Export-Import Operations Research Paper Starter

Export-Import Operations

(Research Starters)

Export-Import Operations are the actions and decisions necessary to take a product or raw material from a source in one country to a market in another. This article will discuss export-import operations as a three part process: pre-shipment, transport, and after-sale. Each of the three will be considered in turn from the perspective of business professionals attempting to expand their companies' interests across national boundaries. Export-import can be considerably more complex than doing business in a single, domestic market, but the realities of a globalizing economy are such that most companies and most people must increasingly deal across frontiers whether they wish to or not.

Keywords Counter Trade; Customs Broker; Export; Export Management Company; Export Trade Company; Freight Forwarder; Import; Logistics; NAFTA; Trade Bloc

International Business: Export — Import Operations


Export-Import Operations are in some ways a misnomer given that, in a globalized economy, the distinctions between domestic and foreign trade are ever more indefinite. However, for the purposes of this article, we can consider them to be the sum total of the tactical and strategic decisions and actions necessary to take a product from a source in one country to a market in another.

As such, Export-Import Operations may be profitably considered a three-part process-1) actions that occur before the actual shipment of the product, 2) those that relate to the shipment of the product to a customer, and finally, 3) those that occur after the sale. For sake of simplicity, this article will refer to them as pre-shipment, transfer, and after-sales.

Many businesses (particularly American) have historically avoided participation in international markets. However, the reality is that we dwell in an increasingly global economy. Even the smallest, most "domestic" transaction may involve suppliers of raw materials in one country, production in another, value-added remarketing in a third, and final consumption in a fourth. Ergo, every business professional must have some idea of the factors involved in international trade, simply because more and more business happens there (U.S. Department of Commerce).



While this taxonomy is in no way standard, export-import operations can be thought of as a three-part process. The first of these is pre-shipment, i.e, all operations that occur prior to the actual transport of the product, or even prior to the sale. Thus, it is possible to regard as a legitimate part of pre-shipment operations even so fundamental a thing as determining a company's seriousness about entering the import/export business. Fortunately, one of the first tasks of pre-shipment is also an easy and effective way for managers to test their companies' ability and willingness to enter the import-export business. To wit, they must determine how willing their companies are to modify their products (or assist a supplier to do so) for foreign markets. It is useful, then, to keep in mind the (perhaps apocryphal but still instructive) story of the American automakers who complained of Tokyo's barriers to their imports, but then declined to produce left-hand models of their cars when given a chance to enter the Japanese market.

If executives find that their companies and/or employers really are committed to import-export, and get genuine buy-in from top management, then the next issue is channels. As in most other business ventures, these boil down to just two-direct and indirect (Seyoum, 1998). The former is the option of companies that either have or are willing to invest in a sales force resident in the nations where they wish to do business. As such, it is often the best choice for larger concerns with deeper pockets, or which have some method of reaching individual consumers without a middleman. For example, the Internet, Web-based sales, and direct package shipping companies (Federal Express, UPS, etc.) have given some companies the ability to directly address individual customers no matter how far away they might be.

If the exporting or importing company does not have a direct sales option, then indirect sales are the obvious alternative, and import-export sales channels range from the familiar to the quite exotic. The former consists of the distributors and resellers, not greatly different from those of any other indirect channel, except that they may be based across national borders and must be handled with additional understanding of cultural differences. For example, a distributor located in a Muslim nation probably will not be available on Fridays, just as many American businesses do not operate on Sundays.

The more exotic, meanwhile, include specialist firms that do nothing but conduct international trade. The two most famed kinds of these, perhaps, are the Export Trading Company (ETC) and Export Management Company (EMC). An ETC, also called an International Trade Company (ITC), is a company that discovers customers in one nation, finds suppliers in another, purchases and takes title to products in the second country, and then arranges transport and sales to buyers in the first. EMCs are similar but do not take title to product and instead operate as a kind of out-sourced export department for other companies (Seyoum, 1998). In addition, there are various modifications of these two models. For example, a number of manufacturers may band together to co-operatively export their products.

Until very recently, American exporters could also set up a Foreign Sales Corporation (FSC), an export-oriented quasi-company based overseas. The benefit to the exporter was that the economic activity of the FSC was, in theory, conducted outside U.S. jurisdiction and therefore not as heavily taxed. However, the European Union objected on the grounds that this constituted an unfair trade advantage, the World Trade Organization concurred, and the U.S. government finally abandoned the FSC ("FSCs agreement," 2006). In 2004, as part of the Jobs Act, a temporary measure to give a tax break to small and medium U.S. companies with foreign sales was introduced. The Interest-Charge Domestic International Sales Corporation(IC-DISC) federal tax incentive was extended for two more years in December, 2010, but was allowed to expire at the end of 2012 (homas, 2012).

Lastly, the relative distance of customer from supplier means that managers doing international business need to be particularly careful about whom they sell to or buy from. It can be hard to collect an overdue account when the customer is not even on the same continent. Moreover, importers and exporters face a number of political problems. Americans, for example, cannot legally do business with a number of individuals or regimes around the world-those believed to be connected to terrorist organizations, for example. By like token, American businesses may be asked by some customers to honor boycotts against other buyers and sellers in third nations. Some nations, for example, have led a drive to boycott Israeli commercial interests. The U.S. government forbids its nationals to participate in such boycotts and, indeed, requires that requests to do so be reported to the proper authorities. For more on these and other issues regarding export controls, see the Department of Commerce's Bureau of Industry and Standard website (http://www.bis.doc.gov/index.htm).


Transport is the actual process of moving a product from point A to point B, as well as from country X to country Z. Transport across national borders is similar to any other problem in shipping. Indeed, most of the issues-logistics, deciding on proper modes of transport (bulk or piece, rail or air, etc.) are identical. The major difference is that in international trade, goods cross frontiers and the business professional has to consider a formidable host of additional documentation, tariff, and bureaucratic complexities.

Fortunately for the company that wishes to engage in transnational trade, there are many independent services and firms to assist navigating the logistical maze. These range from the ubiquitous package delivery services (which in recent years have added sophisticated logistics features to their core offerings) to more traditional Freight Forwarders. A Freight Forwarder is a firm or person who acts for the exporter or importer to ensure that shipments get from their sources to their destinations with a minimum of fuss. Forwarding is something of an arcane art, requiring its...

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