CH 13 - Exporting & Importing

Question 1

Opportunities of exporting

Answer 1

• international market is larger = + revenues
• economies of scale & lower costs
• More growth

Question 2

Difficulties of exporting

Answer 2

• paperwork & formalities
• long periods of time
• problems securing financing

Question 3

Letter of credit

Answer 3

Issued by a bank at the request of an importer. States that the bank will pay to a beneficiary.

Question 4

Draft

Answer 4

Exporter-Importer
pay a specified amount of money

Question 5

Bill of Lading

Answer 5

Transportation carrier-exporter Receipt / contract

Question 6

Countertrade

Answer 6

Alternative means of having an international sale when conventional means are difficult, costly or nonexistent.

Question 7

Types of countertrade

Answer 7

• Barter: exchange of goods between parties without cash.
• Counterpurchase: a firm agrees to purchase a certain amount of materials back from a country to which a sale is made
• Offset: counter purchase, this party can fulfill the obligation with any firm in the country to which the sale is being made
• Switch trading: use of a specialized third-party trading house
• Compensation of Buybacks: a firm builds a plant in a country

Question 8

Countertrade Pros

Answer 8

• way to finance an export deal
• export opportunity
• often the only option when doing business in developing countries

Question 9

Countertrade cons

Answer 9

• exchange unusable goods
• small and medium exporters may need to avoid countertrade