Product Shipment

Transportation

- The shipment of the product to the border of the country is usually handled by an independent
freight in combination with a shipping agency.

Clearing through operations

- The product will go from the ship or airline to a customs-free depot before being processed
through customs
- This depot can be a large free-trade zone
- Bill of lading
- The tariff rate can be decided on by the local customs official on the spot

Wearhousing

- The goods often require storage

- Companies try to save money by getting the goods through customs quickly and warehoused at
a less expensive location

Export Pricing

Price Quotes

- The firm selling abroad would generally be in a stronger competitive position by quoting prices
CIF (cost-insurance-freight)
- FOB (free on board) means the buyer has to arrange shipping to his country

Trade Credit

- For many foreign buyers, governments as well as companies, the actual price is of less concern
that what the periodical payments will be.
- Credit is important in exchanges that involve large items such as industrial plants, aircraft, and
so on.

Price Escalation

- There are several cost items faced by the exporter not encountered in domestic sales.
- The factors relate to transportation cost, tariffs and other duties, special taxes, and exchange
rate fluctuations
- Several middlemen are involved in channel adds to the costs
- To cope with the problems, Companies attempt to redesign the product so as to fit into a lower
tariff category
- Another solution is to lower prices and thus absorb some of the trade barrier cost on the part of
the company
- FDI could also be made in a third country with more favorable tariffs compared to the market
country
Dumping

- Is commonly defined as selling goods in some markets below cost

- Often illegal since it is destructive of trade and competitors can take an offender to court to
settle a dumping case
- Reversed Dumping refers to the less-common practice of selling products at home at prices
below cost
o This would be done in extreme cases where the share at home needs to be protected
while monopolistic market positions abroad can be used to generate surplus funds

Local Distribution

Finding a Distributor

- To get the product into the distribution channels

- Distributors usually take ownership of the goods, paying the producing firm, and often will
handle the importing and customs process.
- Trade fairs held in place such as Frankfurt, Cologne, Hong Kong, and Las Vegas where distributor
will come to spot new products that might have a market in their country and try to establish a
relationship with a vendor

Screening Distributor

- Once a few select candidates have been identified, they must be screened on key performance
criteria
- The process does not miss some key characteristics

Personal Visits

- Once a promising lead have been developed, a personal visit to the country is necessary. On the
trip managers should do three things:
o Talk to ultimate users of the equipment to find out which distributors they prefer to buy
and why
o To see which ones, you would be able to sign up
o Before making the final choice, look for the distributor who has the key person for your
line

Negotiating a Contract

- The contract has to be very specific as regards the rights and obligations of the manufacturer
and the distributor, the length of the contract, and conditions for its renegotiation.
- The conditions under which competitive product lines might be added and the degree of
exclusivity that the distributor is granted prominently among the rights and obligations