The term export means shipping the goods and services
out of the port of a country. The seller of such goods and services is referred
to as an "exporter" and is based in the country of export whereas the
overseas based buyer is referred to as an "importer". In International
Trade, "exports" refers to selling goods and services produced in the
home country to other markets.
Export of commercial quantities of goods normally requires
involvement of the customs authorities in both the country of export and the
country of import. The advent of small trades over the internet such as through
Amazon
and eBay have
largely bypassed the involvement of Customs in many countries because of the
low individual values of these trades. Nonetheless, these small exports are
still subject to legal restrictions applied by the country of export. An
export's counterpart is an import.
Definition
"Foreign demand for goods produced by home
country" In national
accounts "exports" consist of transactions in goods and services
(sales, barter, gifts or grants) from residents
to non-residents.The exact definition of exports includes and excludes specific
"borderline" cases. A general delimitation of exports in national
accounts is given below:
- An export of a good occurs when there is a change of ownership from a resident to a non-resident; this does not necessarily imply that the good in question physically crosses the frontier. However, in specific cases national accounts impute changes of ownership even though in legal terms no change of ownership takes place (e.g. cross border financial leasing, cross border deliveries between affiliates of the same enterprise, goods crossing the border for significant processing to order or repair). Also smuggled goods must be included in the export measurement.
- Export of services consist of all services rendered by residents to non-residents. In national accounts any direct purchases by non-residents in the economic territory of a country are recorded as exports of services; therefore all expenditure by foreign tourists in the economic territory of a country is considered as part of the exports of services of that country. Also international flows of illegal services must be included.
National accountants often need to make adjustments to the
basic trade data in order to comply with national accounts concepts; the
concepts for basic trade statistics often differ in terms of definition and
coverage from the requirements in the national accounts:
- Data on international trade in goods are mostly obtained through declarations to custom services. If a country applies the general trade system, all goods entering or leaving the country are recorded. If the special trade system (e.g. extra-EU trade statistics) is applied goods which are received into customs warehouses are not recorded in external trade statistics unless they subsequently go into free circulation in the country of receipt.
- A special case is the intra-EU trade statistics. Since goods move freely between the member states of the EU without customs controls, statistics on trade in goods between the member states must be obtained through surveys. To reduce the statistical burden on the respondents small scale traders are excluded from the reporting obligation.
- Statistical recording of trade in services is based on declarations by banks to their central banks or by surveys of the main operators. In a globalized economy where services can be rendered via electronic means (e.g. internet) the related international flows of services are difficult to identify.
- Basic statistics on international trade normally do not record smuggled goods or international flows of illegal services. A small fraction of the smuggled goods and illegal services may nevertheless be included in official trade statistics through dummy shipments or dummy declarations that serve to conceal the illegal nature of the activities.
History
The theory of international trade and commercial policy is
one of the oldest branches of economic thought. Exporting is a major component
of international trade, and the macroeconomic risks and benefits of exporting
are regularly discussed and disputed by economists and others. Two views
concerning international trade present different perspectives. The first
recognizes the benefits of international trade. The second concerns itself with
the possibility that certain domestic industries (or laborers, or culture)
could be harmed by foreign competition.
Process
Methods of export include a product or good or information
being mailed, hand-delivered, shipped by air, shipped by vessel, uploaded to an
internet site, or downloaded from an internet site. Exports also include the
distribution of information that can be sent in the form of an email, an email
attachment, a fax or can be shared during a telephone conversation.
National regulations
United States
The export of defense-related articles and services on the United States Munitions List (USML) is governed by
the Department of State under the International Traffic in Arms
Regulations (ITAR).
The Bureau of Industry and Security
(BIS) is responsible for implementing and enforcing the Code of Federal Regulations Title 15
chapter VII, subchapter C, also known as Export Administration Regulations
(EAR), in the United States. The BIS regulates the export and reexport of most
commercial items. Some commodities require a license in order to export. There
are different requirements to export lawfully depending on the product or
service being exported. Depending on the category the 'item' falls under, the
company may need to obtain a license prior to exporting. EAR restrictions can
vary from country to country. The most restricted destinations are countries
under economic embargoes or designated as supporting terrorist activities,
including Cuba, North Korea,
Sudan, Syria and Iran (see: Sanctions against Iran). Some
products have received worldwide restrictions prohibiting exports. An item is
considered an export whether or not it is leaving the United States
temporarily, if it is leaving the United State but is not for sale (a gift), or
if it is going to a wholly owned U.S. subsidiary in a foreign country. A
foreign-origin item exported from the United States, transmitted or transhipped
through the United States, or being returned from the United States to its
foreign country of origin is considered an export.[5]
How an item is transported outside of the United States does not matter in
determining export license
requirements. Refer to U.S.
Census Data for data on exports by industry for 2006.
Canada
Bangladesh
Australia
Barriers
Trade barriers are generally defined as government
laws, regulations,
policy, or
practices that either protect domestic products from foreign competition or
artificially stimulate
exports of particular domestic products. While restrictive business
practices sometimes have a similar effect, they are not usually regarded as
trade barriers. The most common foreign trade barriers are government-imposed
measures and policies that restrict, prevent, or impede the international exchange
of goods and services.
Strategic
International agreements limit trade in, and the transfer
of, certain types of goods and information e.g. goods associated with weapons
of mass destruction, advanced telecommunications, arms and torture, and also
some art and archaeological artefacts. Examples include Nuclear Suppliers Group - limiting trade in
nuclear weapons and associated goods (currently only 45 countries participate),
The Australia Group - limiting trade in chemical &
biological weapons and associated goods (currently only 39 countries), Missile Technology Control Regime
- limiting trade in the means of delivering weapons of mass destruction
(currently only 34 countries) and The Wassenaar Arrangement - limiting trade in
conventional arms and technological developments (currently only 40 countries).
Tariffs
A tariff is a tax placed on a specific good or set of goods
exported from or imported to a country, creating an economic barrier to trade.
Usually the tactic is used when a country's domestic output of the good is falling and imports from foreign competitors are rising, particularly if there exist strategic reasons for retaining a domestic production capability.
Some failing industries receive a protection with an effect similar to a subsidies in that by placing the tariff on the industry, the industry is less enticed to produce goods in a quicker, cheaper, and more productive fashion. The third reason for a tariff involves addressing the issue of dumping. Dumping involves a country producing highly excessive amounts of goods and dumping the goods on another foreign country, producing the effect of prices that are "too low". Too low can refer to either pricing the good from the foreign market at a price lower than charged in the domestic market of the country of origin. The other reference to dumping relates or refers to the producer selling the product at a price in which there is no profit or a loss. The purpose (and expected outcome) of the tariff is to encourage spending on domestic goods and services. Protective tariffs sometimes protect what are known as infant industries that are in the phase of expansive growth. A tariff is used temporarily to allow the industry to succeed in spite of strong competition. Protective tariffs are considered valid if the resources are more productive in their new use than they would be if the industry had not been started. The infant industry eventually must incorporate itself into a market without the protection of government subsidies. Tariffs can create tension between countries. Examples include the United States steel tariff of 2002 and when China placed a 14% tariff on imported auto parts. Such tariffs usually lead to filing a complaint with the World Trade Organization (WTO) and, if that fails, could eventually head toward the country placing a tariff against the other nation in spite, to impress pressure to remove the tariff.
Usually the tactic is used when a country's domestic output of the good is falling and imports from foreign competitors are rising, particularly if there exist strategic reasons for retaining a domestic production capability.
Some failing industries receive a protection with an effect similar to a subsidies in that by placing the tariff on the industry, the industry is less enticed to produce goods in a quicker, cheaper, and more productive fashion. The third reason for a tariff involves addressing the issue of dumping. Dumping involves a country producing highly excessive amounts of goods and dumping the goods on another foreign country, producing the effect of prices that are "too low". Too low can refer to either pricing the good from the foreign market at a price lower than charged in the domestic market of the country of origin. The other reference to dumping relates or refers to the producer selling the product at a price in which there is no profit or a loss. The purpose (and expected outcome) of the tariff is to encourage spending on domestic goods and services. Protective tariffs sometimes protect what are known as infant industries that are in the phase of expansive growth. A tariff is used temporarily to allow the industry to succeed in spite of strong competition. Protective tariffs are considered valid if the resources are more productive in their new use than they would be if the industry had not been started. The infant industry eventually must incorporate itself into a market without the protection of government subsidies. Tariffs can create tension between countries. Examples include the United States steel tariff of 2002 and when China placed a 14% tariff on imported auto parts. Such tariffs usually lead to filing a complaint with the World Trade Organization (WTO) and, if that fails, could eventually head toward the country placing a tariff against the other nation in spite, to impress pressure to remove the tariff.
Subsidies
To subsidize an industry or company refers to, in this
instance, a governmental providing supplemental financial support to manipulate
the price below market value. Subsidies are generally used for failing
industries that need a boost in domestic spending. Subsidizing encourages
greater demand for a good or service because of the slashed price. The effect
of subsidies deters other countries that are able to produce a specific product
or service at a faster, cheaper, and more productive rate. With the lowered
price, these efficient producers cannot compete. The life of a subsidy is generally
short-lived, but sometimes can be implemented on a more permanent basis. The
agricultural industry is commonly subsidized, both in the United States, and in
other countries including Japan and nations located in the European
Union (EU). Critics argue such subsidies cost developing nations $24
billion annually in lost income according to a study by the International Food
Policy Research Institute, a D.C. group funded partly by the World Bank.
However, other nations are not the only economic 'losers'. Subsidies in the
U.S. heavily depend upon taxpayer dollars. In 2000, the U.S. spent an all-time
record $32.3 billion for the agricultural industry. The EU spends about $50
billion annually, nearly half its annual budget on its common agricultural
policy and rural development.
Exports and free trade
The theory of comparative advantage materialized during the
first quarter of the 19th century in the writings of 'classical economists'.
While David
Ricardo is most credited with the development of the theory (in Chapter 7
of his Principles of Political Economy, 1817), James Mill
and Robert
Torrens produced similar ideas. The theory states that all parties maximize
benefit in an environment of unrestricted trade, even if absolute advantages in
production exist between the parties. In contrast to Mercantilism,
the first systematic body of thought devoted to international trade, emerged
during the 17th and 18th centuries in Europe. While most views surfacing from
this school of thought differed, a commonly argued key objective of trade was
to promote a "favorable" balance
of trade, referring to a time when the value of domestic goods exported
exceeds the value of foreign goods imported. The "favorable" balance
in turn created a balance of trade surplus. Mercantilists advocated that
government policy directly arrange the flow of commerce to conform to their beliefs.
They sought a highly interventionist agenda, using taxes on trade to manipulate the balance of trade or commodity
composition of trade in favor of the home country.
Export strategy
Export strategy is to ship commodities to other
places or countries for sale or exchange. In economics, an export is any good
or commodity, transported from one country to another country in a legitimate
fashion, typically for use in trade.
The four key pillars of a successful export strategy:
Internal 1: Export readiness assessment of a company (and
gap analysis with recommendations how to address the change required)
Internal 2: Export readiness assessment of a product
(including benchmarking with similar products that are currently successfully
traded on target markets; technical characteristics; packaging and labelling).
External 3: Research of 220 countries and the World’s major
trade channels to find target market/s.
External 4: Develop export strategy to enter the selected
above target market/s (that will include such considerations like transport,
partnership, key distribution channels, pricing, volumes, advertising, etc.).
Overview
Advantages of exporting
Ownership advantages are the firm's specific assets,
international experience, and the ability to develop either low-cost or differentiated products within the
contacts of its value chain. The locational advantages of a particular
market are a combination of market potential and investment
risk. Internationalization advantages are the benefits
of retaining a core competence within the company and threading it
though the value chain rather than obtain to license, outsource, or
sell it. In relation to the Eclectic
paradigm, companies that have low levels of ownership advantages either do
not enter foreign markets. If the company and its products are equipped with ownership
advantage and internalization advantage, they enter through low-risk
modes such as exporting. Exporting requires significantly lower level of
investment than other modes of international expansion, such as FDI. As you might expect, the lower risk
of export typically results in a lower rate
of return on sales than possible though other modes of international business. In other words, the
usual return on export sales may not be tremendous, but neither is the risk.
Exporting allows managers to exercise operation control but does not provide
them the option to exercise as much marketing control. An exporter usually
resides far from the end consumer and often enlists various intermediaries to
manage marketing activities. After two straight
months of contraction, exports from India rose a whopping 11.64% at $25.83
billion in July 2013 against $23.14 billion in the same month of the previous
year.
Disadvantages of exporting
For Small-and-Medium Enterprises (SME)
with less than 250 employees, selling goods and services to foreign markets
seems to be more difficult than serving the domestic market. The lack of
knowledge for trade regulations, cultural differences, different
languages and foreign-exchange situations as well as the
strain of resources and staff interact like a block for exporting. Indeed there
are some SME's which are exporting, but nearly two-third of them sell in only
to one foreign market. The following assumption shows the main disadvantages:
- Financial management effort: To minimize the risk of exchange-rate fluctuation and transactions processes of export activity the financial management needs more capacity to cope the major effort
- Customer demand: International customers demand more services from their vendor like installation and startup of equipment, maintenance or more delivery services.
- Communication technologies improvement: The improvement of communication technologies in recent years enable the customer to interact with more suppliers while receiving more information and cheaper communications cost at the same time like 20 years ago. This leads to more transparency. The vendor is in duty to follow the real-time demand and to submit all transaction details.
- Management mistakes: The management might tap in some of the organizational pitfalls, like poor selection of oversea agents or distributors or chaotic global organization.
Ways of exporting
The company can decide to export directly or indirectly to a
foreign country.
Direct selling in export strategy
Direct selling involves sales representatives, distributors, or retailers who
are located outside the exporter's home country. Direct exports are
goods and services that are sold to an independent party
outside of the exporter’s home country. Mainly the companies are pushed by core
competencies and improving their performance of value chain.
Direct selling through distributors
It is considered to be the most popular option to companies,
to develop their own international marketing capability. This is
achieved by charging personnel from the company to give them greater control
over their operations. Direct selling also give the company greater control
over the marketing function and the opportunity to earn more profits. In other
cases where network of sales representative, the company can transfer them
exclusive rights to sell in a particular geographic region.
A distributor in a foreign country is a merchant who purchases the product from the manufacturer and sells them at profit. Distributors usually carry stock inventory and service the product, and in most cases distributes deals with retailers rather than end users. Evaluating Distributors
A distributor in a foreign country is a merchant who purchases the product from the manufacturer and sells them at profit. Distributors usually carry stock inventory and service the product, and in most cases distributes deals with retailers rather than end users. Evaluating Distributors
- The size and capabilities of its sales force.
- Its an analysis of its territory.
- Its current product mix.
- Its facilities and equipment.
- Its marketing polices.
- Its customer profit.
- Its promotional strategy.
- Its policy against the abstract data protocols.
Direct selling through foreign retailers and end users
Exporters can also sell directly to foreign retailers.
Usually, products are limited to consumer lines; it can also sell to direct end
users. A good way to generate such sales is by printing catalogs or attending
trade shows.
Direct selling over the Internet
Electronic commerce is an important mean to
small and big companies all over the world, to trade internationally. We
already can see how important E-commerce is for marketing growth among
exporters companies in emerging economies, in order to overcome capital and
infrastructure barriers.
E-commerce eased engagements, provided faster and cheaper
delivery of information, generates quick feedback on new products, improves customer
service, accesses a global audience, levels the field of companies, and support
electronics data interchange with suppliers and customers.
Indirect selling
Indirect exports, is simply selling goods to or through an
independent domestic intermediary in their own home county. Then
intermediaries export the products to customers foreign markets.
Making the export decision
Once a company determines it has exportable products, it
must still consider other factors, such as the following:
- What does the company want to gain from exporting?
- Is exporting consistent with other company goals?
- What demands will exporting place on the company's key resources - management and personnel, production capacity, and finance - and how will these demands be met?
- Are the expected benefits worth the costs, or would company resources be better used for developing new domestic business?
Export promotion
In the U.S.
The U.S. Department of Commerce provides
U.S. companies the opportunity to promote their products and services free of
charge. To do so, the Export Yellow Pages is published online and in
print and is delivered to embassies, trade
centers, consulates,
and associations worldwide.
The California Centers for
International Trade Development (CITD's) have 13 offices throughout
California, each CITD is hosted by a local community college and provides a
variety of free or low-cost programs & services to assist local companies
in doing business abroad. These include one-on-one technical assistance and consulting,
market research, training and educational programs, trade leads and special
events.
In the U.K.
The UK Trade & Investment (UKTI), formed
in 1999, is a government body that assists British companies with their
exporting needs.
Internationally
There are several global B2B directories and also
country-specific directories, such as Kelly's Directory in the U.S. and Alibaba
in China.
Challenges
Exporting to foreign countries poses challenges not found in
domestic sales. With domestic sales, manufacturers typically sell to
wholesalers or direct to retailer or even direct to consumers. When exporting,
manufacturers may have to sell to importers who then in turn sell to
wholesalers. Extra layer(s) in the chain of distribution squeezes margins and
manufacturers may need to offer lower prices to importers than to domestic
wholesalers.
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