Customer
D. Loading. E. Port Authority/Con
6. Seaport/ Airport (Import)
A. Unloading B. Port Authority/Control
7. Financial transaction
Buyer’s bank receives shipping invoice.
Money is credit to seller’s bank.
8. Import intermediary custom’s broker.
9. Custom’s release
10. Inland Shipping. A. Truck. B. Rail. C. Air. D. Water.
11. Receipt of goods by buyer.
A successful export (and import) strategy must take each element of the transaction chain into consideration.
To establish a successful export strategy, management must.
1. Assess the company’s export potential by examining its opportunities and resources. First of all, the company needs to determine if there is a market for its goods and services. Next it needs to make sure it has enough
2. Obtain expert counseling on exporting most governments provide assistance for their domestic companies, although the extent of commitment varies by country. Other government agencies also assist exporters. As a company’s export plan increases in scope, it probably will want to secure specialized assistance from banks, lawyers, freight forwarders, export management companies, export trading companies, and others.
3. Select a market or markets. This key part of the export strategy may be done passively or actively.
The company learns of markets by responding to requests from abroad that result form trade shows, advertisements, or articles in trade publications.
A company can find newer markets for its goods, by attending different seminars relating to international business affairs and some other issues. For example, Grieve’s Calabrese took a more active approach by selecting Southeast Asia as an area for export development as a result of a seminar he attended featuring the U.S. ambassadors to the ASEAN countries. A company also can determine the markets to which products like its own are correctly being exported. For example, in the U.S. setting U.S. ambassadors to the ASEAN countries. A company also can determine the markets to which
products like its own are currently being exported. For example, in the U.S. Setting, U.S. Census foreign trade statistics identify the markets for different classifications of exports, and the National Trade Data bank (NTBD) provides specific industry reports for different countries. The NTDB is updated monthly, so potential exports can get the most recent studies. Similar forms of assistance are found in other countries.
4. Formulate and implement an export strategy. In this step, a company considers its export objectives (immediate and long term), the specific tactics it will use, a schedule of activities and dealings that enable it to achieve its objectives, and the allocation of resources that allows it to accomplish the different activities. Then it implements the strategy by getting the goods and services to foreign consumers.
The development of the plan depends on the nature of the company. For a small or medium-size company, the plan usually gets the attention of the top levels of management, as was the case with Grieve Corporation. Larger companies might establish a separate export department to deal with the export of ai1 products. Research has shown that commitment precedes success in exporting, and the development of an export department is one indicator of commitment by top management.
All too often, newcomers to exporting are so preoccupied with the flow of documents that they fail to concern themselves with the physical movement of their goods. As long as the carrier delivers their shipments in good condition at a reasonable cost, they are satisfied. However, the tremendous advance in materials handing techniques over the past two decades such as containerization, RO-RO and LASH not only offer opportunities for cost savings but also enable exporters to reach markets which the previously could not serve.
Containers are large boxes 8´8 feet in cross section, by either 10,20 or 40 feet which the seller fills with the shipment in his or her own warehouse. They are then sealed and are not opened until the goods arrive at their final destination. Over the long voyage, the containers, but a tractor trailer or a railroad for delivery to shipped where huge earns will load of aboard ship. From the port of entry railroads or trucks will deliver the container, often unpinned even for custom’s inspection, to the buyer’s warehouse where officials will examine the shipment. Not only is handling time reduced but also the risks of damage and theft are minimized. Both air and water carriers encourage the use of containers by charging lower rates for containerized shipments.
Ro-RO. Another innovation in cargo handling is the RO-RO (Roll On-Roll Off) ship which permits loaded trailers and any equipment on wheels to be driven onto this specially designed vessel_ RO-RO service has brought the benefits of containerization to ports which have been unable to invest in the expensive lifting equipment required for containers.
LASH. Something similar to PO-RO is the LASH (Lighter Aboard Ship) vessel which gives customers located on shallow inland waterways access to ocean freight service. Sixthly foot-long barges are towed to inland ports, loaded, and towed back to deep water where they are loaded aboard the anchored LASH vessel. LASH service has been especially useful when adequate port facilities are lacking, because the vessel carrying the barges is able to load and unload offshore.
Air freight has bad a profound effect on international business because shipments which once required 30 days now arrive in one day. Huge freight planetary payloads of 200,000 pounds, most of which goes either in containers or on pallets. Airlines guarantee overnight delivery from New York to many European airports and claim that their planes can be completely loaded or unloaded within 45 minutes.
Although air freight rates are higher than ocean rags, when total costs of the two modes are compared, it frequently turns out that shipping by air is less expensive. Components of the total cost which may be lower for air than for f ocean freight are: (i) insurance rate, (2) customs duties when they are calculated on gross weights, (3) packing, and (4) inventory costs. In addition, the necessity for warehousing at the destination is often eliminated. Illustrates how the total cost of air freight may be lower.
Even when the total costs based on these items are higher for air freight, it still may be advantageous to ship by air when factors other than the conventional expense, inventory, and capital are considered:
1. Production and opportunity costs, although somewhat more difficult to calculate, are property a part of the total cost. Getting the product more quickly to the buyer results in faster payment which, speeds up the return on investment and improves cash flow. The firm’s capital is released more quickly and can be invested in other profit-making ventures or can be used to repay borrowed capital, thus reducing interest payments. Production equipment may be assembled and sent by air so that it may go into production sooner without the transit and set-up delays associated with ocean shipments.
2. The fume may be air dependent; that is, export business is possible only because of air freight. Suppliers of perishable food products to Europe, Japan, and the Middle East are in this category as are suppliers of live animals (newly hatched poultry and prize bulls). Without air freight, these furor would be out of business.
3. The products may be air dependent when the market itself is perishable. Consumer products with extremely short life cycles (high fashion and fad items) are examples, but many industrial products also fit in this category. A compute, for example, is perishable to the extent that the time it losses between the final assembly and the installation at the customer’s location is time that is not earning income (leasing fee).
4. The sales argument which assures the customer that spare parts and factory technical personnel are available within a few hours is a store one for the exporting firm which has to compete with overseas manufacturers.
Table: Sea-Air total cost comparison (shipment of spare part)
Ocean Freight (with Warehousing) Air Freight (No Warehousing)
Warehouse administrative costs $850 –
Warehouse rent 1,400 –
Taxes and insurance 630 $330
Inventory financing 240 160
Inventory obsolescence 1,500 850
Seller’s warehouse and handing
costs 1,550 950
Transportation 350 2,000
Packaging and handing 250 100
Gargo insurance 60 30
Custom duties 110 107
Total $6,940 $4,527
Total Systems concepts
The total systems approach goes beyond the total cost approach to consider in addition to costs, the possible effect that a physical distribution decision may have on the other functional areas of the firm, Furthermore, an analysis of the
impact of such a decision on the channel members and the final customers is made. The application of this concept to exporting is creating marketing opportunities that previously were thought to be nonexistent.
Potential Pitfalls Of Exporting
To understand the elements in an export strategy, some major problems that exporters often face. The attacks of September 11 have reminded traders how risky exporting can be. In the days following the attacks, it was nearly impossible for traders to send or receive goods. From problems that are common to international business in general and not unique to exporting, such as language and other cultural factors, the following are mistakes companies new to exporting most frequently make:
Failure to obtain qualified export counseling and to develop a master international marketing plan before starting an export business.
Insufficient commitment by top management to overcome the initial difficulties Gnd financial requirements of exposing.
Insufficient care in selecting overseas agents or distributors.
Chasing orders from around the world instead of establishing a base of profitable operations and orderly growth.
Neglecting the export business when the domestic market booms.
Failure to treat international distributors on an equal basis with their domestic counterparts.
Unwillingness to modify products to meet other countries regulations or -cultural preferences.
Failure to print service, sales and warranty messages in locally understood languages.
Failure to consider use of an export management company or other marketing intermediary when the company does not have the personnel to handle specialized export functions.
Export Policy ‘Of Bangladesh:
The Export Policy 1997-2002 has been designed to operate in the imperatives and opportunities of the market economy with a view to maximizing export growth and narrowing down the gap between import payment and export earning. The following are the salient features of the policy:
To achieve optimum growth of national economy through increase of exports.
To narrow down the gap between export earnings and import payments.
To undertake timely steps to produce goods at a competitive price.
To take highest advantage of entering into globalize international market.
To make items more attractive to the market through product diversification and quality improvement.
To establish backward linkage industries and services.
To simplify export procedures, and rationalize and strengthen export incentives.
To develop an export infrastructure.
To develop trained human resources in the export sector and
To raise the quality and grading of export products up to international standard.
Simplifying export procedures and helping private sector achieve efficiency, Government’s role is to facilitate.
Providing facilities for technological development, productivity increase, cost reduction etc. for attaining internationally accepted standards of quality.
Ensuring maximum use of local raw materials and encouraging establishment of backward linkage industries.
Participation in international trade fairs, exhibitions, and sending trade missions with a view to consolidating Bangladesh position in the existing market and creating new market.
Encouraging export of new categories of high value added RMG and encouraging BGMEA for establishing of a Fashion Institute.
Organizing regularly international trade fairs and exhibitions.
Development and expansion of infrastructure conducive to export.
Necessary technical and practical training for development of skilled manpower.
Extending technical and marketing assistance for development of new products and for finding appropriate marketing strategies.
Promotion of High Value Added Leather and Leather Goods
Providing various facilities including bonded warehouse facilities for import of raw materials to 100% export oriented leather industries.
Promotion of Shrimp
Extension and modernization of traditional/semi-intensive method of shrimp cultivation and ensuring quality standard as per buyer’s requirements.
Promotion of Jute and Jute Goods
Extensive publicity on jute goods as environment friendly natural fiber and diversification of uses.
Promotion of Tea
Undertaking programs for establishing brand name and developing linkage established blending and distributing agents.
Promotion of Agro-based Products
Undertaking programs for raising production, quality, standard and expansion of export markets.
Promotion of Electrical and Electronic Goods
Building and ensuring conducive infrastructure.
Promotion of Engineering and other Consultancy Services and Subcontracting
Involving Bangladeshi missions abroad in obtaining contracts.
Export Promotion Councils/Committees
A National Committee on export at the highest level will review the export situation, and provide necessary direction and resolve problems.
Task Force under the chairmanship of the Minister for commerce has been formed for immediate attention and action on export related problems.
An export council has been formed with a view to exchanging ideas with chambers, exporter’s associations and private sector organizations in formulating policy decisions.
A task force will also be formed to recommend measures for accelerating export of items identified under thrust sector and crush programs.
Commodity councils will be formed for jute, tea, shrimp. RMG, and leather and leather products.
Facilities to be given to Thrust Sector Thrust Sectors
Leather and leather goods industries.
High priced and high value added RMG.
Leather and Leather Goods
Leather manufacturing units will be modernized in order to enable them to produce increased quantities of finished leather from raw hides.
Steps will be taken to establish supporting industries producing necessary chemicals and other inputs within the country.
The existing Leather Technology Institute will be modernized so as to be used as a Common Facilities Centre’ for the leather industries.
Necessary credit facilities will be extended for setting up leather goods industries. All credits will be brought under the umbrella of a single bank.
Import of raw hides including wet blue and pickled leather shall continue to be permitted and shall be exempt from the prevailing customs duty and import license fee.
Facilities for BMRE and other transformation process shall be made available to all tanning units to enable them to switch over by 2000 to processing of crust/finished leather from wet blue leather.
All out efforts would be made and steps taken for production and export of high priced RMG as per market demand.
Immediate steps will be taken to establish a Fashion Institute.
Liberal credit may be considered for capacity building and hiring of technology for production of high quality garments.
For development of human resources in the software computer science course will be introduced in all universities and BITs.
An information technology village having multifaceted facilities will be set up.
Appropriate provisions on protection of intellectual property rights will be incorporated in the existing copyright Act.
Development activities under the recently established ‘Hortex Foundation’ will be extended.
Several new incentives and facilities have been made available to the exporters along with the existing ones.
Restructuring of the Export Credit Guarantee Scheme(Ecgs)
At present EGGS covering risk on export credit as well as probable commercial and political risks occurring abroad are available. These schemes are not giving desired result due to existence of various complicates. Therefore these schemes will be restructured.
Convertibility of Taka
Taka has been made convertible. Earnings from the trading account shall be freely convertible into foreign exchange for import of goods. Exporters will be allowed gradually to retain their foreign exchange earnings at higher proportion in their own foreign currency accounts.
Utilization of Foreign Exchange by Exporters
Proportion of foreign exchange that an exporter can retain in his foreign account has been raised from 20% either to 40% of his FOB earnings or at a rate fixed by the government after review. The following table are showing Export Target:
EXPORT TARGETS (COMMODITY-WISE) FOR FINANCIAL YEARS 2002-2003 THR000H2O42-2003
(In Million US dollar)
Commodity 1998-99 1999-2000 2000-2001 2001-2002 2002-2003
Readymade Garments 2500 2756 3010 3280 3590
Jute goods 307 312 314 317 319
Leather 205 225 240 280 330
Frozen food 320 350 380 400 420
Knitwear 983 1178 1412 1687 2010
Raw Jute 125 132 140 150 160
Tea 40 42 48 50 55
Chemicals 94 98 100 102 102
Petroleum products 10 10 10 10 10
Engineering products 18 21 23 25 28
Agricultural products 132 32 35 37 40 42
Handicrafts 18 8 9 9 10 10
Others 1378 378 462 617 824 1024
Total: 5020 5630 6340 7175 8100
* Rate of Exchange : US $ 1.00 = Taka 45.00
For Example: An export oriented Readymade Garments Industries of Bangladesh follows the following export strategy:
This industry used the following Documents:
Bill of Leading.
Certificate of Origin.
Raw Materials Import: Yarn, Polybag, Level, Handbag, Cartoon, Gamtep, P.P. belt, Tag pin, Zipper, Button and others.
Constraints Faced by the Exporters of Bangladesh:
– Export Finance.
– Transportation Cost.
Trade Information. Market Intelligence.
Backward Linkage/ Import raw material.
Quality and Quantity. Skilled Labor force.
Political Unrest ( Hartal, Trade Union)
Importing: Importing is the bringing of goods and services into a country and results in the importer paying money to the exporter in the foreign country.
Types of Imports: There are two basic types of imports
(1) Industrial and consumer goods and services to independent individuals
and companies that are not related to the foreign exporter.
(2) Intermediate gods and services to companies that part of the firm’s global
Companies imports goods and services because –
They can be supplied to the domestic market at a cheaper price,
They can provide better quality than competing goods manufactured in the domestic market,
Specialization of production and export to markets around the world is more efficient than manufacturing every product in every market. For example, Nike buys shoes manufactured in several Asian countries, including Korea, Taiwan, China, Thailand, Indonesia, and Vietnam, because of the cheaper cost. It would be impossible to manufacture the same product on an industrial country and be able to sell it at ‘ a reasonable price because of the relatively high labor costs.
∎ Companies import products that are not available in the local market.
Types of Importers: There are three broad types of importers
(1) Those that are looking for any product around the world to import and sell. They might specialize in certain types of products- such as sports equipment or household items- but they are simply scanning the globe4 and looking for any product that will generate positive cash flow for them.
(2) Those that are looking for foreign sourcing to get their products at the cheapest price.
(3) Those that are use foreign sourcing as part of their global supply chain.
The Import process: The import process basically mirrors the export process. It involves both strategic and procedural issues. In fact, the export business plan could easily be adapted to make it an import business plan. Under the import process, first, managers need to research the potential markets, both in terms of the countries themselves and the suppliers. Second, they need to determine the legal ramifications of importing the products, both in terms of the product themselves and the countries from which they come. Third, they also need to deal with third-party intermediates, such as freight forwarders and customs agents, and finally, they need to arrange financing for the purchase.
THE ROLE OF CUSTOMS AGENCIES:
When importing goods into any country, a company must be totally familiar with the customs operations of the importing country. “Customs” are the country’s import and export procedures restrictions, not its cultural aspects. The primary duties of customs service are the assessment and collection of all duties, taxes, and fees on imported merchandise, the enforcement of customs and related laws, and the administration of certain navigation laws and treaties. As a major enforcement organization, it also deals smuggling operations and is increasingly involved and helping protect against foreign terrorist attacks.
An importer needs to know how to clear goods, what duties to pay, and what special laws exist regarding the importation of products. On the procedural side, when merchandise reaches the port of entry, the importer must file documents with customs officials, who assign a tentative value and tariff classification to the merchandise. It is almost art form for companies to figure out of the tariff classification that will give them the lowest possible tariff. Then customs officials examine the goods to determine whether there are any restrictions on their importation. If there are restrictions, the goods may be rejected and be prevented from entering the country. If the goods are allowed to enter, the importer pays the duty and the goods are released. The amount of the duty depends on the product’s country of origin, the type of product, and other factors.
A customs broker or other import consultant can help an importer minimize import duties by
Valuing products in such a way that they qualify for more favorable duty treatment. Different product categories have different duties. For example, finished goods typically have a higher duty than do parts components.
Qualifying for duty refunds through drawback provision. Some exporters use in their manufacturing process imported parts and components on which they paid a duty.
Deferring duties by using bonded warehouses and foreign trade zones. Companies do not have to pay duties on imports stored in bonded warehouses foreign trade zones until the goods are removed for sale or used in a manufacturing process.
Limiting liability by properly marking an import’s country of origin. Because governments assess duties on imports based in part on the country of foreign, a mistake in marking the country of origin could result in a higher import duty.
When a shipment arrives at port, the importer must file specific documents with the port director in order to take title to the shipment. (Take title means the importer receives the products without purchasing them-that is, without laying ‘out any money). Importers must submit documents to customs that determine whether the shipment is released and what duties are assessed. So, there are two different types of documents:
those that determine whether customs will release the shipment.
those that contain information for duty assessment and statistical purposes.
The specific documents that customs requires vary by country but include an entry manifest, a commercial invoice, and a packing list. For example, the exporter’s commercial invoice contains information .such as the port of entry to which the merchandise is destined; information on the importer and exporter; a detailed description of the merchandise, including its purchase price; the currency used for the sale; and the country of origin.
Third-party intermediaries are the companies that facilitate the trade of goods but that are not related to either the exporter or the importer. A company that either export or is planning to export must have some expertise, but not every company may have this skill. So, they must decide whether its internal staff will handle certain essential activities or if it will contract with other companies. Regardless, the following functions must occur.
Stimulate sales, obtain orders, and do market research
Make credit investigations and perform payment-collection activities
Handle foreign traffic and shipping
Act as support for the company’s overall sales, distribution, and advertising staff.
Handling these functions internally can be costly and can require expertise a company doesn’t have. Most companies initially use external specialists and intermediary organizations to assume some or all of these functions, before developing intemal capabilities.
Specialists are useful for such duties as preparing export documents, preparing customs documents in the importing country, and identifying the best means of transportation. They may perform more extensive roles, including taking ownership of foreign bound goods and/or assuming total responsibility got marketing and financing exports.
Before discussing intermediary organizations, let we know about exporting. Exporting may be either direct or indirect.
Direct exports are goods and services sold to an independent party outside of the exporter’s home country. In other words, direct selling is when an exporter sells through representatives, to distributors, to foreign retailers, or to final end users. Exporters undertake direct selling to give them greater control over the marketing function and to earn higher profits. Direct intermediaries involve sales representatives, distributors, or retailers.
Sales representatives: sale representative sells products in foreign markets on a commission basis, without assuming risk or responsibility. He/she may have exclusive rights to sell in a particular geographic area or may have to compete with other sales representatives that represent the firm.
Distributors: A distributor in a foreign country is a merchant who purchases the products from the manufacturer and sells them at a profit. Distributors usually carry a stock of inventory and service the product. They also usually deal with retailers rather than end users in the market.
Companies should consider the following points about each potential foreign sales representative or distributor.
The size and capabilities of its sales force
Its sales record
An analysis of its territory
Its current product mix
Its facilities and equipment
Its marketing policies
Its customer profile
The principles it represents and the importance of the inquiring company to its overall business
Its promotional strategies
Foreign retailers: Exporters can also sell directly to foreign retailers. Usually these products are limited to consumer lines, but-the growth of large retail chairs around the world has facilitated the export of products to the large chains, which gives the exporter instant coverage to a wide area. j
End users: Exporters can also sell directly to end users. A good way to generate such sales is by printing up catalogs of by going to trade shows, or such sales can be generated when foreign buyers either get company brochures or respond to advertisements in trade publications.
A company that has sufficient financial and managerial resources and decides to export directly rather than working through an intermediary must set up a solid organization. This organization may take any number of forms, ranging from a separate international division, to a separate international company, to full integration of international sales force that is separate from the domestic sales force because of the different types of expertise required in dealing in foreign markets.
Direct Exporting Through the Internet and Commerce:
Electronic commerce is an important way for companies to export their products to end users. A study conducted by Forester Research found that 7 percent of ‘ revenues from world-wide trade in 2002 was from e-commerce. E-commerce is easy to start, it provides faster and cheaper delivery of information, it provides quick feedback on new products, it helps to improve customer service, it is available to a global audience, it helps to level the field of competition, it can be a strategic tool to access different markets, it’s cheaper than a phone call, and it helps establish electronic data interchange (EDI) with both suppliers and customers.
In indirect selling, the exporter sells goods directly to or through an independent domestic intermediary in the exporter’s home country that exports the products to foreign markets. The major types of indirect intermediaries are listed bellow-
Export Management Company (EMC),
Export Trading Company (ETC),
Export and Import brokers.
Export Management Company (EMC):
An export management company (EMC) is firm that acts as its client’s export department. It often uses the manufacturer’s own letterhead in communicating with foreign sales representatives and distributors. An EMC’s staff typically is knowledgeable about the legal, financial, and logistical details of exporting. The EMC primarily obtains orders for its clients’ products through the selection of appropriate markets, distribution channels, and promotion campaigns. It collects, analyzes, and furnishes credit information and advice regarding foreign accounts and payment terms. It may also take care of export documents, arrange transportation (including the consolidation of shipments among multiple clients to reduce costs), set up patent and trademark protection in foreign countries, and assist in establishing alternative forms of doing business, such as licensing or joint ventures. EMCs usually concentrate on complementary and noncompetitive products so that they can present a more complete product line to a limited number of foreign importers.
EMCs usually operate in one of two ways:
1. Some act as commission agents for exporters. They handle the details of shipping, clearing customs, and document preparation in return for an agreed-upon, fee. In this case, the exporter normally invoices the client and provides any necessary financing it may need.
2. Others take title to the goods. They make money by buying the goods from the exporter and reselling them at a higher price to foreign customers. Such EMCs may offer customer financing and design and implement advertising and promotional campaigns for the product.
Limitations of EMC: We may mention some limitations of EMCs-
A manufacturer that uses an EMC may lose control over foreign sales because it id passing off that responsibility to an independent party.
If the EMC does not actively promote the product, the company will not generate many exports.
To overcome these limitations, the manufacturer needs to balance the desire for control with the cost of performing the export functions directly.
International Trading Companies:
An international trading company is a firm directly engaged in importing and exporting a wide variety of goods for its own account. It differs from an EMC in that it participates in both importing and exporting activities. By buying goods in one country and selling them in a second, an international trading company provides the gamut of necessary exporting and importing services. These include market research, customs documentation, international transportation, and host country distribution, marketing, and financing. Typically, international trading companies have agents and offices worldwide. The economic intelligence information they glean from these far-flung operations is one of their most potent competitive- weapons.
The most important international trading companies in the global market place are-
∎ Sogo sosha: Japanese trading company sogo sosha acquire goods by importing them from other countries or by giving the goods manufactured and then reselling them in both domestic and foreign markets. The sogo sosha are an integral part or the trading arms of the Japan’s keiretsu system- Japanese business groups that are networks of manufacturing, service, and financial companies. There operations expanded significantly beyond exporting to include investing in production and processing facilities, establishing fully integrates sales systems ff certain products, expanding marketing activities, and developing large bases for the integrated processing of raw materials.
An example of the type of activities that the Japanese trading companies pursue is the joint purchase by Itochu Corporation and Arco of the western U.S. coal operations of Coastal States Energy Company.
Chaebol: The second one is Chaebol. Chaebol are the Korean business groups that are similar to keiretsu and also contain a trading company as part of the group. They are trying hard to challenge the sogo shoshas in the trading company market.
Export Trading Company (ETC):
ETCs are like EMCs. They are like independent distributors that match up buyers and sellers. They tend to operate on the basis of demand rather than of supply. They identify domestic suppliers who can fill orders in overseas markets. An ETC looks for as many manufacturers as it can find to supply overseas customers. Because ETCs could control the foreign distribution of products and collaborate with producers of competing products, they could be open to antirust allegations.
Foreign Freight Forwarders:
A foreign freight forwarder is an export or import specialist dealing in the movement of goods from producer to consumer. A freight forwarder is an agent for the exporter in moving cargo to an overseas destination, known as the travel agents of cargo. The typical freight forwarder is the largest export intermediary in terms of value and weight handled.
The services it offers are more limited than those of an EMC. Freight forwards are specialize in the physical transportation goods, arranging customs documentation and obtaining services for their clients. They obtain the best routing and means of transportation based on space availability, speed, and cost.
Trey will get the products prom the manufacturing facility to the air or ocean terminal and then overseas. They use different transportation modes- surface freight (truck and rail), ocean freight, airfreight. The movement of goods across different modes from origin to destination., is known as intermodal transportation. The forwarder secures space on planes of ships and necessary storage prior to shipment, reviews the letter of credit, obtains export licenses, and prepares necessary shipping documents. It also may advise on packing and labeling, purchase transportation insurance, repack shipments damaged en route, and warehouse products, which saves the exporter the capital investment of warehousing. They don’t take title to the goods or act as a sales representative in a foreign market.
The freight forwarder usually charges the exporter a percentage or the shipment value, plus a minimum charge dependent on the number of services provided. They also receives a brokerage fee from the carrier.
Using a freight forwarder is usually less costly for an exporter than providing the service internally. It also can get exporters shipping space more easily and consolidate shipments to obtain lower rates.
It is group of U.S. firms that operate within the same industry and that are allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws. First authorized by the Export Trade Act of 1918, A WebbPomerene association engages in market research, overseas promotional activities, freight consolidation, contract negotiations, and other services for its members and selling the goods in foreign markets on the association’s behalf. .In addition to the intermediaries that provide abroad range of services to international exporters and importers, numerous other types of intermediaries, including the following, offer more specialized services:
Manufacturers’ agents solicit domestic orders for foreign manufacturers, usually on a commission basis.
Manufacturers’ export agents act as a foreign sales department for domestic manufacturers, selling those firms’ goods in foreign markets.
Export and Import brokers bring together international buyers and sellers of standardized commodities. Companies whose have not the required degree of skills and expertise to deal with institutions and documentation may elect to work through a broker. The import broker helps an importer clear customs. It obtains various government permissions and other clearances before forwarding necessary paperwork to the carrier that is to deliver the goods to the importer. This list is by no means complete. Indeed, specialists are available to provide virtually every service needed by exporters and importers in international trade.
TOP GLOBAL TRADING COMPANIES, 2003.
REVENUE – 2003
RANK COMPANY COUNTRY (S N11LLIONS) ($ MILLIONS) RANK
12 Mitsubishi Japan 105,814 482 0-5
13 Mitsui Japan 101,206 443 0-6
17 Itochu Japan 91,177 242 0-8
23 Sumitomo Japan 77,140 362 0—-4
25 Marubeni Japan 71,757 -931 (1)-16
28 E.ON Germany 66,453 1,834 3…….1
74 Nissho Iwai Japan 43,703 10 0…….13
118 Samsung South Korea 33,212 32 0………..11
219 Hyundai South Korea 21,702 -186 (1)………..15
248 LG International South Korea 19,516 26 0___10.
255 Tomen Japan 19,073 38 0- 9
273 Toyota Tsusho Japan 18,040 70 0 7
289 SK Global South Korea 17,214 -95 (1) 14
305 Nichimen Japan 16,437 11 0–12
311 Sinochem China 16,164 82 1- 3
329 COFCO China 13,004 131 1- 2
Import Policy of Bangladesh.:
Bangladesh government is concern about developing market economy according to the GATT agreement. To increase export and easy investment; a long term, helpful, consistent import policy is necessary. For this purpose the present government has taken step by introducing 5 years policy (1997-2002) instead of 2 years policy. By giving up control policy, government take some liberalize policy that easy and simple than previous one.
Objectives of the policy:
Important objectives of the policy are
1. To introduce an import policy that is consists with market economy and GATT agreement.
2. To arrange the import of basic industrial machineries and materials to enhance export.
3. To ensure development of domestic companies and provide quality product to the customer at a reasonable price.
General rules related to import:
Control over product import: It ensure control on product imported by –
Listing import restricted product.
Listing conditionsl import product
Free import product.
General condition on product import:
1. It is compulsory to use I.T.C. (Import Trade Control) number on product (6 digit).
2. Origin of the product collection and restriction of shipment. Any kind of product originated from Israel is strictly prohibited to import in Bangladesh and no ship can be used belonging that country.
3. Pre shipment inspection.
4. Import at a competitive rate.
5. Origin of the country: In every kind of imported product country of origin must clearly be printed on product.
Source of fund:
1. Cash foreign currencies.
2. Foreign currencies of Bangladeshis.
3. Fund of foreign aid.
Methods of import:
1. Import license/certificates.
2. Import by LC(Letter of Credit).
3. Import permit or clearance permit.
4. Direct paying import by abroad Bangladeshi.
5. Time period of Product shipment:
Products should be shipment within a month of registration of L/C. Import related fees:
I. UC permit fee: No UC permit fees would be paid up to product import
value Tk. 100,000. And beyond this limit 2.50% permit fee would be paid.
II. Certificate renew fee: There are Four types of certified, these are as
Class Amount Import
Tk. Primary Registration
Fee Tk. Annual Renew
A 5 Lakes 500 500
B 15 – 1500 15000
50 – 3000 3000
D 50 – 5000 5000
From the exporters point of view, there are four major issues that relate to the
financial aspects of exporting:
The Price of the Product.
The Method of Payment.
The Financing of Receivables.
1. Product Price:
Product pricing of exports entails many of the factors that managers consider in pricing their products for domestic markets. If the exporter bills in its own home country currency, the importer absorbs the foreign exchange risk and must decide weather to pass on any possible exchange-rate differences to the consumer. If the exporter bills in the currency of the importers country, the foreign-exchange risk falls on the exporter.
Export pricing is influenced by:
Multiple wholesale channels.
2. Method of Payment:
The flow of money across national borders is complex and requires the use of special documents. Exporters and importers must deal in foreign exchange, and the transfer of funds .from one bank to another across national borders can be complicated and can take time.
In descending order in terms of security to the exporter, the basic methods of payment for exports are
A. Cash in advance.
B. Open Account.
D. Draft or Bill of Exchange.
E. Letter of Credit.
A. Cash in Advance: When the credit standing of the buyer is not know or is uncertain, cash in advance is desirable. However, very few buyers will accept these terms because part of their working capital is tied up until the merchandise is received and sold. Furthermore, they have no guarantee that they will receive what they ordered. As a result, few customers will pay cash in advance unless either the order is small or is for a product of special manufacture.
B. Open Account: When a sale is made on open account, the seller assumes all the risk and therefore, these terms should be offered only to reliable customers in economically stable countries. The exporter’s capital, of course, is tied up until payment is received.
C. Consignment: This follows the procedure well known in the United States by which goods are shipped to the buyer and payment is not made until they are sold. All of the risk is for the seller and terms such as these should not be offered without making the same extensive investigation of the buyer and country that is recommended for open account terms. Multinationals frequently sell goods to their subsidiaries on this basis.
D. Draft or Bill of Exchange: When an individual or a company pays a bill in a domestic setting, it typically uses a check. This is also known as a ‘Draft’ or a commercial `Bill of Exchange.
A draft is an instrument in which one party (the drawer) directs another party (the drawer) to make a payment.
The drawer can either be a company like the importer or a bank. Documentary drafts and documentary letters of credit are often used to protect both the buyer and seller. They require that payment be made based on the presentation of documents conveying the title. If the exporter requests payment to be made immediately, called a Sight Draft. If the payment is to be made later-for example, 30 days after delivery-the instrument is called a Time Draft. A time draft is more flexible for the importer and more risky to the exporter. A time draft drawn on a bank and bearing the bank’s promise to pay at a future date is known as a Banker’s Acceptance. Banks assists in establishing and collecting a draft and usually charge the exporter a modest fee that range from about – eight to one-quarter percent of the value of the draft, with a minimum of $35 to $75 and a maximum of $150 to $200.
E. Letter Of Credit: A letter of credit, abbreviated as L/C, stands at the center of international commercial transactions. Only cash in advance offers more protection to the seller than an export letter of credit. This is a document issued by the buyers bank which promises to pay the seller a specified amount when the bank has received certain documents stipulated in the letter of credit by a specified time.
A letter of credit can be revocable or irrevocable.
-A revocable letter of credit is one that can be changed by any of the parties.
– Irrevocable letter of credit, which is a letter that cannot be canceled or changed in any way without the consent of all parties to the transaction. Exporter and importer may prefer an irrevocable letter of credit.
-A confirmed letter of credit, the exporter has the guarantee of an additional bank, sometimes in the exporter’s home country, sometimes in a third country. It rarely happens that the exporter establishes the confirming relationship. Usually, the opening bank seeks the confirmation of the L/C with a bank with which it already has a credit relationship.
Fig: Letter of Credit Relationships:
Above the figure explains the relationships among the parties to a letter of credit. We can also explain this relationship by an example, of the U.S exporter and the French importer. The French importer applies to the Bank of Paris, for the issuance of a letter of credit. The Bank of Paris then undertakes a credit check of the importer. If the Bark of Paris is satisfied with her creditworthiness, it will issue a letter of credit. The Bank of Paris will charge the importer a fee for this service. This amounts to between 0.5% and 2% of the value of the letter of credit, depending on the importer’s creditworthiness and the size of the transaction.
If the Bank of Paris is satisfied with the French importer’s creditworthiness, it will pay the U.S exporter for the merchandise as long `as it is shipped in accordance with specified instructions and conditions. At this point, the letter of credit becomes a financial contract between the Bank of Paris and the U.S exporter. The Bank of Paris then sends the letter of credit to the U.S exporter’s bank, say the Bank of New York.
The Bank of New York tells the exporter that it has received a letter of credit and that he can ship the merchandise. After the exporter has shipped the merchandise, he draws a draft against the Bank of Paris in accordance with the terms of letter of credit, attaches the required documents and presents the draft to his own bank, the Bank of New York, for payment. The Bank of New York then forward the letter of credit and associated documents to the Bank of Paris. If all of the terms and conditions contained in the letter of credit have been complied with, the Bank of Pans will honor the draft and will send payment to the Bank of New York. When the Bank of New York receives the funds, it will pay the U. S exporter.
As for the Bank of Paris, once it has transferred the funds to the Bank of New York, it will collect payment from the French importer. This example can be showed graphically as follows:
3. Financing of Receivables:
Although exporters would prefer to sell on the almost riskless letter of credit terms, increased foreign competition and the universally tight money situation are forcing them to offer credit. To do so, they must be familiar with the available sources and kinds of export financing, both private and public.
a) Private Source: Commercial banks have always been a source of export financing through loans for working capital and the discounting of time drafts, but in recent years, new types of financing have been developed, these are discuss bellow:
Factoring: This is a financing technique which permits the exporter to be more competitive by selling on open account rather than by means of the more costly letter of credit method.
Under the export factoring arrangement, the seller passes its order to the factor for approval of the credit risk. Once the order is approved, the exporter has complete protection against bad debts and political risk. The customer pays the factor who, in effect, acts as the exporter’s credit and collection department. The period of settlement generally does not exceed 180 days.=
Forfeiting: This is the term used to denote the purchase of obligations which arise from the sale of goods and services and fall due at some date beyond the 90-180 days that are customary for factoring. These receivables usually are in the form of trade drafts or promissory with maturates ranging from six months to five years.
b) Government and government-assisted organizations:
The Export-Import Bank (Eximbank) is a government institution which not only offers direct loans for large projects and equipment sales requiring long-term financing (over five years) such as commercial aircraft and power plants, but also provides medium-term (181 days to five years) and long term credit guarantees fix commercial bank financing.
Ex-IM Bank offers four programs.
1) Working capital guarantees.
2) Export credit insurance.
3) Guarantees of commercial loans to foreign buyers.
4) Direct loan to foreign buyers.
Other government incentives: There are other government incentives to trade which, although they are not strictly a part of export financing, certainly are closely related. These are-
Overseas Private Investment Corporation (OPIC)
The Foreign Sales Corporation (FSC).
The Foreign Trade Zone (FTZ).
5. Insurance: There are two kinds of insurance that are used most often in exports.
Insurance on transportation risks, damaging weather conditions, rough handling by carriers, and other hazards to cargo make insurance an important protection for exporters. The terms of sale determine whether the exporter or the importer is responsible for the insurance, and that should affect the cost of the export. Marine cargo insurance and air carrier insurance should be purchased to protect against damage or loss
Political, Commercial and Foreign-Exchange Risk, some private sector insurance companies will cover these types of risks for established exporters with a proven track record, but government agencies tend to be the most important insurer for these risks. Political risks include war and expropriation. Commercial risks arise from buyer default and insolvency. Foreign-exchange risks arises when a fall in the value of the foreign currency results in the exporter receiving less of their own currency.
Insurance premiums are based on the risk of the transaction, including the country where the risk has been incurred.
Counter trade is an alternative means of structuring an international sales when conventional means of payments are difficult, costly or nonexistent Counter trade denotes a whole range of barter like agreement; its principle is to trade goods and services for other goods and services when they cannot be traded for money.
TYPES OF COUNTER TRADE
With its roots in the simple trading of goods and services for other goods and services, counter trade has evolved into a diverse set of activities that can be categories as five distinct types of trading arrangement.
2. Counter purchase
4. Switch trading and
5. Compensation or Buyback.
Barter is the direct exchange of goods and\or services between two parties without a cash transaction. But barter has two main problems-
Goods Goods may not exchanged simultaneously
The firm engaged in barter run the risk of having to accept goods they do not want, can not use, or have difficulty reselling at a reasonable price.
2. Counter purchase:
Counter purchase is a reciprocal buying agreement. It occurs when firm agrees to purchase a certain amount of materials back from a country to which a sales is made.
Offset is similar to counter purchase in so far as one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sales. The difference is that this party can fulfill the obligation with any firm in the country to which the sales is being made
4. Switch trading:
Switch trading refers to the use of a specialized third – party trading house in a counter trade agreement. Switch trading occurs when a third party trading house buys the firm’s counter purchase credits and sells them to another firm that can better use them
5. Compensation or Buybacks:
A buyback occurs when a firm builds a plant in a country or supplies technologies, equipment, training or other services to the country and agree to take a certain percentage of the plant’s output as a partial payments for the contract.
Advantages of counter trade:
Counter trade gives a firm a way to finance an export deal when other means are not available.
When one currency is not convertible with other, then counter trade is occurs
Counter trade is most attractive to large, diverse multinational enterprise’s that can use their worldwide network of contract to dispose of goods acquired in counter trade.
Disadvantage of counter trade:
The main disadvantage of counter trade is that the firm may receive unusable or poor quality goods that can not be disposed of profitability.
Being an internee of Fast Cargo Services Ltd., I have learned a lot about the import & export process through the EPZ. Fast Cargo Services Ltd. let me introduced myself as an expert of import process indeed.
Moreover, I have got some experience in the field of internship which is relevant garment industries in the perspective of Bangladesh. Fast Cargo Services Ltd. has diversified business sectors, so they needed such information that I collected by my internship report making. Beside that the Fast Cargo Serves Ltd. has a very good command in the business market of garments. As our country has a very positive attitude in garment sector, so the future plan regarding garment sector in Fast Cargo Services Ltd. is very fruitful in deed.
In conclusion we can say that, once a company has identified the good or service it wants to sell, it must explore market opportunities, a process that entails a significant amount of market research. Next, it must develop a production or service development strategy, prepare the goods or services for market, determine the best means for transporting the goods or services to the market, sell the goods or services and receive payment. All of these steps require careful planning and preparation. Without a separate export staff, a company must rely on specialists to move goods and services from one country to another, agents or distributors to sell the goods or services and banks to collect payment. Companies may have many strategies both Export and Import when entering foreign markets.