-GLOBAL BUSINESS- EXPORTING & IMPORTING

1. -GLOBAL BUSINESS- EXPORTING & IMPORTING

2. KEY POINTS • Small firms should consider exporting and importing. • A range of approaches may be used to enter foreign markets. • There are widely accepted procedures for reducing the risk of doing business with an individual or firm in another country. • A wide range of government programs to assist entrepreneurs in exporting is available.

3. 1.EXPORTING

4. 1.1 The Current Situation • Commerce of the world is changing rapidly  affect domestic business profoundly. • U.S. has not pursued development of export markets as aggressively as many other countries balance of trade = (-) since the 1970s. • Much of the economic growth of the next century will occur in developing nations. • Many entrepreneurs do not even consider opportunities in IB feel the domestic market > enough & any business in a foreign country = complications.

5. 1.2 The Decision to Start Exporting • The most basic concern in deciding whether to go international with a product is its export potential. Some products seem to fit well into many cultures; others have very limited appeal in cultures other than their origin. • In addition to the question of whether the firm’s product will be accepted, the reasons why the move is being considered and what it will mean to the company’s operations must be examined.

6. 1.3 Developing and Export Plan • One early step in the development of an export plan is the identification of products that are export ready. This step includes product design and technology. • The country or countries to which product are to be exported must be selected. • The price to be charged may be based on a number of factors, including the costs of serving the market, the objectives of the firm, competition, etc.

7. 1.4 Getting Established in an International Market • One approach to entering the international market is through indirect exporting. This involves the use of an outside individual or organization to assist in marketing and/or shipping the product. • The direct approach to exporting is much more ambitious because it requires the company to make all the arrangements with the foreign buyers, including shipping, marketing, promoting, servicing, selecting channels of distribution, etc.

8. 1.5 Getting Paid • Dealing with a buyer in another country can be very risky because of the ways in which culture and laws may differ. • The conventional way of removing the uncertainty regarding the payment is the letter of credit.

9. 1.6 Government Assistance • General export counseling is offered by the MITI to firms and individuals new to exporting. • Industry specifics are provided by the Matrade to entrepreneurs who need information on world trade in a particular industry. • Several programs of the MATRADE of commerce provide information on specific countries. • The Government also provides customized research on overseas markets.

10. 2. IMPORTING

11. 2.1 INTRODUCTION • One way of locating the product to bring into the country is by searching for sources internationally. • Another Way to locate goods to import is by spotting opportunities to make foreign goods that currently are not marketed domestically available to the localmarket.

12. 2.2 Getting the Goods Into the Country • The first of five steps in the process is entry, during which a variety of shipping documents are used. • Inspection of the goods is made to determine whether the goods can be brought into the country. • After the goods have been inspected, an appraisal of their value is made. • The next step involves the Customs Service classifying the import to establish what duty should be charged. • With the rate of duty and the value of the goods, the amount of duty can be determined; this step is known as liquidation.

13. 2.3 Selling the Goods • If the entrepreneur used the sourcing method of locating goods, the buyers of the imported goods are rather easily identified. They are the current users of the product for whom the better price and/or value is appealing. • Opportunity-spotting importers, on the other hand, may find they have to use a number of channels to develop a sufficiently high level of sales.

14. 3. HOW TO BE AN EXPORTER

15. Step 1 • Check the Malaysian rules & regulations to determine whether the goods can be exported & license is necessary. (Except Israel). • Controlled short supply, sensitive (arms antiquities), hazardous items, prohibited by international agreement, to protect endangered wildlife species. • CUSTOMS ACT 1967 & www.customs.gov.my. • The Washington Treaty = 1000 species of animals & plants is controlled.

16. Step 2 • Identifies the export market & conducts research for his goods, including the country’s import system & relevant tariff level. • Information regarding target market: • Local production figures, export by size & import by country of origin, market size (value & qty), profile of local manufacturers, distribution channel, competition among local products & imported brands, import systems & rules (certification & necessary documentation).

17. Ease of doing business ranking(Worldbank, 2011)

19. Step 2 • How Can Market Information Be Collected ? • Visit MATRADE Business Library • Collect catalogues of the products, magazines & newspapers concerning the products through business associates. • Participate in the overseas trade fairs/exhibition or trade missions. • Visit trade promotional organizations of foreign embassies stationed in M’sia. • Visit trade associations in Malaysia or target country.

20. Step 3 • The exporter tries to find buyers in the target country through various sources & chooses a potential buyer. • MATRADE has a database of foreign importers. • Visit MATRADE Business Library. • Visit foreign markets trade missions, exhibitor organized by MATRADE or Malaysian companies.

21. Step 4 • The exporter sends the business offer to the potential overseas buyer while investigating the buyer’s credit rating through a bank or any other 3rd party. • Request the importer’s bank to furnish the importer’s standingcredibility. • Services of Mercantile Agency (such as Dun & Bradstreet International Ltd). • Checking any company directory/database.

22. Step 5 • If the buyer agrees with exporter’s office price, including the terms & conditions, & if the credit rating on the buyer if found acceptable, the exporter concludes the sales contract with the importer. • Process of verbal agreement (phone, f2f, email) • Process of agreement by writing (letter, fax, telegram) • Process of agreement by order sheet (B2S or S2B) • Process of agreement by sales contract

23. Step 6 • The exporter receives a Letter of Credit from the importer if the agreement between the seller & buyer stipulates that the transaction is based on the LOC. • Importer  bank  issue an LOC • Bank  LOC  exporter (importer = deposit) • Issuing bank notifies exporter through correspondent bank by telegram & send the original LOC. • Exporter execute the shipment LOC conditions. • Exporter present Bill of Exchange + shipping doc at the exporter’s bank. • Negotiation bank check the LOC conditionsconsistent pays the exporter.

24. Step 7 • If the exporter requires financing for the exportation of goods, he applies for export financing from a commercial bank. At the same time, he also applies for an export license at the relevant govt orgs., if the export of the products is subject to export licensing. • Pre-Shipment Financing when exporter receives an export order (maximum 80% of order value) • Post-Shipment Financing exporter get finance after making shipping arrangements & receiving Bill of Lading from the shipping com.(maximum=RM50m)

25. Step 8 • The exporter prepares the goods for shipment in the manner agreed with importer, includes inspection and an approved by agency designated by importer. • Obtains necessary documents pertaining to the goods such as certificate of origin & a quarantine certificate from the relevant authority if required by agreement or LOC.

26. Step 9 • Books shipment space, arrange for marine insurance (usually done by the freight forwarder/custom agent). • Shipper arranges the goods for shipment tp be brought into the bonded area, undergoes preshipment inspection (if required), measuring, weighing & customs clearance. • Goods then loaded on board the ship.

27. Step 10 • The exporter arranges export credit insurance if he wish to protect himself from commercial and political risks. • Cargo Insurance  to insure cargo against risk such as sinking, stranding, collision, fire etc. • Export Credit Insurance Scheme to insure against commercial & political risks such as import restriction & war in the importing country & non-payment by the buyer/importer.

28. Step 11 • The exporter forwards an exchange contract with the bank, if necessary, to avoid the risk of foreign exchange fluctuation. • Forward Exchange Contract.

29. Step 12 • The shipping co. issues the Bill of Landing(B/L) which functions as certificate of title of the shipped goods. The exporter receives it from freight forwarder / customs agent. • Inform the importer  qty, details of goods shipped, name of the carrier, departure date etc. • Prepare the Bill of Exchange, applies for negotiation of the Documentary Bill at the negotiation banks, submits the B/L together with other shipping documents & collects the payment.

30. (Procedures In The Importing Country) Step 13 • The Letter of Credit (LOC) opening bank (reimbursing bank) receives the documents from the negotiating bank. Step 14 • The bank notifies the importer of the arrivals of the documents.

31. Step 15 • The importer effects payment at the bank & receives the documents in return. Step 16 • The importer requests the customs agent to receive the shipment from the shipping company & to clear all customs procedures in the importer’s name & arrange transportation of the goods to the importer’s warehouse.

32. 4. AGENCIES INVOLVED

33. 4.1 ROLE OF MATRADE • To promote, assists & develop Malaysia’s external trade with particular emphasis on the export. • Manages Malaysia’s participation in about 30 overseas trade fairs & country exhibitions per year booking exhibition space, booth construction, inviting buyers to M’sian booth. • Organize trade & investment mission to various countries around the world. • Organizes seminars, workshops for the benefit of local exporters & manufacturers.

34. 4.2 RELEVANT AGENCIES • Malaysia External Trade Development Corp. 7th Floor, Wisma Sime Darby, Jalan Raja Laut, 50350 Kuala Lumpur Tel : 03-26947259 ; Fax: 03-26947362 Email: info@hq.matrade.gov.my; www.matrade.gov.my • EXPORT-IMPORT BANK OF MALAYSIA (EXIM BANK) Level 19, Bank Industry Building, Bandar Wawasan, P.O.Box 13028, 1016 Jalan Sultan Ismail, 50250 Kuala Lumpur Tel : 03-26927077; Fax ; 03-26927078 Email : exim@exim.po.my ; www.exim-bank.com