franklin export management company, llc -...

AOF Business in a Global Economy

Lesson 10The Export Process

Student Resources

Resource Description

Student Resource 10.1 Job Description: Temporary Export Assistant

Student Resource 10.2 Reading: Understanding Export

Student Resource 10.3 Template: Letter of Credit

Student Resource 10.4 Template: Bill of Lading and Bill of Exchange

Student Resource 10.5 Matching Activity: Export Assistance

Student Resource 10.6 Case Study: Countertrade Options

Student Resource 10.7 Partner Activity: Understanding Flowcharts

Student Resource 10.8 Assignment: Export Process Flowchart

Copyright © 2009-2016 NAF. All rights reserved.

AOF Business in a Global EconomyLesson 10 The Export Process

Student Resource 10.1

Job Description: Temporary Export Assistant

Franklin Export Management Company, LLC

Seeking Temporary Export Assistants

We are an export management firm that assists more than 900 international firms with their exporting needs. This includes the preparation and checking of export financing documents and counseling on export assistance, including financing, regulations, and improving performance. We are looking for seasonal workers to help our team facilitate export financing and logistics. Candidates must be quick learners who can follow directions precisely and who are looking for an introduction to the fast-paced world of export management. This is an unpaid position, but class credit may be available to those who qualify.

Job Responsibilities: Examine export financing documents for accuracy

Respond to letters of credit by specifying relevant information, including prices and delivery terms

Calculate payments due to banks

Arrange shipment of goods

Prepare bills of lading and documentary drafts

Recommend export strategies and opportunities for countertrade

Create a flowchart of the export financing process

Write chapter titles for an employee manual

Skills: An understanding of basic business economics

An understanding of the political, economic, and cultural influences on the global economy

Strong math skills

Excellent attention to detail

Good written and verbal communication skills

Ability to work well with others




Reading: Understanding Export

Companies have many reasons to export their goods to buyers far and wide. In some cases, a business may simply want to increase the number of potential consumers for its products. In other cases, the product or service may be better suited to a foreign market than a domestic one. But exporters must deal with certain issues that domestic-only companies don’t face to the same degree. They must make sure their goods get to their buyers and that they get paid by buyers who are located in foreign markets.

One of the concerns that exporters have is getting paid for their goods in a timely manner and for a fair price. Because of distance and currency exchange, it’s often harder to deal with customers who are far away. But there are ways that an exporter can ensure receipt of payment from a buyer. First, the exporter must decide how trustworthy a customer is about paying. Based on that determination, the exporter chooses how the buyer must pay for the goods. The various payment methods available provide the buyer and seller with differing levels of security.



When an exporter sells something on consignment, he or she ships the items to a distributor in the foreign country, who will then sell the goods for the exporter. The exporter doesn’t give up ownership of the goods until they’re sold. In this scenario, there’s no telling how long it will take for the goods to sell, or if they’ll sell at all. Another risk is that the seller loses control of the goods once they are delivered, which could result in theft of the items or sales prices that are less than favorable just to get the items off the seller’s showroom floor. These reasons are why it is the riskiest method for an exporter to use.

When an exporter and a buyer have a longstanding relationship, or the exporter is certain that the buyer is trustworthy, the exporter may offer an open account. With an open account, the exporter simply sends a bill and expects the buyer to pay at some point, usually 30, 60, or 90 days after the sale. Large companies often buy things using open accounts. The risk with this sort of payment arrangement is that if something goes wrong and the buyer does not pay, it becomes difficult for the exporter to get the money.

A letter of credit is the safest method of payment for exporters, since banks guarantee the seller that the payment will be made and the buyer that the goods will be received on time.



Businesses can use a letter of credit to guard the interests of both parties involved in an export transaction.

Let’s say that Elina is an exporter of gemstones from India and Stanley is her customer in the United States. Stanley initiates an order for garnets by going to his bank and requesting that a letter of credit be sent to Elina in India. The bank checks that Stanley has the funds to pay Elina and states the terms of the sale, including the price he will pay and the date the goods will be shipped to him. When Elina receives the letter of credit, she examines it, making sure the price is fair and that she can ship the garnets in time.

If necessary, Elina requests changes to the terms of the letter of credit and sends it back to Stanley’s bank for confirmation. Once all the terms of the sale have been met, Elina can now work with Stanley to sign a bill of exchange, or draft, as it is also known.



A bill of exchange, also called a draft, is similar to a check you’d write to pay a bill. There are three kinds of drafts. One type of a draft, a sight draft, requires the buyer to pay immediately. Once he’s signed the draft, in effect paying for the goods, the buyer receives the documents that allow him to claim the goods from the shipper.

Another form of a draft is called a time draft. This draft tells the buyer how much time he has to pay for the goods. For instance, a time draft might state that the buyer has 60 days from the time he accepts the draft to pay for the goods. By signing the draft, the buyer agrees to pay within that amount of time. A date draft is similar to a time draft, but it lists a specific date by which the money is due instead of an amount of time. In this case, it doesn’t matter when the buyer signs the draft, because he has to pay by the date listed.

Drafts are riskier than a letter of credit, because there is no bank guaranteeing payment. If the buyer decides not to pay for whatever reason, the exporter will have to deal with the problem.

Because Elina has worked with Stanley before, she is willing to accept a time draft for 60 days in the future. Stanley agrees to the timing, so he signs it and sends it to Elina’s bank.



The bill of lading is a document that helps ensure that the shipper delivers the proper items to the proper place. The bill of lading will contain a variety of information about the products being delivered: who is shipping them, what they are, the quantities, the price, who is to receive them, and so forth. Generally, the exporter sends the bill of lading to the buyer’s bank. Once the buyer has paid for the goods, he receives the bill of lading. The buyer then presents the bill of lading to the shipper to receive the goods.

Once Elina gets the bill of exchange that assures her she will be paid for the garnets, she sends the bill of lading to Stanley. Stanley signs it and thus officially becomes the owner of the garnets. Once this step is complete, Elina sends the garnets to Stanley, who finally receives the garnets he ordered from Elina.



An exporter has several methods at his disposal for selling his goods to customers in other countries. He must decide what’s best for himself and the buyer based on their business relationship and the trustworthiness of the buyer.

A letter of credit, for instance, provides the most security for both parties, but it comes with added costs in the form of bank fees. An open account, on the other hand, makes things easy for the buyer but involves much more risk for the seller.

Generally, however, everyone involved wants the same things. They want the transaction to go smoothly, for the buyer to get his goods and the exporter to get his money, with the lowest cost and the fewest administrative steps.




Template: Letter of CreditStudent Names:______________________________________________________ Date:___________

Directions: Work with your partner to fill in the missing information in this letter of credit according to the terms outlined.

Terms to be met: 18,000 (9,000 pairs) of the shoelaces should be black, 6,000 (3,000 pairs) rainbow striped.

The shoelaces come in boxes of 2,000 that weigh 20 pounds each.

The Shining Shoelace Company is unable to accept payment for goods after 60 days of shipment date.

The Shining Shoelace Company only accepts US dollars for payment; the price is $0.03 per pair of single-colored shoelaces and $0.04 per pair of multicolored shoelaces.

Insurance must be obtained for at least 10% of the value of the shipment, calculated in US dollars.

Shipment must be received no later than 90 days from today or this letter of credit expires.

The exporter must pay the bank 8% of the value of the shipment, calculated in US dollars.

Letter of Credit




Template: Bill of Lading and Bill of ExchangeStudent Names:_______________________________________________________ Date:___________

Directions: Work with your partner to fill in these templates based on the terms outlined in Student Resource 10.3, Template: Letter of Credit.

Bill of Lading

Bill of Exchange




Matching Activity: Export AssistanceStudent Names:_______________________________________________________ Date:___________

Directions: Match the phone message requesting information with the organization that can help.

Phone Messages



Export Assistance Organizations The Export-Import Bank: a US government agency with the mission to provide financial aid to

firms to facilitate import and export. It primarily deals with and insures against political risks.

The Foreign Credit Insurance Association (FCIA): an agency that provides insurance for firms unable to obtain letters of credit. If the firms default on the payment, the FCIA reimburses the insured company for the loss. It primarily deals with and insures against commercial risks.

The US Department of Commerce: helps firms with research, including information on the rules and regulations of export around the world.

The Small Business Association: helps firms understand successful export strategy—entering on a small scale, adding products only when successful, and hiring locals to promote the products.




Case Study: Countertrade OptionsDirections: Decide which method of countertrade would most benefit the firms in the case study. Be ready to share the reasons behind your decision.

Case Study:Pinky’s Pencils from Fargo, North Dakota, and the Rubber Tree Plant Company of Bangalore, India, have been trading partners for the last 19 years. The Rubber Tree Plant Company has provided the erasers for Pinky’s Pencils and Pinky’s has paid for them with currency. However, because of recent changes in both firms, they would like to countertrade but do not know which type of countertrade would be best for them.

Pinky’s has seen a 22% increase in demand for pencils over the last fiscal year and is lacking enough employees to fill all the orders it has. It will soon be developing a “green” pencil and is looking for a partner to invest in research and development for the new pencil. Pinky’s is known for its management expertise and keeping itself profitable through shrewd decision making.

The Rubber Tree Plant Company has recently lost a major trading partner and is facing layoffs due to the decrease in business. It has never laid off workers and hopes to avoid doing so, especially its much valued research and development team, who created the everlasting eraser. Ironically, the success of the everlasting eraser has contributed to a decrease in eraser sales, and the company must now reconfigure its operations or face closure.

Types of Countertrade:Bartering is when two companies exchange goods and/or services for other goods and/or services. Bartering does not involve any cash. There are two requirements to successful bartering: the two parties bartering must agree on how much of each item is a fair trade, and each party must have something that the other one wants. Because these two requirements are rarely met, bartering is not a very common form of countertrade.

In counterpurchasing, a firm agrees to buy products or services from a country where it made a sale. One interesting feature of this type of countertrade is that the purchase of products or services doesn’t have to be immediate but could be agreed to be made at a later date or even after certain goals are met. It can also be an effective way to enter a new market. One example of counterpurchasing: An airplane manufacturer in the United States sells jets to the government of a small developing nation. The government agrees to purchase the planes if the manufacturer will buy some goods produced there, such as tools. The airplane manufacturer agrees to buy $100,000 worth of tools so that it can break into this new market.

In buyback trading, the countertrade is clearly linked to what the exporter is selling to the buyer. The exporter agrees to buy back some of what is produced with the equipment or other materials it has sold to the buyer. For instance, if the exporter is selling manufacturing equipment, it may agree to buy back some of the finished product made with that equipment. These sorts of agreements tend to involve larger purchases (or more units) and occur over a longer time period than either barter or counterpurchasing.

Switch trading is a form of countertrade that often occurs between businesses and governments or between governments. If one government owes another a lot of money, it can pay that off by sending its goods and services to a third country. For example, let’s say the United States has been exporting food to Bulgaria. If the United States builds up enough credit, Bulgaria may decide to engage in switch trading to pay off its debt. In this case, a third country (France, for example) would export something to the United States, but rather than the United States paying for it, Bulgaria would pay for it by exporting something it has to France.




Partner Activity: Understanding FlowchartsStudent Names:_______________________________________________________ Date:___________

Directions: Read the rules of thumb about flowcharts and answer the questions about the example. Use what you learn to fill in the blanks on the Weekly PE Activity Flowchart.

Flowchart Rules of Thumb The title of the process is written at the top of the flowchart.

Each step in the process is written in a box.

The function of a step is indicated by one of three different shapes:

o Actions go in rectangles.

o Decisions to be made go in diamonds.

o Start and end steps go in ovals.

Questions have to be phrased in the form of yes/no answers or one-word answers.

Arrows go between each step and show the direction of the process.



Example Flowchart: Deciding What to Do on Saturday

Questions:What is the first step in the process?

What are the two choices if you stay indoors?

What are some things you would consider when deciding between reading and playing cards?



Weekly PE Activity Flowchart




Assignment: Export Process FlowchartStudent Names:_______________________________________________________ Date:___________

Directions: Follow the steps on this resource to complete your export process flowchart. Check the steps off as you complete them.

Flowchart Rules of Thumb The title of the process is written at the top of the flowchart.

Each step in the process is written in a box.

The function of a step is indicated by one of three different shapes.

o Actions go in rectangles.

o Decisions to be made go in diamonds.

o Start and end steps go in ovals.

Arrows go between each step and show the direction of the process.

STEPS1. Title your chart Export Process Flowchart.

2. Write each step on a sticky note and label it with rectangles around actions and diamonds around decisions.

3. Discuss and decide where to place the sticky notes on chart paper to accurately reflect the export process.

4. Troubleshoot your chart: make sure each step is in its proper place by going through the flow of the chart. Revise the order of the steps and recheck it until it is accurate.

5. When you are satisfied that the flow is correct, remove the sticky notes and transfer the steps from the sticky notes to the chart paper.

6. Place the arrows in the right direction between each step.

7. Add the start and finish ovals.

8. Write an explanation of the issues that must be considered for each of the decision steps on the flowchart—one index card per decision step. Attach the cards to the back of the flowchart.

9. Give and receive peer feedback.

10. Integrate the peer feedback and create a final draft of your flowchart.



Make sure your assignment meets or exceeds the following assessment criteria: The flowchart clearly and accurately portrays the export process from start to finish.

Each step in the process is categorized and labeled correctly.

The arrows accurately depict the order of the steps.

The explanations of the decision-making steps are complete and detailed.

The explanations use correct grammar, spelling, and punctuation.


franklin export management company, llc -...

Documents