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
The Essentials
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
Is the product exportable?
o Legally exportable according to the Export Administration
Regulations (EAR)
• http://www.bis.doc.gov/licensing/exportingbasics.htm
o Easily imported into the targeted foreign market
• Taxes (duties) or administrative expenses
o Exempted from market-related restrictions
• Unit size, nature of the product, modification costs
o Possesses unique qualities
• Competitive edge in new market (low cost vs differentiation)
o Satisfies demand
• AND can meet demand both in the domestic and international market
o No existing prejudice against country of origin
• US

Three basic modes of entry for exporting
1.
Stocking Distributors
• Majority of export sales are done through distributors
• Responsible for all aspects of marketing and distribution in the country
importing the product
• Purchase in stocking quantities and ship to customers from warehouse
• http://www.dcbattery.com/
2.
Piggybacking
•
•
•
3.
Seeking out and tying in with other non-competitive, complimentary
product line exporters in your industry
Learn from others – specifics of overseas distribution
Establish relationships
Export Management Companies (EMCs)
•
•
Work on salary or retainer plus commission – solicits business
Export Trading Companies (ETC) take title to goods and does the
actual exporting

You go to an expo and a prospect (Mr. X) later contacts you with
an order inquiry and request for a quote
o You – pro forma invoice = describe merchandise specifics, packaging,
unit price, and payment terms.

Mr. X – responds with a purchase order, including payment
confirmation.
o Mr. X arranges financing through bank
o You begin production

Mr. X (the importer) has bank verify company’s credit
worthiness, prepare necessary documents, and informs you
(through your bank) that all financial requirements have been
satisfied.
o You prepare goods for export and contact a freight forwarder to pick up
shipment

When the shipper receives goods – you are given a Bill of
Lading (B/L) or air way-bill) = contains full description of
shipment contents.
o You prepare required documents (insurance policy, consular invoice,
permits, etc) – these go to your bank who notifies Mr. X’s bank

Mr. X’s bank then sends payment to your bank
o Meanwhile the goods are en route and Mr. X receives the transaction
documents from your bank to claim goods on entry.

BIS = Bureau of Industry and Security
o Primary agency for implementing and enforcing EARs
o EEA (Export Enforcement Arm of the BIS) protects
• National Security
• Foreign Policy
• Economic Interests
o Concerned with exporters, freight forwarders, carriers, consignees,
and other involved parties
o Intercepts illegal exports, investigates violations, and prosecutes
violators of export control laws
• BIS will negotiate settlements
• VSDs – voluntary self-disclosure = violator admits to wrong doing
1.
National Security
o Strategic commodities or technology
2.
Foreign Policy
o May be commodity oriented or country specific
3.
Short Supply
o To protect domestic economy from the excessive drain of scarce
resources and reduce inflationary impact of foreign demand
(petroleum products)

Anti-Terrorism (AT), Missile Technologies (MT), Nuclear Proliferation (NP),
Chemical and Biological Weapons (CB), Crime Control (CC), Regional Stability
(RS), Computers (XP), UN Controls (UN)

Agencies in the EAR –
http://www.bis.doc.gov/licensing/index.htm#factsheets

Dual-Use Items
o Regulated by BIS
o Commercial application but ALSO potential military or proliferation
use (www.gpo.gov/bis/)
• Weapons of extreme violence, conventional arms, or end-use violations
by terrorists

Regulations are complex
o Freight forwarders used as resource

Foreign end-user of US high tech products
o VEU = Validated End User – legitimate exports to civilian end-user
o Allows for export of eligible items to specified end-users in eligible
locations without a license.
• www.bis.doc.gov/finalchina.html - China VEU explanation

Keys to US recovery and security
o Economic Competitiveness
o Innovation

Exporters need:
o Sufficient information to support security and competitiveness
goals
o Transparency fosters awareness
o Communication and participation with reforms

Anti-boycott provisions
o allow businesses to refuse participation in foreign boycotts
o must report boycott-related requests
 Any
item sent from the US to a foreign destination
is an export!
 Transfer (even if temporary) and
 Transaction (does not matter how it gets there)
 Small
percentage of total US exports require an
export license from the BIS
 Depends on technical characteristics,
destination, end-user and end-use

ECCN = Export Control Classification Number
o Alpha-numeric code identifying the level of export control
o Listed in the Commerce Control List (CCL)
o Commerce Country Charter (CCC) contains licensing requirements
based on destination and Reasons for Controls
o http://www.bis.doc.gov/licensing/exportingbasics.htm

Classifying is essential – you may submit a request to BIS
o Determine which of the 10 categories of the CCL your included in
o Then the five specific product groups your exports apply
Commerce Control List Categories
0 = Nuclear materials, facilities and
equipment (and miscellaneous items)
1 = Materials, Chemicals, Microorganisms
and Toxins
2 = Materials Processing
3 = Electronics
4 = Computers
5 = Telecommunications and Information
Security
6 = Sensors and Lasers
7 = Navigation and Avionics
8 = Marine
9 = Propulsion Systems, Space Vehicles, and
Related Equipment
Five Product Groups
A. Systems, Equipment and
Components
B. Test, Inspection and Production
Equipment
C. Material
D. Software
E. Technology

OFAC = Office of Foreign Assets Control
o in Treasury Department
o Administers and enforces economic and trade sanctions
o Acts under presidential wartime and national emergency powers or
under authority granted by specific legislation

Embargoed countries have most restrictions
o Cuba, Iran, Sudan, Taliban controlled Afghanistan, Syria

If sanctions are international – require cooperation with
allied governments

Trade sanctions
o could be revocation of preferential treatment such as Most Favored
Nation (MFN) status or barriers against a country not abiding by
agreed international rules of trade.

Economic sanctions are disciplinary in nature and meant to
isolate the target.
o Economic sanctions may include trade embargoes or boycotts,
freezing of assets, bans on cash transfers, bans on technology
transfer and restrictions on travel.
o Embargo – disposition of the state (between countries)
o Boycott – private non-state initiative

Once you have classified the item, the next step is to
determine whether you need an export license based on the
“reasons for control” and the country of ultimate
destination.
o Compare the ECCN with the Commerce Country Chart (Supplement
No. 1 to Part 738).
o “Reason for Control” (e.g., NS for National Security, AT for AntiTerrorism, CC for Crime Control, etc.). Below this, you will find the
“Country Chart” designator which shows the specific export control
code(s) for your item (e.g., NS Column 2, AT Column 1, CC Column 1,
etc.). These control codes for your ECCN must be cross-referenced
against the Commerce Country Chart.


Question: You have polygraph equipment classified as 3A981
for export to Honduras. Would you be required to obtain an
export license from the Department of Commerce before
selling and shipping it to your purchaser?
Answer: Yes. 3A981 is controlled for Crime Control (CC)
reasons under CC Column 1 and the Country Chart shows that
such items require a license for Honduras.

Cross-referencing the ECCN with the Commerce Country Chart
o identifies the “reasons for control” aka reasons for export license

Table 5.3

Violators
o Entity List – risk of diverting exports
o Designated Nationals & Blocked Persons List
o Denied Persons List –
www.bis.doc.gov/dpl/thedeniallist.asp
o Debarred List
o Unverified List –
www.bis.doc.gov/enforcement/unverifiedlist/unverified_
parties.html

Majority of US commercial exports do not require a license

Three types of export authorization
1.
2.
3.

Export application – through BIS
o

No License Required (NLR)
License – export license # and expiration
License Exception
http://www.bis.doc.gov/snap/index.html
Export assistance – NTIS EAR Marketplace
o
o
https://bxa.ntis.gov/
http://www.ntis.gov/products/export-regs.aspx

SED or Form 7525-V = Shipper’s Export Declaration
o Gov’t required for every export item over $2,500
o Electronically filed using AESDirect
• http://www.aesdirect.gov/ Automated Export System

Commercial Invoice
o Bill for the goods from the seller to the buyer

Certificate of Origin
o Required by some countries
o Special trade agreements (NAFTA Certificate of Origin)

CE Mark Requirements
o EU – Conformite Europeenne

Exporter’s Bill of Lading
o Contract between the owner of the goods and the carrier
1. Straight Bill of Lading – no negotiating
2. Negotiable or shipper’s order bill of lading
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Insurance Certificate = assure the buyer
Export Packing List = detailed itemization
Import License = not always required but responsibility of the
importer
Consular Invoice = describes shipment and transaction
o In language of importing country
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Inspection Certificate = guarantee that goods shipped are the
same as those ordered
Dock Receipt and Warehouse Receipt = transfers accountability
Destination Control Statement = item can be exported only to
certain destinations
Export License = US gov’t document required for
o “Dual Use” exports (commercial items with military applications)
o Exports to embargoed countries
1.
2.
Verify export under US Dept of Commerce (USDOC)
Classify item CCL and ECCN
• Export Control Classification Number
• Listed in the Commerce Control List (CCL)
3.
Cross-reference the ECCN against the CCC to see if license
is required
•
4.
5.
Commerce Country Charter (CCC)
Check legality and end-user/uses issues
EXPORT!
o With ECCN on export documentation (Shipper’s Export Declaration)

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
Number 1 reason = consumer demand and to make a profit
http://www.cnn.com/video/#/video/internati
onal/2011/05/23/mpa.africa.imports.china.
bk.a.cnn?iref=videosearch
How is China
Hurting Africa
Helping Africa

US = largest importing nation in the world
o We want stuff and can pay for stuff

Risks to Importing
o Language
o Laws
o Forms of protection
o Lead time = time between ordering goods and receiving shipment
• Import controls may impact entry
• 70,000 shipments every day
• 80% of shipments by infrequent importers
• Container Security Initiative (CSI) – threat of terrorist use of
shipments
Consumer
demand (the market)
Offer a unique assortment of
goods/services
Price


IMPORT TRADERS – those who import goods for resale
MANUFACTURERS – those who import goods for production
o Components needed
 First
Price = the manufacturer’s selling price in
the factory show room
o Landed Cost = includes all shipping, entry
costs, and duty charges to the port of foreign
entry.
• Delivered-into-store cost
• Delivery and insurance
• Overhead expenses
• Profit margin
• Resale Price
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
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Analyze domestic and international competitors
Is importing a must?
o Is the good you’re seeking already being imported? From
where?
o Domestic suppliers can be found in trade association
directories, manufacturers’ indexes, or industry journals.
• Trade Publications and Shows
If there is a domestic supplier, why import???
Competitive SWOT vs. Environmental SWOT
o EXAMPLES???
1.
2.
3.
4.
Explain why fashion is a global industry.
What is fashion week all about?
How does technology serve the fashion industry?
What does the article mean by “new seasons”?
o Opportunity or Concern?

What is the biggest concern for the fashion industry?
o (this was not explicitly stated in the case study)

Identify a country or group of countries where the product is
available.
o Assistance through gov’t agencies, trade commissions, chambers of
commerce, exhibitions, journals, INTERNET
• National Trade and Professional Trade Association Directory, by Columbia
Books

Most foreign manufacturers are eager to export to the US
o Why???

Why are relationships important? How do trade shows help?
o Meet, Greet, and Compete!
o Why do trade shows get overlooked?
 The
US market became attractive for manufacturers
in Japan, South Korea, Taiwan, and Hong Kong
 Protectionism
occurred
o Tariffs, quotas, and anti-dumping
o Currency revaluation – gov’t changes the value of
country’s currency relative to other currencies,
increasing costs of imports
 Yet,
Americans kept importing
 Speeds
up transactions, increased world trade
o What are e-tailers?
 Global
sourcing – the process of purchasing
imported goods from markets around the world

Sourcing options
1. Buy ready
2. Buy components
3. Off-shore production???
• Where is the most attractive location today? 80% of
this country’s assembly factories are foreign owned!


What has contributed to global sourcing?
What are the benefits and what are the dangers?
o Developing countries have almost doubled their share of world
clothing exports since the early 1970s to account for more than half
of all exports today.

What has led to the restructuring of the apparel industry?
1. Competition
2. Mass marketing stores
3. Discount retailers
4. Consumer attitudes

Reduce cycle time
o For design
o Manufacturing
o Delivery

Quick Response = replenishment systems that allow
retailers to…
o Trim their inventory
o Respond more quickly to changes in preferences
o Restock almost instantly
o Offer wider choices

In the current economic climate – what is the main concern
facing the apparel industry?
 Domestic
Production – Foreign Materials
o Produced in the US with foreign raw material
components
 Foreign Production – Foreign Materials
o Produced overseas
o Specification Buying: the domestic company has
designed the product and the foreign
manufacturer creates it.
 Foreign
Production – Domestic Materials
o Going off-shore… why?
o Tariff applied on the value-added portion
 Manufacturer-owned Foreign Production
o Low-cost suppliers to supplement US production
o Contract out assembly operations to overseas
contractors
o Shift production
• Outsourcing – delegation of non-core operations from
internal production to an external entity specializing
in the mgmt of that operation.
 Two
Concerns
o Quality and Safety
o “Made (Deadly) in China”

20% generic & over-the-counter drugs, and more than 40%
of active ingredients for drugs made in the US, come from
India & China.
o In 15 years, 80% of key ingredients for drugs will come from India
and China
 The
US FDA inspects less than 1% of all foods and
food ingredients entering the US and tests only .5%

Customs inspections have been decreased for two reasons:
1.
2.
Food imports have grown dramatically
Food oversight activities have been reduced due to lack of funds
 China
has increased overall its food sales to the US
by over 20% in one year
Protectionism vs Free Trade



Isolationism – limiting international trade
o Import restrictions to create “level playing field”
o Protect domestic manufacturers of unfair competition
Fair Trade – forms of international trade that provide for
human rights including
o fair wages, safe conditions, environmental protection
Free Trade – voluntary exchange meets the demands of
justice
o Exchange augments wealth
1.
2.
3.
4.
5.
Evaluate Market Demand
Locate Foreign Suppliers
Review Import Regulations – HTSUS number
Pricing Your Imports – freight & insurance
Comply with US Customs Policies and Procedures
o Customs Automated Commercial System (ACS)
o Automated Broker Interface (ABI)
6.
Learn Basic Vocabulary – terms
o Incoterms – created by the International Chamber of Commerce (ICC),
are rules used for the interpretation of the import-export terms.
• What is included or not included in selling price and responsibility aka
“transfer of title”