Steps in the Exporting Process

1. Steps in the Exporting Process

2. Determining Export Requirements: Step 1—The Export License • General License—permits exportation of certain products that are not subject to EAR control; the shipper’s export declaration can serve as the licenseby noting the type of product, its value, and its destination under the notation NLR (no license required) • Validated License—issued only on formal application, a specific document authorizing exportation within specific limitations designated under the EAR Commerce Country Chart (CCC), to (Exhibit 15-to determine the reason(s) for control

3. Determining Export Requirements: Step 2—The Export Control Number There are three ways to determine the proper Export Control Classification Number (ECCN) for the commodity to be exported: • If you are the exporter of the product but not its manufacturer, you can contact the manufacturer or developer to see if they already have an ECCN • Compare the general characteristics of the product to the Commerce Control List and find the most appropriate product category. Search the entire product category to match your product’s particular functions • Request a classification from the BIS (Bureau of Industry and Security)—request must include end user, end use, and destination (www.bis.doc.gov )

4. Innovations Developed to Ease The Acquisition And Submission of Export Licenses • Export License Application and Information Network (ELAIN)—permits license applications to be submitted electronically • System for Tracking Export License Application (STELA)—an automated, voice-response system that provides the status of the license via a touch-tone phone • Electronic Request for Item Classification (ERIC)—allows the exporter to submit commodity classification requests via the Internet • Simplified Network Application Process (SNAP)—sends electronic facsimiles of export licenses and other documents online

5. Determining Export Requirements: Step 3—Export Documents • Export Declaration — presented at the port of exit; gives the description, value, and destination of the goods • Consular Invoice – a certificate of origin; not required by all countries • Bill of Lading — a contract between the seller (shipper) and the freight carrier; serves as the shipper’s receipt and the buyer’s title • Commercial Invoice — a bill that lists or describes the goods sold (required for customs clearance) • Insurance Policy — almost all international shipments are insured • OthersHealth Inspection Certificate; Packing List

6. Terms of Sale (cost, insurance, freight) to a named overseas port of import. It includes the costs of goods, insurance, and all transportation and miscellaneous charges to the named place of debarkation 1. CIF (cost and freight) to a named overseas port. It includes the cost of the goods and transportation costs to the named place ofdebarkation. The cost of insurance is borne by the buyer 2. C&F (free alongside) at a named U.S. port of export. Price includes cost of goods and charges for delivery of the goods alongside the shipping vessel. Buyer is responsible for the cost of loading onto the vessel, transportation, and insurance 3. FAS

7. Terms of Sale (continued) (free on board) at a named inland point, at a named port of exportation, or at a named vessel and port of export. The price includes the cost of the goods and delivery to the place named 4. FOB (named port of origin). The price quoted covers costs only at the point of origin (example, EX Factory). All other charges are the buyer’s concern. 5. EX

8. Getting Paid • Cash in advance—you’re paid cash before the goods ever change hands • Letters of Credit—instead of the buyer writing you a check on his bank, he has drawn up a letter of credit on his bank. You take the letter of credit and “cash it in” after you have proved that you shipped the goods and met all other conditions of shipment • Bills of Exchange—a.k.a. “dollar drafts”—the seller presents documentation and draws a draft on the buyer. The seller’s bank send the draft to the buyer’s bank to be honored. • Open Accounts—a buyer may order at any time and arrange for payment later or wait to be billed • Forfaiting—the seller arranges with a bank to take over collection of the buyer’s account

9. Customs-Privileged Facilities Foreign Trade Zones (FTZs)—temporary holding zones for goods before being re-exported to the final destination. May be used for processing, repackaging, cleaning, etc. of goods. Goods in the zone are not subject to custom duties or quotas until they leave; some are exempted completely Maquiladoras, In-Bond Companies plants in LDCs that allow for processing, packaging, assembly, or repair to take advantage of low labor costs; tariff applied only on value-added while in the in-bond area; most require product to be re-exported to some other country

10. “Total Cost Approach” to Logistics Management • In this example, 44,000 peripheral boards worth $7.7 million are shipped from a Singapore plant to the U.S. West Coast. Cost of capital to finance inventories is 10 percent annually; $2,109 per day to finance $7.7 million. OCEAN AIR • Transport $31,790 $ 127,160 costs (in transit 21 days) (in transit 3 days) • In-transit inventory financing costs $ 44,289 $ 6,328 • Total transportation costs $ 76,079 $ 133,488 • Warehousing inventory costs (60 days @$2,109/day) • Singapore and U.S. $ 126,540 • Warehouse rent $ 6,500 • Real physical distribution costs $ 209,119 $ 133,488