Exporting, Importing and Counter-trade

Improving Export Performance A major obstruction to exports is the absence of basic information of the open doors. There are numerous business opportunities, but since they are spread in various nations base by culture, dialect, separation and time, it is in some cases hard to assess those. Recognizing export circumstances is made significantly more intricate by the way that 192 nations broadly contrasting society make the world out of potential openings.

Ford currently sells its cars in 146 countries out of those. Ford has recently taken a decision to start manufacturing vehicles in India and export it to the European market. This can help Ford to reduce the cost and tackle with the uncertainties that have flourished with Brexit in the Euro Area. One of the ways Ford can start exporting to the European market in an efficient way, thereby reducing the administrative cost of customs clearance, is by utilizing Export Management Companies. EMCs are the pros who go about as the promoting division or global office for the customer firms. EMCs by and large acknowledge two kinds of assignments – first is to begin sending out tasks for a firm with the understanding that the firm will assume control activities after they are settled and second is when EMCs will have nonstop duty regarding offering the association's item. However, with the ongoing presence of Ford in European markets and the dealership structure, it will be more beneficial in long-term for Ford to set up its own division. Export and Import Financing Mechanisms for financing exports and imports have evolved over the centuries in response to the Lack of Trust that exists.

There are various tools available in the Canadian market to tackle this problem:

1. Letter of Credit Letter of Credit (L/C) is a document issued by the bank indicating that bank will make payments under specific circumstances. The importer applies to the bank, who undertakes a credit check of the importer, to issue L/C. The bank may require a cash deposit or some collateral in addition to the fees which will be around 0.5% to 2% of the value of the transaction. This option is safe but involves high cost.
2. Draft The draft also referred to as a bill of exchange, is an order written by the exported instructing the importer or his agent to pay a specific amount of money at a specific time. Draft falls into two categories – A sight draft payable on the presentation to the drawee, and a time draft allowing payment in 30, 60, 90 and 120 days. This is the most used option but is relatively risky.
3. Bill of Lading Bill of lading is issued by the basic bearer transporting the stock (i.e. common carrier transporting the merchandise). It fills in as a receipt, an agreement and a report of title. Bill of lading can work as security against which assets might be progressed to the traded by its neighbourhood bank before the last instalment from the merchant. Bank charges a specific sum alongside premium while at the same time issuing reserves against Bill of Lading.

CounterTrade Countertrade is an elective methods for organizing a worldwide deal when ordinary methods for instalments are troublesome, expensive, or non-existent. A legislature may confine the convertibility of the money to save the outside trade so they can be utilized to benefit universal obligation responsibility and buy essential imports. Ford once sold $6 Million worth of its automobiles to Uruguay in exchange for sheepskins which were then made into car seat covers and sold through European dealer network. It has also sold automobiles in exchange for Spanish potatoes, Finnish toilet seats, Norwegian cranes and Columbian coffee. (Aggarwal, International Business Through Barter and Countertrade, 1989) There are five distinct types of countertrade out of which, Offset is most used.

Other techniques are Barter, Switch Trading, Buyback and Counter Purchase. Countertrade has pros and cons. Given the problems that many developing nations are facing in raising the foreign exchange to pay for the imports, countertrade will be a good option for Ford when doing business with these countries. However, the drawbacks of countertrade are also substantial with the risk of exchange of unusable or poor-quality goods that the firm cannot dispose of profitably. Ford needs to be very cautious while entering into these types of agreements.