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“Exporting is the CHALLENGE” LUIS PATRICIO ESTRADALUIS PATRICIO ESTRADA-HEREDIA - Phone (593-... ) 406-851 / (09) 925-276 RAUL EDMUNDO ESTRADA-ALBUJA - Phone (593-... ) 923-581
Whithin the international trade environment, Ecuador has been known for its traditional exports: banana, cacao, and coffee. But during last 10 years it has been distinguished due to non traditional products exports like flowers, vegetables, fruits, and in a smaller scale, textiles and also automoviles. Such exports do not reveal all the exporting potenciality of the country; in fact, its enormous natural resources, and due to its people's genious and ability, it's easy to predict that if circumstances are positive, exports could be duplicated or triplicated, resulting in a high benefit for the country. One of the main problems when exporting is the small knowledge of the quality characteristics that the exporting products, the foreign markets characteristics, the exporting mechanisms and procedures, the payment circunstances and securities should have. In order to fill this lack of knowledge and experience, we have condensed in this book the basic and practical information needed by those companies and individuals which are beginning their exporting activities. The introductory part of this book analyzes the reasons of the lack of a sustained development as production have been addressed towards easy-technical-manufacturing items and small volumes, and the national production have been based in raw materials imports and other foreign origin inputs. Although exports have increased during the last years, its influence on the incomes (US$) has been total, because we still have a fragil economical structure, which diminishes the favourable conditions for a sustainable economic growth. Consequently, it's necessary not only to increase and diversify exports, but progresively and quickly diminish the dependency level the country has for importing raw materials. The increased process that the own resources of the country has have for its industrialization will allow the strengthening of our economy, while diminishing its foreign dependency. Chapter 2: Knowledge and Selection of the Exporting Markets
2.1 THE EXPORTING DECISION In order to penetrate the foreign markets, known as demanding markets, specially of high quality goods, where many competitors provides attractive prices, the exporter must be sure that his/her product and his/her company accomplishes with the following characteristics:
8. The can/tin/bottle and packing means and systems my company can use, warrants the product quality. 9. My company can warrant the country of destination consumer with an appropriate service. 10. The transportation means used by the company warrant the quality, timeliness and all the rest of elements keys for commercialization purposes. 11. Study the other products' (those in the market of destination) competitivity ability with my product. Some important criteria to be taken into account in order to select the potential exporting markets, are:
For a correct qualification and quantification of a foreign market, it's convenient to use the statistic data of at least three public or private organizations which you rely on. The exporter shall perform a market research in the place he/she wants to introduce the commodity. It's also necessary to have relevant information, duly justified, so as to identify risks, opportunities, and solutions. You can find important information through the following sources:
A sound analysis of possible exporting markets shall also include an appropriate knowledge of your possible clients and their specific requirements. Sometimes it will be necessary to send samples without commercial value and pamphlets, which shall include price, quality, quantity, and the services you provide. This information can make reference to the following:
2.4 MARKET ACCESS It's necessary to get reliable and updated information on:
Chapter 14: How to Cash Exports When you have the ability to make things skilfully, exporting is an art, but an ART is also to know how to cash your exports. Success of the international commercialization on the part of producers, industrialists, and merchandisers will depend upon the knowledge they have on the commercialization systems and basically on the risks and way of payment. It's true, natural, manufactured and industrialized products are being exported, but nobody tells us how do they cash their exports. What's going to happen with a future exporter that works hard producing quality but ignores the risk? Lets have an example: when we import raw materials, machines, or prepared products the foreign sellers ask us to make a prepayment before the shipment process, or on the other hand the foreign providers ask us for credit cards before sending us the merchandise; but when we want to export, the counterparts want to know nothing about letters of credit or prepayments, adducing that letters of credit raise their costs, and prepayments are very risky. That is why we have taken this important matter into account. Each company has its own form of commercializing, closing a bargain or a business, it has its own seal, and its own form of payment; therefore, you have five ways to cash your exports 1. You send the merchandise upon receiving the PREPAYMENT. 2. You ship the merchandise and wait until the foreign purchaser agree with the products received and only after that he/she pays. 3. You do it with a 60, 90, or 120 days draft. 4. You ask for a letter of credit, foreign collection, or other kind of international paper. 5. You sell on credit with insurance to exports. Documentary credit is a general term that represents a contract used for regulating imports and exports operations from one place to another; it has several types, but the letter of credit and the foreign collection are the most common ones. Likewise, the letter of credit is an "irrevocable payment document used for warranting the product's sell/purchase", which provides security both the exporter and the importer. But letters of credit can also be revocable, irrevocable, and at the same time they can be tranformed in confirmed credits, credits without confirmantion, back to back, red clause, green clause, transferable, divisible, revolving, and stand-by. But in Ecuador the most used ones are the sight letter of credit and the time letter of credit. Sight letter of credit. Is when a client abroad says "Firstly I've to see and then I'd pay"; i.e., he/she receives the transportation papers, invoices, certificates, and all necessary papers for clearing or legalizing the merchandise, and then he/she pays for the credit value. Time letter of credit. Is when the customer pays 30, 60, 90, 120, or 180 days period after a business have been done, after the letter's signature, or generally after the date of shipment. After such period the importer goes to the foreign local bank where he/she had opened the letter of credit and pays the corresponding amount. On the other hand we have the documentary collections, known abroad as foreign collections, a system in which the exporter ships the merchandise, and a bill of exchange plus the rest of documents are sent to the local bank in order to cash the value through a correspondent bank located in the purchaser's country. Chapter 15: Necessary Papers for a Exporting Process The books analyzes how useful it is for the future international seller to know how to sellect exporting markets, basic factors, how to acceed to international markets, the market requirements, to fix exporting prices, to cash exports, procedures to follow, etc. Now we will analyze the basic papers needed for an exporting process. In fact, when assuming an international contractual obligation, an extra aspect an exporter should know, is those papers needed to send or legalize the merchandise's exit from the customs territory, letter of credit cash, foreign collection cash, transportation, not only in order to legalize the merchandise exit, but to facilitate the clearance of the merchandise inside the purchaser's country. The most important international papers are:
15.1 International Transportation Papers Are the papers that prove that the transporter had received the merchandise in order to carry them with a contract to last destination.
A transportation paper is clean when it has no evidence that the merchandise is in bad conditions, and dirty when the shipper has find any fault. For example 500 boxes of oranges are to be shipped, of which 450 are in good conditions, and 50 boxes' product are in bad conditions; then the shipper must inform that there are 50 boxes in bad conditions. Another example could be that we have to ship 150 boxes of glasses frames, and we just ship 130 boxes; so shippers must notify about this matter in the corresponding paper. For documentary collection, this procedure is known as dirty shipment or shipment with origin reserves. 15.2 International Transportation Papers Generally people knows very little about transportation papers. Most of them think that the B/L (Bill of Lading) form is a terrestrial transportation paper. False. To have no doubt, we have the following classification for international transportation papers:
15.3 Commercial Invoice Is the paper which describes the merchandise of the contract of sale. This paper is delivered by the exporter on behalf of the importer. 15.4 Certificates There are several papers used within this group: the quality, weight, sanitary, phyto-sanitary, ichthyo-sanitary paper, as well as checking and consular papers, among others. But one of the most important papers is that one used when a person wants to apply a preferential agreement subscribed between two or more involved countries.
Other chapters: 3. Exporting Prices Determination 4. Accuracy and Standardization in the Exporting Procedures 5. Packing for Exporting Purposes. 6. Transportation Dynamic. 7. Procedures for Exporting Purposes. 8. Exportable Products. 9. Currency Sale from Exporting Business. 10. Products Subjet to Minimum Benchmark Prices. 11. Consignment Exports. 12. Deductions. 13. Currency Sales Exemptions. 14. How to Cash Exports. 17. The Foreign Trade and Investment Council “COMEXI” 18. The Export and Investment Promotion Corporation “CORPEI” 19. Andean Tariff Preferences Act 20. Bans, Restrictions, and Requirements for Sending Products Abroad. 21. Annexes:
General Bibliography. Acronyms. |
