Abstract

Guide for Prospective Agricultural Cooperative Exporters

Alan D. Borst

Agricultural Cooperative Service

U.S. Department of Agriculture

This report describes the different aspects of exporting that a U.S. agricultural cooperative must consider to develop a successful export program. t

First, the steps involved in making the decision to export are covered.

Then, information on various sources of assistance is given, along with ,

information on how to contact them. Next, features of export marketing

strategy-the export plan, sales outlets, market research, product preparation, promotion, and government export incentives-are discussed.

Components of making the sale-the terms of sale, pricing, export finance,

and regulatory concerns-are also included. Finally, postsale

activities-documentation, packing, transportation, risk management, and

buyer relations-are described.

Keywords: cooperatives, agricultural exports.

ACS Research Report 93

September 1990
Preface

This report is solely a guide-not a complete manual or blueprint of operations-for any individual cooperative wishing to export. Its objectives

are to (1) help co-op management, personnel, and members with little or

no experience in exporting to gain a better understanding of the export

process, and (2) provide a basic reference tool for both experienced and

novice exporters.

As a guide, this report is not intended for use in resolving misunderstandings or disputes that might arise between parties involved in a particular

export transaction. Nor does the mention of a private firm or product constitute endorsement by USDA.

The author acknowledges the contribution of Donald E. Hirsch.’

‘Donald E. Hirsch, Export Marketing Guide for Cooperatives, U.S. Department of

Agriculture, Farmer Cooperative Service, FCS Marketing Research Report 1074, March

1977.
Contents

HIGHLIGHTS .**.....*...........*..............,...,..........,...........................................iv

MAKING THE DECISION TO EXPORT ...................................................... 1

Assessing Export Potential .................................................................. 1

The Decisionmaking Process ............................................................... 1

Commitment to Exporting ................................................................... 3

SOURCES OF ASSISTANCE ....................................................................... 3

Foreign Agricultural Service (FAS) ..................................................... 3

Agricultural Cooperative Service (ACS).............................................. 6

Other U.S. Department of Agriculture Agencies................................. 7

U.S. Department of Commerce (DOC) ................................................. 9

State Sources of Assistance ................................................................. 9

Other Sources of Assistance ................................................................ 9

EXPORT MARKETING STRATEGY ............................................................ 9

Preparing an Export Plan ..................................................................... 9

Equipment and Procedures for Exporting ......................................... 10

Sales Outlets and Distribution Channels .......................................... 11

Market Research ................................................................................. 13

Relations With Foreign Sales Agents ................................................ 15

Product Preparation ........................................................................... 16

Promotion ........................................................................................... 17

U.S. Government Export Incentives ..................................................17

MAKING THE SALE . . . . . . . . . . . . . . . . ..*............... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Relations With Foreign Buyers .......................................................... 18

Delivery Terms of Sale ....................................................................... 21

Pricing ................................................................................................ 24

Sales Offer and Contract .................................................................... 25

Payment Terms of Sale ....................................................................... 27

Regulatory Concerns .......................................................................... 30

COMPLETING THE EXPORT TRANSACTION ........................................ 31

Freight Forwarders............................................................................. 31

Documentation ................................................................................... 32

Packing ............................................................................................... 33

Transportation .................................................................................... 34

Risk Management ............................................................................... 35

Buyer Relations and Feedback .......................................................... 38

SELECTED BIBLIOGRAPHY . ..I,.................................................................39

ii
LIST OF FIGURES

Figure I-The Export Decision-Issues to Consider .......................... 2

Figure Z-Outline for a Cooperative Export Plan ............................. 10

Figure 3Individual Buyer Interview Record .................................. 19

Figure &-Information Needed for Sales Offer.................................. 21

APPENDIX:

ACS International Trade Program (ITP) Publications *.*.....*................**.,** 39
Highlights

Export markets offer some agricultural cooperatives the chance to significantly increase sales and earnings. Success in domestic sales is one indication that a cooperative may have potential in foreign markets.

The co-op’s management, board of directors, and membership should all

be fully committed to any export marketing program.

There are several sources of assistance for prospective co-op exporters.

The Foreign Agricultural Service of the U.S. Department of Agriculture

(USDA) is the major provider of assistance to US. agricultural exporters.

The Agricultural Cooperative Service (and other USDA agencies), other

Federal agencies, State departments of agriculture, and various private

sources are also available to cooperatives seeking assistance with exporting.

Once a cooperative has decided to initiate an export program, an export

plan stating constraints, goals, and strategy should be drawn up.

Cooperatives may choose how involved they want to become in the

mechanics of their export sales. They may sell either to direct export sales

outlets-agents or buyers-or to indirect sales

outlets-intermediaries-which then directly export the products themselves.

Cooperatives need to do market research to facilitate the selection of targeted markets.

A cooperative with continuing sales to a selected foreign market will usually be represented by a foreign sales agent in that market. Because of

their knowledge and presence in the foreign market, these agents are able

to provide many important services for the co-op exporter.

To satisfy the needs of a foreign buyer or to comply with the import regulations of a foreign country, a cooperative may find it necessary to modify

its product(s).

Trade shows, direct mailings, price and nonprice promotion, and media

advertising are all promotion options that a cooperative can use to develop a foreign market for its products.

Cooperative exporters need to maintain communication and good relations with serious foreign buyers. Personal visits by co-op management

and export staff are an important part of this process.

iv
For any export transaction, the cooperative and the foreign buyer must

agree on price and other terms of sale-including those for payment and

delivery-in the final sales contract.

The National Bank for Cooperatives (CoBank) offers co-op exporters a

complete line of international financial services. Many other commercial

banks with international departments can also serve the needs of co-op

exporters.

Cooperatives must be familiar with both U.S. export regulations and the

import regulations of the foreign countries to which they ship products.

Unless a cooperative has its own export department, it may benefit from

using the services of an export freight forwarder to handle the details of

export shipping, including transportation and documentation.

A cooperative exporter will benefit from practicing risk managementidentifying sources and degrees of risk that the co-op faces, analyzing its

capacity to absorb losses, and developing strategies to deal with those

risks.

Physical risk can be handled through obtaining adequate marine insurance

coverage. Commercial and political risks can be minimized by negotiating

favorable sales terms with the foreign buyer, checking the foreign buyer’s

credit, and taking out adequate credit insurance. Foreign exchange risks

can be managed by demanding payment in U.S. dollars or by arranging a

hedging contract with a commercial bank.
Guide for Prospective Agricultural

Cooperative Exporters

MAKING THE DECISION TO EXPORT

There are many good reasons for

agricultural cooperatives to consider exporting.

By expanding their sales into foreign markets,

cooperatives can benefit from economies of scale

in processing, marketing, and distribution.

With increased sales, fixed costs can be

spread over more units of production, and any

excess capacity that exists can be reduced. As a

result, a cooperative may find that it can operate

more efficiently, lower its costs of production,

and become more competitive-even in its

domestic markets. A successful export program

can significantly increase the earnings of an agricultural marketing cooperative.

Foreign markets may also represent new

sources of demand for products that have stable

or declining demand in the United States.

In a basic way, export marketing is the same

as domestic marketing. The exporter has to sell

the products or services that buyers want, and

where, when, and how they want them. There

are, however, significant differences that must be

taken into account by a potential exporting cooperative. Trade barriers, international transportation, documentation, financing, payment collection, insurance, and customs procedures are

some of the major aspects of an export transaction that will differ from a domestic transaction.

Although the potential for selling products

in foreign markets should be considered, exporting is not always a viable marketing option for a

cooperative.

Assessing Export Potential

One of the most basic ways to measure a

product’s potential in foreign markets is its success in domestic markets. If a cooperative’s

product has sold well in the United States, there

is a good chance that it will be successful in

those foreign markets where similar needs and

conditions exist. In such situations, there may

‘vc: ‘itire i3r 71-o -rree-& !i-ra wrs3-~~s;l?rg %!r& -fl-&&~.

Trade statistics and commodity reports can

give a preliminary indication of markets for a

particular commodity in most countries.

Production and trade statistics and situation and

outlook reports are available for most commodities from the U.S. Department of Agriculture

(USDA). Expert advice on the export potential of

a product or commodity is available from

USDA’s Foreign Agricultural Service (FAS) and

from State departments of agriculture. A more

detailed discussion of export assistance is given

in the next section, “Sources of Assistance.”

Once a cooperative has determined that one

or more of its products has export potential,

more indepth research is necessary for specific

targeted foreign markets. This is discussed in

“Market Research.”

The Decisionmaking Process

The decisionmaking process in an exporting

cooperative deserves special consideration, A

decision to make an initial trial shipment to a

foreign destination appears to be a policy matter

requiring board action. A decision to develop a

new export program, however, or to significantly

change an existing export program more likely

requires prior approval by the membership.

Membership should be involved in decisionmaking, but international trade is highly

competitive and tends to be more secretive than

domestic trade. Premature disclosure of specific

market objectives, names of buyers, or exact

sales terms may be more helpful to competitors

than to a co-op’s general membership.

Thus a board of directors must make export

policy decisions, review the results of its export

program, and keep the membership informed.

The board, however, may have to delegate more

authority to management and staff responsible

for export sales than would be needed for a

domestic marketing program. This is generally

so because there are fewer persons with the

knowledge and expertise to deal with technical

problems involved in exporting,

A critically important step in planning an

export program is to develop broad consensus

among the board of directors and management

on the co-op’s goals, capabilities, and constraints. Answering’the questions in “figure 1 is a

good way to start. The questions are presented

to help key people in the cooperative focus on

important issues to consider before deciding to

export.

1
1. With what countries has business already been con- 1. Is an adequate volume of the selected commodity

ducted (or from what countries have inquiries available from interested producers in a relatively

already been received)? compact geographic area?

2. 2.

3.

4.

5.

6.

Which agricultural commodities or products are

mentioned most often?

List the sales inquiries of each buyer by product and

by country.

Is the trend of sales and inquiries up or down?

Which U.S. and foreign suppliers are the main competitors? 3.

What general and specific lessons have been learned 4*

from past export experiences? 5.

Will it be necessary to build or lease additional port

facilities in the co-op’s supply area or at a loading

port? If so, can these be obtained at locations that

are satisfactory with respect to the supply area,

inland transportation, export shipping, and other

factors?

II. Management, Staff, Board Members,

and Producer-Members

1 .

2.

Who will be responsible for the organization and

staffing of export operations? 6.

To what extent is the cooperative now organized and

structured to handle exporting operations? Can it

administer export sales and arrange for international

shipping? Should it join with other cooperatives to

Will filling export orders hurt domestic sales?

What will be the costs of additional production?

What are the usual problems in the domestic marketing of this commodity (such as wide fluctuations

in volume, quality, varieties, or prices of product:

inventory carryovers, etc.)? How difficult will it be

for the cooperative to handle these problems in serving foreign markets on a continuing basis?

How do the costs of handling the commodity and

transporting it to a satisfactory loading port compare

with those in competing production areas of the

United States? How about the relative cost of delivering the commodity to a foreign discharge port?

3.

4.

pool export efforts? 7.

How 

2

3

4

’

program and then stick with the program throughout

a trial period of reasonable length? Is strong farm 5.

leadership available?

essary to develop budget estimates to show anticipated capital requirements, sources of capital, operating costs, payments to members, etc.)

What amount of capital can be tied up in export

operations?

What level of export department operating costs can

be supported?

How are the initial expenses of export efforts to be

allocated?

What other new development plans are in the works

that may compete with export plans?

By what date must an export effort pay for itself?

Figure l--The Export Declslon-lssues to ConsldeP

I. Experience Ill. Productlon and Marketing

6.

2 This figure was adapted from A Basic Guide to Exporting, U.S. Department of Commerce, September 1986, p. 3.

2
Commitment to Exporting

There are different degrees of commitment

among cooperatives involved in the export market. Moving from the most aggressive to the

most passive approach to export market development, four approaches have been identified: 2

Export Market Developer - Views export

marketing as an integral component of overall

marketing strategy and has a long-term commitment to develop foreign customers and serve

them on the same basis as domestic customers.

Occasional Exporter - Has occasional export

sales, but is willing to regularly commit

resources to preserve export marketing options.

Surplus Exporter - Seeks export markets in

years of excess domestic supplies.

Passive Exporter - Responds to export

opportunities if sought out by foreign buyers,

and if there will be little interference with

domestic marketing efforts.

All of these approaches are acceptable. The

expectations of a cooperative, however, should

be in line with its commitment to foreign buyers.

Importers will rely on their regular and most

committed suppliers first and then fill any additional needs by purchasing from less committed

suppliers.

A cooperative also chooses the degree to

which it handles each export transaction. It may

sell directly to a foreign buyer or indirectly to an

intermediary, such as a trading company, which

then transacts with foreign buyers.

Direct exporting requires the cooperative to

assume greater risks and to handle more of the

arrangements, but it may give the cooperative a

larger share of the marketing margin. Options

available under direct and indirect exporting are

thoroughly discussed in “Sales Outlets and

Distribution Channels.”

SOURCES OF ASSISTANCE

Agricultural cooperatives that are interested

in exporting their products to foreign markets

3 Newman, Mark D. and Riley, Harold M.,

Coordinating Exports by Farmer Cooperatives, U.S.

Department of Agriculture, Agricultural Cooperative

Service, Research Report 15, September 3982.

may obtain assistance from various sources. The

initial problem for a cooperative that has little or

no experience in exporting is to determine what

information is available and from which sources.

Foreign Agricultural Service

Cooperatives seeking export assistance from

the Federal Government should begin their

search at the Foreign Agricultural Service (FAS)

of the U.S. Department of Agriculture (USDA).

FAS has primary responsibility for international

trade, foreign market development, and foreign

affairs with respect to agricultural products.

The following is a brief description of FAS

and some of its programs that may be of particular interest to cooperatives. Addresses and telephone numbers for various services are included.*

l’bade Assistance

The Trade Assistance and Planning Office

(TAPO) provides a single point of contact for

cooperatives that are new, established, or potential exporters. The TAP0 provides foreign market information and/or assistance on procedures,

initiatives, corrective measures, and marketing

approaches necessary to successfully sell in foreign markets. Information is available on overall

market opportunities for U.S. farm exports and

on U.S. Government programs and services

aimed to maintain and expand foreign markets

for American agricultural products.

Co-op exporters who believe they have been

injured by unfair trade practices with respect to

trade in agricultural commodities and products

can obtain assistance from the TAPO. The Office

compiles and makes readily available information concerning trade practices carried out by

other countries, and remedies under U.S. law

that might be available to persons injured by

unfair trade practices.

In addition, the Office staff may refer a

cooperative to sources of information that can

*If a listed USDA telephone number is incorrect,

the general number for any USDA agency can be

obtained by calling the USDA Locator Service at (202)

447-USDA. The correct number for any section of

that agency can then be obtained by calling its general

number.

3
help it solve its particular problems. They may

be contacted at:

Trade Assistance and Planning Office

Foreign Agricultural Service

U.S. Department of Agriculture

3101 Park Center Drive, Suite 1103

Alexandria, VA 22302

Telephone: (703) 756-6001

FAX: (703) 756-6124

Marketing Lnfomation and Statistics

Historical data on the volume and value of

international agricultural trade flows can help

cooperatives to recognize important export

trends. The Trade and Economic Information

Division of FAS collects such data, along with

information on prices, market share, and many

other economic indicators. Cooperatives seeking such information for their marketing plan or

other purposes may contact:

Trade and Economic

Information Division

Foreign Agricultural Service

U.S. Department of Agriculture

Room 6506-S

Washington, DC 20250-1000

Telephone: (202) 382-1294

Another useful source of marketing information is reports filed by FAS attaches who are

constantly monitoring foreign agricultural markets. These reports are useful for cooperatives

seeking information about competing firms in

specified foreign markets. Cooperatives may

obtain any of these reports by contacting the:

Reports Officer

Foreign Agricultural Service

U.S. Department of Agriculture

Room 6078-S

Washington, DC 20250-1000

Telephone: (202) 382-9509

nude Shows

FAS coordinates the US. national pavilions

at major international trade shows: it can assist

co-op exhibitors with obtaining a booth, advance

publicity, product shipment, and customs clearance.

Trade fair exhibits are a well-established

means of introducing and promoting food products in foreign markets. Personal contacts are

made with potential buyers. Sales may be consummated on the spot or a basis for future sales

may be developed. Each exhibitor pays a fee for

both space, use of pavilion facilities, and other

services. There must be full-time representation

at most kinds of exhibits.

The principal kinds of trade exhibits are (1)

international food shows, (2) agent food

exhibits, (3) hotel-restaurant-institutional

exhibits or demonstrations, (4) catalog shows,

(5) product displays managed by agricultural

attaches, and (6) livestock shows.

Cooperatives seeking information on international trade shows and how to participate in

them should contact the:

Trade Show Office

Foreign Agricultural Service

U.S. Department of Agriculture

Room 4647-S

Washington, DC 20250-1000

Telephone: (202) 245-5182

Export Product Review

Cooperatives that want to ensure that their

product meets the labeling and ingredient

requirements of a particular foreign country may

wish to have their products evaluated through

the Export Product Review Program of FAS. The

U.S. agricultural attache will use the product

label and ingredient list to check with foreign

government officials to make certain that the

product can be cleared for import. As part of

the review, U.S. agricultural attaches may comment on the potential marketability of the product. There is a charge of $75 per label/country

for this service. For more information, contact

the:

Export Product Review Program

Foreign Agricultural Service

U.S. Department of Agriculture

Room 4647-S

Washington, DC 20250-1000

Telephone: (202) 475-3408

4
FAS Attaches

Agricultural counselors, attaches, trade officers, and other FAS officers are stationed at

about 80 U.S. embassies and consulates around

the world. These counselors and attaches assemble information on (a) the production and utilization of agricultural commodities and (b) governmental policies and programs related to

agriculture in the country (or countries) to which

they are assigned. They also supervise U.S. market development activities in the country and

assemble information about marketing opportunities and competition for U.S. agricultural commodities.

Counselors and attaches often help U.S.

exporters make contact with foreign businesses

and government officials. This service is especially helpful to a cooperative when it is

attempting to establish or expand an export sales

program.

Bade Leads

tide Ofices

In addition to the presence of FAS officers

at U.S. embassies and consulates worldwide,

FAS maintains 15 U.S. agricultural trade offices

in major foreign markets. These offices could

serve as a “home base” for co-op executives and

staff that are visiting foreign markets. Desks,

telephones, and secretarial support are available.

For more information on U.S. agricultural trade

offices contact the:

Foreign Agricultural Affairs

Assistant Administrator

Foreign Agricultural Service

U.S. Department of Agriculture

Room 4951-S

Washington, DC 20250-1000

Telephone: (202) 447-6138

Ag Export Connections @EC)

AEC provides foreign trade opportunities

and contacts to exporters of U.S. agricultural

products by (a) collecting and publicizing information on foreign buyers and (b) advertising U.S.

export availability. AEC offers these export marketing services: Trade Leads, Buyer Alert, and

Foreign Buyer Lists.

FAS agricultural counselors, attaches, and

trade officers worldwide locate trade leads and

report them to AEC. Cooperatives may receive

these leads in three ways. One alternative is to

contact the following commercial networks:

Agridata Resources, Inc

330 East Kilbourn

Milwaukee, WI 53203

Tel: (800) 558-9044

AT1 Net

CSU Fresno, Cati Office

Mail Stop 115

Fresno, CA 93740-0115

Tel: (209) 294-4872

(209) 294-2361

Another alternative is to subscribe to

Export Briefs, a weekly bulletin which lists all

export leads for that week. Upcoming trade

shows and foreign trade developments are also

highlighted. To subscribe ($75 per year) contact:

High Value Products Services Division

Foreign Agricultural Service

U.S. Department of Agriculture

Room 4647-S

Washington, DC 20250-1000

Telephone: (202) 475-3416

Finally, cooperatives may subscribe to the

Journal of Commerce, a newspaper which publishes selected trade leads.

The trade leads provide sufficient information to enable a U.S. cooperative to select foreign

firms for further consideration as buyers or

agents. U.S. firms may also use commodity listings of foreign buyers for direct mail advertising.

Buyer Alert

Through this free service, U.S. agricultural

exporters may advertise their products in markets around the world on a weekly basis. Using

telecommunications, the AEC staff in

Washington, DC, forwards product announcements to potential foreign buyers through FAS’

overseas offices. For more information you may

5
contact the High Value Products Services

Division of FAS at the same address as above, or

call (202) 475-3421.

Foreign Buyer Lists

AEC maintains a database of about 13,000

foreign buyers from over 70 countries. Lists may

be formatted to provide foreign buyers by product for all countries or by country for all products. Cooperatives can use these lists to match

their products with prospective buyers. Lists

provide company name, contact, address, telephone, and FAX, telex, or cable where applicable. Lists are $15.00 each. For more information contact the High Value Products Services

Division at the same address as above, or call

(202) 447-7103.

USDA Technical Office

The Technical Office informs US. agricultural exporters about proposed changes in the

health, quality, and packaging standards of foreign governments. As with trade leads, information on such matters is published in the FAS

weekly bulletin Export Briefs and is released

through the two commercial computer networks

cited above. Information for subscribing to

either source is given under “Trade Leads.”

Cooperatives having questions about the

agricultural standards of either the United States

or foreign countries should contact the

Technical Office, which keeps extensive and

constantly updated files on proposed and existing U.S. and foreign regulations. The Office is a

cooperative effort between FAS and the

Agricultural Research Service. Inquiries may be

sent to:

USDA Technical Office

Building 1072

BARC-East

Beltsville, MD 20705

Telephone: (301) 344-2651

Publications

FAS produces many publications and periodicals that will prove useful to cooperative

exporters. Two publications that are especially

important are the Food and Agricultural Export

Directory and the Dictionary of International

Agricultural Trade. * Two FAS periodicals that

cooperative exporters should consider receiving

are :

AgExporter - A monthly magazine providing information on foreign markets and opportunities for U.S. agricultural exporters.

Foreign Agricultural Circulars - Reports

providing U.S. agricultural exporters with information on the needs of foreign buyers, changing

consumer preferences, trade policy issues, and

the supply and demand situation in foreign

countries. Circulars are available for most major

crops. They are published periodically and are

available by subscription.

A list of FAS publications, and information

on how to order them, is available from the FAS

Information Division. The address is:

Information Division

Foreign Agricultural Service

U.S. Department of Agriculture

Room 5920-S

Washington, DC 20250-1000

Telephone: (202) 447-7937

Agricultuml Coopem five Service

The Agricultural Cooperative Service (ACS)

of the USDA concentrates on the problems and

opportunities of U.S. agricultural cooperatives.

ACS staff assist cooperatives by providing (1)

research reports and other publications that

address broad topics and (2) technical assistance

studies that are aimed at solving specific problems of one or more cooperatives. The ACS

research reports and other publications are

available to the public: technical assistance

reports are only distributed to the cooperatives

for which they were done.

To get a catalog of ACS publications and an

order form, write to:

USDA/ACS/Publications

P.O. Box 96576

Washington, DC 20090-6576

*These and other publications of particular

importance for co-op exporters are listed in the

selected bibliography at the end of this report,

6
The International Trade Program (ITP),

located in the Cooperative Marketing Division of

ACS, is responsible for all agency activities that

contain international trade as a principal component. ITP agricultural economists conduct

research on topics that are related to cooperatives engaged in international trade. Recent ITP

publications are listed in the appendix.

Any cooperative(s) seeking technical assistance from ACS must send a written request to

the administrator stating the nature of the

problem(s). Requests will be considered on a

case-by-case basis. Typically, technical assistance studies have addressed matters of business

organization, operating efficiency, and the economic feasibility of obtaining new facilities or

adding new products or services. ACS does not

currently charge for technical assistance studies.

Requests for technical assistance should be

mailed to the:

Administrator

Agricultural Cooperative Service

U.S. Department of Agriculture

P.O. Box 96576

Washington, DC 20090-6576

ACS also conducts research concerned with

improving the organizational structure and operations of cooperatives in general. These studies

can be of value to all cooperatives, including

those that export. In addition to research and

technical assistance, ACS publishes the monthly

magazine Farmer Coopem tives.

Agricultural Marketing Service @MS)

Some foreign governments may require

USDA certification that shipments of agricultural

products bound for their country meet specified

quality levels. Similarly, a foreign buyer may

request USDA certification that a shipment being

exported to them meets contract specifications.

A cooperative facing either situation can get

these inspection services, on a user-fee basis,

from the Food Quality Acceptance Service

(FQAS) of AMS. FQAS certification may be

made a part of the purchase contract.

FQAS certification is available for export

shipments of dairy products, poultry and eggs,

fruit and vegetables, and meats. Cooperatives

can contact the following offices for information

on FQAS inspection services:

Dairy Grading Branch

Dairy Division

USDA/AMS

Room 2750-S

P.O. Box 96456

Washington, DC 20090-6456

Telephone: (202) 382-9382

Meat Grading and

Certification Branch

Livestock and Seed

Division

USDAIAMS

Room 2638-S

P.O. Box 96456

Washington, DC 20090-6456

Telephone: (202) 382-1113

Fresh Products Branch

Fruit and Vegetable Division

USDAIAMS

Room 2750-S

P.O. Box 96456

Washington, DC 20090-6456

Telephone: (202) 447-5870

Grading Branch

Poultry Division

USDAIAMS

Room 3938-S

P.O. Box 96456

Washington, DC 20090-6456

Telephone: (202) 447-3271

Processed Products Branch

Fruit and Vegetable Division

USDA/AMS

Room 0711-S

P.O. Box 96456

Washington, DC 20090-6456

Telephone: (202) 447-4693

Agricultural Research Service (ARS)

ARS can provide co-op exporters with

research and information on product selection,

packaging, storage, refrigeration, and transportation of export shipments. To get more informa7
tion about ARS and their publications and

reports, contact the:

Information Staff

Agricultural Research Service

U.S. Department of Agriculture

Room 307, Building 005, BARC-West

Beltsville, MD 20705

Telephone: (301) 344-2264

Animal and Plant Health kiwpection Service

(APHIS)

APHIS can help co-op exporters comply

with the import requirements of foreign countries. Through pre-export inspection, APHIS

can certify that the export shipment is free of

injurious pests and/or diseases. For information

on APHIS health and sanitary inspection and

certification, contact one of the following

offices:

USDA/APHIS/PPQ

Export Certification Unit

Staff

Room 669

Federal Center Building

6605 Belcrest Road

Hyattsville, MD 20780

Telephone: (301) 436-8537

USDAIAPHISIVS

Import-Export Operations

Room 764

Federal Center Building

6605 Belcrest Road

Hyattsville, MD 20780

Telephone: (301) 436-8590

Economic Research Service (ERS)

Cooperatives seeking economic information

on foreign agriculture or world commodity markets can read ERS publications and technical

reports. The Agricultural Trade and Analysis

Division of ERS analyzes world agricultural

commodity markets. It also forecasts utilization,

stocks, trade, and prices of internationally traded agricultural commodities for the world,

regions, and individual countries. For more

information about ERS publications and technical reports, write to the:

Information Staff

Economic Research Service

U.S. Department of Agriculture

1301 New York Avenue, NW., Room 208

Washington, DC 20005-4788

Telephone: (202) 786-1512

Federal Grain Inspection Service (FGIS)

Almost all grain being exported from the

United States must be officially inspected and

weighed. FGIS or delegated state agencies perform these services for a fee. Their International

Monitoring Staff responds to complaints from

foreign buyers about either quality or weight of

U.S. grain. In addition, they can provide U.S.

exporters with technical information about U.S.

grain quality standards and inspection and

weighing procedures.

FGIS provides, on a fee basis, other tests for

export shipments of grain and related commodities, such as measuring aflatoxin levels in corn

or protein content in wheat, or inspection of

rice, pulses, and processed grain products. For

further information, contact the:

Federal Grain Inspection Service

U.S. Department of Agriculture

Room 1095-S

P.O. Box 96454

Washington, DC 20090-6454

Telephone: (202) 382-0216

Food Safety and lkpection Service (FSIS)

All meat and poultry being exported from

the United States must be inspected by FSIS.

All meat must be certified and most countries

require that poultry products also be certified.

FSIS reinspects meat and poultry at the time of

export certification to ensure that the shipment

is properly labeled and inspected and meets all

requirements of the importing country. There is

no fee for standard FSIS inspections of meat.

FSIS will charge a fee for all poultry certification and for meat if the importing country

requires a special certification.

8
FSIS also provides information to exporters

about foreign import requirements for meat and

poultry. For further information, contact the:

Export Coordination Division

Food Safety and Inspection Service

U.S. Department of Agriculture

Room 0019-S

Washington, DC 20250-1000

Telephone: (202) 447-9051

Ofice of lhnsportation (OT)

Cooperative exporters with international

transportation problems or questions should

contact OT’s International Division. The

Division provides technical assistance to

exporters and puts out research publications on

international transportation matters. Co-ops can

contact OT at:

Director, International Division

P.O. Box 96575

Office of Transportation

U.S. Department of Agriculture

Washington, DC 20090-6575

Telephone: (202) 245-5304

US. Department of Commerce

The International Trade Administration

within the U.S. Department of Commerce (DOC)

provides many of the same services for nonagricultural exporters as FAS does for agricultural

exporters. These include identification of foreign market opportunities, market research,

sponsorship of foreign trade missions, participation in foreign trade shows, export counseling,

and reports on foreign buyers. DOC also has

responsibility for assisting exporters of seafood

and agricultural equipment.

DOC has a number of publications on general exporting subjects that could be helpful for coop exporters. For more details on export publications call (202) 377-3808.

State Sources ofAssistance

All 50 States have trade professionals who

are responsible for assisting agricultural

exporters, and most are within the marketing

divisions of their State departments of agriculture. State contacts for agricultural export assistance are listed in FAS’ Food and Agricultural

Export Directory

Other Sources of Assistance

Many other government and private sources

provide export assistance, e.g., the International

Banking Division of CoBank, other commercial

banks with international departments, international credit rating companies, commodity trade

associations, port authorities, and air and ocean

shipping lines.

EXPORT MARKETING STRATEGY

Preparing an Export Plan

Once a cooperative makes the decision to

export, it should develop a written plan. The

purpose of an export plan is to outline relevant

facts, constraints, and goals and to set forth the

cooperative’s export strategy. It should include

specific objectives with time schedules for

implementation and standards for evaluating the

performance of the export program.

One key to developing a successful plan is

the participation of those co-op management and

staff members who will be involved in export

operations. All components of the export plan

should be agreed upon by those who will ultimately be responsible for their execution. A

written plan is important because it clarifies the

positions and states the commitment of co-op

board members and management with regard to

the export program.

The first time an export plan is made, the

efforts should be kept simple. The initial planning efforts can produce much information and

insight that can later be incorporated into more

sophisticated planning. An export plan should

be a working document that can be used as a

management tool. The objectives of the plan

should be used to evaluate the performance of

the export program. As more information and

experience are gained, the cooperative can modify the plan and make it more specific.

Cooperatives that intend to export directly

will need a more complex and detailed export

9
plan than those planning to make only indirect

export sales. A basic outline of a general export

plan is presented in figure 2 below.

Equipment and Procedures for Exporting

The following office procedures and equipment are especially important for export marketing:

Facsimile (Fm Machine

The FAX machine is rapidly displacing

telex equipment as the preferred means of transmitting material to foreign countries.* It can

*Though telex equipment is still being used by

some smaller foreign buyers, it is questionable

whether a new-to-exporting cooperative should invest

in it.

Flgure 2-Outline for a Cooperative Export Plan4

Table of Contents

Executive Summary (one or two pages maximum)

Introduction: Why the Cooperative Should Export

An Export Policy Commitment Statement

Situation/Background Analysis

Agricultural Commodities or Products

Operations

Personnel and Export Organization

Resources of the Cooperative

Industry Structure, Competition, and Demand

The Marketing Component

Identification, Evaluation, and Selection of Targeted

Markets

Product Selection and Pricing

Distribution Methods

Terms and Conditions on Which Sales Will Be Made

Internal Organization and Procedures

send written messages and documents faster

than a telex machine and can transmit things

that a telex cannot, such as charts, graphic material, or anything else on paper. A FAX duplicates material just as a photocopier does and

then transmits the image over long-distance

phone lines to the other party’s FAX.

Calculations

It is important to be able to calculate the

cubic measurements of any container (or item)

in order to figure its volume. This is done by

multiplying three numbers: the length times the

width times the height or depth of the container

(or item) = its cubic measurement.

Whatever linear unit (e.g., inches, centimeters) is used to measure length, width, and

height will be the cubic unit of measurement.

Sales Goals: Profit (Loss) Forecasts

Tactics: Action Steps

Countries Where Cooperative Has Special Advantages

Primary Targeted Countries

Secondary Targeted Countries

Indirect Marketing Efforts

Export Budget

Pro Forma Financial Statements

Implementation Schedule

Follow up

Periodic Operational/Management Review (Evaluating

Results When Compared to Goals Set in Plan)

Appendices-Background Data on Targeted Countries

and Markets

Market Statistics: Historical and Projected

Background Facts

Competitive Environment

4 This figure was adapted from A Basic Guide to Exporting, U.S. Department of Commerce, September 1986, p. 4

10
For example, if length, width, and height are

measured in centimeters, then the volume will

be measured in cubic centimeters. Cubic measurements are necessary for figuring out packing

and loading details and shipping rates.

Shipping weights

Three weights are used in export shipping:

(1) net weight, which is the weight of the product without its packaging and container: (2) tare

weight, which is the weight of the packaging and

container without the product: and (3) gross

weight, which is the total weight of the product,

packaging, and container.

Measures

Export staff should be able to convert imperial units of measure into metric units and vice

versa. Almost all foreign countries use the metric system.

Couriers

For urgent letters or packages that must be

sent to a foreign destination, the export staff

should be familiar with available courier services.

Postage

Cooperatives can obtain information on

rates for international mail service at a US. post

office.

Sales Outlets and Distribution Channels

For some foreign markets there are numerous buyers or agents that could potentially

import a shipment from a cooperative. In others,

there may be only one importer-e.g., a statecontrolled trading company-with which a cooperative could deal. Each entity connected with a

foreign market to which a cooperative could

potentially sell an export shipment can be considered a “sales outlet” for that cooperative.

Each sales outlet is part of a “distribution

channel” in its foreign market. A distribution

channel is the series of buyers, or agents and

buyers, that control a commodity in sequence as

it passes from the cooperative to the end user.

The agents and buyers of a chain may perform

many marketing functions before the commodity

reaches the ultimate consumer, including transportation, storage, packaging, and merchandising.

Export Definitions

To officials of the U.S. Department of

Commerce, the U.S. Customs Service, and most

other Federal agencies involved in the export

process, the meanings of “export shipment” and

“exporter” are clear. An export shipment is a

shipment that leaves a U.S. port en route to a foreign destination, including Canada or Mexico.

The exporter is the party who takes legal responsibility for the export shipment by signing the

shipper’s export declaration and other required

documentation.

In practice, defining “export shipment” and

“exporter” is less clear-cut. Many cooperatives

prepare and package products for foreign customers and have recognized brand names in foreign markets. But they use an intermediary to

sell their products overseas. These cooperatives

usually consider such sales as exports, regardless

of which party fills out the required documents.

In addition, not all shipments of U.S. commodities that ultimately arrive at foreign destinations are considered exports. The following

three types of sales would generally not be considered export sales: (1) shipments to U.S. territorial possessions, such as Puerto Rico, Guam,

and the Virgin Islands: (2) shipments to the U.S.

Armed Forces or U.S. diplomatic missions

abroad for their use: and (3) shipments to be

used as supplies aboard ocean and air carriers

engaged in international commerce.

Direct vs. Indirect Export Sales

Traditionally, a distinction has been made

between “direct” export sales-those made to

foreign buyers or agents-and “indirect” export

sales-those made to intermediaries who then

directly export the product. The degree to which

a cooperative makes an export sale through its

own personnel and facilities determines whether

the sale is classified as direct or indirect.

11
Opportunities for direct exporting vary

with commodity and industry. Moreover, opportunities vary with individual transactions.

Cooperatives capable of making direct export

sales will make indirect ones when it is more

profitable to do so.

Sales made to, or through, the following

types of firms are classified as either indirect or

direct export sales. These definitions may vary

between persons and according to the circumstances in which they are used.

Indirect Export Sales

Export Management Company (EMC)-An

EMC is an export facilitator that may perform all

of the management functions and administrative

tasks involved in conducting an export marketing program. Thus it can, in effect, act as a coop’s export department. It may work for a commission, retainer, or retainer plus commission.

It may have other clients with noncompetitive

commodities. Its offices are located in the U.S.

An EMC generally does not buy or sell commodities but, in some instances, it may finance

export sales.

Export Trading Company (ETC)-In contrast to an EMC, an ETC is an export intermediary that typically takes title to the commodities

that it exports. Cooperatives and investorowned competitors can form their own ETC.

The Export Trading Company Act, passed in

1982, grants limited antitrust protection for

groups of producers that engage in specified

trade activities. The distinctions between an

EMC and ETC are diminishing as each increasingly provide services that are typical of the

other.

The Export Trading Company Act of 1982 is

explained in greater detail in “Regulatory

Concerns.”

Export Merchant-The export merchant

purchases commodities directly from U.S. food

handling firms. The commodities are labeled,

packed, and marked as the merchant specifies.

The export merchant then sells them to foreign

buyers, assumes the necessary risks, and seeks

to make a profit. The merchant’s offices are

located in the United States.

Export Commission Agent-This type of

domestic firm represents foreign companies.

Acting as an agent for a foreign buyer, it will

locate a U.S. supplier, purchase commodities

needed, and receive a commission from the foreign firm.

Foreign Government Buying Agent-Some

foreign governments have agents located in the

United States that exclusively serve them and

buy various commodities as requested by them.

International Trading Company-This firm

specializes in purchasing commodities in one

country, selling them in one or more countries,

and handling all international shipping arrangements. A few very large international trading

companies handle most exports of US. grain:

they also have foreign sources of supply. All

sales to such firms are considered indirect.

Several large Japanese trading companies

maintain offices in the United States and other

countries. In addition to agricultural products,

they market industrial commodities and-unlike

the more generalized trading companies-are

primarily concerned with exporting Japanese

commodities and importing U.S. and other foreign-source commodities for use in Japan,

In a sale where a U.S. cooperative sells a

commodity to a Japanese trading company and

(1) the cooperative is responsible for delivery of

the commodity to a U.S. or Japanese port and (2)

the commodity is destined for use in Japan, then

the Japanese company is acting as a foreign

importer rather than as an intermediary (as

defined in this report). Such a sale may be classified as a direct export sale. In other circumstances, a sale to a Japanese trading company

may be considered an indirect export sale.

Direct Export Sales

Export Broker-An export broker is a US.

firm whose main function is to bring importer

and exporter together. A broker will typically

have a very small staff, perhaps only one or two

persons. Offices are small and are located in the

United States, usually at a port.

The broker is not a party to export transactions, although its services may result in a sale

that may otherwise not have been made. It may

also provide some limited advisory assistance to

the exporter. The broker receives a commission

from the exporter for each sale it arranges and

works with all buyers and exporters with which

12
it can establish contact. The broker does not buy

or sell commodities or finance export sales. The

cooperative exporter has essentially the same

sales responsibilities that it would have in the

absence of the broker.

If a co-op makes a sale through a broker to a

firm that subsequently exports the products

directly, such a sale would be considered indirect.

Foreign Sales Agent-The term “foreign

sales agent” is used interchangeably with “foreign sales representative.” It signifies a special

relationship between the U.S. exporter and a foreign firm. The agent works under a contract that

specifies the rate of commission (when applicable), defines the sales territory, and lays out

other working arrangements. The agent does not

usually represent the cooperative on an exclusive basis, but its other clients should have noncompetitive commodities.

There are two types of foreign sales agents:

an import agent and a foreign distributor. The

import broker is a foreign firm that brings together a U.S. supplier and a foreign buyer. A foreign

distributor purchases a commodity for its “own

account” and then resells it to other buyers further along in distribution channels. Both types

of agents are located in the major foreign markets

that they cover.

Foreign Retailer or Retailer Association-A

foreign retail food chain, or a foreign association

formed to purchase supplies for distribution to

affiliated chain stores or independent food

stores, may buy commodities direct from a U.S.

food cooperative.

End User-An end user is a foreign firm or

individual who is the last purchaser of a co-op’s

product in the form in which it was exported

from the United States. Thus a foreign consumer

may be the end user of fresh oranges, a bakery

may be the end user of canned cherries, or a textile mill may be the end user of a bale of cotton.

Foreign Government Agency-A foreign

government purchasing agency may buy commodities direct from a cooperative with delivery

to be made at a U.S. loading port or a designated

foreign discharge port. In some foreign countries, importing is handled through a government

monopoly, frequently called a “state-controlled

trading company.”

Market Research

After management has appraised the

resources and the competitive strengths and

weaknesses of the cooperative and has determined that it may be feasible to initiate or

expand an export program, market research is

needed to facilitate the selection of targeted markets. This research will help management

design a feasible export plan.

The U.S. l’kade Data Classi’cation System

Federal Government agencies use a series of

trade data classification schedules to categorize

U.S. export data. A cooperative export staff will

benefit from learning the code numbers that are

used for their export product(s). With these

numbers, staff members are in a better position

to fill out custom and census reports and other

required export documentation and to locate

trade and marketing statistics.

The United States recently joined the majority of its trading partners in adopting the

Harmonized Commodity Description and Coding

System for classifying trade data. More widely

known as the Harmonized System (HS), it is

organized into 22 sections: the first 4 cover most

agricultural goods.

Under the HS, each agricultural product is

assigned a six-digit code number. U.S. trade data

classification schedules are currently being

revised to be in accordance with the HS. Beyond

the first six digits, however, each country is

allowed to have its own coding system.

The following U.S. trade data classification

schedules are especially significant for U.S.

exporters:

Schedule B-These numbers are used for

reporting export shipments on the shipper’s

export declaration and other required documentation. All U.S. export shipments are originally

recorded and classified by their schedule B numbers. The data for all other U.S. export classification systems are transformed from schedule B

data.

Schedule B code numbers are the most

important for the cooperative staff to identify.

Code numbers for individual products can be

obtained by contacting the:

13
Foreign Trade Division

Bureau of the Census

Washington, DC 20233

Standard Industrial Classification

(SIC&This classification code is used by the

Bureau of the Census and the U.S. Department

of Commerce (DOC) for analyses of domestic

commerce. The Bureau of the Census, however,

transforms schedule B data into an approximation of the SIC-format in order to facilitate comparisons of domestic and international markets.

Many government agencies and private firms

use the SIC-format to organize their statistics

and reports on foreign markets.

SIC code numbers for individual products

are listed in the Bureau of the Census publication Standard Industrial Classification Manual,

which can be found in most research libraries.

Standard International lhde

Classification (SIX&This system was devised

by the United Nations to organize and report foreign trade data for all countries. SITC data are

commonly used for comparing the international

trade of different countries.

Targeting Pofen tial Foreign Markets

Cooperatives may find the following procedures useful for selecting targeted markets?

Screen Potential Markets

Step 1 - Obtain agricultural trade statistics

that show the global marketing trends for the

agricultural commodity your cooperative is

planning to export. As noted in the previous

section “Sources of Assistance,” FAS is an

excellent source for such data.

Step 2 - Identify 5 to 10 large and fast-growing markets for this commodity. ‘IYade trends

for these markets should be examined for the

past 3-5 years.

Step 3 - Identify some smaller but fastemerging markets that may provide opportunities. If the market is just beginning to open up,

5These suggestions are adapted from A Basic

Guide to Exporting, U.S. Department of Commerce,

September 1986.

there may be fewer competitors than in established markets.

Step 4 - Target three to five of the most statistically promising markets for further assessment. Consult with FAS staff, other suppliers

with experience in those countries, freight forwarders, and others to help refine targeted markets.

Assess Targeted Markets

Step 1 - Examine trends for the commodity

in more detail, as well as trends regarding related commodities that could influence demand.

Calculate overall consumption of the product

and the amount accounted for by imports for

each targeted market.

Step 2 - Determine the sources of competition, including the extent of domestic production and the major foreign suppliers for each targeted market.

Step 3 - Analyze factors affecting marketing

and use of the commodity in each market,

including end-user sectors, distribution channels, cultural idiosyncracies, and business practices.

Step 4 - For each targeted market, identify

any foreign trade barriers (tariff or nontariff) for

the commodity. Check for U.S. barriers, such as

export controls, that may affect exports to any of

the targeted markets.

Step 5 - Identify any U.S. or foreign government incentives to promote exporting of the

commodity.

After analyzing the information, the cooperative can select one or two of the most promising markets as primary export targeted markets,

and a few others as secondary targets. Again,

FAS staff and other sources of assistance can

help any cooperative with export market selection,

Cooperatives assessing alternative export

markets should give special attention to (1) the

supply-demand situation and (2) the alternative

distribution channels of each country:

1. Supply-Demand Situation - The potential

for exporting a U.S. agricultural commodity to a

foreign country is affected by changes in the

supply and effective demand for the commodity

14
in both that foreign country and in the rest of the

world.

Data should be assembled to show trends

and developments on a seasonal and annual

basis for shipments to the selected foreign country. Included should be data showing trends in

the volumes, values, and prices of the foreign

country’s imports of the commodity from the

United States and other sources, and trends in

the domestic production and consumption of the

foreign country.

This should be supplemented, at a latter

stage, by information on:

l The way in which the commodity is consumed in the foreign country:

l Consumption habits of consumer groups

(classified according to race, religion, age,

income, and rural or urban location):

l Variations in demand according to factors

such as product quality and packaging:

l The trend in consumer purchasing power,

recent or anticipated changes in import restrictions and other trade barriers:

l Outlook for preferential arrangements

between the foreign country and other countries:

l Nature and intensity of competition provided by domestic supplier firms:

l The major kinds of importers, i.e., brokers, distributors, end users, etc.;

l The export capabilities and probable competitive impact in this market of suppliers located in other countries.

Cooperatives should also consider the physical facilities of the selected foreign country. Are

the port facilities sufficient for discharging the

commodity? Are storage facilities adequate at

the port and inland? What is the situation with

respect to transportation facilities? Is the supply

of labor required for handling the commodity

large enough, competent, and stable?

Finally, political instability or anti-U.S. sentiment in the foreign country may limit the market potential of the country.

2. Alternative Distribution Channels - The

relative merits of each distribution channel

should be considered before an exporting cooperative commits itself to any one of them. The

following questions should be considered:

l Through what channels flow commodities

of the kinds handled by the cooperative?

l How important is each channel in terms

of volume and margin?

l How well is it supplied by domestic and

foreign firms?

l How difficult would it be for the cooperative to gain entry?

l Have some marketing opportunities been

overlooked by other U.S. suppliers?

l Have other U.S. suppliers tried to grasp

certain apparent opportunities but failed? If so,

why?

An exporting cooperative must select those

foreign importers and foreign sales agents that

have the experience and contacts needed to

develop sales through the distribution channel(s)

with the greatest potential for the cooperative’s

products.

Relations With Foreign Sales Agents

Some foreign sales agents operate import

businesses and buy products from the export

suppliers they represent, while others offer agent

representation as brokers who work on commission. With either type, an exclusive agreement

can be established. The agent as broker permits

more control over pricing but requires transactions with several different buyers.

A cooperative will usually have no more

than one foreign sales agent in a designated foreign market. Similarly, the agent will typically

not handle the same commodities for other U.S.

suppliers, unless the cooperative gives prior consent in each instance.

The cooperative is the shipper and bears the

responsibility for all major decisions in developing and maintaining the export program, but an

agent can provide some or all of the following

services:

l Obtain information from various sources

to aid in selection of dependable buyers:

l Arrange for the shipment of sample quantities of the co-op’s products and deliver or send

them to potential buyers;

l Estimate all costs, beyond the U.S. loading port, to be incurred in an export sale of the

co-op’s products:

l Sell the co-op’s commodities, subject to

final confirmation by the home office, to foreign

buyers:

15
l Reserve space on vessels to provide for

overseas delivery of the products:

l Meet with foreign buyers or their agents

soon after an initial shipment of the co-op’s

product is received to discuss all aspects of the

sale and delivery:

l Resolve misunderstandings (if any)

between buyer and seller:

l Provide a detailed accounting of all

expenses incurred on behalf of the cooperative:

l Assist the cooperative, if necessary, in

collection of payments for shipments to foreign

buyers:

l Regularly call on both established and

potential buyers and assist them with promotional activities designed to increase sales of the

co-op’s products:

l Keep the cooperative informed about regulations and actions of foreign governments and

other important information that may affect the

cooperative’s exports to that market:

l Handle promotion of the co-op’s products.

In most instances, the export sales function

should be centered in the cooperative’s own

export sales unit. The export sales manager

must maintain close and effective working relations with the co-op’s foreign sales agents.

Cooperatives may or may not wish to have

an agreement with their foreign sales agent in

written form. In practice, some co-op exporters

insist upon written agreements with all of their

foreign sales agents. Some refuse to enter into

any such agreements, and some decide on a

case-by-case basis, depending upon a number of

variables such as the agent’s preference, the contract laws of the agent’s country, and the business traditions of that country with regard to

contracts.

The responsibilities and obligations of each

party, the division of decisionmaking authority,

terms of compensation for the representative,

and the geographic area to be served by the representative are all key points to cover in any

agreement reached with an agent, whether it is

written or verbal.

Attention should also be given to avoiding

conflict with U.S. laws and those of the country

where the agent is based.

Product Preparation

A cooperative may have to modify its

export products to conform to foreign government regulations, geographic and climatic conditions, importer preferences, or standards of

living in the importing market. Product modification may also facilitate export shipping,

A cooperative may not have to modify its

product if consumers in the importing market

have similar demographic characteristics or

tastes, if the product is unique, if a brand name

identity has been established in the foreign market, or if the product is a commodity with few or

no distinguishing features.

Many foreign countries have agricultural

standards which may force co-op exporters to

modify their products. These regulations serve

to:

l protect the safety and health of the country’s citizens:

l force the importer to comply with the

quality requirements of the country:

l protect agricultural producers from foreign competition.

As is mentioned, co-op exporters can find

out about the agricultural standards of foreign

countries by contacting the USDA Technical

Office.

When deciding on the branding and labeling of export products, cooperatives must consider if:

l international brand names are important

to promote and distinguish the product or

whether local brands or private labels would do

more to heighten local interest:

l the colors used on labels and packages

are offensive or attractive to consumers in the

targeted market:

l labels can be produced in official or customary languages, if required by law or practice;

l it is necessary to provide information on

product content or country of origin:

l weights and measures are stated in local

units:

A cooperative may find that building international recognition for a brand is expensive.

Protection for brand names varies from one

country to another, and in some countries there

are barriers to the use of foreign brands or trademarks. In other countries, piracy of U.S.

16
exporters’ brand names and counterfeiting of

their products are widespread.

To protect its products and brand names, a

cooperative must comply with local laws on

patents, copyrights, and trademarks. A cooperative may benefit from consulting with local attorneys or consultants from the targeted market.

Promotion

Promotion can be an important part of

export market development for some cooperatives. Promotion activities include foreign trade

shows, direct mailings, price and nonprice promotions, and media advertising. Activities will

vary significantly in expense, and some will be

more appropriate than others for reaching a certain audience.

Trade shows and direct mailings are useful

for reaching potential foreign buyers or foreign

sales agents. Media advertising and price and

nonprice promotion are more appropriate for

reaching foreign consumers. In general, media

advertising is more expensive, and to get the

maximum benefit from it, the cooperative must

have a long-term commitment to that foreign

market.

A cooperative should work closely with its

foreign sales agent(s) or other foreign contacts in

developing any promotion campaigns or materials aimed at foreign markets. As noted earlier,

the USDA’s Foreign Agricultural Service (FAS)

offers extensive promotion assistance to agricultural exporters.

Participation in international trade shows

and foreign sales missions are two ways for a

cooperative to promote its products to buyers

and agents in a foreign market. FAS is heavily

involved in both of these promotion activities.

A major means of advertising in foreign

markets is by direct-mail brochures or correspondence. A cooperative can target a specific audience in a direct-mail campaign, depending upon

the quality and size of its mailing list. All

brochures or letters should have essential material translated into the foreign language of the

audience. As noted, FAS can provide cooperatives with foreign-buyer mailing lists by product

or country.

Price promotions include coupons and

sales. Nonprice promotions include (1) point-ofsale activities, such as instore demonstrations,

free samples, displays and posters, and pamphlets with nutritional information or recipes

and (2) promotional events, such as contests,

pageants, and sporting events.

For most foreign markets, cooperatives can

choose to advertise in any of a wide variety of

trade and consumer publications. Publishers frequently offer marketing assistance to exporters,

including specific recommendations on promoting their products in specific foreign markets.

A cooperative may also use television or

radio to promote its products in foreign markets.

In areas where programs may be seen and heard

in public places, television and radio promotions

offer one of the few means of bringing an advertising message to a large number of people. In

many countries, particularly in Latin America,

various forms of outdoor advertising (billboards,

posters, electric signs, etc.) are widely used to

reach the mass audience.

Because of the specialized knowledge

required to advertise and promote successfully

in foreign markets, cooperatives may wish to use

the services of a U.S. advertising agency with

offices or correspondents abroad. Some of these

agencies handle nothing but foreign advertising.

In addition, some marketing consultants specialize in the problems unique to selling in foreign

markets. Cooperatives can get information on

U.S. advertising agencies that handle foreign

accounts by contacting the:

International Advertising Association, Inc.

4 75 Fifth Avenue

New York, NY 10017

Such information is also available from the

annual international edition of Advertising Age.

U.S. Government Export Incentives

Cooperative exporters can take advantage of

a number of Government export incentives,

including foreign sales corporations, “drawback”

refunds of customs duties, and foreign trade

zones.

Foreign Sales Corporations

A foreign sales corporation (FSC), which

can be formed by one or more U.S. firms with

17
export interests, can obtain a corporate tax

exemption on 15 to 32 percent of the income

generated from the export of products grown,

processed, or made in the United States. (Up to

50 percent of the export product’s inputs may be

imported.) An FSC can function as a principal,

buying and selling for its own account, or as a

commission agent.

An FSC must incorporate and maintain its

major office in either a qualified foreign country

(one having an exchange of tax information program with the United States) or one of four U.S.

possessions-the U.S. Virgin Islands, Guam,

American Samoa, or the Commonwealth of

Northern Mariana Islands. In addition, an FSC

must keep its books of account at its foreign

office, although duplicates of certain records

must also be kept in the United States. The FSC

can have no more than 25 shareholders: and it

may issue common, but not preferred, stock.

Further, at least one member of the board of

directors must not be a U.S. resident. Finally, it

must file an election to become an FSC with the

Internal Revenue Service.

For an export transaction to qualify for tax

benefits, certain related activities and costs must

be handled by the FSC outside of U.S. customs

territory, either directly or through its agents. At

a minimum, it must either solicit, negotiate, or

make the contract with the foreign buyer. In

addition, it must pay for some of the following

five sales activities: advertising and promotion,

processing of customers orders and arranging for

delivery, international transportation, billing

and collection, and assumption of credit risk.

The FSC may choose to assume either 50 percent of the total costs of all five activities or 85

percent of the total costs of any two of the five.

As an alternative to a regular FSC, exporters

may form a “small” FSC, which is exempt from

many of the requirements that apply to the former’s transactions and operations. Such an FSC

may have no more than $5 million in qualifying

export sales.

Another option for exporters is to form an

Interest Charge-Domestic International Sales

Corporation (IC-DISC). With this type of DISC,

94 percent of up to $10 million in export sales

can be deferred as taxable income. IC-DISC

shareholders must pay yearly interest charges, at

Treasury bill rates, on the deferred taxes. In

effect, IC-DISC tax deferral benefits allow small

exporters to “borrow” from the U.S. Treasury at

relatively favorable interest rates.

For more information on FSC’s, contact the

Office of Trade Finance of the U.S. Department

of Commerce at (202) 377-4471.

Drawback of Custom Duties

“Drawback” is a form of tax relief in which

a customs duty is refunded, in part or in total,

because of the particular use made of the commodity on which the duty was collected. Some

agricultural marketing cooperatives import commodities for use as inputs in the manufacture of

their products. They are eligible for drawback,

less 1 percent for customs costs, on any duties

paid for inputs used in the manufacture of products which are exported. For more information

on drawbacks, contact the Drawback and Bonds

Branch of the U.S. Customs Service at (202) 566-

5856.

Foreign Tkade Zones

Foreign trade zones (or free trade zones) are

sites located throughout the United States that

are considered outside of US. customs territory.

Cooperatives can use these zones to accelerate

the export status of their shipments for purposes

of customs drawback. In addition, imported

commodity inputs can be storedsorted, graded,

or otherwise processed before being brought into

U.S. customs territory. Finally, cooperatives can

manufacture export-bound products that use

imported inputs in the zone, and thus avoid

paying any duties in the first place.

MAKING THE SALE

Relations with Foreign Buyers

Requirements of Foreign Buyers

Information on the current commodity

interests of selected foreign importers can be

obtained through FAX, letter, cable, or telephone

by a cooperative that has established personal

18
contact with each importer. It is also possible,

though more difficult if there has been no personal contact, to find out through correspondence exactly what a buyer’s preferences or

needs are with respect to product specifications,

container and package specifications, import

restrictions and requirements, shipping requirements, supply schedule, and terms of sale.

Cooperatives need to make direct and personal contacts with foreign buyers to gain a

deeper insight into the nature of a market, and

the economic, political, and social forces at work

within it. One or more co-op staff members with

export responsibilities should visit foreign markets to learn about them firsthand.

Many important questions can best be

answered through personal interviews with foreign buyers. Some of these important questions

are: What are the attitudes and opinions of individual foreign business persons regarding the

United States, its agricultural commodities, and

its agricultural cooperatives? How favorable or

unfavorable is the foreign market environment

for maintaining or increasing purchases of your

co-op’s products? What changes are likely?

Figure 3 is an illustration of a form that may

be helpful for summarizing information obtained

during an interview with a foreign buyer.

Figure 34ndivldual Buyer Interview Record 6

(A) Name and address of firm:

(B) Phone:

FAX:

(C) Names and titles of key individuals:

03 Kind of import business:

Functions performed:

Kinds and numbers of customers/sales outlets:

(El Markets served:

VI Physical facilities:

G)

M

Size of business (approx):

Number of employees:

Total annual $ volume:

Annual import $ volume:

US. foods now handled

Kinds of foods and packs:

Names of firms with which deal regularly:

Kinds of sales arrangements:

(I) US. foods for which new sources desired

Kinds of foods and packs:

Kinds of sales arrangements:

(J) Other information:

Last personal interview with coop

Date:

Rep(s) of buyer:

Rep(s) of co-op:

6 This figure is adapted from Hirsch, Donald E., Export Marketing Guide for Cooperatives, U.S. Department of Agriculture,

FCS Marketing Research Report 1074, March 1977, p. 30.

19
Elements of a Sale

The foreign buyer is interested in four basic

elements of a sale: product, price, performance,

and profit.

A foreign buyer usually wants to study a

sample of the co-op’s product. The cooperative

should provide a sample which is representative

of the type of product that it can supply regularly and in quantity, rather than a selection of its

very best quality products. Many foreign buyers, especially in Western Europe and Japan,

stress uniformity in quality. They want the

same quality-whether of size or grade-in each

shipment they receive.

For food products sold under the co-op’s

brand name, a foreign buyer will often seek

exclusive use of that brand name within its sales

territory. This is to enable the buyer to profit

from its sales and from its efforts to promote that

brand. The cooperative may benefit from granting the buyer such exclusive use.

The foreign buyer seeks to buy at the lowest

practicable price. If the buyer is dependable

and interested in developing a continuing business, then the buyer can recognize the stake that

the cooperative has, as well as its own benefit,

in settling on a price that reflects the competitive market situation in relation to the quality

and quantity of the product sold. A cooperative

is generally well advised to stay away from the

“fast buck” buyers who are interested in “oneshot” deals or who specialize in “distress sales.”

Performance by the co-op supplier is

important to the foreign buyer. The product

shipped should conform to the product and

delivery specifications of the sales agreement.

The buyer also wants a dependable supply.

Adverse weather during the production season, or other factors, often cause year-to-year

fluctuations in the volume of a commodity marketed by a cooperative. An exporting cooperative has three basic alternatives with respect to

its export sales program during the years of

short supply. It can:

l Tell a foreign buyer that it is not interested in sales to the buyer’s market during the current marketing year.

l Quote a price to the foreign buyer that is

sufficiently higher than that available in the U.S.

domestic market, or in other foreign markets, to

make a sale financially attractive to the cooperative.

l Guarantee in advance that the foreign

buyer will receive a specified minimum proportion of the cooperative’s supply. For example,

the cooperative may guarantee that the proportion available to the buyer during the current

marketing year would be the same proportion

that it purchased during the previous year.

Under this arrangement, the buyer would

have a smaller quantity available to it in absolute terms but would have an assured share of

the co-op’s supply. The buyer could still sell to

its customers, though in reduced quantities.

Price could also be guaranteed in advance. The

maximum might be based on the current price of

the co-op’s product in that foreign market or in

the U.S. market.

The first of these alternatives is not appropriate for a cooperative that is interested in

developing or maintaining an export presence in

that foreign market.

The third alternative may be in the longterm interest of the cooperative, especially if the

co-op is selling a product under its own brand

name or that of the buyer. This kind of supply

guarantee on the part of the cooperative during a

year of short supply may well lead to a request

that the buyer make a similar quantity-and-price

purchase guarantee for years when the cooperative has unusually large quantities of product to

market.

Agreement on Terms

After selection of a market and a potential

buyer, there are still many details to be worked

out in developing a sale. The major items may

be summarized as follows:

1. The buyer’s preferences with respect to

product specifications, including variety, price

levels, size and kind of shipping container, season of year during which deliveries are desired,

quantities per shipment and per season, and

delivery and payment terms of sale.

2. Import restrictions and requirements

with respect to labels and markings on packing

containers: import periods, licenses, quotas, and

levies: and documents such as certificate of origin, grade inspection certificate, or certificate of

composition or viability.

20
3. Shipping requirements, particularly temperature and humidity. In addition, the availability, frequency, dependability, and comparative costs of various modes of ocean or air

transportation.

4. Costs to be incurred by shipper in preparing an export shipment and also the costs from

the time the shipment leaves the local shipping

point until the time and place at which the buyer

takes title.

Clear communication is a necessity in international trade. The buyer and exporter must

agree on all the terms of a sale if it is to be consummated to the satisfaction of both parties.

Specifying details explicitly and in writing minimizes opportunities for misunderstanding.

The task of getting agreement on all possible

points of issue can be simplified by advance

planning. Figure 4 is a checklist of information

that will be needed by a buyer and a seller to

complete a sales offer.

Many communications between seller and

buyer can be handled by FAX, mail, cable, or

telephone. A new-to-exporting cooperative will

soon find that acquisition of, or access to,

telecommunication facilities, especially a FAX

machine, is essential to its business.

Speed, as well as accuracy, is needed in

communications with a potential foreign buyer

that has made a serious offer. If buyers feel that

their inquiries are not receiving adequate attention, they may turn to competing U.S. and foreign suppliers. Moreover, many foreign buyers

initially contact more than one supplier when

they need to arrange a purchase. The need for

prompt action by the cooperative is also necessary in this situation.

Delivery Terms of Sale

A key aspect of any export sale is the location at which the title and risk of a shipment is

transferred from the exporter to the importer. To

designate that point, it is customary to use one of

several delivery terms of sale which is almost

always expressed as an abbreviation. Each delivery term of sale defines the respective duties and

liabilities of the exporter and the importer.

While there is no official agreement among

countries, the 14 delivery terms of sale currently

defined by the International Chamber of

Commerce (ICC), known as the “incoterms,” are

widely regarded as the standard around the

world. The ICC periodically updates the definitions of the incoterms and has added new ones

to keep up with developments in international

trade, such as the rise of intermodal transportation.

Some shippers still quote delivery terms of

sale from the Revised American Foreign 7Yade

Definitions-1941. Although there is little difference in terms from either source, it is safer

and more precise to use incoterms.

For any export sale, it is critical that both

the exporter and the foreign buyer have a common understanding regarding the delivery terms

of sale. For this reason, the co-op export staff

should be familiar with the incoterms before

preparing a quotation or a pro forma invoice.

A guide defining the 14 incoterms in detail

is available from ICC. A smaller booklet describing the incoterms without diagrams and illustrations is also available. For current prices and

ordering information, contact:

ICC Publishing Corporation, Inc.

801 Second Avenue Suite 1204

New York, N.Y. 10017

The four most frequently quoted trade terms

for agricultural commodities and their common

three-letter abbreviations are: “free alongside

ship” (FAS), “free on board” (FOB), “cost and

freight” (C&F) and “cost, insurance, and freight”

(CIF). Working with the United Nations, the ICC

has given each incoterm a standardized three-letter abbreviation known as its international code.

FAS, FOB, and CIF remain the same, but C&F

has been changed to CFR.

These terms are briefly described below, but

any person who is responsible for developing

export sales needs a more detailed knowledge of

these and the other incoterms.

Fme Alongside Ship

Under the FAS trade term, the exporter

assumes all risks and pays all expenses through

placing the shipment on a dock ready for loading

at a port specified by the importer. At this point,

the importer takes title and assumes liability

(i.e., assumes the risks of loss or damage to the

goods) for the shipment from that moment. The

importer must also contract for the carrier and

21
pay for the costs of clearing the shipment for

export, loading it into the vessel, and all subsequent expenses.

Free on Board (FOB)

Under the FOB term, the exporter aisumes

all risks and pays all expenses through loading

the shipment into the holds of the vessel at a

Figure AInformation Needed for Sales Offer7

This checklist applies to raw and processed foods in general; not all items

are pertinent to any given commodity.

KEY:

BP - Buyer to express preferences

BI - Buyer to provide information

needed by seller

SP - Seller to express preferences

SI - Seller to provide information

needed by buyer

COMMODITY

1. Kind (BP, SI)

2. Variety (BP, SI)

3. Fresh, frozen, canned, or

dehydrated (BP, SI)

4. End use (BP, SI)

PRODUCT SPECIFICATIONS

5. Grade(s) (BP, SI)

6. Composition (BP, SI)

7. Minimum and/or maximum percent

moisture (BP, SI)

8. Size (raw product) (BP, SI)

8. Size of particles (processed product)

(BP, SI)

10. Shape (raw product) (BP, SI)

11. Appearance (BP, SI)

12. Flavor (BP, SI)

13. Brix (processed product) (BP, SI)

14. Brand name(s) (BP, SI)

15. Special process or handling (BP, SI)

CONTAINER AND PACKAGE

SPECIFICATIONS

16. Packing container:

a. Kind-Carton of given number of layers, double corrugated or triple wall,

or specified test weight; outer “master” or “telescope” carton (BP, SI)

b. Strapping-Plastic tape or metal

band (SI)

c. Waterproof or other lining, packing

material, cell pack or other trays,

special wrappings (SI)

d. Gross and net weights (SI)

e. Length, width, height, and/or cubic

measurement (SI)

f. Special markings required (BI)

17. Individual package:

a. Kind (BP, SI)

b. Size (SI)

c. Net weight (SI)

d. Number per packing container (BP,

SI)

e. Special imprints or labels required

(BI)

18. Minimum truckload, carlot, or van

containerloada. Number of packing containers (SI)

b. Gross weight of packing containers

(SI)

22. Certificate of origin (BI)

23. Grade certificate (BI)

SHIPPING REQUIREMENTS

26. Mode of transportation (BP, SI)

27. Dry, ventilated, or reefer space (BP,

SI)

28. Temperature and humidity (BP, SI)

SUPPLY SCHEDULE

2% Approximate beginning and ending

dates supply desired or available

(BP, SI)

30. Date first shipment desired (BP, SP)

31. Quantity desired or available for

first shipment (BP, SP)

32. Quantity desired or available in

next 12 months (BP, SP)

33. Number of shipments desired in

next 12 months (BP, SP)

TERMS OF SALE

34. Loading port(s) (BP, SP)

35. Discharge port(s) (BP, SP)

36. Indicated price; FAS, FOB, CFR,

CIF, or other delivery term of sale;

named port (BP, SI)

37. Firm price for specified period, or

price subject to final confirmation

(SI)

38. Quantity firm for specified period,

or quantity subject to prior sale (SI)

39. Payment term of sale (BP, SP)

40. Discounts by seller for cash, quantity, or other conditions (BP, SI)

41. Promotional allowances by

seller-cash or product (BP, SI)

42. Rate of commission to be included

for importer if acting as an agent

rather than as actual buyer (BI)

DISTRIBUTION

43. Geographic area involved (BI)

44. Distribution channels (BI)

specified area(s) (BP, SI)

PROMOTIONAL ITEMS

SUPPLIED BY SELLER

47. Samples of labels (BP, SI)

48. Printed materials on characteristics,

promotion, merchandising, and/or

use of product (BP, SI)

7 This fIgwe is adapted from Hirsch, Donald E., Export Marketing Guide for Cooperatives, U.S. Department of Agriculture,

FCS Marketing Research Report 1074, March 1977, p. 33-4

22
port specified by the importer. The major difference from FAS conditions is that the exporter

takes responsibility for, and bears the costs of,

clearing the goods for export. The importer takes

title and assumes liability for the shipment at the

moment it “passes the ship’s rail.” The importer

pays for freight and all subsequent costs, including loading costs if they are included in freight:

otherwise the exporter pays for loading.

If either the cooperative or the buyer desires

flexibility in selecting a loading port, a general

area, such as U.S. Gulf, may be specified rather

than a single port.

Since 1976, ICC has had the separate

incoterm “FOB Airport” (FOA) for FOB shipments that are transported by air carriers. The

difference between this and FOB is that title and

liability are transferred when the goods are

delivered to the air carrier at the airport of

departure, rather than when they are loaded onto

the aircraft.

Cost and Fmigh t (CFR)

The “cost” is the value of the shipment

when it is loaded aboard an ocean carrier at the

U.S. port of embarkation, and “freight” is the

cost of transportation to a named foreign port of

destination or specified geographic range of foreign ports. Under CFR the exporter pays all

costs (except insurance) through unloading the

shipment over the vessel’s rail at the foreign port

of destination. The importer, however, assumes

liability when the shipment is loaded at the U.S.

port and pays for marine insurance to cover the

shipment.

Cost, Jimrance, and Freight (CLFJ

Under CIF conditions, the exporter pays all

costs, including insurance, through unloading

the shipment over the vessel’s rail at the foreign

port of destination. The difference between CIF

and CFR terms is that the exporter pays for

marine insurance coverage. The importer, however, still assumes liability for the shipment

when it is loaded at the U.S. port.

Other lixotenns

There are nine other less-frequently-used

incoterms defined by the ICC. The title, international code abbreviation, and a summary of conditions for each of these incoterms are listed

below. They are presented in order of increasing

involvement and cost for the exporter.

Ex Works (EXW)-_The seller is only responsible for making the shipment available at its

premises. The buyer must make all of the export

arrangements and bear all of the costs and risks.

“Works” is a generic term which could mean

warehouse, plant, or any other point where products are produced or stored, thus “ex warehouse” and “ex plant” are two of many possible

variations of the term.

Free Carrier (FI?C)_This term was adopted

in 1980 to meet the needs of exporters that use

intermodal transport, such as shipping by containers that are carried by rail car or truck, and

then directly loaded into air or ocean carriers.

The seller fulfills its obligation by delivering the

shipment to the buyer’s carrier at a terminal

somewhere between the seller’s premises and the

carrier’s port.

Free on Rail (FOR)/Free on Truck (FOT)-

The seller’s primary duties here are to deliver

the shipment to the railway. Both “truck” and

“rail” refer to transport by train (truck here

means a railroad freight car). The buyer assumes

all costs and risks for the shipment after it has

been delivered to the railway dispatching station

(or in the case of full freight-car loads, after the

shipment has been loaded aboard cars arranged

by the seller).

Freight or Carriage Paid To (OCPtAs with

a CFR sale, the exporter is responsible for paying

freight and cost to the foreign destination, while

the buyer must obtain and pay for marine insurance. CFR only applies to ocean carriers, however, while OCP can apply to any mode of international transport. OCP sales also differ from CFR

in that the exporter assumes all risks for the

shipment until it is delivered to the first carrier,

not the ship’s rail. This is used with intermodal

shipments where the first carrier of a container

will be a truck, freight car, or barge.

Freight or Carriage and Insurance Paid To

(UP)- This term has the same conditions as

OCP, except that the exporter is responsible for

marine insurance coverage.

Ex Ship (EXS&-For EXS sales, the exporter

is obligated to deliver the shipment on board an

ocean carrier to the designated foreign port of

destination. As with a CFR sale, it pays all costs

23
up to the point where the shipment is unloaded.

Unlike a CFR sale, however, the exporter also

assumes all risks to that point. It is up to the

exporter to obtain any marine insurance coverage that it wants for its shipment.

Ex Quay (EXQ&This term has the same

conditions as EXS, except that the exporter must

pay the costs and assume the risks of unloading

the shipment and clearing it, for import with the

foreign government.

Delivered At Frontier (DAF)-Under this

term, the exporter assumes all costs and risks for

the shipment up to the point where it is delivered to the border of the foreign country specified by the importer and cleared for export.

DAF is intended to be used for shipments that

are transported by railway or road, though it

may be used with any mode of transportation.

Delivered Duty Paid (DDP)-The opposite

of EXW, the exporter assumes all costs and risks

for the shipment until it is delivered to a point

specified by the importer inside the foreign

country. The exporter is responsible for unloading the goods, clearing them for import, and

transporting them to the designated point.

Pricing

The basic objective of export pricing is the

same as domestic pricing-to have the price

high enough to provide a net margin for the

cooperative but low enough to induce foreign

importers to buy the commodity.

Alternative Methods

The following export pricing methods are

some that can be used by a cooperative seeking

to establish a continuing export marketing program (in contrast to periodic surplus disposal

activities):

1. Take the EXW plant price for a domestic

sale and add all costs involved in preparing the

product for export and in moving it to the point

where the title is transferred to the foreign

buyer. This is the simplest method of pricing,

which is commonly used by many cooperatives,

especially the smaller ones or those new to

exporting.

2. Take the price arrived at under alternative 1 and deduct the average cost of domestic

selling and advertising. (The cost of foreign selling-and advertising, if any-would be included

in the price developed under alternative 1.)

This modification results in a more realistic as

well as a slightly lower export price.

3. Calculate the marginal cost of producing

the commodity for the export market: this is the

average cost of each additional unit produced in

excess of the quantity desired for the domestic

market.

This alternative has much greater application for industrial products than for agricultural

products because the industrial producer normally has much greater control over the annual

supply of its commodity. It may, however, be

considered by a cooperative that purchases supplies of an agricultural commodity on the spot

market to supplement quantities received from

producer-members. It may also have significance in long-range planning for any exporting

cooperative.

Calculate the proportions of the total volume of the product that are to be sold domestically and in foreign markets at competitive

prices in order to have the highest possible price

for the cooperative’s total output of the product.

It may not be desirable to adhere to this

pricing procedure on a seasonal or annual basis

because it can lead to an in-and-out export sales

program that prevents development of relatively

stable foreign markets for the co-op’s product.

Recapturing lost markets can be both difficult

and expensive. It also may be difficult to calculate the total output value in the long run, but

this technique deserves consideration as a

means of maximizing returns to producer-members. There must be a balance between shortrun

and longrun considerations.

4. Another pricing technique is to guarantee

an established foreign buyer who offers attractive long-term sales opportunities (especially for

a branded product) a certain proportion of the

co-op’s annual volume of production. A price or

range of prices could be agreed upon ahead of

time.

5. Finally, “introductory” pricing has a

place in export marketing as well as in domestic

marketing. Exceptionally low prices during an

initial sales effort may encourage more potential

users to try a product. They may find that they

24
like it and are willing to pay a competitive price

for it. To avoid misunderstandings, it may be

desirable to indicate that the introductory price

is a temporary bargain price.

Some degree of flexibility in agricultural

pricing is needed. Sales conditions vary

between buyers and markets and over time.

Foreign sales are extremely important to some

cooperatives but not to others. Prices are highly

volatile for some commodities but quite stable

for others. The levels of competitive prices in a

foreign market may be quite well known among

sellers of some commodities (e.g., wheat) while

sellers of other commodities (e.g., fresh cranberries) may have relatively few sources of price

information. Thus, there is no set pattern for

agricultural export pricing.

Estimating Costs

The marketing margin is necessarily wider

for export shipments than for domestic shipments. This creates pressure on cooperatives to

control export marketing costs and to complete

export transactions as efficiently as possible.

An efficient cost accounting system is

essential. It enables a co-op manager to develop

realistic price quotations for both foreign and

domestic sales. Once a cooperative has established a basic value for its commodity, the cooperative can begin to consider export marketing

costs.

Sales Offer and Contract

An export sale, like a domestic sale,

involves both a sales offer and a sales contract.

These are likely, however, to be more formal and

precise documents in exporting than in domestic

marketing.

A few cooperatives regularly issue price

lists to established foreign customers. Most,

however, begin negotiations with a more formal

sales offer. Sometimes the foreign buyer will

make the initial contact by inquiring whether a

given quantity of a specified commodity is available, submitting a detailed purchase offer,

including a designated purchase price, or issuing

a tender.

A “tender” is a formal bid by an individual

buyer to purchase-or a formal offer by an individual exporter to sell-a specified quantity of a

selected commodity under prescribed conditions. A “public tender” to buy is open to all

qualified suppliers, whereas a “private tender”

to buy is open to selected suppliers only.

A sale to a foreign government or its representative usually involves a tender to buy that

specifies the characteristics of the commodity,

shipping arrangements, and payment provisions.

Many export sales of grain, soybeans, and livestock have been made in response to tenders.

Sales Offer

An export sales offer includes a price quotation and a description of the product, specifies a

quantity, or range in quantity, of product available, and specifies shipping arrangements and

payment terms.

The foreign buyer will’need to know the

number of individual items to be handled, such

as bags or cases of designated size or weight. In

order to arrange for transportation and to estimate its cost, the buyer will need to know the

gross and net shipping weights and the cubic

volume of each packing unit and the total shipment. The buyer may also need the dimensions

of each packing unit.

In some instances, an exporting cooperative

may wish to offer various options. These may

relate to the form in which the product will be

shipped, packaging, mode of transportation,

shipping date, price discounts related to quantity

or payment in cash, or other details.

The foreign buyer will also need to know

the approximate date that the shipment can be

loaded at a U.S. port or be expected to arrive at a

foreign discharge port. When a sale is completed, the buyer will need definite information.

A sales offer is usually qualified by setting

an expiration date or by inclusion of the term

“subject to confirmation.” The objective in each

case is to give the cooperative some flexibility in

case of a sudden rise in domestic or foreign market prices for the commodity, development of

another sales opportunity with more favorable

terms, or the acceptance of offers by a number of

buyers that result in more orders than the cooperative can fill.

It is customary to receive counteroffers from

buyers that seek to purchase supplies of a com25
modity at a lower price than that offered by the

exporter. This is a part of the sales negotiation

process. In some instances, an exporter will

anticipate such a reaction and set its first offering price at a higher level than it expects to

receive. This can backfire, however, if the buyer

simply purchases from another lower priced

source.

In all its decisions with respect to price and

other terms of sale, an exporting cooperative

will base its decision on both current and longterm assessments of its supply situation and

alternative sales possibilities. If delivery and

payment are not to be made promptly, special

consideration will have to be given to developments that may occur before delivery and payment are made.

A “pro forma invoice” is often supplied to a

foreign buyer clearly interested in making a purchase. This is a temporary document that (1)

enumerates terms of sale that tentatively have

been agreed to by both the cooperative and the

buyer; (2) provides estimates of shipping specifications, costs, and dates: and (3) assists the

buyer to meet certain requirements that may

exist in its country. For example, the buyer may

need an import license and may need to present

a pro forma invoice to receive one.

Sometimes the importer will accept the

terms of a pro forma invoice and commit, by

FAX, letter, or other means, to a purchase on

those terms. In other cases, the importer will

submit a formal export order. The provisions of

an export order are similar to those of a pro

forma invoice, but it is a document prepared by

the buyer rather than the exporter.

An export order is often used when there

has been no prior agreement on such matters as

specifying the documents to be handled by the

buyer, foreign bank references, U.S. trade references, and the form and nature of markings on

each shipping container that are required by the

buyer.

Most of the information in the buyer’s

export order may be entered on a special form

called a “house order.” The purpose is to have a

uniform way of summarizing information

received in export orders from various buyers.

This simplifies the internal handling of the

information by the cooperative.

Sales Contract

Each export sale should be confirmed in

writing in some manner. Both buyer and

exporter must be firmly committed. A sales contract is the safest way to form and record a contractual agreement.

The sales contract may be in essentially the

same format as the pro forma invoice. However,

it must be signed by both parties. This type of

agreement is generally satisfactory in a continuing sales program involving a dependable foreign buyer. In other cases, however, more detail

may be necessary. Sometimes, for example, provision should be made to compensate for an

impending change in the exchange rates of the

U.S. dollar and the importer’s currency.

A more detailed contract may be necessary

if the buyer has limited experience with imports

of U.S. agricultural commodities or is new to the

trade. For example, in a sale on Cost and

Freight (CFR) delivery terms, it may be to the

advantage of the cooperative to explicitly state

in the contract that the buyer will obtain and

pay for the necessary marine insurance. The

time and place at which ownership transfers

from exporter to importer should also be specified. In a CFR sale this would normally occur

when the commodity is unloaded over the ship’s

rail.

The other terms of sale-commodity specifications, packing, payment, shipment, documents-may be described in greater detail than

was necessary on the pro forma invoice.

Further, it may be appropriate to state in the

contract that the seller will make delivery as

scheduled, unless there is some extraordinary

event resulting from nature or unforeseen

human acts, such as storms at sea or at port,

shipwreck, strikes, riots, civil commotions, or

acts of war.

In some countries it is customary to have

the sales contract expressed in English. In other

countries, however, it may be necessary to use

the local language. Great care must be taken to

be certain that a translation has the same meaning as a contract expressed in English. Even

within the same language, words and phrases

will vary in meaning between dialects.

Sometimes misunderstandings, or accusations of noncompliance with the terms of a sales

26
contract, lead to disputes between exporter and

foreign buyer. The procedures for resolving such

disputes varies greatly according to circumstances and the individual importer and foreign

country involved.

In any sales contract each party seeks to

obtain a maximum degree of flexibility for itself

and a minimum for the other party. The optimum result is a workable compromise.

Payment Timns of Sale

There are several basic ways in which a

cooperative can arrange to receive payment from

a foreign buyer. As with delivery terms, the

importer and the exporter must agree upon a

payment term of sale in the sales contract. This

payment term will define the rights and obligations of each party with respect to payment for

the export shipment.

One matter on which both parties must

agree is the currency in which the exporter is to

be paid. Cooperatives usually demand payment

in U.S. dollars. This avoids the risk and complications of accepting payment in a foreign currency, which must then be exchanged for U.S. currency. In certain instances, however, being able

to accept payment in a foreign currency may give

a cooperative an advantage over competing suppliers.

Each party wishes to minimize its risk exposure in the transaction, and each wants terms

most favorable to itself. The importer wants to

delay paying for the shipment as long as it can,

while the exporter wants to receive payment as

soon as possible.The payment terms of sale that

a cooperative can offer to foreign buyers can give

it a competitive edge over competing suppliers.

Before determining which payment terms of sale

are acceptable to the cooperative, the export staff

should consult with an international banker.

The following payment terms of sale are

arranged in order from the least risky to the most

risky for the exporter:

Cash in Advance-Receiving payment

before sending the shipment would seem ideal

for the exporter, but importers are reluctant to do

this for obvious reasons. They lose use of those

funds for the period of time it takes for the shipment to arrive, and they must trust the exporter

to deliver the shipment in accordance with contract specifications.

Letters of Credit (LOCJ--An export letter of

credit is a document issued by a bank at the

importer’s request in favor of the exporter. It

provides the issuing bank’s promise to pay a

specified amount of money contingent upon the

exporter’s presentation of certain documents

related to the transaction. The documents confirm that conditions stated in the letter of credit-e.g., terms of sale, shipping date, insurance

coverage, etc.-have been met.

An LOC may be either irrevocable, which

means that it cannot be altered or canceled without the consent of all parties concerned, or revocable, meaning it can be altered or canceled solely at the buyer’s request. When an LOC is

irrevocable, the bank must pay, even if the buyer

defaults. In practice, nearly all LOC’s are irrevocable.

If an LOC is confirmed by a U.S. bank, the

exporter is assured payment by that bank, even if

the buyer’s foreign bank defaults.

Drafts and Documentary Collection:

Documents Against Payment (D/P) and

Documents Against Acceptance (D/A&In the

context of an export sale, a draft is an order from

the exporter to the foreign buyer to make payment for the commodities being shipped. It is a

financial document drawn by the exporter,

through a bank, against the assets of the importer

for the value of the export shipment. It is similar

to an LOC, but it is less secure because the

exporter has no recourse to the bank if the buyer

defaults.

A “clean draft” is one that is sent to the

importer’s bank without any of the transaction

documentation, while a “documentary draft” is

sent with the documents attached.

There are three types of drafts commonly

used in export transactions: (1) A “sight draft”

requires that the importer promptly pay the

value of the draft: (2) a “time draft” requires that

the importer pay within a specified period of

time, such as 30, 60, or 90 days after accepting

the draft: and (3) a “date draft” requires payment

by a date that is specified on the draft, regardless

of when the draft is accepted by the importer.

An importer can delay paying either sight or

time drafts by delaying acceptance of the draft.

Such delays can be prevented by using a date

draft.

27
Under D/P terms, payment is to be made at

sight of the completed documents. This method

involves the use of a sight or date draft: it is

used when sellers wish to retain control of the

shipment either for credit reasons or for the purpose of title retention.

A bank acts as intermediary and is presented with the original bill of lading endorsed by

the shipper and other documents (packing lists,

consular invoices, insurance certificates, etc.)

that are not released to the importer until payment of the draft. The advantage of this method

is that the exporter retains title to the goods

until payment is made. The disadvantage is that

the importer can refuse to pay the draft and the

exporter is then responsible for shipping the

goods back to the United States at its own

expense or reselling the shipment to a third

party in the foreign country.

D/A terms are similar to D/P terms, except

that the importer is only required to agree to pay

the draft by a specified future date in order to

receive title and other documents to the shipment. Time or date drafts are used in these

transactions.

Cash Against Documents (CAD)-CAD is

similar to D/P, but instead of using a sight draft,

the sales offer and contract will provide for

“cash against documents” or “cash against documents at first presentation.” These phrases

mean that the buyer is to pay promptly as soon

as the bill of lading, invoice, and other documents are received at its designated bank. No

financial documents or drafts, however, are sent

to the designated bank. This method of collection can be used to avoid paying taxes on financial documents, or in those cases when the

importing country does not use drafts.

The necessary documents are airmailed to

the foreign bank, and payment is made directly

to the exporter, its agent, or its bank. Under this

arrangement, the U.S. bank normally performs

no special services, has no responsibility for collection of payment, and does not receive a special fee for such services.

A relatively small U.S. exporter working

with an export agent that has close personal contacts and experience with foreign buyers may

rely on the agent to select buyers with high credit and performance ratings to which sales can be

made on CAD basis.

Open Account-This method of payment

involves having the commodities shipped to the

foreign importer who takes the title according to

the delivery term of sale. Payment is made at

some future date, such as 30 days after delivery,

or at the end of each month if deliveries are

made frequently. In effect, the exporter is making an interest-free loan for the value of the

shipment from the time of the delivery until

payment is made.

Consignmen t-In a consignment sale, the

commodity is shipped to the foreign importer

and payment to the U.S. exporter is deferred

until the importer has resold the commodity.

The importer provides a statement showing the

gross sales value, its expenses, its commission,

and the amount due the exporter.

For the exporter, this is a high-risk method

of payment. If there is a sharp drop in price on

the foreign market, exceptional deterioration of

a perishable product, or an inaccurate cost statement from an unscrupulous importer, the

exporter may not receive enough money to cover

its international freight expenses. Conversely,

for the importer this is a low-risk situation. The

importer cannot lose money except under

extraordinary circumstances where the receipts

from sales are less than expenses.

Barter and Coun tertrade-Countertrade is

an arrangement for payment or financing by a

means other than a currency-for-goods basis.

Barter-goods directly traded for goods-is the

most basic form of countertrade.

Barter transactions are more frequently

arranged with importers from developing and

centrally planned countries. Many of these

countries either have currencies that are weak

relative to the U.S. dollar or “soft” currencies

that are not accepted in world trade.

This method is not popular with U.S.

exporters because it increases transaction costs,

requires additional management time and planning, and is characterized by detailed contract

requirements. The ideal countertrade arrangement for a cooperative would be where it

receives goods that it can use internally or sell

to members.

28
Alternative Methods of Financing an Export Sale

Banker’s Acceptance (BAJ-When a cooperative concludes an export sale where a letter of

credit or documentary collection is used, it can

employ banker’s acceptance (BA) financing to

receive immediate payment. A bank creates a

BA when it formally accepts, or agrees to pay, a

letter of credit or draft that calls for payment

from a buyer at a future date. An exporter may

either keep the BA document until it matures,

and then present it to the bank for full payment,

or sell it to the bank or an investor at a discounted amount.

BA’s are negotiable instruments which are

marketed as short-term investments. Banks can

use BA financing to provide credit to their customers without requiring the use of their own

funds.

Fo$aiting/Factoring-Exporters who use

these methods of export finance sell their trade

debts or assign their rights to claim payment to a

bank, forfaiting house, or factoring house. The

cooperative that uses these methods will have

improved liquidity because its balance sheet will

not show new contingent liabilities. Moreover,

these methods eliminate the cooperative’s need

for Eximbank guarantees, thereby saving administrative costs and premium fees.

Forfaiting differs from factoring in two basic

ways. First, forfaiting is used for financing an

individual export sales transaction, while factoring can be used for financing either an individual transaction or a group of them. Second, the

forfaiter has no recourse to the exporter in the

case of nonpayment by the foreign buyer, while

the factorer may or may not have such recourse,

depending upon the terms of the factoring transaction.

Minimizing Credit Risk

Cooperatives can minimize the credit risks

of an export transaction in three ways: (1) negotiate payment terms of sale that offer it reasonable

security, (2) obtain adequate commercial credit

insurance, and (3) investigate the credit history

of a foreign buyer. These subjects are explained

in the next section under “Commercial and

Political Risk. ”

Sources of International Finance

CoBank-The National Bank for

Cooperatives (CoBank) offers a complete range of

international financial services to US. agricultural cooperative exporters through its

International Banking Division (IBD), including

export financing, foreign exchange services,

funds transfer, and country risk analysis.

Cooperatives can finance their export transactions through CoBank in a variety of ways.

CoBank offers direct documentary collection and

letter of credit (LOC) services. In addition, it can

provide banker’s acceptance, forfaiting, and factoring services.

If a cooperative does agree to accept payment in a foreign currency, it can sell that currency to CoBank for U.S. dollars. To counter the

risk of a loss from fluctuations in foreign

exchange rates, the cooperative can also enter

into a “hedging” contract with CoBank for the

future sale of the foreign exchange at a specified

rate of exchange. Hedging contracts are

explained in the next section under “Foreign

Exchange Risks.”

CoBank can send funds for any co-op customer for payment or transfer to individuals or

businesses abroad. It has a number of reciprocal

depository accounts with correspondent banks to

assist with this service.

IBD economists and credit officers evaluate

the risks of lending to a foreign country by considering political and social factors, domestic

economic and balance of payments performance,

ability and willingness to service their foreign

debt, and various financial ratios.

Finally, CoBank is a major participant in the

USDA Export Credit Guarantee Programs, GSM102 and GSM-103, which are explained under

“Commercial and Political Risks.”

Other Commercial Banks-There are several

hundred commercial banks in the United States

that have international departments, but a great

number of those do not find it profitable to serve

small- or medium-sized exporters. Cooperatives

seeking a bank for international financial services should carefully consider if the bank is

genuinely interested in serving an agricultural

business of their size.

29
When considering a prospective bank, a

cooperative should ask the following questions:

l What is the size and experience of the

international department?

l What are the charges for confirming a letter of credit, processing drafts, collecting payment, or other services that the cooperative will

require?

l Can the bank provide buyer credit reports

and country risk analysis?

l Does it have experience with U.S. and

State government financing programs that support agricultural export transactions (such as the

USDA Export Credit Guarantee Programs)?

l What other services can it provide?

Regulatory Concerns

Cooperative exporters need to be aware of

both U.S. and foreign trade regulations that

affect their foreign sales, Below are brief

descriptions of some of the more important U.S.

export regulations. Sources of information on

foreign import regulations are listed in the second section of this report, “Sources of

Assistance.” This guide does not offer details

on any of these regulations. Cooperatives with

questions on these and other U.S. trade regulations should consult with a freight forwarder, an

attorney, or the U.S. Department of Commerce

(DOC).

U.S. Export Regulations

Export Licenses-For reasons of national

security, foreign policy, nuclear non-proliferation, or domestic shortages of certain products,

the Bureau of Export Administration (BXA)

within the Department of Commerce controls

exports through a system of export licensing.

Licenses are granted for transactions, not firms.

There are two types of export licenses-validated and general.

A validated license is a specific grant of

authority from the Federal Government to a particular exporter to export a specific product. An

exporter must apply for such a license. They are

granted on a case-by-case basis for either a single transaction or for a specified period of time.

Export shipments requiring such licenses cannot

be made without prior approval.

A general license is a broad grant of authority to all exporters for certain categories of

goods. Export shipments that can be made

under general license authorization do not need

prior approval. Exporters do not have to apply

for such licenses.

Cooperatives that make direct export sales

need to be aware of which licenses they need for

each transaction. This guide does not include

the procedures for determining which license is

appropriate. Cooperatives with questions about

export licenses should contact the:

Bureau of Export Administration

Exporter Assistance Staff

Office of Export Licensing

Room 1099D

U.S. Department of Commerce

Washington, DC 20230

Telephone: (202) 377-4811

Antiboycott Regulations-It is against U.S.

law for an exporter to participate in a foreign

boycott or other restrictive trade practices fostered by foreign countries against countries that

are friendly to the United States. In addition,

U.S. exporters must report when foreign governments request their participation in a such a

boycott. Cooperatives with questions about

complying with antiboycott regulations should

contact the:

Office of Antiboycott Compliance

Room 3886

International Trade Administration

U.S. Department of Commerce

Washington, DC 20230

Telephone: (202) 377-2381

Antitrust Lows-Exporters need to be aware

of, and comply with, the antitrust laws of both

the United States and the importing country,

Under U.S. antitrust law, business practices are

judged by two legal standards. Some practices,

called “per se” violations, are conclusively illegal: these include price-fixing agreements and

conspiracies, divisions of markets by competi30
tom, and certain group boycotts and tying

arrangements.

Most practices are judged under a second

legal standard, the “rule of reason.” Under this

standard, for a practice to be found in violation

of the law, it must be shown that the act

occurred and had an anticompetitive effect.

Many factors are considered, including business

justification of the practice, its impact on prices

and output in the market, barriers to entry, and

the market shares of the parties.

The Export Trading Company Act of 1982

offers exporters certain protections from

antitrust regulations. Competing cooperatives

and investor-owned suppliers seeking to establish an export trading company (ETC) can apply

for a Certificate of Review from the U.S.

Department of Commerce. A certificate can be

issued if it is determined that the proposed

export trade activities and methods of operation

will not significantly diminish domestic competition or result in a restraint of trade within the

United States.

For the conduct described in the certificate,

the ETC will have immunity from Government

antitrust suits: and in private party actions, liability will be reduced from triple to single damages. For more information on ETC’s, contact

the:

Office of Export Trading Company Affairs

Room 5618

U.S. Department of Commerce

Washington, DC 20230

Telephone: (202) 377-5131

Antidiversion Clause-To help ensure that

U.S. export shipments only go to legally authorized destinations, the Federal Government

requires a “destination control statement” on the

commercial invoice and bill of lading for almost

all export shipments. Exceptions are shipments

intended for consumption in Canada and shipments being made under certain general licenses.

Intellectual Property Rights-Trade marks,

patents, and trade secrets are all considered

“intellectual properties.” Cooperatives with

intellectual properties to protect should investigate the intellectual property laws of a foreign

country before they start exporting to that market.

Foreign Corrupt Practices Act (FCPA)-The

FCPA prohibits payments, offers of payments, or

gifts to government officials, political parties, or

political candidates of a foreign country if made

for the purpose of obtained, retaining, or directing business to any person. The act also establishes recordkeeping and internal accounting

control requirements that firms must follow,

Foreign Import Regulations

When evaluating a prospective foreign market, co-ops should be familiar with any import

barriers that may adversely affect their exports.

As mentioned earlier in “Sources of Assistance,”

the Trade Assistance and Planning Office (TAPO)

of the USDA Foreign Agricultural Service monitors the agricultural trade barriers of foreign governments. Cooperatives seeking information on

nontechnical trade barriers in a specific foreign

market should contact them, while those with

questions or comments about proposed or existing foreign government standards should contact

the USDA Technical Office (TO). Information on

contacting either TAP0 or TO is given above in

“Sources of Assistance.”

COMPLETING THE EXPORT TRANSACTION

Freight Forwarders

The details of export shipping are often

handled by an “export” freight forwarder (also

referred to as an “international” or “foreign”

freight forwarder). The forwarder acts as an

agent for the exporter in moving cargo to foreign

destinations.

Freight forwarders are a key link in the

export marketing chain. They (1) provide information to exporters about foreign market regulations and practices, including packaging and

labeling requirements: (2) assist with domestic

and international transportation arrangements;

and (3) assist with the preparation and handling

of various documents. They may also arrange for

marine insurance and suggest sources of financial assistance.

Freight forwarders help exporters transport

their shipments efficiently. To do this, they

must know exactly what is expected of them.

Following discussions of a proposed shipment,

31
an exporter should prepare a set of “shipping

instructions” that describes the documents the

forwarder is to prepare, the services the forwarder is to perform, and the manner in which

the shipment is to be handled and stowed by the

carriers for inland and overseas transportation.

The forwarder may respond with a completed

form indicating “acknowledgment of shipping

instructions.”

Freight forwarders operate on a fee basis

paid by the exporter and often receive an additional percentage of the freight charge from the

carrier. The forwarder’s fees vary and consist of

an agreed-upon amount plus documentation

charges.

All freight forwarders must be licensed by

the Federal Maritime Commission (FMC) to handle ocean freight at U.S. ports and by the

International Air Transport Association (IATA)

to handle air freight in the United States.

A cooperative with a large volume of

exports may create its own export department to

prepare documents and to make transportation

arrangements to its established sales outlets.

For many cooperatives, however, there is no

substitute for a freight forwarder.

Additional information on freight forwarders may be obtained from port authorities,

banks, or the National Customs Brokers and

Forwarders Association of America located at:

One World Trade Center STE 1109

New York, NY 10048

Telephone: (212) 432-0050

Documentation

In international trade, a “document” is an

important paper providing certain essential

information pertaining to a specific shipment

moving internationally. In some instances, it is

proof that designated commodity or shipping

requirements have been met. Use of a printed

form is customary and in some cases mandatory.

A “document” differs from other business

forms in that it is seen by two or more businesses or regulatory entities. For example, any or all

of the following might view a document prepared by or for an exporter: the freight forwarder, the U.S. Department of Agriculture, the

U.S. Department of Commerce, the U.S. Customs

Service, the carrier(s), a foreign government

import inspection or control agency, the foreign

importer, the foreign bank, or the U.S. bank.

Some of the documents most frequently

used in agricultural exporting are described

below and others, as noted, are covered elsewhere.

Bill of Lading-A bill of lading is a contract

between the owner of the shipment and the carrier. There are two types: a “straight” bill of lading, which is nonnegotiable and must be sent

straight to the consignee, and the negotiable or

“shipper’s order” bill of lading, which is a negotiable document that must be endorsed by the

shipper. The former is typically used for shipments that are made on an open account, while

the latter is used for letter of credit or documentary collection transactions.

A bill of lading is referred to as “clean”

when it does not have any adverse notations

made by the carrier relating to the condition of

the shipment. This can serve as proof that a

shipment was actually loaded and received by

the carrier and that the carrier had no reservations about the shipment’s condition.

Commercial InvoiceA commercial invoice

is an itemized account, prepared by the exporter

for the buyer, that specifies the kind and quantity of commodity shipped, the national origin of

the commodity, mode of international shipping,

carrier loading date, export markings used, destination of shipment, delivery and payment

terms, destination control statement, and prices,

discounts, and total amount of money due to the

exporter. It includes the name and address of

the shipper and of the consignee (buyer or its

agent), and reference numbers and date of sale.

It is also a request that payment be made.

The buyer needs the commercial invoice to

prove that it owns the shipment and to arrange

for payment to the exporter. In addition, some

foreign governments use it to assess customs

duties.

Certificate of Origin-A certificate of origin

certifies the country from which a shipment

originated. It is required by some foreign governments even when such information is provided on the commercial invoice.

Inspection Certificate-There are several

kinds of inspection certificates, including phy32
tosanitary certificates declaring that fruits and

vegetables are free of diseases, health certificates

reporting the condition of livestock, and grade

certificates certifying that a shipment of agricultural goods meets certain quality criteria. These

certificates can all be used to assure foreign governments that a shipment meets their technical

regulations.

As mentioned earlier in “Sources of

Assistance,” Food Quality Acceptance Service

certification can be used to assure a foreign

buyer that its shipment has been prepared in

accordance with contract specifications.

Shipper’s Export Declaration

(SEDtRequired for export shipments larger

than $500, SED is a document used both for U.S.

Government statistical purposes and for moving

a shipment through U.S. customs. Each commodity being exported must be identified with a

Schedule B number. (Schedule B numbers are

explained in “Market Research.“)

Dock and Warehouse Receipts-Dock and

warehouse receipts are used to transfer accountability when a shipment is moved by a domestic

carrier to the port of embarkation and left with

the international carrier for export.

Export Packing List-See “Packing.”

Export License-See “Regulatory Concerns.”

Insurance Certificate-An insurance certificate is a negotiable instrument which must be

endorsed before it is sent to a bank, along with

other documentation. If the exporter provides

insurance, this certificate states the type and the

amount of coverage.

Destination Control Statemen t-A destination control statement lists the countries to

which the shipment may be sent. When applicable, it will appear on the commercial invoice, the

bill of lading, and the shipper’s export declaration.

Export Order-See “Sales Offer and

Contract. ”

Pro Forma Invoice-See “Sales Offer and

Contract.”

Shipping Instructions-See “Freight

Forwarder. ”

Packing

The first step in export packing is to assemble the kind and quantity of commodity needed.

The second step is to pack the commodity

according to specifications given in the final

sales agreement (contract).

Special labels with information expressed

in a foreign language and weights and measures

listed in metric terms might be needed on consumer-size, and even larger, packages.

Both the export package and the outer container should be designed and filled with the

goal of minimizing product losses. Causes of

such losses include excessive movement of the

product within the container or too much weight

on the product, as with fresh apples and peaches. Moisture damage, to wheat flour for example, is another problem. Some perishables may

be damaged by excessively high or low temperatures.

The threat of pilferage of products, such as

oranges that can be easily consumed on the spot

or high-value products that can be moved rather

easily and sold for cash, requires special packing

and handling precautions.

Export shipping places extra stress and

strain on the packages and containers. A sling

may be used to hoist commodities over a ship’s

rail, or conveyors or chutes may provide a

rugged ride into or out of a ship’s hold. Riding

the waves tends to be rougher than riding the

rails. And handling and storage practices and

facilities at an unloading port may further test

the packing.

Each export container must be carefully

marked on at least two sides to be sure it gets to

its destination. In many cases the buyer will

request use of its shipping mark. Standard symbols and foreign phrases help to ensure proper

handling. An export freight forwarder can help a

cooperative make sure that all necessary markings are made in the proper form.

An export packing list should be prepared

which lists information about each package or

container. The export packing list itemizes the

contents: the net, tare, and gross weights: the

measurements: and the volume of space required

for each package. In addition, the list should

include illustrations of the shipping marks.

The packing list has two uses: (1) It is used

for calculating the cubic space required for shipping. This calculation is made by the exporter’s

shipping department or a freight forwarder. (2)

It serves as a checklist to ensure that the cargo

33
received is as described on the list: such checking is made by representatives of the carrier(s),

port authorities at the loading port, customs officials at both the U.S. loading port and the foreign port of destination, and the buyer.

lhnsportation

The domestic transportation of an export

shipment may be handled in much the same

way as that of any domestic shipment. It may

often be arranged by a co-op’s domestic traffic

department. However, selecting the U.S. port

where the export shipment will be sent, delivering it there, and arranging any international

transportation for it will require additional

expertise. For cooperatives, this may come from

either a freight forwarder or the co-op’s export

department.

The development of intermodal shippingexporting in containers that can be efficiently

handled by different types of carriers-has revolutionized the export shipping process. Now,

under one bill of lading, a co-op’s export shipment can be transported in containers by train,

truck, or barge to an U.S. airport or seaport and

then transported by ocean or air carrier to its foreign destination. This is typically more efficient, and the shipments are far more protected

from damage and pilferage.

Shipments may be transported to overseas

destinations by either ocean or air carrier. For

destinations in North or South America, railroad

or truck may also be used. The vast majority of

agricultural exports are shipped overseas by

ocean carriers.

Ocean Carriers-Cooperatives seeking the

servics of an ocean carrier have three basic alternatives. The first two are variations of a common carrier, and the third is a private carrier.

A common carrier is a firm that transports

shipments to specified destinations for stated

freight rates. In the case of an ocean carrier, it is

a steamship line that provides regularly scheduled service between selected ports and publishes uniform freight rates and contract conditions.

By U.S. Government regulation, a common carrier is required to carry all goods offered if accommodations are available and the established rate

is paid. A common carrier may operate as either

part of a “conference line” or independently.

1. Conference Carrier-A conference carrier

is a member of a “conference line,” which is a

group of common carriers serving the same trade

route(s). The conference line sets uniform

freight rates and establishes certain trade practices for all of its member carriers. Exporters

that contract with a conference line may obtain a

lower shipping rate than if they did not have a

contract. They are committed, however, to shipping most or all of their cargo that is bound for

destinations served by the conference on member vessels.

2. Independent Carrier-An independent

carrier is a common carrier operating outside of

a conference line and making shipping arrangements on a space-available basis. When independent carriers are in direct competition with

conference lines, they usually charge lower than

conference rates.

3. Private Carrier-A private carrier, or

“tramp ship,” is a vessel without fixed

itineraries or schedules. Individual exporters

negotiate contracts with a private carrier’s owners.

The type of carrier that a cooperative

selects will depend upon the nature of the individual export shipment, the pattern of the cooperative’s exports over time, and the general

availability and efficiency of service offered by

the different types of carriers.

Cooperatives selecting common carriers

must “book” space (sign a “booking contract” to

reserve space) for a cargo of a given size on a

specific vessel. The booking contract is binding

to the extent that the carrier has the right to

charge for reserved space that is not used, or to

charge for reservations canceled without adequate notice.

Transport rates can be highly complex and

can be based on commodity type, value per

freight ton, weight as distinct from volume,

weight or volume (whichever gives the highest

yield to the carrier), volume as distinct from

weight, a percentage of the value of the goods, or

per-unit prices for unusual or awkward loads.

There are significant variations in transporting less than shipload quantities. Some

agricultural products may be shipped in ordi34
nary dry cargo space, while others may require

controlled atmosphere facilities or “reefer” space

(refrigerated holds). Shipments may also be

transported in van containers, either refrigerated

or unrefrigerated, on specially designed container ships or on the decks of conventional ships.

nansporting a shipment from a U.S. port to

a foreign port may not end the exporter’s transportation responsibilities. Sometimes the least

expensive way to make shipments to several

buyers is to consolidate them into a single

transocean shipment. Arrangements can be

made for “drop” shipments to various foreign

buyers, either from one or several foreign discharge ports.

Many countries have “foreign trade zones”

or “free trade zones” where quantities of a commodity can be stored, processed, or exhibited

without payment of customs duties. Sometimes

it is possible to ship large volumes of a commodity to such a zone and then reship smaller lots to

buyers in other markets. In this way, both the

cost of shipping and the payment of customs

duties are kept to a minimum.

Air carriers are another option for co-op

exporters. Although they charge higher rates

than ocean carriers, their costs may be offset by

lower domestic shipping costs (by using a local

airport rather than a coastal seaport) and quicker

delivery times. In addition, shipments of agricultural goods are typically exposed to less physical risk on air carriers, and thus marine insurance costs are likely to be lower. Air carriers

may be especially useful to cooperatives exporting perishable high-value agricultural products.

As mentioned in “Sources of Assistance,”

cooperatives can get transportation assistance

from USDA’s Office of nansportation (OT).

Risk Management

Sound risk management involves identifying sources and degrees of risk that the exporting

cooperative faces, analyzing the co-op’s capacity

to accept varying degrees of risk given its goals

and abilities to absorb losses, and developing

strategies that are compatible with those goals

and available resources.

The four types of risk associated with

export transactions are physical, price and cost,

commercial and political, and foreign exchange.

Physical Risk

Marine cargo insurance (or simply marine

insurance) policies offer protection to shippers

against financial losses resulting from the loss of,

or damage to, the exported goods while in transit

from one destination to another. It is advisable

for a exporter to obtain marine insurance coverage on its shipments because (1) carriers, under

law, have very limited liability: and (2) if the

export sale is being financed, the bank or intermediary will usually insist that the shipment,

which serves as collateral, be adequately insured

while in transit.

Arranging the Insurance-The exporter is

responsible for arranging insurance coverage for

each sale that is made on CIF delivery terms. If

the export sale is made on CFR, FOB, or FAS

then the buyer assumes responsibility for insurance.

In these situations, however, the exporter

may still wish to arrange the insurance because

then it may be assured that (1) adequate insurance coverage has been obtained: (2) any claims

will be paid without the difficulties of foreign

litigation or foreign currency exchange: and (3)

banks and other financial intermediaries will be

satisfied, since insurance documentation is less

readily available to them when the importer

arranges the insurance.

In addition, the exporter may arrange for

insurance that covers the shipment for the entire

voyage. This simplifies the collection of claims

because there are no rival parties to dispute

responsibility of coverage. The exporter may

turn the insurance policy over to the foreign

buyer with the titles and other documentation,

The payment of the insurance premium may be

made as specified in the delivery terms of sale,

regardless of which party arranges the insurance.

Marine insurance brokers are intermediaries

that help exporters to obtain adequate insurance

coverage at reasonable rates. In addition, they

help exporters to settle claims. Exporters pay

brokers to act as their agents, while marine

insurance companies pay brokers a commission

for each of their policies that the brokers place.

Adequate Coverage and Cost-The exact

amount of insurance needed by an exporting

cooperative can be determined in consultation

with a marine insurance broker. The rates

35
charged by most marine cargo insurance companies depend upon a number of factors, including

the type of coverage desired, shipping routes,

types of conveyances, nature of commodities

being exported, and duration of voyage.

qpes of Marine Cargo Insurance-An

exporter has three options for insuring an export

shipment: (1) obtain a “specific policy” to cover

each shipment, (2) obtain an “open policy” to

cover all shipments during a specified period, or

(3) arrange to have its shipments covered by a

freight forwarder’s open policy.

There are four types of losses recognized by

marine insurance underwriters:

1. Total loss-an entire shipment is

destroyed or not salvageable.

2. Total loss of part of a shipment-some,

but not all of the separate parts, units, or packages of a shipment are totally lost.

3. Particular average loss-a shipment is

partly lost or damaged.

4. General average loss-a shipment is voluntarily sacrificed in the interests of the carrier

and other shippers (e.g., part of a shipment is

damaged by firefighters who save the ship and

other cargo.)

The word “average,” as used in the insurance industry, means “partial loss.” Marine

insurance policies offer different types of coverage, depending upon the type of loss suffered.

The three most common types of marine

insurance coverage are “free of particular average” (FPA), “with particular average” (WPA),

and “all risks” (AR).

FPA is the least comprehensive policy in

general use which covers total losses and general average losses, but not particular average losses. Two more liberal variations of FPA exist:

FPA-American conditions and FPA-English conditions. Both of these variations offer all the

protection of a normal FPA policy, along with

coverage of partial losses occurring aboard a vessel that has been stranded, sunk, burned, or in

collision at some point during its voyage. Under

FPA-American conditions, however, it is necessary for the partial loss to have been directly

caused by stranding, sinking, burning, or collision, while under FPA-English conditions no

such direct loss need be established for coverage

to be extended.

WPA is a more comprehensive policy that

offers all the protection of FPA policies, plus

coverage for particular average losses, such as a

partial loss resulting from salt water damage.

AR is the most comprehensive and expensive type of marine cargo insurance: it offers

protection from most external causes of physical

loss. Exceptions include losses from delay,

product deterioration, loss of market, strikes,

riots, civil commotions, and war. It should be

noted that insurance coverage against virtually

any cause of damage can be obtained for the

right price.

Loss Prevention Service--Many brokers and

marine insurance companies offer a loss prevention service, usually at no charge to the exporter

since it benefits both parties. It may be to the

exporter’s advantage to select an insurance company or broker that offers such a service because

it assists in keeping down losses, and thus premium rates.

Pricing Risk

Unpredictable variation in the prices of the

commodities being exported and in the prices of

marketing services which the exporter is using,

notably transportation, can each be significant

sources of risk. Such price variation may result

in either financial losses or unrealized profit

opportunities for the co-op exporter.

Some cooperatives mitigate the pricing risk

of their export sales by hedging through futures

markets. For cooperatives exporting commodities that are not traded in organized futures markets, forward contracts or the holding of inventories may be used to help reduce such risk

exposure.

Exporters are also exposed to fluctuating

ocean freight rates. A cooperative, or group of

cooperatives, can reduce the risk of loss from

such rate fluctuation through either chartering

or acquiring a vessel. Either option, however,

would require significant expertise, capital, and

export sales volume.

Commercial and Political Risk

Cooperatives making export sales face the

risk that the importer will fail to pay for the

shipment. Such default problems may result

36
either from commercial factors such as economic

deterioration in the buyer’s area, unanticipated

competition, or fluctuations in demand, or from

political factors such as war, riots, or seizure of

shipment by a foreign government.

Market knowledge and contacts are essential to evaluate and reduce commercial credit

risks in individual export transactions. The

exporter, or an intermediary in its service,

should have access to credit reports on potential

importers and should be able to analyze them

and follow up on any difficulties encountered in

receipt of payment.

Further, the exporter may benefit from discussions with other firms that have done business with a prospective importer.

An exporter may also reduce the commercial risks of default by negotiating for relatively

favorable payment terms of sale, such as requiring the importer to pay in advance or to post an

irrevocable letter of credit in favor of the

exporter.

In addition, the exporter may obtain commercial credit insurance. Coverage for both commercial and political risks is available through

the Foreign Credit Insurance Association (FCIA).

The FCIA is an association of over 50 major

property, casualty, and marine insurance companies operating in cooperation with, and as an

agent of, the Export-Import Bank of the U.S.

(Eximbank).

The FCIA offers U.S. agricultural exporters

three types of policies:

1. Short-term single-buyer policy-Covering

either single or multiple shipments under a sales

contract, a short-term single-buyer policy is custom written for the terms of an individual export

transaction, The standard policy period during

which shipments can be made is generally 3

months, though it may be up to 12 months for

multiple shipments. Coverage applies to credit

sales to a foreign buyer, or export letters of credit

opened by a foreign issuing bank, for U.S. goods

produced and shipped from the United States

during the policy period. Cover is generally provided for credit terms of up to 180 days, though

it may be extended for up to 360 days for export

sales of bulk agricultural commodities.

Percentages of cover are equalized for both commercial and political risks: for bulk agricultural

commodities, 98 percent: for sovereign obligers

(foreign governments), 100 percent: for letter of

credit transactions, 95 percent: and for private

sector obligers, 90 percent.

2. Short-term multibuyer export policyGenerally written to cover shipments for a l-year

period, a short-term multibuyer policy is

designed to cover a “reasonable spread” of an

exporter’s eligible sales. (What constitutes a

“reasonable spread” is specified in the policy.)

At the inception and each annual renewal of the

policy, the exporter may choose to cover either

95 percent of commercial risks and 100 percent

of political risks or 95 percent of each risk. This

policy insures short-term sales with repayment

terms generally up to 180 days. Coverage

applies to the gross invoice amount and, in some

cases, to the buyer’s interest obligation for a limited time at FCIA-specified rates. This policy

does contain a deductible feature. Export credit

sales of some agricultural commodities may be

insured under this policy with terms extended to

1 year (if needed), and with commercial coverage

increased to 98 percent.

(3) New-to-export policy-Designed for

firms just beginning to export, a new-to-export

policy offers enhanced commercial risk protection for the first 2 years, which includes 95 percent commercial coverage, 100 percent political

coverage, and no deductible. To .be eligible for

this policy, a cooperative must not have had

direct FCIA coverage for 2 years preceding the

date of application.

Cooperatives seeking more information

about FCIA policies may contact the FCIA at

their central headquarters in New York City

(telephone: (212) 306-5000). There are also FCIA

regional marketing offices located in Chicago,

Houston, Los Angeles, Miami, and New York

City.

Cooperatives may also reduce the commercial and political credit risks of their export sale

transactions by obtaining coverage from the

Export Credit Guarantee Program (GSM-102) or

the Intermediate Credit Guarantee Program

(GSM-103). The intent of these programs, which

are both operated by USDA’s Commodity Credit

Corporation (CCC), is to increase U.S. agricultural exports by stimulating U.S. bank financing of

foreign purchases. Payment guarantees are provided to the exporting firm, which may then

37
assign them to a U.S. financial intermediary that

finances the export sale.

GSM-102 guarantees are issued for export

credit sales with terms of 6 months to 3 years.

GSM-103, a more recent and smaller program,

offers guarantees for export credit sales with

terms of 3 to 10 years. For a transaction to be

eligible for program coverage, the foreign buyer’s

bank must issue an irrevocable letter of credit in

favor of the exporter covering the U.S. port

value (FOB value) of the shipment. In general,

the programs cover 98 percent of the U.S. port

value of the shipment and a certain amount of

the interest.

CCC will consider offering program guarantees to any export credit sale of U.S. agricultural

goods that furthers its longrun market development objectives. Requests for program coverage

are considered on a case-by-case basis.

For more details on these credit guarantee

programs, contact the General Sales Manager,

Export Credits, Foreign Agricultural Service

(telephone: (202) 447-3224).

Foreign Exchange Risk

In all export transactions, foreign currencies must be exchanged, normally through commercial banks. There is always the risk that the

relative value between the dollar and the

importer’s currency could change between the

time that the sale is made and the payment is

received. If the exporting cooperative is accepting payment in a foreign currency, it is assuming

the risk that the relative value of the dollar

could fall against that of the importer’s currency,

thus causing a financial loss for the cooperative.

There is also the chance that the relative value

of the dollar could rise against that of the

importer’s currency, in which case the cooperative would reap a financial gain. Most cooperatives, however, are not interested in speculating

on foreign exchange fluctuations and would prefer to avoid such risks.

One way of avoiding this foreign exchange

risk is to quote prices and require payment in

dollars. This is the method that has been traditionally used by cooperative exporters. This

method requires the importer to make the currency exchange and to face the risks that go with

it. It may improve the competitive position of

the cooperative, however, to be able to make

export sales in foreign currencies. Many foreign

suppliers and large trading companies that are

competing with cooperatives routinely accept

foreign currencies.

If the importer wishes to make payment in

a foreign currency, then the cooperative should

consult an international banker before negotiating the sales contract. The bank can give advice

on the foreign exchange risks that exist for a specific currency.

In addition, most international banking

departments can help a cooperative exporter

hedge against foreign exchange risk by agreeing

to purchase the foreign currency at a fixed dollar

price, regardless of the exchange rate at the time.

When this type of hedging is done, the bank

assumes the foreign exchange risks in return for

a fee or discount on the transaction. The cost of

these bank services should be included in the

price quotation.

Buyer Relations and Feedback

It is often necessary for the exporting firm

to go beyond secondary sources when seeking

information that is critical to its position in foreign markets. Sales figures may accurately

reflect how well the firm is doing today, but they

are not always good indicators of future sales,

changing market conditions, customer needs, or

untapped market opportunities.

Sources for this kind of information include

agents or distributors located in foreign markets;

the firm’s sales staff, who may periodically visit

foreign markets: or an export management or

trading company. In addition, the exporting

firm may benefit from sending high-level executives to visit foreign markets.

Such firsthand visits offer several potential

advantages. It is important for those making

decisions about export sales and strategy to get a

flavor of foreign markets. Such visits may shed

light on how the products are being received,

what the competition is doing, and other foreign

marketing details. Complaints or problems that

might not show up in a report or message may

come out over lunch. A FAX message or an

occasional visit by a subordinate employee may

not convince foreign contacts of the seriousness

of the co-op exporter’s intentions.

38
Executives or staff who travel to foreign

markets should acquire, through reading or training, a basic knowledge of the business culture,

management attitudes, business methods, and

consumer habits of the importing country.

There is no substitute for a good working

relationship with foreign buyers. A co-op’s foreign sales agent frequently plays a central role by

staying in contact with foreign buyers and dealing with any of their complaints.

SELECTED BIBLIOGRAPHY

International Chamber of Commerce, Guide to

Incoterms, New York, N.Y.: ICC Publishing

Corporation, 1980.

International Chamber of Commerce, Incoterms,

New York, N.Y.: ICC Publishing Corporation,

1980.

US. Department of Agriculture, Foreign

Agricultural Service, Dictionary of International

Agricultural Trade, Agriculture Handbook No.

411, Washington, DC, June 1988.

U.S. Department of Agriculture, Foreign

Agricultural Service, Food and Agricultural

Export Directory 1990, Miscellaneous

Publication No. 1481, Washington, DC, August

1990.

U.S. Department of Agriculture, Office of

‘Transportation, Export Handbook for U.S.

Agricultural Products, Agricultural Handbook

No. 593, Washington, DC, March 1985.

APPENDIX: ACS INTERNATIONAL TRADE

PROGRAM (ITP) PUBLICATIONS

1, Agricultural Exports by Cooperatives, 1985.

ACS Research Report 66, Tracey L. Kennedy and

Arvin R. Bunker, 1987. (13 pp.)

Cooperatives exporting agricultural products are

described in terms of number, value of exports

by commodity and destination, and share of U.S.

agricultural exports.

Price: Domestic-$1.25; foreign-$1.50

2. Directory of U.S. Agricultural Cooperative

Exporters. Service Report 21, ITP Group, 1989.

(33 pp.1

Lists U.S. agricultural cooperatives that export,

or have the capability of exporting, commodities

to other countries. One section is indexed by

type of product. The other section lists the

cooperatives in alphabetical order, including

complete address, individual contact, communication numbers, and the commodities available

for export.

Price: Domestic-$2.00; foreign-$2.50

3. Export Market Development by Agricultural

Commodity Development Programs. ACS

Research Report 79, Karen J. Spatz, 1989. (30 pp.)

This report describes how farmers’ products are

promoted in international trade, who does the

promoting, and at what costs. The report discusses promotion programs carried out by government and private industry groups.

Price: Domestic-$2.00; foreign-$2.50

4. Grain Exporting Economies: Port Elevator

Cost Simulations. ACS Research Report 56,

Magid A. Dagher. Bruce J. Reynolds, and Lynn

W. Robbins, 1986. (24 pp.)

Significant economies of size are often attributed

to grain exporting, but until recently empirical

estimation had been lacking. An economic-engineering technique is used to simulate cost curves

for port elevators over a range of capacities for

both shortrun and longrun costs.

Price: Domestic-$1.25; foreign-$1.50

5. Imports by Cooperatives, 1986. ACS Research

Report 74, Karen J. Spatz, 1988. (7 pp.)

Activities of 28 cooperatives are reported in

terms of import values by origin, commodity,

and shares. Commodity reviews cover fruits and

vegetables and farm supplies.

Price: Domestic-$1.25; foreign-$1.50

39
6. Marketing High-Value Food Products in the

Asian Pacific. ACS Research Report 85, Bruce J.

Reynolds, Steven C. Schmidt, and Alan J.

Malter, 1990. (28 pp.)

Export marketing of branded and nonperishable

food products is examined for several Asian

Pacific countries.

Price: Domestic-$2.50; foreign-$3.00

7. Using Export Companies to Expand

Cooperatives’ Foreign Sales. ACS Research

Report 52, Arvin R. Bunker and Tracy L.

Kennedy, 1985. (17 pp.)

Discussion of export management companies

covers services and products handled: market

coverage: fees, margins, and costs: ownership

and financial structure; and advantages and disadvantages.

Price: Domestic-$1.50; foreign-$1.75

These publications may be ordered from ACS.

Please make check or money order payable to

Agricultural Cooperative Service. Mail your

order to:

USDA/ACS/Publications

P.O. Box 96576

Washington, DC 20090-6576

*U.S. Government Printing Office : 1990 - 517-013/27589

40
U.S. Department of Agriculture

Agricultural Cooperative Service

P.O. Box 96576

Washington, D.C. 20090-6576

Agricultural Cooperative Service (ACS) provides research, management, and

educational assistance to cooperatives to strengthen the economic position of farmers

and other rural residents. It works directly with cooperative leaders and Federal and

State agencies to improve organization, leadership, and operation of cooperatives and

to give guidance to further development.

The agency (1 ) helps farmers and other rural residents develop cooperatives to obtain

supplies and services at lower cost and to get better prices for products they sell; (2)

advises rural residents on developing existing resources through cooperative action to

enhance rural living; (3) helps cooperatives improve services and operating efficiency;

(4) informs members, directors, employees, and the public on how cooperatives work

and benefit their members and their communities; and (5) encourages international

cooperative programs.

ACS publishes research and educational materials and issues Farmer Cooperatives

magazine. All programs and activities are conducted on a nondiscriminatory basis,

without regard to race, creed, color, sex, age, marital status, handicap, or national

origin.