Exporting Simplified: Four Key Parties and Ten Steps for Beginners

Abstract

This article sets out a simplified explanation of the exporting process for beginners, aiming to help potential exporters overcome common fears and misconceptions about exporting. It notes that exporting, the oldest form of international business, remains fundamental to all modes of foreign market entry, yet only about 1% of U.S. businesses and 25% of manufacturers export, and that the U.S. trade balance has not been positive since 1976, which the authors link to the need to give American businesses knowledge and skills in exporting. The article first identifies four parties central to an export transaction: the exporter (seller), the importer (buyer), the opening or issuing bank in the importer's country, which issues a letter of credit, and the advising bank in the exporter's country, which verifies the letter of credit and advises the exporter. It then describes a ten-step process to complete a basic export transaction, from product promotion to secure payment collection, ending with customs clearance and the importer's possession of the merchandise under a release order. The authors conclude that understanding these parties and steps can encourage managers to see exporting as a route to growth, profitability and larger markets, since U.S. consumers make up less than 5% of the world market, and that larger export volumes yield economies of scale and greater competitiveness.

Abstract prepared by the editorial office from the full text of the article; the authors did not supply one.