7. Export Strategy
• Hire EMC
• Focus on one market
• Enter on small scale
• Added time & resources
• Build relationships
• Hire local
• Seek opportunities to learn
• Consider local production
8. Trust
Ship Goods
Send Payment
Exporter Importer
What happens first?
Shipment or payment?
10. Financing
2. Bank promises Letter of Credit 1. Importer obtains
exporter to pay on LC bank’s promise to pay
importer’s behalf 0.5% to 2% on importer’s behalf
Exporter Bank Importer
3. Exporter ships to 4. Bank pays the 5. Bank gives
the bank exporter good to the
importer
6. Importer pays
the bank Loan to extend payment
12. Bill of Exchange
Draft
Draft
An order written by an exporter
instructing the importer, or
importer’s agent, to pay the
specified amount of money at a
specified time.
13. Parties to the Draft
Maker - Exporter
Drawee - Who the draft is
presented to (Bank)
16. Banker’s Acceptance
Once a draft has been accepted
by a bank
Trade Acceptance
Once a draft has been accepted by
a business firm
17. Time Draft
Negotiable
Can sell
Discount
9% for 120 days = 3%
18. Time Draft
What would a $100,000 draft at 90
days be worth at 8%?
90 ÷ 360 = 1/4
8% ÷ 4 = 2%
$100,000 x 98% = $98,000
19. Bill of Lading
A document issued to the exporter
by the common carrier
transporting the merchandise.
It serves as a receipt, a contract,
and a document of title
21. Exporter Importer
2. Exporter agrees to fill order
1. Importer orders goods
6. Goods shipped to Saudi
3. Importer arranges letter of credit
7. Exporter presents draft to bank
13. Importer agrees to pay bank in 90 days
11. Exporter sells acceptance draft to bank at discount
Importer
Exporter
Bank
Bank
5. U.S. bank informs exporter of L/C 4. Saudi bank send L/C to U.S. Bank
8. U.S. bank presents draft and bill of lading to Saudi bank 9. Saudi bank accepts draft and returns to U.S. bank
10. U.S. bank informs Exporter of acceptance 12. Saudi bank informs importer of arrival of documents.
14. U.S. bank collects payment from Saudi bank in 90 days