IMPORTING, EXPORTING, AND TRADE RELATIONS

1 6-16-26-36-4 importing ProceduresExporting ProceduresImportance of TRADE RelationsThe Nature of CompetitionChapter 6 importing , EXPORTING, AND TRADE RELATIONS Getty Images/PhotoDisc06_Biz_in_Global_Econ 12/14/04 11:02 AM Page 142143 The Scoop on Ice Cream ExportsAs producers of ice cream look for new international markets, theyface a continuing problem. Refrigeration, or rather the lack of it, cangreatly influence market potential. In the urban areas of China, for exam-ple, very few homeowners own freezers. As a result, most Chinese pre-fer their ice cream in the form of small snacks and consume them on the late 1980s, annual exports of ice cream to Japanwere only $200,000. This was due to a Japanese import quota for icecream and frozen yogurt.

2 With the elimination of that TRADE barrier,Japanese customers bought more ice cream from companies. Afterice cream sales in Asia dropped in the late 1990s (due to poor economicconditions), demand then started to Costa Rica and other Central American countries, there was littleor no market for ice cream in the mid 1990s. Then Costa Rica honoredits commitment to the World TRADE Organization by reducing the 44 per-cent tariff and increasing the 500-ton import strong growth area for expanding ice cream exports is theCaribbean market. The hot climate and many tourists in that region cre-ate a strong demand for various frozen snacks and factors have increased the demand for ice cream from over-seas customers? obstacles might an ice cream exporter encounter when doingbusiness in other countries?

3 To the web site of the Foreign Agricultural Service of the of Agriculture ( ) to obtain current information about ice cream 12/14/04 11:02 AM Page 143 Explain the impor-tance of importing . Identify the four stepsof PROCEDURES6-1 GOALSTHE IMPORTANCE OF IMPORTINGI magine how life in the United States would be without international busi-ness. Most television sets, calculators, athletic shoes, and video recordersbought in the United States come from other countries. And these productsare only a few of the imported products in use each day. importing providesa wide variety of products and services for consumers. exporting createsjobs and expands business opportunities. importing and exporting are pri-mary international business services or products bought by a company or government frombusinesses in other countries.

4 Businesses can get involved in internationaltrade by importing goods and services and selling them in their own importing business can create new sales or expand sales with existingcustomers. A company usually gets involved in importing for one of threereasons. These reasons are consumer demand for products unique to foreigncountries, lower costs of foreign-made products, or foreign-made parts usedin domestic DemandCustomers who want a unique item or a certainquality may purchase a foreign-made product. Some goods and services maybe available only from other countries. Almost all bananas, cocoa, and coffeeconsumed in the United States are CostsThe prices of goods and services are constantly item from one country may be less expensive than the same item fromanother country.

5 Electronic products manufactured in Taiwan are frequentlyless expensive than similar items produced , exporting , AND TRADE RELATIONS Getty Images/PhotoDisc06_Biz_in_Global_Econ 12/14/04 11:02 AM Page 144 Production InputsCompanies regularly purchase raw materials andcomponent parts for processing or assembly from other countries. For exam-ple, the radios, engines, transmissions, and windshield washer systems formany cars assembled in the United States come from companies in canada ,Mexico, Brazil, Japan, Korea, and other ACTIVITIESWhat does a company have to do to become an importer? importing usually involves four main activities or steps, as shown in Figure 6-1 onthe next page. STEP 1 DETERMINE DEMANDThe first activity is to determine whether consumers in this country will pur-chase imported products.

6 As with any business venture, there are risks. Manycompanies import goods, only to have these items remain in a warehousebecause no one wants them due to differences in buying habits. STEP 2 CONTACT SUPPLIERSThe second importing activity is to contact foreign suppliers. Finding foreigncompanies that provide what you want when you want it may be using the appropriate information sources, importers can identify thecompanies that will best serve their are the three main reasons companies import?6-1 importing PROCEDURESWORK ASA GROUPE xamine labels and othermarks on clothing andother items students in thegroup own. Determinewhich items have beenimported or manufacturedin another country. Getty Images/PhotoDisc06_Biz_in_Global_Econ 12/14/04 11:02 AM Page 145146 STEP 3 FINALIZE PURCHASEThe third importing activity is to finalize the purchase agreement.

7 Theimporting company must come to an agreement with the supplier on specif-ic terms for the purchase. Who will pay for shipping? When will items bedelivered? How will payment be made? Will payment be made in advance,during shipping, or after the receipt of the goods? These are just some of thedetails that need to be described in the purchase agreement. STEP 4 RECEIVE GOODSThe fourth activity is to receive the goods and make payment. This includeschecking the order for accuracy and damage, paying for the order, and pay-ing any import duties. This tax can be based on either the value of goods orother factors, such as quantity or duties are paid to customs officials. A customs officialis a govern-ment employee authorized to collect the duties levied on imports.

8 The termcustomsalso refers to the procedures involved in the collection of duties. Youmay have heard a person traveling to another country say I have to gothrough customs. This means travelers must report to customs officials thevalue of anything bought in the country they are leaving or anything theyplan to sell in the country they are , exporting , AND TRADE RELATIONSIMPORTING ACTIVITIESI dentify potentialmarket demandContact potentialsuppliersFinalize the purchaseagreementReceive goods andmake paymentFigure 6-1 Importers go throughseveral steps to find and pur-chase products that are ACTIVITIESAN importing ERRORC lear and complete communicationfor foreign suppliers is vital. A company contracted with a for-eign shirtmaker to manufacturemen s shirts.

9 The contract stated thatthe shirts must be made of 60 per-cent cotton and 40 percent manufacturer provided shirtlabels to that effect. The shirtmakermanufactured shirts that were 35percent cotton and 65 percent poly-ester. Without verifying the materialcontent, the company acceptedthe shirts and sold them with theincorrect information on the Federal TRADE Commission finedthe company for deceptive CriticallyHow might this situation have beenavoided?GLOBAL BUSINESSGLOBAL BUSINESS06_Biz_in_Global_Econ 12/14/04 11:02 AM Page 146 IMPORT ASSISTANCES everal government agencies are available to assist companies and indi-viduals interested in importing . The Customs Department of the easury ( ) provides current information on import are the four steps involved in importing ?

10 HISTORY:THE GREAT WALL OF CHINAW hile nations frequently take actions to communicate with others, sometimesa country wants to seclude itself. Imagine a structure about 2,400 kilometers(1,500 miles) long that varies in height between and meters (18 and30 feet). Then imagine that it is to meters (15 to 30 feet) wide at thebase and tapers to about meters (12 feet) wide at the top. The wallincludes watchtowers about 12 meters (40 feet) high that are placed aboutevery 180 meters (about 200 yards). Those are the dimensions of the GreatWall of Great Wall of China was built of earth and stone. The largest portionwas constructed during the rule of Emperor Ch in Shih Huang Ti, whichended about 204 BC. The Great Wall was designed to protect the Chinesepeople from nomadic invaders.