LS170:X Case STUDY
July 14, 2014
SERVE MARKETS host government’s requirements REMAIN Competitive test foreign markets actual or prospective demand
FOB Factory FAS FOB Port of origin CFR Foreign Port CIF Foreign Port delivered at frontier (DAF)
FOB Factory
Supplier COST
FAS
Supplier COST
FOB PORT OF ORIGIN
Supplier COST
CFR foreign port
Supplier COST
CIR foreign port
Supplier COST
*Delivered at frontier
Supplier COST
OPEN ACCOUNT $
€
1. Establish a contract EXPORTER
IMPORTER
$
€
EXPORTER’s BANK
IMPORTER’s BANK
EXPORTER
2-3. DOCUMENTS+EXPORTS are DELIVERED
IMPORTER
$
€
EXPORTER’s BANK
IMPORTER’s BANK
EXPORTER
IMPORTER
4. EXPORTER RECEIVES PAYMENT $
EXPORTER’s BANK
4. IMPORTER PAYS through channels
€
IMPORTER’s BANK
EXPORTER
IMPORTER
LETTER OF CREDIT $
€
NOMINATED BANK
ISSUING BANK BANK
1. Establish a contract EXPORTER
IMPORTER
$
€
NOMINATED BANK
ISSUING BANK BANK
EXPORTER
5-6. COPY OF DOCUMENTS+ EXPORTS are DELIVERED
4. ADVICE of L/c ISSUANCE $
IMPORTER 2. Request for issuance €
3. ISSUANCE NOMINATED BANK
ISSUING BANK BANK
DOCkS
EXPORTER 7. negotiates L/c and submits req’d original documents 8. PAYS L/C Amount less charges $
NOMINATED BANK
9. Orig documents delivered
IMPORTER
€
ISSUING BANK BANK
DOCkS
EXPORTER
IMPORTER 11. Pays Bank
$
NOMINATED BANK
12. Documents are released €
10. reimburses exporters bank
ISSUING BANK BANK
13. BUYER receives goods
EXPORTER
IMPORTER 11. Pays Bank
$
NOMINATED BANK
12. Documents are released €
10. reimburses exporters bank
ISSUING BANK BANK
EXPORTER
IMPORTER
DOCUMENTARY DRAFT $
sigHt Draft or time draft
NOMINATED BANK
€
ISSUING BANK BANK
1. Establish a contract EXPORTER
IMPORTER
$
€
NOMINATED BANK
ISSUING BANK BANK
EXPORTER 5. submits documents+draft
3-4. COPY OF DOCUMENTS+ EXPORTS are DELIVERED
IMPORTER
$
€
NOMINATED BANK
ISSUING BANK BANK
EXPORTER 5. submits documents+draft
3-4. COPY OF DOCUMENTS+ EXPORTS are DELIVERED
IMPORTER
7. Pays for the draft and charges (sight); “accepts” (time) $
NOMINATED BANK
€
6. SENDs Docs + Draft
ISSUING BANK BANK
DOCkS
EXPORTER
IMPORTER 8. Documents are released
$
€
NOMINATED BANK
ISSUING BANK BANK
9. BUYER receives goods
EXPORTER
IMPORTER 8. Documents are released
$
€
NOMINATED BANK
ISSUING BANK BANK
9. BUYER receives goods
EXPORTER 11. CREDITS ACCOUNT OF SELLER $
NOMINATED BANK
IMPORTER 8. Documents are released €
10. REmits payment (if sight)
ISSUING BANK BANK
9. BUYER receives goods
EXPORTER IMPORTER 11. CREDITS ACCOUNT 8. Documents OF SELLER 12. Pays Bank are released at maturity 14. CREDITS ACCOUNT OF SELLER, at maturity € $
NOMINATED BANK
10. REmits payment (if sight) 13. REmits payment at ISSUING BANK maturity (if TIME) BANK
State manufacturing: export pricing
HOW WOULD YOU CALCULATE PORT of entry price?
Deduct: 21,500 x (.20)= 4,300 Sales Expense Ad & Promotion Expense 21,500 x (.10)= 2,150 6,450 21,500-6,450=15,050
HOW WOULD YOU CALCULATE
PORT of entry price? Base Price 15,050.00 Containerization 200.00 Inland freight less handling 798.00 Forwarding and Documentation 90.00 Ocean freight 2,633.00 Commercial risk insurance 105.00 18,876.00
HOW SHOULD THEY BILL THE CLIENT
LETTER OF CREDIT? TIME DRAFT?
HOW SHOULD THEY BILL THE CLIENT
LETTER OF CREDIT? TIME DRAFT?
HOW SHOULD THEY BILL THE CLIENT
LETTER OF CREDIT? TIME DRAFT? BECAUSE OF high percentage in defaulting on loans, the company should still insist on a letter of credit.