Export and Import Transaction
Import transaction
Import is considered to be the classical type of foreign trade operations and is realized by many subjects. Import operations can be realized by manufacturers, import goods users and special organizations approved for conducting foreign trade operations, natural and legal persons. Each transaction has its specific continuance that is influence by the type of a commodity, market characteristics, trade method, political situation etc.
There are legal regulations in SR that are protecting domestic manufactures against the import (import duties, import quotas, subsidies etc.)
The import transaction can be divided into three phases:
- Developing phase that includes the market research>
-Territorial research,
-commodity research,
-price research,
-subjective market elements research,
Before the realization of an import transaction, few things has to be clear:
-subject of import transaction,
-the country of import transaction,
-the form of import transaction,
-the time of delivery,
-INCOTERMS,
-Other conditions such as offered services etc.
When assuming the estimated price of imported commodity the following elements have to be taken into consideration:
-Customs duties, taxes, other charges.
Price calculation in foreign trade:
- foreign price of a commodity * exchange rate = trade parity price
+ foreign direct trade costs ( transportation, insurance, banking costs, interests, commissions etc.
= FCO price of a commodity at Slovak border according to INCOTERMS 2000 DAF
+ customs duty,
+ consumption taxes ( only in certain commodities),
+ import charge
+ licenses
+ other domestic direct trade costs
+ trade charge ( if the import is conducted through the middlemen)
= price without VAT
+ VAT
= estimated import price.
To this phase also belong the business negotiation and the selection of a business partner.
- Contractual phase of import transaction
-order and order acceptance,
-contract,
-contract with domestic partners
- Realization phase
-Customs clearance,
-Insurance,
-Goods checking,
-The payment for the imported goods,
-The completion of import transaction.
Export transaction
Export transaction is considered to be more complicated than import transaction. Its phases are:
1)Developing phase
It comprises the needs research, market research and conjuncture research, promotion and offering activities
Market research
To be successful, exporters must assess their markets through market research. Exporters engage in market research primarily to identify their marketing opportunities and constrains within individual foreign markets and also to identify and find prospective buyers and customers. Market research includes all the methods that a company uses to determine which foreign markets have the best potential for its products. Results of this research inform the firm of:
-the largest markets for its products,
-the fastest growing markets,
-market trends and outlook,
-market conditions and practices,
-competitive firms and products.
Approach to market research
- Screen potential markets
Step 1. Obtain export statistics that indicate product export to various countries.
Step 2. Identify five to ten large and fast-growing markets for the firm´s product. Look at them over the past three to five years. Has market been consistent year to year?
Step 3: Identify some smaller but fast-emerging markets that may provide ground-floor opportunities. If the market is just beginning to open up, there may be fewer competitors than in established markets.
Step 4: Target three to five of the most statistically promising markets for further assessment.
- Assess targeted markets.
Step 1: Examine trends for company products as well as related products that could influence demand. Calculate overall consumption of the product and the amount accounted for by imports.
Step 2: Ascertain the sources of competition, including the extent of domestic industry production and the major foreign countries the firm is competing against in each targeted market.
Step 3: Analyze factors affecting marketing and use of the product in each market, such as end user sectors, channels of distribution, cultural idiosyncrasies, and business practices.
Step 4: Identify any foreign barriers for the product being imported into the country.
Step 5: Identify SR or foreign government incentives to promote the exporting of the product or service.
- Contractual phase of export transaction
The exporter can choose either direct or indirect trade method.
- Realization phase of export transaction
contract signing, the arrangement of transportation, insurance, invoicing and paying, closing the export transaction (reclamation, guarantees, possible arguments)
Preparing products for export
Selecting and preparing a product for export requires not only product knowledge but also knowledge of the unique characteristics of each market being targeted. The extend to which the company will modify products sold in export markets is a key policy issue to be addressed by management. Some exporters believe the domestic product can be exported without significant changes.
Product preparation consideration
-What foreign needs does the product satisfy?
-Should the firm modify its domestic market product for sale abroad?
-What specific features: design, color, size, packaging, brand, warranty, and son on should the product have?
-What specific services are necessary abroad at the presale and postsale stages?
-Are the firm’s services and repair facilities adequate?
Branding, Labeling, and Packaging
Branding and labeling of products in foreign markets raise new considerations for the company:
-Are international brand names important to promote and distinguish a product?
-Are the colors used on labels and packages offensive or attractive to the foreign buyer?
-Does information on product content and country of origin have to be provided?
-Are weights and measures stated in the local unit?
-Must each item be labeled individually?
-Are local tastes and knowledge considered?
Warranties
The company should include a warranty on the product, since the buyer expects a specific level of performance and a guarantee that it will be achieved. A company may use warranties for advertising purposes to distinguish its product from its competition. Strong warranties may be required to break into a new market, especially if the company is an unknown supplier.
Servising
Of special concern to foreign consumers is the service the company provides for its product. Service after the sale is critical for some products, generally, the more complex the product technology, the greater the demand for presale and post sale service.