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Individuals, companies, and countries participate in international trade by importing and exporting goods and services.

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To describe the processes of importing and exporting

To explain the differences between goods and services

To identify the steps of the importing and exporting processes

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International trade opens new markets for companies from many nations and provides access to products some people would otherwise never use.

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What Is International Trade?

International trade can take place between one nation and another.

international trade

all business activities conducted between individuals, companies, and governments

International trade can also take place within groups of countries.

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What Is International Trade?

Business Activities in International Trade

Buying

Selling

Shipping

Receiving

Paperwork

Granting Credit

Making Payments

Servicing Products

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Importing and Exporting

BusinessImports Exports

Needs are met by imports

Extra products andsupplies are

exported

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The Nature of International Trade

The WTO stands for the World Trade Organization.

This is an organization in which many countries belong to for trade relations.

The EU stands for the European Union.

Many countries also belong to this group for special trade considerations.

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The Nature of International Trade

Look up on the internet to find benefits of being a EU Member

Also, look up some restrictions to being a member of the EU.

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Imports

Imports can come from foreign companies or foreign governments and individuals.

imports

goods and services that people in one country buy from people in another country

The United States imports oil and customer-relations call centers.

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Exports

Exports can go to foreign companies or foreign governments and individuals.

exports

goods and services that people in one country sell to people in another country

The United States exports agricultural products, technology, and financial services.

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Goods and Services

When a good is imported or exported, a method of transportation must be chosen to move the item across national boundaries.

good

a tangible item that is made, manufactured, or grown

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Goods and Services

A company must pay shipping costs in order to transport goods.

Companies must agree to insure or pay for damaged or missing goods.

There must be a procedure for returning goods.

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Goods and Services

Producer MiddlemanCompany

Customer

Channel of Distribution

MerchantMiddleman

AgentMiddleman

or

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Services

Selling a service usually involves convincing the customer of the benefits of the particular service.

service

an intangible benefit or task provided by a business to its customersA service may not

require a middleman.

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Services

Individual consumers purchase services such as hospitality and tourism.

Companies purchase services such as consulting, insurance programs, and banking and financial services.

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Services

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Goods with Services

Often, a good is sold with a service such as an extended warranty on a car.

Services are sold with other services such as flight insurance with an airline ticket.

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Importing Process

Identify need

Search for suppliers

Create and finalize a purchase

agreement

Receivegoods

Confirm the

purchase

1 2 3 4 5

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Identify Need

An individual customer, a company, or a government can have a need.

A need can be for a good or a service.

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Search for Suppliers

The Internet makes the search for suppliers easy because there are so many choices.

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Create and Finalize Purchase Agreement

A purchase agreement is a contract between the buyer and the seller.

ItemsInvolved

Deliverymethod

PriceExchange

Rate

DueDate

Who paysfor shipping

Items in a Purchase Agreement

Provisionsfor damage

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Create and Finalize Purchase Agreement

International trade documentation refers to the papers and documents that companies must send to customers with their products to legally export or import goods.

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Receive Goods

Goods are usually received at a shipping dock or a company’s front door.

Goods need to be checked.

As goods pass across national borders, companies may owe a tax or duty.

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Confirm the Purchase

The importing company confirms the purchase and makes payment when it agrees that the terms of the contract have been met.

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Confirm the Purchase

Relate What imported products do you buy and use? What countries export those products?

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Exporting Process

AssessDemand

Identify potential

customers and make

sales contacts

Create and finalize a purchase

agreement

Deliver the goods or services

Complete the

transaction

1 2 3 4 5

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Assess Demand

The two steps in assessing demand are:

Analyze the export potential for a good or service.

Assess the company’s ability to follow through and provide the good or service.

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Identify Customers and Make Contacts

Ways to identify customers and make contacts include:

Trade Shows

Visits by Salespeople

Telephone Calls

E-mails

Teleconferences

Internet Solicitations

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Create and Finalize Purchase Agreement***

Most shipping terms are FOB.

FOB

(free on board or freight on board) signifies that the ownership of merchandise in transit determines if freight charges are free

FOB-loading dock means the seller will pay all shipping until goods reach the loading dock.

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Create and Finalize Purchase Agreement

CIF is another term used in a purchase agreement.

CIF

(cost, insurance, and freight) the price quoted to the buyer, including cost, insurance, and freight

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Create and Finalize Purchase Agreement

C&H is another term used in a purchase agreement.

C&H

(cost and freight) the price quoted to the buyer, signifying the buyer pays separately for insurance

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Deliver Goods and Services

The seller must arrange to transport the goods to the buyers location.

The seller must comply with all legal and accounting requirements.

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Deliver Goods and Services

Many goods require a certificate of origin.

A bill of landing (BL) identifies exactly what is being shipped.

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Complete the Transaction

The transaction is completed when the buyer and seller agree all terms are met and payment is made.

Many countries rely on the International Monetary Fund (IMF) to settle exchange rate problems.

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Complete the Transaction

The World Bank Group can lend money to support an international trade relationship.

The International Development Association (IDA) helps companies in less-developed nations.

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When in Armenia…

Meeting and Greeting Men greet with a handshake and may embrace; women hug and kiss each other once on the left cheek. Maintain eye contact.

Business Etiquette When arranging business, provide a letter of introduction. Punctuality is not typical.

Business Dress Wear casual but stylish attire. Never wear tight clothing.