Chapter 16- Exporting, Importing, and Countertrade Flashcards
a solution to the problem of getting paid by a foreign company; it is an agreement putting the bank in the middle of an international transaction
letter of credit
when a company gets a letter of credit from a smaller bank, and you want them to get that letter of credit backed up by a larger bank that you know for sure will be able to pay you
confirmed letter of credit
a letter of credit pays on _____
documents; the bank never sees the goods; they just have to have all of the right documents required by the letter of credit before they will pay it off
something issued by a common carrier; contract between you and the shipper stating where the thing is going
bill of lading
bill of exchange; when the bank receives this they have to pay
draft
what are the two types of drafts
sight and time
upon the bank getting this type of draft and the other documents required by the letter of credit, it has to immediately pay
sight draft
upon the bank getting this type of draft, it will pay but within a certain number of days
time draft; stipulates when the bank pays
______ try to get time drafts so that they have time to sell the goods
buyers
_____ normally prefers sight drafts so that they can be paid as soon as possible
sellers
person initiating a draft
maker
the party to whom the draft is presented (has to pay it)
drawee (ex. the foreign bank)
the letter of credit can require an ________ from an inspector
inspector’s certificate; do this to make sure the goods are there and accounted for before paying
what are three documents that might have to be presented to a bank that has issued a letter of credit in order to get paid
a bill of lading, a draft (bill of exchange), and/or an inspector’s certificate
fancy word for bartering and trading; exchanging and trading in goods (commodities)
countertrade
why do people engage in countertrade
the purchasing party may not have enough money or cash in order to trade
associated with counter trade; GE wants to sell a power plant, the larger one will be cheaper in the long run but they can only afford the small one; promise to buy back the extra capacity that it produces until you need that extra
buyback
if contract is silent on something and those countries signed this treaty then the treaty covers it; if you don’t want this as the default then you either need to cover it in the contract or opt out
United Nations Convention on Contracts for the International Sale of Goods (CISG)
what do shipping terms help us to determine
where ownership and risk of loss passes
FOB shipping point
title passes to the buyer when the goods ship; changes hands in the seller’s city
FOB destination
title passes when it arrives at its destination
international shipping terms published by the International Chamber of Commerce in Paris
INCOTERMS
the two most common types of shipping contracts
FOB and CIF
one other type of shipping contract
EXW
cost insurance freight
CIF
freight on board
FOB
a shipping contract but has the economic effect of a destination contract
CIF; title passes to buyer in Atlanta but seller insures it until it gets to destination
what is important in exporting
having an adequate market analysis
what is are three impediments that make it difficult for some companies to gain knowledge of opportunities in foreign countries
time, language, and distance
Kevin is in charge of finding out all of the available export opportunities for his company; the best source for him to begin is
the US Department of Commerce
what would be included on a “best prospects” list supplied by the US Department of Commerce
the name of a potential distributor in a foreign market and the products sold by that potential distributor in a foreign market
what is the primary task of a freight forwarder
to combine smaller shipments into a single large shipment to lower shipping costs
what firms are export specialists that handle all aspects of marketing for their clients
export management companies (EMC)
Michelle contacted another company to see if they could provide the lawnmowers she needed for an overseas client because her company does not produce lawnmowers
piggyback marketing
what are the four diagnostic tools found on globalEDGE that assist companies with exporting
CORE, PARTNER, DISTRIBUTOR, and FREIGHT
______ and _____ are both financial devices that were created in response to a lack of trust that can develop when companies export products
the letter of credit and a bill of lading
what can you (the seller of goods) use as collateral
the letter of credit
while a ____ draft is negotiable, a ____ draft is not
time
sight
a _____ acts as a receipt, contract, and document of title
bill of lading
what are the two negatives associated with a letter of credit
the importer has to pay the bank’s fee for the letter of credit; it could limit the importer’s ability to borrow since it is a liability
an organization that is an independent agency of the US government that was set up to provide financing to facilitate exports, imports, and the exchange of commodities
Export-Import Bank
what is one way to avoid payment default on a foreign export sent without a letter of credit
to purchase export credit insurance
trading goods for other goods when they can’t be traded for money
countertrade
what are three forms of countertrade
offset, buyback, and barter
