Exam 14: Exporting, Importing, and Countertrade

Consolidated Petroleum negotiated a deal with Saudi Arabia in which Consolidated Petroleum would build several refineries in Saudi Arabia and receive oil as partial payment over a 20-year period. This is an example of

Tuf-Enuf Steel, a rapidly growing company, is looking to buy a large industrial furnace from Thailand that is expected to cost $3 million. The exporter wants Tuf-Enuf Steel to produce a letter of credit, but its CFO is reluctant to do so. What disadvantage of letter of credits is the likely reason for the CFO's reluctance?

Savannah Pecans is a fourth-generation family business. The company has concentrated on the U.S. market by selling its products primarily in the United States but now wants to sell abroad. The board of directors is hesitant about new markets because of their lack of knowledge regarding foreign legal systems and languages. What is the likely reason behind this hesitation?

Kristine works for Ringer Labs in Salt Lake City, Utah. Her company is seeking information on export opportunities. What is the best source of information Kristine can use?

An international business would use a sight draft when it wishes to delay payment.

A ________ is issued to an exporter by a common carrier transporting the merchandise and serves as a receipt, a contract, and a document of title.

Issued by a bank at the request of an importer, a letter of credit states that the bank will pay a specified sum of money to the exporter, on presentation of particular, specified documents.

Compared to a decade ago, commercial banks and major accounting firms are more willing to assist small firms in starting export operations.

A bill of lading proves that the carrier has received the merchandise described on the document.

Describe some of the common pitfalls encountered by companies trying to do business abroad for the first time.

Describe the role of export management companies. List their advantages and disadvantages.

Lack of trust in international trade is exacerbated by the distance between the two parties in space, language, and culture.

A type of countertrade where a third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them is called

Briefly describe the various financial devices that help exporters solve the problem of a lack of trust in international trade.

Describe the role of the U.S. Department of Commerce in helping U.S. firms increase their knowledge of export opportunities.