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MBA of International Trade Management

These are some brief notes on International Trade Management - 1

Dr.  S.  Maurer,  
MBA Professor

If the consignee is to unload thë trailer,  the issue then involves whether there was an agreement that delivery was to be accomplished without obtaining a signed delivery receipt.

You should also research existing treaties and any currently under development,  such as GATT and the North American free trade Agreement [NAFTA].  [These trade agreements are still evolving,  so be sure to monitor them closely.]

In Intech,  Inc.  v.  Consolidated Freightways,  Inc.,  836 F.2d 672 [1st Cir.  1987],  the carrier had transported a machine and its accessories in two containers from California to Acton,  Massachusetts.  Upon arrival of the first container at the consignee’s facility,  there was a dispute as to who was responsible to unload the machine.  The container sat there for some six months before C.F.  finally came back and removed it.  Damage was discovered five months later,  when the consignee went to inspect the machine at C.F.’s yard.

The United States is virtually alone in its adherence to a non-metric system,  and U.S.  firms that compete successfully in the global market have found metric measurement to be an important detail in selling to overseas customers.

A product’s size and packaging may have to be modified to facilitate shipment or to conform to possible differences in engineering or design standards in a country or regional markets.

The cost of petroleum products along with a country's infrastructure,  for example,  may mandate the need to develop products with a greater level of energy efficiency.

Worst case scenario would be that the supplier goes ahead and ships the merchandise to the buyer but also contacts them proposing that they not use the LC as the method of payment.  They might even suggest that instead of the LC,  they would be happy to offer open account terms.  They may propose that after the buyer has received the merchandise,  they could wire transfer payment.

On ramp-to-ramp rail traffic,  delivery by the railroad is completed when the railroad delivers the car to the destination ramp and notifies the consignee that the shipment is available for pick up.

One area in which you should definitely seek assistance is market research.  You can get up-to-date information from the U.S.  Commerce Department's trade information Center and the SBA.  The SBA and its volunteer offshoot,  the Service Corps of Retired Executives [SCORE],  can also help you with marketing or distributing your commodity.

If the bank doesn’t hear from the beneficiary during the stipulated timeframe,  it will automatically assume the beneficiary has agreed to the amendment.  From the issuing bank’s perspective,  this arrangement is nice and tidy,  as they can adjust their customer’s liability for the LC at the end of the timeframe without having to do any follow up if they haven’t heard from the beneficiary.

You should also consider after-sales requirements such as service,  customary business methods and established distribution channels in the markets you've targeted.  In indirect exporting,  rather than dealing with the customer or a foreign importer directly,  you may rely on the services of foreign sales representatives or agents [equivalent to a manufacturer's rep],  distributors,  retailers or government-controlled trading enterprises.

Companies in lesser developed countries that have achieved local success may find it necessary to adopt an “up-market strategy” whereby the product may have to be designed to meet world class standards.

Local product market scanning,  competitive product sampling and evaluation are also needed to determine the appropriate level of warranties in country markets where the products are being exported.

The international market average rate for the 90s has been two percent,  topping 2.3 percent under the best of circumstances

These numbers don't mean that the U.S.  isn't growing,  but rather that other countries are growing so much faster.

With the Assignment in place,  once the supplier turns over the merchandise to the broker/middleman,  the supplier does lose control of the transaction.

These are some brief notes on International Trade Management - 2

Dr.  S.  Maurer,  
MBA Professor

Product adaptations may even include changës in one or more combinations of brand name,  color,  size,  taste,  design,  style,  features,  materials,  warranties,  after sale service,  technological sophistication and performance.

Sell the standard products you make for your country market in as many foreign markets as will accept them.  Adapt your standard products to meet foreign market needs more closely.  Adapt your products to meet both foreign and domestic market criteria at the same time,  i.e.  create a universal [global] product.

For doing business overseas,  you will want to choose one that offers short-term and medium-term export financing,  foreign credit,  commercial letters of credit,  collection or discount export drafts,  and purchase and sale of foreign exchange.

The case of PolyGram Group Distribution,  Inc.  v.  Transus,  Inc.,  990 F.Supp.  1454 [N.D.  Ga.  1997] involved a mis-delivery of some 67 cartons of sound recordings intended for a new Media Play store in Gainesville,  Florida.  The shipment was supposed to be sent to a distribution center in Minneapolis.  However,  PolyGram instructed the carrier to deliver to a new store that was still under construction and had not yet opened for business.  The carrier delivered the shipment to the site and apparently obtained the signature of one of the construction workers.  it was later discovered that most of the cartons had disappeared.

The case of Indemnity Insurance Co.  of North America v.  Hanjin Shipping,  348 F.3d 628 [7th Cir.  2003] involved a shipment of tools from Shenzhen,  China,  to a Lowe’s facility in North Vernon,  Indiana,  moving under a through multimodal ocean bill of lading.

Many firms still hold onto the frontier mentality left over from the railroads.  But the frontier has moved offshore.  Only one-third of U.S.  small businesses export and they do it incidentally,  not as a purpose.  In Europe,  every other transaction is a foreign one.

Transportation is not completed until a shipment has both arrived at its destination and has been delivered.  Danciger v.  Cooley,  248 U.S.  319,  327 [1919].

Studies reveal that enterprises willing to invest,  to innovate and design their products for a specific export market are most likely to succeed.

The great complaint of most exporters is distributors who are poised to hop aboard the fastest train and move whatever product is currently hot

However,  the savviest exporters manage to make the relationship work.

We believes that even though there's an obvious benefit to designing products to meet a variety of standards,  the idea of a fully standardized global product that is identical all over the world is a near myth.

The level of income,  the level of education,  and the availability of energy are all factors that help predict the acceptance of a product in a foreign market.

American enterprises are more sophisticated and much more capable in many dimensions,  including marketing techniques,  technology,  experience and access to a lot of high quality products.

Don't ignore the human resources factor in the export equation,  say Terence Barber,  founder of BHP Associates,  a global economic development and management consulting firm in Sacramento,  California.  Concentrate on developing a multicultural workforce.  Opportunities may arise from informal interpersonal contacts.

Carrier liability ends when delivery has been completed.  Again,  this is a question of fact that often involves a “dropped” trailer.  When it is the carrier’s duly to unload the trailer,  dropping the trailer in the consignee’s premises does not constitute delivery.

When analyzing the need for adaptation or determining the extent to which adaptation may be necessary,  a close look at cultural differences between the target customers in home [country of origin] and those in the host country is extremely important.

These are some brief notes on International Trade Management - 3

Dr.  S.  Maurer,  
MBA Professor

Remember,  most lëtters of credit are freely negotiable,  meaning that the beneficiary could present documents to any bank.  By endorsing the LC,  any bank that might receive documents will know that an assignment has been made.

Sell the standard products you make for your country market in as many foreign markets as will accept them.  Adapt your standard products to meet foreign market needs more closely.  Adapt your products to meet both foreign and domestic market criteria at the same time,  i.e.  create a universal [global] product.

Size of packaging,  material used in packaging,  before and after sale service and warranties may have to be adapted in view of the scope and level of service provided by the distribution structure in the country markets targeted.  In the event post sale servicing facilities are conspicuous by their absence,  enterprises may need to offer simpler,  more robust products in overseas markets to reduce the need for maintenance and repairs.

If you have found that direct mail has paid off for you at home,  chances are good that it will also help you reach buyers in foreign markets.

In defining their price,  most exporters choose from three common methods.  You can base your overseas price on your domestic one,  then add in export costs.  You can use incremental cost pricing,  determining a basic unit cost that takes into account production and exporting costs plus an additional markup for profit.  Or you can reduce the quality of your product,  using cheaper materials or simplifying production processes.

The availability,  performance and level of sophistication of commercial infrastructure will warrant a need for adaptation or localization of products.  For example,  an exporter may decide not to market its frozen line of food products in countries where retailers do not have adequate freezer space.

Many firms still hold onto the frontier mentality left over from the railroads.  But the frontier has moved offshore.  Only one-third of U.S.  small businesses export and they do it incidentally,  not as a purpose.  In Europe,  every other transaction is a foreign one.

Once the endorsement is taken care of,  the bank will issue a document or letter titled Assignment of Proceeds addressed,  in this case,  to the supplier.  The content of this document will indicate that an assignment of proceeds has been made in their favor with a stated value.  it will also indicate that if and when payment is made under the letter of credit,  payment will automatically be made under the assignment.

Hot dusty climates of countries in the Middle East and other emerging markets may force the automakers to adapt the automobiles with different types of filters and clutch systems than those used in North America,  Japan and Europe countries.

As the shipment approached Chicago,  Lowe’s customs agent,  Fritz enterprises,  directed Hanjin to release the shipment to a motor carrier so that it could be taken to a U.S.  Customs facility for an intensive customs examination.  After the inspection had been completed,  the container sat for over a week in Channel’s unprotected yard,  and was eventually stolen.

A product may have to be adapted in a number of ways to meet the physical,  social or mandatory requirements of a new market.  it may have to be modified to conform to government regulations or to operate effectively in country specific geographic and climatic conditions.  it may be redesigned or repackaged to meet the diverse buyer preferences,  or standard of living conditions.

The great complaint of most exporters is distributors who are poised to hop aboard the fastest train and move whatever product is currently hot

However,  the savviest exporters manage to make the relationship work.

We have the supplier sitting back patiently waiting for payment.  After two or three weeks,  they may contact the bank asking about the status of payment against the assignment only to hear that documents have yet to be presented against the letter of credit.  The supplier will be referred to the line in the assignment of proceeds that payment will be made to them if and when payment under the letter of credit is made.

* Similarities in business culture,  practices and the law.  * Language and other possible communication barriers.  * Spending habits.  * National traditions.  * Religious beliefs.  * The stability of the market's economic and political environment.  * Direct and indirect barriers to initial market entry.  * Product standards in the quality,  safety and technical areas.  * Current market size and growth potential.  * Existing domestic and foreign competition.

The case of Indemnity Insurance Co.  of North America v.  Hanjin Shipping,  348 F.3d 628 [7th Cir.  2003] involved a shipment of tools from Shenzhen,  China,  to a Lowe’s facility in North Vernon,  Indiana,  moving under a through multimodal ocean bill of lading.

These are some brief notes on International Trade Management - 4

Dr.  S.  Maurer,  
MBA Professor

For example,  the amëndment is trying to reduce the value of the LC and the beneficiary accepts the amendment,  the issuing bank can reduce the exposure booked against the applicant’s line of credit.  Until the issuing bank hears from the beneficiary,  however,  they can’t assume that the beneficiary will agree,  and the bank must keep the full value of the LC booked against the applicant’s line of credit.

Perhaps you think you've tapped out your market in the U.S.  and believe exporting could breathe some life back into your product.  Before you start pouring in time and other resources,  step back and candidly assess your potential for success.  This assessment should include a look at manufacturer trends,  your firm's domestic position in the manufacturer,  the effect exporting will have on your present operations,  the status of your resources and the anticipated demand for your commodity.

The great complaint of most exporters is distributors who are poised to hop aboard the fastest train and move whatever product is currently hot

However,  the savviest exporters manage to make the relationship work.

Firms that market their products and services internationally expect higher growth rates than those which concentrate exclusively on domestic markets,  reports financial consulting firm Coopers & Lybrand.

If the consignee is to unload the trailer,  the issue then involves whether there was an agreement that delivery was to be accomplished without obtaining a signed delivery receipt.

Factors such as topography,  humidity and energy costs can affect the performance of a product or even define its use in a foreign market.

Whatever methods you choose to promote your products,  you'll find that direct exporting offers distinct advantages: lower inventory,  control over your product,  potentially higher profits and a closer relationship to foreign buyers and the marketplace.  However,  these advantages come with a price.

Let’s assume that we have a buyer,  a broker/middleman,  and a supplier/manufacturer.  At the request of the broker,  a buyer applies for a letter of credit,  but this time there is no mention of the letter of credit needing to be transferable?

The decision to market your product directly or indirectly should be based on several important factors: the size of your firm,  the nature of your product,  previous export experience,  and business conditions in your selected overseas market.

To be successful in marketing products in international markets,  most products require some level of adaptation or localization.

Size of packaging,  material used in packaging,  before and after sale service and warranties may have to be adapted in view of the scope and level of service provided by the distribution structure in the country markets targeted.  In the event post sale servicing facilities are conspicuous by their absence,  enterprises may need to offer simpler,  more robust products in overseas markets to reduce the need for maintenance and repairs.

We have the supplier sitting back patiently waiting for payment.  After two or three weeks,  they may contact the bank asking about the status of payment against the assignment only to hear that documents have yet to be presented against the letter of credit.  The supplier will be referred to the line in the assignment of proceeds that payment will be made to them if and when payment under the letter of credit is made.

Domestic,  regional and multinational corporations are scanning the globe to source and market their products,  which is forcing the exporter to critically evaluate the kind and level of adaptation needed for various country markets.

Once you have made your export commitment,  chosen your market and distribution method and established a price,  you need to translate that information into a strategic exporting plan.

Foreign government product regulations now common in international trade are expected to expand in the future.