IB 3101 Lecture Notes - Lecture 11: Foreign Exchange Risk, Trade Finance, International Trade
17 May 2017
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Document Summary
Week 11 chapter 14 exporting, importing, and countertrade. Exporting is very difficult, hardest part is to figure out how to actually start exporting. Most of the value of us exports comes from a small number of firms that export a lot. Exporting firms: market opportunities, foreign exchange risk, challenges of doing business in foreign market. Lack of trust: exporters prefer to receive payment prior to shipping goods. Importers prefer to receive goods prior to making payments: solution can be the use of a third party, international trade financing, letter of credit. Issued to the exporter by the common carrier transporting the merchandise: a receipt, a contract, a document of title. Issue: firm might end up with goods that have low value or are difficult to resell to earn money: used primarily for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy, counterpurchase. This is frequently an integral part of international defense contracts.
