Minority Business:

Going Global in the 21st Century

Minority Exporters:

A Resource Guide ’99

Minority Exporters: A Resource Guide ’99 U.S. Department of Commerce
A Quote from

Secretary William M. Daley

U.S. Department of Commerce i

“While minority-owned firms are growing at

double the rate of all firms in the country,

they are exporting at half the rate of all U.S.

businesses. The U.S. Department of

Commerce is committed to working hard to

ensure that minority-owned firms are

prepared to take full advantage of the wealth

of opportunities in the global economy.”

Secretary William M. Daley

U.S. Department of Commerce

Preface

Dear Reader:

Historians will look back on the 1990s as the

decade of globalization. Globalization is

inevitable and irreversible. Increasingly, minority

firms, like all other firms, are being compelled to

conduct business outside their own borders. As

markets are mutating with frightening speed,

allowing billions of dollars to be moved with the click of a key, it is imperative

for minority-owned businesses to capitalize on the opportunities globalization

presents. To embrace globalization is to embrace the Internet, as the Internet is

one of the keys of globalization. Any discussion of exporting must therefore

take advantage of the resources and opportunities that are available through the

Internet and E-commerce. 

This guide for minority exporters is distinguished from other exporting guides

by its emphasis on the use of electronic resources, both in the research process

and as a tool for penetrating foreign markets. Consistent with the mission of the

Minority Business Development Agency (MBDA) to foster the development

and growth of minority businesses, this publication is intended to foster

minority business export growth. MBDA designed this publication as a roadmap

for navigating the maze of electronic resources that are available to assist firms

in the exporting process. This guide is one of the first of its kind as a resource

that is fully integrated with the latest electronic resources. It will be available in

electronic form at MBDA’s website (http://www.MBDA.gov), thereby allowing

minority firms to “click” on key information to be fully informed about the

latest resources available to assist them in going global. 

Our goal is that this publication will contribute toward enabling all interested

and able minority-owned firms to fully participate in the remarkable ongoing

globalization process. It is underscored, however, that the information in this

guide will not guarantee success in exporting, nor is it intended to substitute for

independently obtained individual legal counsel. Firms are encouraged to seek

the advice of counsel and to use this guide merely as a reference to resources

for assistance. 

Courtland Cox

Director

MBDA

U.S. Department of Commerce iii

Overview

Minority Exporters:

A Resource Guide ’99

The Export Imperative 

...You can no longer rely on your home market because your

home market is now an export market for everybody else!

Aggressive internationalization and the globalization of markets have

heightened attention to the export challenge and spawned a growing

array of export assistance services designed to help even the smallest

businesses become global competitors. Some of these initiatives are new and

untested; others are well established. There are so many initiatives it is difficult

to navigate through the maze of them to get to what is needed. The Minority

Exporters: A Resource Guide ’99 is a navigational tool to help minority firms

identify different resources for different needs. It anticipates some of the critical

questions minority-owned firms have about the export process, regardless of

their overall development, and provides a comprehensive reference guide of

sources of information and assistance for firms. 

How This Book Is Organized 

There are six chapters in this book. Each chapter presents questions and

answers about the export process. Reference materials are included that provide

the best answers to the listed questions. Instead of attempting to provide static

answers to the export questions of today, this book foresees that nothing in the

new millennium will remain the same for very long. Therefore, this book is

distinguished from other “export how to” books because it is a tool for

navigating through the ever-changing landscape of information and resources. It

shows the reader where to look for answers to questions and explains how the

various public and private sector providers of export services and programs are

woven into a complex mosaic of assistance. While answering important

questions, this book delves deeper to demonstrate how to conduct the research

that is required to succeed in exporting. 

U.S. Department of Commerce v

U.S. Department of Commerce vii

Chapter One: The Enabling Environment for Exporters. This chapter focuses

on six questions that are typically raised by new-to-the-market firms about

exporting. They are: 

■ Why does exporting matter? 

■ What is the U.S.A. doing to compete for export markets? 

■ Why do firms engage in exporting? 

■ What assistance is available to lower entry costs? 

■ Who are some of the players in the export arena? and 

■ How do firms determine if they are ready to export?

The answers to these questions give provide a basic understanding of the export

environment and will further introduce minority firms to the resources that are

available to help them go global. 

Chapter Two: Ways of Entering the Export Arena. This chapter focuses on

making a distinction between the market entry research that is needed by

different categories of exporters. Attention focuses on the differences between

the research needs of indirect exporters, service exporters, and direct exporters.

Key initial market research steps are outlined based on how a firm enters into

exporting.

Chapter Three: Export Planning Insights for Export Market Entry. This

chapter shows readers how to integrate the market research discussed in the

previous chapters into the export planning process by focusing attention on the

ten most common mistakes and discussing strategies to help firms avoid these

common mistakes. 

Chapter Four: Export Operations. This chapter examines the details and

mechanics of export operations, providing guidance on such operational

processes as obtaining export licenses, pricing, quotations, and terms, methods

of payment, financing, insurance, and shipping. 

Chapter Five: “Hot” Export-Related Issues. This chapter provides a detailed

discussion of “hot” export topics, including Intellectual Property Rights (IPR),

standards, international, regional, and bilateral agreements, Free Trade Zones,

and other topics. 

Chapter Six: Electronic Commerce and Exporting. This chapter focuses on

making the connection between the globalization process and the Internet. It

provides a step-by-step explanation of E-Commerce and demonstrates its

applications for going global. 

U.S. Department of Commerce ix

Table of Contents

A Quote from Secretary William M. Daley . . . . . . . . . . . . . . . . . . . . . . . . . . i

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Chapter One: The Enabling Environment for Exporters. . . . . . . 1

1. Why does exporting matter? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. What is the U.S. doing to compete for exports? . . . . . . . . . . . . . . . . . . . . . . . 2

3. Why do firms engage in exporting? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4. What assistance is available to lower entry costs? . . . . . . . . . . . . . . . . . . . . . 4

Federal Government Resources

The U.S. Department of Commerce (DOC) . . . . . . . . . . . . . . . . . . 6

Resources for Exporting Counseling . . . . . . . . . . . . . . . . . . . . . . . . 8

Resources for Locating Market Research . . . . . . . . . . . . . . . . . . . . . 8

Resources for Pinpointing Your Export Prospects. . . . . . . . . . . . . . . 9

Resources for Promoting Your Products and Services Abroad. . . . . 10

Resources for General Export Counseling . . . . . . . . . . . . . . . . . . . 11

Resources for Industry-Specific Export Counseling . . . . . . . . . . . . 12

Resources for Country-Specific Export Counseling . . . . . . . . . . . . 13

Other Important Resources and Sources of Data. . . . . . . . . . . . . . . 14

The U.S. Department of Agriculture (USDA). . . . . . . . . . . . . . . . . 15

The U.S. Export Import Bank (EXIM Bank). . . . . . . . . . . . . . . . . 16

The U.S. Small Business Administration (SBA) . . . . . . . . . . . . . . . 17

The U.S. Agency for International Development (USAID) . . . . . . 19

The Overseas Private Investment Corporation (OPIC). . . . . . . . . 20

The Department of State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

The Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . 22 

The U.S. Trade Representative (USTR) . . . . . . . . . . . . . . . . . . . . . 23

The Department of Transportation (DOT) . . . . . . . . . . . . . . . . . . 23
x U.S. Department of Commerce

State Government Resources for Export Promotion . . . . . . . . . . . . . . . 26

College and University Resources for Export Skills Development . . . . . 28

Embassy Resources for Trade and Investment Facilitation . . . . . . . . . . 28

Private Sector Resources for Export Services . . . . . . . . . . . . . . . . . . . . 29

5. Who are some of the players in the export game? . . . . . . . . . . . . . . . . . . . . 29

6. How do I know if my firm is export-ready? . . . . . . . . . . . . . . . . . . . . . . . . . 31

Chapter Two Ways of Entering the Export Arena . . . . . . . . 33

1. What steps are involved in the market research

and planning process for Indirect Exporters? . . . . . . . . . . . . . . . . . . . . . . . 34

A: Research Domestic Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

B: Research EMC and ETC Mechanisms. . . . . . . . . . . . . . . . . . . . . . 37

C: Research Target Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

D: Research Foreign Buyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

2. What steps are involved in the market research

and planning process for Service Exporters? . . . . . . . . . . . . . . . . . . . . . . . . 42

A: USAID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

B: Multilateral Development Banks (MDBs). . . . . . . . . . . . . . . . . . . 46

C: United Nations Development Program (UNDP) . . . . . . . . . . . . . . 49

3. What steps are involved in the market research

and planning process for Direct Exporters? . . . . . . . . . . . . . . . . . . . . . . . . . 51

Step 1: Determine if you have an exportable product. . . . . . . . . . . . . 52

Step 2: Determine target countries. . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Step 3: Identify economic trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Step 4: Understand the political environment. . . . . . . . . . . . . . . . . . . 54

Step 5: Understand marketing factors . . . . . . . . . . . . . . . . . . . . . . . . 55

Step 6: Identify leading sectors for U.S. exports and investment . . . . 56

Step 7: Understand trade regulations and standards . . . . . . . . . . . . . . 57

Step 8: Understand investment climate . . . . . . . . . . . . . . . . . . . . . . . 58
U.S. Department of Commerce xi

Step 9: Understand trade and project financing situation . . . . . . . . . . 60

Step 10: Know business travel environment. . . . . . . . . . . . . . . . . . . . 60

Step 11: Research economic and trade statistics. . . . . . . . . . . . . . . . . 60

Step 12: Take advantage of market research and trade events . . . . . . 60

Appendix A: A NTDB Primer of Doing Business with MDBs . . . . . . . . . . . . 61

Chapter Three: Export Planning Insights for 

Export Market Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

1.Failure to obtain qualified export counseling and 

to develop a master international marketing plan 

before starting an export business . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Using export counseling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Knowing what questions to ask . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

2. Insufficient commitment to exporting by top management . . . . . . . 68

Michigan State University’s Center for International Business

Education and Research – CIBER . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

3. Failure to have a solid agent and/or distributor’s agreement . . . . . 68

1. Understanding the Role of Agents . . . . . . . . . . . . . . . . . . . . . . . . . 68

2. Understanding the Role of Distributors . . . . . . . . . . . . . . . . . . . . . 69

3. Contract Drafting Considerations for Agent/Distributor Agreements. . . 69

4. Using Commerce’s Agent/Distributor Service (ADS). . . . . . . . . . . 70

4. Blindly chasing e-orders from around the world . . . . . . . . . . . . . . . 70

1. Make sure the order is not on the denied list . . . . . . . . . . . . . . . . . 70

2. Check BXA’s Entity List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

3. Business considerations in checking 

out the firm making the inquiry . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

4. Competitive considerations in checking out 

the market for the product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

5. Contact Commercial Service Officers in the country . . . . . . . . . . . 72
xii U.S. Department of Commerce

5. Failure to understand the connection between country risk

and securing export financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

1. Access the ExIm’s Country Limitation Schedule (CLS). . . . . . . . . 74

2. Access the Export Financing Options. . . . . . . . . . . . . . . . . . . . . . . 74

3. Check out SBA’s Export Financing Products . . . . . . . . . . . . . . . . . 74

4. Consult the ExIm’s Export Financing Products . . . . . . . . . . . . . . . 74

5. Access ExIm’s Export Credit Insurance . . . . . . . . . . . . . . . . . . . . . 75

6. Failure to understand Intellectual Property Rights (IPR) . . . . . . . . 75

7. Insufficient attention to marketing and advertising requirements . . . 75

1. Options for U.S. Firms to Market Overseas . . . . . . . . . . . . . . . . . . 76

2. Options for Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

8. Lack of attention to product adaptation and preparation needs. . . 76

1. Product Adaptation to standards requirements . . . . . . . . . . . . . . . . 77

2. ISO 9000 and ISO 14000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

3. Product Engineering and Redesign . . . . . . . . . . . . . . . . . . . . . . . . 77

4. Branding, Labeling and Packaging . . . . . . . . . . . . . . . . . . . . . . . . 77

5. Installation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

6. Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

7. Servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

9. Failure to obtain legal advice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

1. Utilize SBA’s ELAN service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

2. Consult the Commerce/ITA Legal web page . . . . . . . . . . . . . . . . . 79

10. Failure to Understand export licensing requirements . . . . . . . . . . 81
Chapter Four: Export Operations . . . . . . . . . . . . . . . . . . . . . 83

1. What are the Export Licensing & Control Rules? . . . . . . . . . . . . . . . . . . . 83

2. How to offer export Quotations? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

A. Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

B. Pricing Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

C. Pro Forma Invoice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

3. What are Methods of Payment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

1. Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

2. Cash in Advance (CIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

3. Draft (or Bill of Exchange) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

4. Credit Cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

5. Open Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

6. Consignment Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

7. Countertrade/Barter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

4. What are the Export Documentation Requirements? . . . . . . . . . . . . . . . . 98

1. Packing List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

2. Commercial Invoice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

3. Consular Invoice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

4. Certificate of Origin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

5. Bill of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

6. Insurance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

7. Inspection Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

8. Dock Receipt and Warehouse Receipt . . . . . . . . . . . . . . . . . . . . . . 99

9. Destination Control Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

10. Export License. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

11. Shipper’s Letter of Instruction . . . . . . . . . . . . . . . . . . . . . . . . . . 100

12. Shipper’s Export Declaration (SED) . . . . . . . . . . . . . . . . . . . . . 100

5. How to obtain financing?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

1. Understanding Types of Export Financing . . . . . . . . . . . . . . . . . . 100

A. Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

B. Trade Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

U.S. Department of Commerce xiii
xiv U.S. Department of Commerce

C. PreExport Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

D. Accounts Receivable Financing . . . . . . . . . . . . . . . . . . . . . . . 102

E. Market Development Financing . . . . . . . . . . . . . . . . . . . . . . . 102

2. Finding Sources of Export Financing. . . . . . . . . . . . . . . . . . . . . . 103

A. Commercial Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

B. Private Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

3. Government Export Financing Programs . . . . . . . . . . . . . . . . . . . 105

6. How to arrange transportation and cargo insurance?. . . . . . . . . . . . . . . . 110

Terms and Conditions of Service . . . . . . . . . . . . . . . . . . . . . . . . 111

Chapter Five: “Hot” Export - Related Issues. . . . . . . . . . . . . . 117

1. What are the “Hot” Agreements?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

1. Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

2. Developing an Agenda for the New Round . . . . . . . . . . . . . . . . . 118

3. Key issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

2. What are the “Hot” IPR Issues? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Substantive Standards of Protection. . . . . . . . . . . . . . . . . . . . . . . . . 121

1. Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

2. Industrial designs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

3. Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

4. Layout-designs of integrated circuits . . . . . . . . . . . . . . . . . . . 123

5. Protection of undisclosed information. . . . . . . . . . . . . . . . . . . 123

6. Control of anti-competitive practices in contractual licenses. . 123

7. Enforcement of intellectual property rights. . . . . . . . . . . . . . . 123

3. What are the “Hot” Standards Issues?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

A. ISO 9000 and ISO 14000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

B. Standards and the WTO

1. Technical regulations and standards in the TBT Agreement. . . 125

2. Conformity assessment procedures. . . . . . . . . . . . . . . . . . . . . 126

3. Loss of Economies of Scale . . . . . . . . . . . . . . . . . . . . . . . . . . 126

4. Compliance Assessment Costs . . . . . . . . . . . . . . . . . . . . . . . . 126
4. What are the 

Hot Foreign Corrupt Practices Issues? . . . . . . . . . . . . . . 126

A. Basic Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

B. Payments by Intermediaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

C. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

5. What’s “Hot” about Tariffs and Taxes? . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

A. Tariff categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

B. Withholding tax on software royalties. . . . . . . . . . . . . . . . . . . . . 129

C. Other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

6. What are the “Hot” FTZ Issues? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

What are the benefits to users of foreign trade zones? . . . . . . . . . . . 131

What are the public benefits?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

Who is interested in FTZs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

How significant are FTZs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

What are the eligibility criteria for FTZ designation?. . . . . . . . . . . . 132

How does the FTZ Board grant FTZs? . . . . . . . . . . . . . . . . . . . . . . 132

Chapter Six: E-commerce and Exporting. . . . . . . . . . . . . . . 133

What is E-commerce?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

What are the technologies involved in E-commerce?. . . . . . . . . . . . . . . . . . . 134

1. EDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

2. Bar codes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

3. Electronic Mail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

4. The Internet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

5. The World Wide Web. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

6. Product Data Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

7. Electronic forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 

How fast is E-commerce growing? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

What are the economic drivers of E-commerce?. . . . . . . . . . . . . . . . . . . . . . 137

1. Electronic Commerce transforms the marketplace . . . . . . . . . . . . 137

2. Electronic Commerce has a catalytic effect . . . . . . . . . . . . . . . . . 137

3. Electronic Commerce increases interactivity in the economy . . . 137

U.S. Department of Commerce xv
xvi U.S. Department of Commerce

4. Electronic Commerce alters the relative importance of time. . . . . 137

5. Electronic Commerce promotes strategic alliances and openness 138

What are the social implications of E-commerce?. . . . . . . . . . . . . . . . . . . . . 138

How connected are minorities to E-commerce? . . . . . . . . . . . . . . . . . . . . . . . 138

1. The impact of income on Internet access . . . . . . . . . . . . . . . . . . 138

2. Race/Origin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

3. Geography and income influence trends . . . . . . . . . . . . . . . . . . . 139

Why is E-commerce important for exporters? . . . . . . . . . . . . . . . . . . . . . . . . 139

How can E-commerce help minority firms to compete for

international markets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

What impact will E-commerce have on intermediaries?. . . . . . . . . . . . . . . . 140

How can I make my business E-commerce ready? . . . . . . . . . . . . . . . . . . . . 141

What are some Internet resources that facilitate global 

E-commerce business transactions? . . . . . . . . . . . . . . . . . . . . . . . . . . 142

Glossary, International Trade Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

List of Tables

Table 1: 15 TPCC Agencies Expenditures by Classification, FY98 . . . . . 5

Table 2: Other TPCC Agencies involved in Export Promotion. . . . . . . . 25

Table 3: Categories of Private Sector Assistance . . . . . . . . . . . . . . . . . . 29

Table 4: SED Requirements and AES Filing . . . . . . . . . . . . . . . . . . . . . 86

Table 5: Categories of Incoterms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Table 6: “C” Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Table 7: “D” Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Table 8: “E” Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Table 9: “F” Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Table 10: Risk Factors Influencing Payment Terms . . . . . . . . . . . . . . . . . 94

Table 11: Payment Terms and Risks with Letters of Credit . . . . . . . . . . . 96

Table 12: Key WTO Issues for the November 1999 WTO

Ministerial in Seattle, WA . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

Table 13: OECD Estimates of E-commerce Sales Compared

To Various Benchmarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
U.S. Department of Commerce 1

Chapter One

The Enabling Environment 

for Exporters

Exporting matters! It matters to firms that profit from exporting and it also

matters to the national economy as a whole. For this reason, the federal

government, state and local governments, and other public and private

organizations annually devote billions of dollars each year to encourage

exporting among firms of all sizes and in all sectors. The purpose of this chapter

is to encourage minority firms to take greater advantage of this wealth of

resources in order to lower their costs and risks of entering the export arena. Six

basic questions are answered in this chapter to encourage greater exporting

among minority firms. 

Why does

exporting

matter?

What is the

USA doing to

compete for

export

markets?

Why do firms

engage in

exporting?

What

assistance is

available to

lower entry

costs?

Who are some

of the players

in the export

game?

How do I

know if my

firm is exportready?

Why does exporting matter?

In 1960, total world exports amounted to $629 billion. By 1995, they had

risen to more than $5 trillion. Why does exporting matter – it’s simple: it is

about money, jobs, and raising standards of living!

$670,246 (millions)

Total value of U.S. exports (1998) of which

■ Capital goods $299,612

■ Industrial supplies $148,266

■ Consumer goods $ 79,261

■ Autos, vehicles, parts, engines $ 73,157

■ Food, feeds, beverages $ 46,397

■ Other $ 35,444
2 U.S. Department of Commerce

The bottom line is that every country, no matter how big or small, wants a

portion of the export market. International competitiveness of the firm and the

country from which it exports determines who wins and loses in the race for

export markets. The factors that influence international competitiveness include:

■ Macroeconomic dynamism – which is concerned with the growth rates of

nations and with monetary and fiscal policies that influence the quantity

and quality of labor, capital, and technology. 

■ Financial dynamism – which is concerned with the level of a country’s

international reserves and the amount of imports their reserves can finance

over a given period of months. 

■ Market dynamism – which is concerned with the extent to which market

conditions support technological development and competition. 

■ Infrastructure dynamism – which is concerned with competitive

advantage of physical infrastructure (roads, rail, air, telecommunications,

power, etc.) and of institutional infrastructure. The latter includes

institutions that support the development and diffusion of technology;

information, risk-taking, export promotion and other factors that help firms

compete. 

■ Human resources dynamism – which is concerned with the competitive

advantage of the skills, motivation, flexibility, age, and health of a nation’s

workforce. 

■ Firm level dynamism – which is concerned with competitive advantage in

labor productivity, quality control, and technological development.

What is the U.S.A. doing to compete for exports?

The relationship between economic growth and exports has become increasingly

important. As export growth has accounted for an increasingly significant

portion of our overall economic growth, the U.S. has intensified its efforts to

promote exports. In 1993, the U.S. crafted its first comprehensive “National

Export Strategy” that examined the export promotion programs of 19 federal

agencies that administered more than 100 export promotion programs. The

purpose of the strategy was to provide a strategic framework and coordinated

approach for increasing U.S. exports. In order to create the strategic framework

and to promote coordination among federal government agencies, the U.S.

Congress established the Trade Promotion Coordinating Committee (TPCC) and

charged it with working together with the 19 federal agencies to develop a

strategy for: 
U.S. Department of Commerce 3

■ Increasing the dollar volume of exports;

■ Increasing the number of export-related jobs;

■ Increasing the number of firms exporting;

■ Promoting the spillover benefits to other sectors from increased export

activity; and

■ Promoting the technological advantage for the U.S. from exporting. 

Agency-specific recommendations were developed and implemented to achieve

these goals. Since the first National Export Strategy was formulated, U.S.

exports have continued to increase – but so has the competition. In order to

counter the competition for export markets, the U.S. has remained committed to

its export promotion activities. Consistent with the goal of promoting exports,

William Daley, the current Secretary of Commerce, is conducting a National

Trade Education Tour to explain to Americans how trade benefits America. 

The bottom line of the message is that international trade is a major driving

force in the American economy which creates jobs and wealth and which

accounts for a significant percentage of our economic growth. 

Why do firms engage in exporting?

There are many reasons why firms engage in exporting. Among them are:

■ To increase overall sales volume

■ To enlarge the sales base to spread out fixed costs

■ To use excess production capacity

■ To compensate for seasonal fluctuations in domestic sales

■ To find new markets for products with declining U.S. sales

■ To exploit existing advantages in untapped markets

■ To take advantage of high-volume foreign purchases

■ To learn about technical methods used abroad

■ To follow domestic competitors who are selling internationally

■ To acquire knowledge about international competition

■ To test opportunities for overseas licensing or production

■ To contribute to the company’s general expansion

■ To improve overall return on investment
4 U.S. Department of Commerce

But if the question is what is the strongest motivation to export, the answer is to

increase profits! Because profit expectations differ across firms for various

reasons, there will always be some firms that view exporting as highly lucrative,

some that view it as being extremely unprofitable, while the views of others will

fall somewhere in between. 

The bottom line is if firms expect exporting profits to be large enough to cover

their start-up costs, they will likely enter the export game. Factors that influence

the estimates which firms make about start-up costs include: 

■ Market research: firms factor in the start-up costs associated with

undertaking market research to identify buyers, to research foreign prices,

to select markets, to adapt to standard and testing requirements, and to

obtain legal advice and assistance. 

■ Product development: while most new-to-export firms may tend to initiate

exporting by selling existing products, some may also factor in the cost of

adapting existing products.

■ Distribution: firms also typically factor in the cost of hiring third parties

such as agents and distributors to handle distribution.

■ Learning Curve: firms also factor in the costs of learning about such

export operations as international customs clearance, documentation,

financing, and other operational issues.

What assistance is available to lower entry costs?

Firms interested in exporting can obtain assistance from six principal sources:

■ Federal government

■ State governments

■ Colleges & universities

■ Embassies

■ Private Sector

Federal Government Resources for Export Promotion

The bottom line is the U.S. government is spending almost $3 billion a year to help

U.S. firms export. Firms can lower their cost of entering the export market by using

the programs and services of federal government agencies. These programs provide

information, technical assistance, financing, advocacy, procurement opportunities,

and policies to support U.S. exporters. The budget allocated for selected export

promotion functions of the principal agencies involved in export promotion is shown

in Table 1. 
U.S. Department of Commerce 5

Table 1: (15 TPCC Agencies) Expenditures by Classification, FY 98

Principal Export Functions Agencies FY 98 Budget 

1. FINANCE Agriculture, Transportation

EXIM, OPIC, SBA $206,503,000

2. INSURANCE Agriculture

EXIM Bank

OPIC $327,676,000

3. COUNSELING Commerce

SBA $122,782,000

4. INFORMATION Agriculture, Commerce

Energy, SBA, USIA $101,998,000

5. TRADE EVENTS Agriculture, Commerce, 

Energy $27,729,000

6. DEVELOPING 

FOREIGN MARKETS Agriculture, Energy, 

FOR U.S. GOODS Commerce, USAID $550,511,000

7. FEASIBILITY

STUDIES TDA $56,187,000

8. COMBATING FOREIGN Agriculture, Transportation

EXPORT SUBSIDIES EXIM Bank $840,186,000

9. CHALLENGING UNFAIR Commerce, Labor, State,

TRADE PRACTICES Treasury, USTR $26,113,000

10. MULTI AND Agriculture, Commerce,

BILATERAL Labor, State, Transportation,

NEGOTIATIONS Treasury, USTR $275,997,000

11. ADVOCACY Commerce, Energy, State $30,620,000

Source: National Export Strategy, 1998

■ Overview: Of the TPCC’s 19 members, 15 have programs of assistance

for exporters while four have only oversight functions. Of the 15

programmatic agencies – USDA, Commerce, and the EXIM Bank – have

historically represented more than 90 percent of federal spending on export

promotion. In order to learn more about the export promotion activities of

federal government agencies and how they can lower the cost of doing

international business for firms, check out the National Export Strategy for

1998. A brief description of 10 of the principal federal government agencies

involved in promoting exports follows. 
6 U.S. Department of Commerce

The U.S. Department of Commerce (DOC) 

Principal Website: http://www.ita.doc.gov

Principal Export Functions: 3, 4, 5, 6, 9, 10, 11

The U.S. Department of Commerce (DOC) is at the center of the federal

government’s efforts to promote exports. The Secretary of Commerce chairs the

TPCC, the interagency group that, since 1992, has been required by statute to

develop a government-wide strategy for rationalizing the federal government’s

nearly $3 billion in federal export programs. These programs include efforts to

provide export financing, export-related information such as market research

and trade leads, export facilitation services such as business counseling, and

other support services such as trade missions and advocacy on behalf of U.S.

exporters. A comprehensive listing of the DOC’s program is provided on its

website (http://www.doc.gov). For those using the web version of this guide,

click on any of these program titles to learn more about the details of each

program. For those readers using the text version of this book, an overview of

some of the most popular Commerce programs follows the list of titles.

■ Advocacy Center 

■ American Business Centers in the Newly Independent States 

■ Agent/Distributor Service 

■ Americas (Office of the) 

■ Asia Business Center 

■ Basic Guide to Exporting

■ Bosnia/Balkan Reconstruction Hotline 

■ Bureau of Export Administration 

■ Business America 

■ Business Information Center for Northern Ireland 

■ Business Information Services for the Newly Independent States (BISNIS) 

■ Central and Eastern European Business Information Center (CEEBIC) 

■ Central and Eastern European Commercial Update 

■ Commercial Centers 

■ Commercial Service, The U.S. and Foreign 

■ Commercial Service International Contacts 

■ Commercial News USA

■ Consortia of American Businesses in the Newly Independent States (CABNIS) 

■ Country Directories of International Contacts 

■ Customized Market Analysis 

■ Destination Japan 

■ District Export Councils 

■ Eastern Europe Business Bulletin

■ Eastern Europe Looks for Partners

■ Economic Bulletin Board (EBB) 
■ European Union Hotline, NIST

■ Export Assistance Center Network 

■ Export License Application and Information Network (ELAIN) 

■ Export Licensing Voice Information System (ELVIS) 

■ Export Promotion Calendar 

■ Export Promotion Coordination (Office of) 

■ Export Trade Certificate of Review 

■ Export Trading Company Affairs (Office of) 

■ Export Yellow Pages

■ GATT

■ GLOBUS 

■ Gold Key Service 

■ Infrastructure Division 

■ Inspection Certification Services for Seafood Exports 

■ International Buyer Program 

■ International Company Profile 

■ International Data Base 

■ International Economic Policy Country Desk Officers 

■ International Programs Center 

■ International Trade Administration (ITA) 

■ Japan Export Information Center 

■ Japanese United Aid Program 

■ Latin America and Caribbean (Office of) 

■ Market Development Cooperator Program 

■ Matchmaker Trade Delegations 

■ Metric Program 

■ Middle East and North Africa (Office of) 

■ Multi-State/Catalog Exhibition Program 

■ Multilateral Affairs (Office of) 

■ Multilateral Development Bank Operations 

■ National Institute of Standards and Technology 

■ National Marine Fisheries Service 

■ National Technical Information Service 

■ National Trade Data Bank (NTDB) 

■ Near East, Africa and South Asia (Office of) 

■ Native Investment & Trade Association (NITA) 

■ North Africa (Office of the Middle East and) 

■ North American Free Trade Agreement (NAFTA) 

■ Northern Ireland, Business Information Center for 

■ Product Literature Centers 

■ Reverse Trade Missions 

■ Single Internal Market 1992 Information Service 

U.S. Department of Commerce 7
■ STAT

USA/Fax 

■ STAT-USA/Internet 

■ State of the Nation 

■ System for Tracking Export License Application 

■ Trade and Economic Analysis (Office of) 

■ Trade Development Industry Officers 

■ Trade Fairs and Exhibitions 

■ Trade Fair Certification 

■ Trade Information Center 

■ Trade Missions 

■ Trade Opportunities Program 

■ Uruguay Round Hotline (GATT) 

■ U.S. and Foreign Commercial Service 

■ U.S. Commercial Center Jakarta 

■ U.S. Commercial Center Sao Paulo 

■ U.S. Commercial Center Shanghai 

■ WTO/GATT Hotline, NIST

Resources for Export Counseling

■ Export Assistance Centers (EACs) – The Office of Domestic Operations

of the U.S. Department of Commerce operates the Export Assistance Center

Network with 19 U.S. Export Assistance Centers (USEACs) connecting 100

Export Assistant Centers (EACs) in a “hub and spoke” network. The

mission of the EAC network is to deliver a comprehensive array of export

counseling and trade finance services to U.S. firms, particularly small and

medium-sized enterprises. As client-driven, bottom-line oriented offices that

integrate the export marketing know-how of the DOC with the trade finance

expertise of the Small Business Administration (SBA) and Export-Import

Bank, EACs have the look and feel of private sector export consulting

firms. They have gone beyond being simply a federal partnership by

incorporating the resources of state and local export promotion

organizations. EAC trade specialists help U.S. businesses identify the best

markets for their products, develop market entry strategies, identify and

assess distribution channels, understand export operations, access trade

finance. Trade specialists are mobile, equipped with laptops, modems, and

cell phones that allow them to deliver export services at the client’s place of

business wherever and whenever is most convenient for the client.

Resources for Locating Market Research

The resources identified below can be accessed through the U.S. Department of

Commerce’s Commercial Service, and through the Export Assistance Centers

8 U.S. Department of Commerce
(EACs) which are operated by the Commercial Service. The Commercial

Service is a global network that is strategically located in more than 220 cities

worldwide to assist U.S. exporters. Overseas, the Commercial Service is present

in 78 countries, which represent more than 95 percent of the world market for

U.S. exports. 

■ National Trade Data Bank (NTDB) – Provides a “one-stop” source of

international trade data collected by federal agencies. The NTDB contains

more than 190,000 trade-related documents, including market research

reports, trade leads, trade contacts, statistical information, country reports,

and much more. It is available at federal depository libraries, can be

purchased on CD-ROM, or can be accessed through the Internet at STATUSA’s World Wide Website (http://www.stat-usa.gov). Call 1(800) STATUSA to order or for more information. 

■ Economic Bulletin Board (EBB)– Provides on-line trade leads timesensitive market information, and the latest statistical releases from a variety

of federal agencies. To subscribe, call 1(800) STAT-USA, or try the

Economic Bulletin Board as a guest user by dialing (202) 482-3870 with

your personal computer and modem. 

■ Industry Sector Analysis (ISA) – Provides a structured market research

reports produced on location in leading overseas markets. Reports cover

market size and outlook, characteristics, and competitive and end-user

analysis for a selected industry sector in a particular country. Industry

Sector Analyses are available on the National Trade Data Bank and the

Economic Bulletin Board. 

■ International Market Insights (IMI) – Provides short profiles of specific

foreign market conditions or opportunities prepared in overseas markets and

at multilateral development banks. These non-formatted reports include

information on dynamic sectors of a particular country. International Market

Insights are available on the National Trade Data Bank and the Economic

Bulletin Board. 

Resources for Pinpointing Your Export Prospects

■ Customized Market Analysis (CMA) – Provides market research made

to order. A Customized Market Analysis report assesses the market for a

specific product or service in a foreign market. The research provides

information on sales potential, competitors, distribution channels, pricing of

comparable products, potential buyers, marketing venues, quotas, duties and

regulations, and licensing or joint venture opportunities.

■ Trade Opportunity Program (TOP) – Provides timely sales leads from

international firms seeking to buy or represent U.S. products or services.

Trade Opportunity Program leads are printed daily in leading commercial

newspapers and distributed electronically via the Department of Commerce

Economic Bulletin Board. 

U.S. Department of Commerce 9
10 U.S. Department of Commerce

■ Agent/Distributor Service (ADS) 

 Provides customized overseas search

for qualified agents, distributors, and representatives for U.S. firms. For

each Agent/Distributor Service, DOC commercial officers abroad identify

up to six foreign prospects that have examined the U.S. firms’ product

literature and expressed interest in representing the U.S. firm’s products. 

■ International Company Profile (ICP) – Portrays the reliability of

prospective trading partners. Information provided in an International

Company Profile includes type of organization, year established, size,

general reputation, territory covered, sales, product lines, principal owners,

financial information, and trade references, with recommendations from onsite commercial officers as to suitability as a trading partner. 

■ Country Directories of International Contacts (CDIC) – Provides the

name and contact information for directories of importers, agents, trade

associations, government agencies, etc., on a country-by-country basis.

Available on the National Trade Data Bank site.

Resources for Promoting Your Products and Services Abroad

■ Commercial News USA – An export marketing magazine promoting U.S.

products and services worldwide. Disseminated in print to screened agents,

distributors, buyers, and end-users, and on-line to electronic bulletin board

subscribers. Selected portions of Commercial News USA are reprinted in

business newsletters in several countries. 

■ Gold Key Service – A custom-tailored service that combines orientation

briefings, market research, appointments with potential partners, interpreter

service for meetings, and assistance in developing follow-up strategies.

Gold Key Service is offered by the Commercial Service in export markets

around the world. 

■ Matchmaker Trade Delegations – “Matches” U.S. firms with

prospective agents, distributors, and joint venture or licensing partners

abroad. For each Matchmaker, the Commercial Service staff evaluates the

U.S. firm’s products and services, marketing potential, finds and screens

contacts, and handles all event logistics. U.S. firms visit the designated

countries with the delegation and, in each country, receive a schedule of

business meetings and in-depth market and finance briefings. 

■ International Buyer Program (IBP) – Supports selected leading U.S.

trade shows in industries with high export potential. DOC offices abroad

recruit foreign buyers and distributors to attend the U.S. shows while

program staff help exhibiting firms make contact with international visitors

at the show. The International Buyer Program achieves direct export sales

and international representation for interested U.S. exhibitors. 
U.S. Department of Commerce 11

■ Multi

State/Catalog Exhibitions  Showcases U.S. company product

literature in fast growing markets within a geographic region. During MultiState/Catalog Exhibitions, DOC staff and representatives from state

development agencies present product literature to hundreds of interested

business prospects abroad and send the trade leads directly to participants. 

■ Trade Fair Certification – Supports major international industry trade

shows providing high-profile promotion of U.S. products. Trade Fair

Certification encourages private organizers to recruit new-to-market, newto-export U.S. exhibitors; to maintain DOC standards for events; and to

provide services ranging from advance promotion to on-site assistance for

U.S. exhibitors. 

Resources for General Export Counseling

■ International Trade Administration (ITA) – ITA is dedicated to opening

markets for U.S. products and providing assistance and information to

exporters. ITA units include: 1) 104 domestic Export Assistance Centers and

141 overseas commercial export-focused offices in the U.S. & Foreign

Commercial Service network, 2) industry experts and market and economic

analysts in its Trade Development unit, and 3) trade compliance and market

access experts in its Market Access and Compliance offices. The units

perform analyses, promote products, and offer services and programs for the

U.S. exporting community, including export promotion, counseling, and

information programs listed elsewhere in this booklet

(http://www.ita.doc.gov).

■ Trade Information Center (TIC) – The TIC is the first stop for

companies seeking export assistance from the federal government. TIC

trade specialists: 1) advise exporters on how to find and use government

programs; 2) guide businesses through the export process; 3) provide

country and regional business counseling on standards and trade regulations,

distribution channels, opportunities and best prospects for U.S. companies,

import tariffs/taxes, customs procedures, and common commercial

difficulties; 4) direct businesses to market research and trade leads; 5)

provide information on overseas and domestic trade events and activities;

and 6) supply sources of public and private export financing. The TIC’s

Internet home page is: (http://www.ita.doc.gov/tic).

■ The Export Assistance Center Network (USEACs/EACs) – Referred to

above (http://www.ita.doc.gov/uscs/).

■ USA Trade Center – U.S. Department of Commerce – Emphasizing

customer service and seamless assistance, the USA Trade Center will bring

together key components of the DOC to serve as a single source for a

complete range of export related products and information. The USA Trade

Center, located in the Ronald Reagan Building at 14th and Pennsylvania
Avenue in Washington, DC, and the USA Trade Center offers general export

counseling, country-specific information and counseling covering the globe,

access to extensive market research and on-line trade leads, in-depth

counseling for local businesses, an export reference center, and an export

focused bookstore (http://www.ita.doc.gov/tic).

■ District Export Councils (DECs) – DECs are organizations of leaders

from local business communities whose knowledge of international business

provides a source of professional advice to the Commercial Service. Closely

affiliated with the EACs, the 55 DECs nationwide combine the energies of

more than 1,500 volunteers to supply specialized expertise to small- and

medium-sized businesses in their local community who are interested in

exporting. DECs organize seminars on a host of international trade topics

including trade finance. They also host international buyer delegations,

design guides to help firms export, put exporters on the Internet, and help

build export assistance partnerships to strengthen the support given to local

businesses interested in exporting. Consult the DEC website at:

(http://www.ita.doc.gov/dec/).

■ Minority Business Development Agency (MBDA) – MBDA provides

management and technical assistance, as well as access to domestic and

international markets. MBDA’s mission is to promote the establishment and

growth of minority-owned business enterprises in the U.S.; consequently, it

is constantly seeking to create new and innovative ways to engage U.S.

minority firms in the international business arena. MBDA assists minority

firms in gaining international access in many ways, including: trade

missions, matchmaker programs, one-on-one client counseling, seminars,

and special international program events (http://www.mbda.gov/). (Click on

Virtual Centers, and select International Trade Center). 

Resources for Industry-Specific Export Counseling

■ Trade Development (TD) Industry Officers of the U.S. Department of

Commerce – TD delivers industry analysis and trade policy support to

promote the interests of U.S. exporters. They work directly with individual

U.S. firms and industry associations to identify overseas trade opportunities

and obstacles by product or service, industry sector, and market. To assist

U.S. businesses in their export efforts, TD’s industry and international trade

experts conduct executive trade missions, trade fairs, product literature

centers, reverse trade missions, marketing seminars, and business

counseling (http://www.ita.doc.gov/ita_home/itatdhom.html).

■ Major Projects Assistance – Project managers for major transportation,

power, industrial, and other infrastructure projects coordinate government

assistance and help U.S. firms to compete for major overseas infrastructure

contracts; identify upcoming projects and develop specific information

about them; monitor worldwide infrastructure developments; provide one12 U.S. Department of Commerce
on

one business counseling to contractors, engineers, constructors, and

engineered systems providers; offer guidance on appropriate market

business contacts, contract bidding procedures, and strategies; and maintain

the Global Infrastructure Projects Database, available on the web

(http://www.ita.doc.gov/infrastructure).

■ Export Advantage for Textiles and Apparel – The Export Advantage

database, on the Office of Textiles and Apparel (OTEXA) home page,

provides information on regulations, policy, and trade statistics specific to

exporting textile and apparel products. Export Advantage also has

directories listing more than 4,000 overseas buyers and more than 1,500

U.S. suppliers. Contact: (http://otexa.ita.doc.gov).

■ National Marine Fisheries Service (NMFS) – The NMFS Inspection

Services Division (ISD) consumer safety officers and trade specialists offer

a range of services to assist U.S. fishing industry businesses engaged in the

exporting of fish and fishery products. Besides inspecting and certifying

products for export, NMFS advises seafood marketers about foreign

regulations and maintains contacts with foreign government regulatory

agencies to resolve sanitary-hygienic issues. Internet home page:

(http://kingfish.ssp.nmfs.gov/).

■ Tourism Industries – The Tourism Industries office collects, analyzes,

and distributes market research data on international travel to and from the

U. S. Arrivals to the U.S. are tracked for more than 200 countries, market

profiles are maintained for 20 countries and nine world regions, and indepth research is conducted on the largest inbound and outbound travel

markets. In addition, sector-specific information on international travelers is

available, such as use of rental cars, mode of transportation, and type of

lodging. Non-Resident Arrivals data, air traffic data, and survey data on

international travel to and from the U.S. are available and sold through the

Tourism Industries office. Customs reports, data tapes, or data files may be

purchased as well. Information on the data available can be found on the

Tourism Industries website. Internet home page: (http://tinet.ita.doc.gov).

Resources for Country-Specific Export Counseling

■ The Trade Information Center – Provides country and export

information by fax (1-800-872-8723) and provides country-specific

counseling (http://www/ita.doc.gov/tic).

■ Business Information Service for the Newly Independent States

(BISNIS) – Serves as the U.S. clearinghouse for business information on

Newly Independent States (NIS) through BISNIS online at:

(http://www.mac.doc.gov/bisnis/bisnis.html).

U.S. Department of Commerce 13
■ Central and Eastern Europe Business Information Center (CEEBIC)

– Serves as the U.S. clearinghouse for business information on Central and

Eastern European countries online at:

http://www.mac.doc.gov/ceebic/ceebic.html).

■ American Business Centers (ABCs) in the NIS – There are five ABCs

located at Commercial Service posts in Vladivostok, St. Petersburg,

Tashkent, Almaty, Kiev, and eight other independently operated ABCs. They

provide such in-country business services as research, counseling,

translation services, and more to help U.S. firms do business in the country.

Other Important Resources and Sources of Data

■ Bureau of Export Administration – The Bureau of Export

Administration (BXA) is responsible for controls of exports for reasons of

national security, foreign policy and non-proliferation. The BXA oversees

the development, licensing and enforcement of export control laws. Their

website includes access to BXA’s fact sheets, BXA’s programs, and the List

of Denied Parties. Fact sheets include information on export licenses,

program descriptions, and office location and contact information. 

■ Import Administration – The Import Administration (IA) enforces laws

and agreements to prevent unfairly traded imports and to safeguard jobs and

the competitive strength of American industry. The website contains

information pertaining to exchange rates, free trade zones (FTZ), and

antidumping and countervail duties. It also includes the Import Library with

a large number of downloadable files. 

■ Trade Compliance Center – Helps U.S. exporters receive benefits from

the more than 200 trade agreements the U.S. has concluded. 

■ U.S. Census Bureau – The Census Bureau maintains international trade

related statistics and provides trade information. For example, they have a

Correct Way to Fill out a Shipper’s Export Declaration and Country by

Commodity Trade Data.

14 U.S. Department of Commerce
U.S. Department of Commerce 15

The Department of Agriculture (USDA)

http://www.usda.gov

Principal Export Functions: 1, 2, 4, 5, 8, 10 

The mission of USDA is to enhance the quality of life for the American people

by supporting production of agriculture. A comprehensive list of its export

programs is given below. If you are viewing this document electronically, please

click on the program of interest for further program details. 

■ AgExport Action Kit 

■ AgExport Connections 

■ AGRICOLA

■ Agriculture Trade and Marketing Information Centers 

■ Animal and Plant Health Inspection Service 

■ Buyer Alert

■ Commodity Credit Corporation 

■ Economic Research Service 

■ Federal Grain Inspection Service (FGIS) 

■ Food Quality Assurance Program 

■ Food Safety and Inspection Service (FSIS) 

■ Foreign Agricultural Service (FAS) 

■ Foreign Buyer Lists 

■ Inspection Certificates for Food and Agricultural Exports 

■ Integrated System For Information Services (ISIS) —Telnet— 

■ Market Promotion Program, National Agricultural Library 

■ Rural Business Cooperative Service 

■ Supplier Lists (U.S.) 

■ Trade Assistance and Promotion Office 

■ Trade Leads 

■ Trade Shows 

■ Transportation and Marketing Division 

■ Voluntary Food Quality Certification Service 

A brief description is provided below of the Department’s “Ag Exporter

Assistance” program, which provides a broad range of assistance to exporters.

(http://www.fas.usda.gov/exporter.html)

■ Are You Ready To Export? – Helps firms determine if exporting is right

for them and identifies their strengths and weaknesses for future exporting.

■ Researching and Identifying Your Market – Helps firms learn how to

conduct market research by classifying their products and by using market

and analysis reports to evaluate international demand and to develop

competitive pricing strategies.
16 U.S. Department of Commerce

■ Export and Foreign Country Import Requirements and Certifications 

Helps firms learn to identify and complete the documents needed to export

plant, animals, and food.

■ Channels of Distribution – Helps firms understand import procedures,

learn about marketing information, and make useful contacts to help get

their products into overseas markets.

■ Finding Customers and Representatives for Your Product – Helps

firms identify potential buyers, sales and promotional opportunities abroad

by using FAS services (trade leads, buyer alerts). 

■ Foreign Buyer Listings, U.S. Suppliers Listings, AgTrade

Opportunities and Trade Shows – Helps firms identify potential buyers

and sellers and upcoming trade shows. 

■ Identify marketing programs – Helps firms promote their product

overseas and provides loan and credit guarantee programs to finance their

exports. 

■ Shipping Your Exports – Helps firms select transportation, choose

freight forwarders and find out about market conditions. 

The Export-Import Bank (EXIM Bank)

http://www.exim.gov

Principal Export Functions: 1, 2, 8 

The Export-Import Bank of the United States (ExIm) was created in 1934 and

established under its present law in 1945 to help finance and facilitate U.S.

exports. ExIm Bank is encouraged to supplement, but not compete with, private

capital by filling gaps created when the private sector is reluctant to engage in

export financing. ExIm Bank programs include: 

■ Bank Letter of Credit Policy 

■ City-State Program 

■ Credit Services 

■ Engineering Multiplier Program 

■ Export Assistance Centers 

■ Export Credit Insurance 

■ Export Financing Hotline 1-800-565-3946 

■ Financial Institution Buyer Credit Policy 

■ Guarantee Program 

■ Lease Guarantees 

■ Lease Insurance Policies 
U.S. Department of Commerce 17

■ Loan Program 

■ Medium-Term Single-Buyer Policy 

■ Multi-Buyer Policy 

■ New-to-Export Policy 

■ Operations and Maintenance Contracts Program 

■ Regional Offices 

■ Short-Term Single-Buyer Credit Policy 

■ Umbrella Policy 

■ Working Capital Guarantee Program 

The U.S. Small Business Administration (SBA)

http://www.sba.gov

Principal Export Functions: 1, 3, 4 

The U.S. Small Business Administration (SBA), established in 1953, provides

financial, technical, and management assistance to help Americans start, run,

and grow their businesses. With a portfolio of business loans, loan guarantees

and disaster loans worth more than $45 billion, SBA is the nation’s largest

single financial backer of small businesses. Major programs of SBA that can be

used by firms “going global” include: 

■ Business Loan Guarantee Program [7(a)] 

■ Export Assistance Centers 

■ Export Legal Assistance Network 

■ Export Working Capital Program 

■ International Trade (Office of) 

■ International Trade Loan Guarantee Program 

■ SBAtlas (SBA Automated Trade Locator Assistance Service) 

■ Service Corps of Retired Executives (SCORE) 

■ Small Business Development Centers (SBDC) 

■ Small Business Investment Companies

A brief overview of how SBA’s international program provides assistance follows.

■ Are You a New-to-Export Small Business? – The SBA sponsors and

supports training conferences, “how to” seminars, and one-on-one

counseling through our resource partners, the Service Corps of Retired

Executives (SCORE) and the nationwide network of Small Business

Development Centers (SBDCs) (http://www.sba.gov/oit/export/).

■ Are You Looking for Export Finance? – Do you need credit to close

that export deal? Many small businesses develop export leads but have

trouble when it comes to financing the transaction. You can finance a single
export order or multiple deals with the SBA

s Export Working Capital

Program (EWCP) (http://www.sba.gov/oit/finance/).

■ Additional Export Information and Resources – Are you looking for

more once you’ve “gone global”? The SBA has information for

experienced exporters looking for general trade information, including

Internet links (http://www.sba.gov/oit/info/).

■ Are You a Lender? – Are you a lender seeking to reach a high-growth

market, increase profits, reduce risks, respond to clients’ needs and invest in

your community? Take a look at SBA’s information about SBA

trade finance programs, contact information, and useful forms

(http://www.sba.gov/oit/lender/).

Key offices and programs of SBA that are available to assist firms in their

efforts to “go global” include:

The Office of International Trade (OIT) – The OIT works in coordination

with other federal agencies and public and private sector organizations to

encourage small businesses to expand their export activities and to assist small

businesses seeking to export. OIT directs and coordinates SBA’s export finance

and export development assistance. OIT’s outreach efforts include regional

initiatives with Russia, Ireland, Argentina, Mexico, and Egypt. In addition, OIT

develops how-to and market-specific publications for exporters. OIT oversees

the SBA’s loan guarantee programs to small business exporters, including the

Export Working Capital Program, which is available to exporters through the

U.S. Export Assistance Centers (USEACs) and SBA field offices across the

country. The office also spearheads a program, through the USEAC network,

called E-TAP (Export Trade Assistance Partnership), which focuses on a small

group of export-ready companies and gives them the assistance they need to

develop export markets, acquire orders or contracts, and use export financing in

preparation for a trade mission or show overseas. Internet home page:

(http://www.sba.gov/oit).

Small Business Development Centers (SBDCs) – Small Business

Development Centers (SBDCs), located throughout the U.S., provide a range of

export assistance, particularly to new-to-export companies. They offer assistance

services to small businesses, including counseling, training, and managerial

assistance. They provide counseling services at no cost to the small business

exporter, but they generally charge fees for export training seminars and other

SBDC-sponsored export events. Many SBDCs are involved in the ETAP

program. Internet home page: (http://www.sba.gov/SBDC/).

Service Corps of Retired Executives (SCORE) – Members of the SCORE

program, many of whom have years of practical experience in international

trade, provide one-on-one counseling and training seminars. Specialists assist

small firms in evaluating export potential and in strengthening domestic

operations by identifying financial, managerial, or technical problems. Internet

home page: (http://www.score.org). 

18 U.S. Department of Commerce
U.S. Department of Commerce 19

Export Legal Assistance Network (ELAN)  The Export Legal Assistance

Network is a nationwide group of attorneys experienced in international trade

that provides free initial consultations to new-to-export businesses on exportrelated matters. The ELAN service is available through SBA district offices,

Service Corps of Retired Executives (SCORE) offices, and Small Business

Development Centers (SBDCs). Internet home page: (http://www.fita.org/elan/).

The U.S. Agency for International Development (USAID)

http://www.info.usaid.gov

Principal Export Function: 6

The United States Agency for International Development (USAID) was

established in 1961 as an independent government agency to provide economic

development and humanitarian assistance to advance U.S. economic and

political interests overseas. Its international programs include:

■ Business Development Services 

■ Center for Trade and Investment Services 

■ Consultant Registry Information System (ACRIS) 

■ Environmental Technology Network for Asia (ETNA) 

■ Export Assistance Centers 

■ Guide to Doing Business with the Agency for International Development

■ International Executive Service Corps 

■ Small and Disadvantaged Business Utilization (Office of)

A brief description of some of the Agency’s most popular programs follows. 

■ USAID Procurements

This site contains information about USAID’s procurements, including

current solicitation documents, announcements, and resources to help you

conduct business with the Agency. Internet home page: 

(http://www.info.usaid.gov/procurement_bus_opp/procurement/).

■ Global Technology Network (GTN)

GTN is a trade lead/business matching program that facilitates the transfer

of U.S. technology and services to address global development problems.

This is accomplished by matching a country’s development needs with U.S.

firms equipped to provide the appropriate technological solutions. GTN

focuses on the following sectors: agricultural technology, communications

and information technology, environment and energy technology, and health

technology (http://www.usgtn.org/).
20 U.S. Department of Commerce

■ Office of Small & Disadvantaged Business Utilization (OSDBU)

The Office of Small and Disadvantaged Business Utilization/Minority

Resource Center (OSDBU/MRC) is the Agency’s advocate for U.S. small

businesses, small disadvantaged businesses, and women-owned small

businesses. One of the most sought out pieces of information at this site is

the “Guide to Doing Business with USAID.” The Internet home page is:

(http://www.info.usaid.gov/procurement_bus_opp/osdbu/).

The Overseas Private Investment Corporation (OPIC)

http://www.opic.gov

Principal Export Functions: 1, 2 

The Overseas Private Investment Corporation (OPIC) is an independent, selfsustaining government corporation that assists U.S. private investment overseas

by providing insurance and financing for their overseas investments. Its

international programs include:

■ Automated Information Line 

■ Finance Programs 

■ Investment Insurance 

A brief description of some of the Agency’s most popular programs follows.

■ Insurance: Three political risks are covered by OPIC: currency

inconvertibility, expropriation, and political violence. In addition, OPIC

offers tailored insurance programs for small businesses. 

■ Finance: OPIC offers two types of direct loans for projects involving

U.S. small businesses or cooperatives, the Corporate Finance Direct Loan

and the Project Finance Direct Loan, which are available (on different

terms) for U.S. small businesses to fund overseas investment in expansion

facilities, permanent working capital, and fixed assets. In addition, OPIC

offers the Finance Contractors Program that provides an OPIC guaranty for

bid bonds, performance bonds, and other guaranties issued by U.S. financial

institutions on behalf of U.S. contractors who have operational and financial

track records.
U.S. Department of Commerce 21

The Department of State

http://www.state.gov

Principal Export Functions: 9, 10, 11

The Department of State and its embassies analyze foreign political and

economic developments and brief U.S. businesses on the local political and

business climate. As experts on host country economies and business practices,

State Department officers work closely with their colleagues in the Commercial

Service and other agencies to identify opportunities for U.S. firms and to

advocate on their behalf. In many overseas markets, State Department officers

report and negotiate for the entire spectrum of U.S. government agencies. State

Department officers in Washington and abroad play important roles in

negotiating economic agreements on trade, investment, intellectual property

rights, taxation, civil aviation, telecommunications, and debt, and in ensuring

that those agreements are honored. Its international programs include:

■ Bureau of Economic and Business Affairs 

■ Coordinator for Business Affairs 

■ Defense Trade Controls (Office of) 

■ Embassies and Consulates (U.S.) 

■ ITAR (International Trade in Arms Regulations) 

■ Munitions List 

■ Overseas Security Advisory Council 

■ Regional Bureaus 

A brief description of some of the Department’s programs that are specifically

concerned with promoting business interests follows. 

■ The Office of the Coordinator for Business Affairs – This office helps

ensure that U.S. business interests are considered in the foreign policy

process, that American companies have opportunities to compete fairly for

foreign business, and that international trade and investment disputes are

resolved. The office coordinates State Department advocacy on behalf of

American businesses and offers them problem-solving assistance in opening

markets, leveling playing fields, and resolving trade and investment disputes

(http://www.state.gov/www/services.html).

■ The Office of Procurement – Companies that are interested in doing

business with the State Department also can obtain the latest information on

procurement contracts and government acquisitions through the Internet

(http://www.statebuy.gov/home.html).

■ The Office of Small and Disadvantaged Business Utilization – This

office ensures that a fair share of the Department’s acquisitions are placed

with small and disadvantaged firms, as well as those owned by women. It

serves as advocate, counselor, trainer, and provider of liaison services to the
22 U.S. Department of Commerce

small business community. The office publishes United States Department

of State: A Guide to Doing Business, which lists useful information

concerning the Department’s procurement opportunities and points of

contact (http://www.statebuy.gov/osdbu1.htm).

■ Country Commercial Guides – Commercial information compiled by

the State Department regarding commercial transactions in practically every

country in the world - includes contacts, marketing information, best

prospects, and more. 

The Department of the Treasury 

http://www.treas.gov

Principal Export Functions:

The Treasury’s Office of International Affairs advises on and assists in the

formulation and execution of U.S. international economic and financial policy.

This entails the development of policies with respect to international financial,

economic, monetary, trade, investment, bilateral aid, environment, debt,

development, and energy programs, including U.S. participation in international

financial institutions. Through the Office of International Affairs, the Treasury

Department has developed a new International Trade Resource Center. The

purpose of the center is to assist those in the international trade community by

providing basic information on international trade. The center provides

information on federal government international procedures, information on the

rules and regulations required to import, and information on exporting, export

finance, and transportation

(http://www.itds.treas.gov/ITDS/Frames/Build_Frames.cfm?Site=ITRC).

Two of the most frequently used programs of the Treasury Department include:

■ ATA Carnet 

■ Foreign Assets Control (Office of)

A brief description of some of the Department’s international programs follows.

■ Customs Service – As the nation’s principal border agency, the mission of

the U.S. Customs Service is to ensure that all goods entering and exiting the

U.S. do so in accordance with all U. S. laws and regulations. The

Importing/Exporting section includes extensive resources regarding rules

and regulations, informed compliance, export licenses, and automated

import/export systems. 

■ Office of Foreign Assets Control – The Office of Foreign Assets Control

administers embargoes and trade sanctions against targeted foreign countries

based on U.S. foreign policy and national security goals. Many of their

regulations covering exports to embargoed countries and entities overlap
U.S. Department of Commerce 23

with the Bureau of Export Administration regulations. In the event that

you are considering an export to an embargoed country or entity you

should check with both agencies to learn the exact regulations covering

your desired transaction. See “Foreign Assets Control Regulations for

Exporters & Importers.”

The U.S. Trade Representative (USTR)

http://www.ustr.gov

Principal Export Functions: 9, 10

The U.S. Trade Representative (USTR) is responsible for developing and

coordinating U.S. international trade, commodity, and direct investment policy,

as well as for leading or directing negotiations with other countries on such

matters. USTR provides trade policy leadership and negotiating expertise in its

areas of responsibility. These include matters concerning the World Trade

Organization (WTO), including the implementation of the Uruguay Round of

trade negotiations; trade, commodity, and direct investment matters dealt with

by organizations such as the Organization for Economic Cooperation and

Development (OECD); export expansion policy; and trade-related intellectual

property protection issues. Interagency coordination is accomplished by USTR

through the Trade Policy Review Group and the Trade Policy Staff Committee.

Useful websites include:

■ General Counsel (Office of the) 

■ National Trade Estimates Report on Foreign Trade Barriers 

■ U.S. Trade Representative (Office of the)

The Department of Transportation (DOT)

http://www.dot.gov

Principal Export Functions: 1, 8, 10

DOT’s Office of International Transportation and Trade leads and oversees

development, coordination, and implementation of the DOT’s international

transportation and trade policies and programs. Among the Office’s primary

responsibilities are coordinating the development of transportation policies

pursuant to Administration trade initiatives in Africa, Asia Pacific (APEC),

Western and Eastern Europe, and Latin America. The Office is also involved in

U.S.-Canada-Mexico transborder issues, developing U.S. transportation policies

and programs in multilateral initiatives in the WTO, OECD, and other

international organizations. 
In addition to the Office of International Transportation and Trade, the following

DOT programs and services are useful for exporters: 

■ Cooperation/Technology Sharing

■ Technical Assistance

■ Bureau of Transportation Statistics (BTS)

The BTS provides information and statistics on different types of

transportation. The website includes freight, hazardous material, and

aviation information. 

■ Federal Aviation Administration (FAA)

In the field of air cargo, the FAA promulgates certain stress standards which

must be met in the tiedown of cargo in flight. The website provides

information regarding airfreight and hazardous material regulations. 

■ Maritime Administration (MARAD)

Promoting the U.S. maritime industry and maintaining the U.S. Merchant

Marine, MARAD’s website contains international shipping related

information. 

■ St. Lawrence Seaway Development Corporation 

The St. Lawrence Seaway has been a vital transportation link for moving

goods between the heartland of North America and international markets.

This website provides current toll schedules, port profiles, and annual

reports.

In addition to the resources identified above, additional resources for

exporters are provided by other agencies. These agencies are identified in

Table 2. 

24 U.S. Department of Commerce
U.S. Department of Commerce 25

Table 2: Other TPCC Agencies involved in Export Promotion

Agency Principal Functions Website

U.S. Information Agency “Doing Business” http://www.usia.gov

(USIA) Television Program

Office of Citizen Exchanges 

U.S. Information Service 

Department of Energy Office of Fossil Energy - http://www.doe.gov

(DOE) International Program 

Coordinator 

Committee on Energy Efficiency 

Commerce and Trade (COEECT) 

Committee on Renewable Energy 

Commerce and Trade (CORECT) 

Export Assistance Initiative 

Department of Labor (DOL) See Website http://www.dol.gov

Environmental Protection International Technology http://www.epa.gov

Agency (EPA) Cooperation 

U.S. Trade Development African Development Bank http://www.tda.gov

Agency (TDA) Business Briefings and 

Technical Symposia 

Definitional Missions 

Feasibility Studies 

Grants to Multilateral 

Development Banks 

International Finance 

Corporation 

Reverse Trade Missions 

Technical Assistance Grants 

Technical Assistance Trust Funds 

for U.S. Consultants 

Technical Symposia and 

Business Briefs 

Training Grants 

World Bank/International Bank 

for Reconstruction and 

Development

National Economic Council Oversight—not program delivery http://www.nec.gov

(NEC)

National Security Council Oversight—not program delivery http://www.nsc.gov

(NSC)

Council of Economic Advisors Oversight—not program delivery http://www.cea.gov

(CEA)

Office of Management and Oversight—not program delivery http://www.omb.gov

Budget (OMB)
26 U.S. Department of Commerce

Non-TPCC AGENCIES OF INTEREST TO EXPORTERS

Federal Maritime Protects shippers, carriers and others http://www.fmc.gov

Commission (FMC) engaged in the foreign commerce of 

the U.S. from restrictive rules and 

regulations of foreign governments

International Trade The ITC is an independent U.S. http://www.usitc.gov

Commission (USITC) government fact-finding agency that 

makes recommendations concerning 

countervailing duty and antidumping 

petitions submitted by U.S. industries 

seeking relief from imports that 

benefit unfair trade practices

Patent and Advises on patent, trademark, and http://www.uspto.gov

Trademark Office copyright protection and on trade-

(USPTO) related aspects of intellectual 

property. 

U.S. Arms Control and Reviews certain dual use export http://www.acda.gov

Disarmament Agency license applications referred by 

(ACDA) BXA. 

State Government Resources for Export Promotion

The bottom line is that exporting occurs at the state level by firms in a given

state. More exports translate into more jobs in the state. Accordingly, states are

interested in promoting exports. Firms interested in exporting should draw upon

the state export promotion resources, just as they draw upon those at the federal

level. State programs, like federal programs, are aimed at lowering the costs and

risk to the exporter entering the market. 

How important is exporting from the state’s perspective?

In October of 1998, the U.S. Treasury conducted a study to learn how turmoil in

the global financial situation was affecting states. The Treasury Department’s

report provided a state-by-state analysis detailing declines in exports and

specific industry effects in individual states from the global financial situation.

The study demonstrated the importance of international trade with both Asia and

the world’s developing nations to each state. It also analyzed the importance of

individual state exports to foreign markets and specific industries within each

state. Some of the highlights of the report include:

■ Thirty percent of U.S. exports go to Asia, supporting millions of U.S.

jobs. For a number of states, including Alabama, Florida, New Mexico,

Texas and Virginia, more than 40 percent of exports go to developing

countries. 

■ Forty percent of all U.S. agricultural exports go to Asia, more than to any

other region. In 1997, total U.S. exports to Asia decreased by 11 percent. 
U.S. Department of Commerce 27

■ Studies have shown that export

related jobs in the U.S. pay an average of

15 percent more than other jobs. 

California (the top exporting state) answers the question of why exports are

important to Californian companies: – California registered $104.97 billion in

exports during 1998, the third consecutive year the state’s exports surpassed

$100 billion. Exports to Latin America, Canada, and Europe led California’s

growth sectors. The state’s export diversity was exemplified by strong sales to

NAFTA partners Mexico ($13.3 billion, up 10.4 percent) and Canada ($12.7

billion, up 10.9 percent). 

Exporting matters to states: The California example is given to underscore the

importance of exporting to the states. Individual states have export advertising

programs that promote the interests of the firms in their states. One

organization promoting states is The National Association of State Development

Agencies (NASDA) (http://www.nasda.com). According to NASDA, the export

promotion activities of states include: 

1. Assisting with international procurement opportunities

2. Providing market research 

3. Governor’s International Advisory Council 

4. Trade development training 

5. Foreign sales corporations

6. Export awareness programs

7. Trade leads and match making

8. In-house counseling

9. Seminars, workshops, and conferences

10. Newsletters

11. Overseas office representation

12. Export financing and trade and catalogue shows

Top picks for researching state programs:

■ The National Export Directory (NED) – The directory was developed

by the Trade Information Center (TIC) (http://www.ita.doc.gov/tic) to better

inform U.S. exporters about trade contacts at the federal, state, and local

levels.

■ The National Association of State Development Agencies (NASDA)

(http://www.nasda.com) – It is a membership organization that provides an

umbrella for state agencies that are charged with promoting economic

development. NASDA has compiled the State Export Program Database

(SEPD), which is available in hard copy or on disk for $164.00. It provides

information on major export development programs, including industry and

regional targets.
U.S. Department of Commerce

■ State and Local Government Procurements (NTDB) 

 Trade leads for

state and local governments are provided through STAT-USA’s National

Trade Data Bank, which can be accessed for free from any federal

depository library (at universities) or on a subscription basis. 

■ State Resources – A comprehensive directory of state resources is

provided by the Treasury Department’s International Trade Data System

(ITDS) at:

(http://www.itds.treas.gov/ITDS/Frames/Build_Frames.cfm?Site=ITRC)

College and University Resources for Export Skills 

The bottom line is that one must scale the learning curve to become a viable

exporter. Colleges, especially community colleges, and universities are at the

forefront of imparting skills for conducting exporting and importing operations.

Firms that are considering entry into the overseas markets can benefit from

these educational programs which will, in the end, help to lower the costs of

exporting. 

Top pick for Community College export and import training programs:

■ The Minority Business Development Agency’s Virtual International

Center (http://www.mbda.gov) – The center provides information on the

export training programs of community colleges in the top ten exporting

states to better inform U.S. exporters about trade contacts at the federal,

state, and local levels. The critical path for finding information about other

Community Colleges in your state: Alta Vista keyword search: “community

colleges+export (or international) training programs.”

Embassy Resources for Trade and Investment Facilitation

The bottom line is that foreign embassies in Washington, DC provide a wealth

of first-hand information about their countries. Firms that are considering entry

into the target overseas markets should contact the embassies of the countries in

which they have an interest to obtain valuable information about the business

conditions and trading opportunities in the country (websearch: key word

“embassies”).

Top pick for researching foreign embassies in Washington, DC:

■ The Electronic Embassy (http://www.embassy.org/) – Provides

information on all of the embassies in Washington, DC. The International

Business Center of the Electronic Embassy will provide a site to market the

products and services of businesses seeking an international audience. The

site will also have more than 170 country pages. Visitors to these pages will

be able to obtain information to aid them in foreign travel, immigration,

importing, and exporting. 

28
U.S. Department of Commerce 29

Private Sector Resources for Export Services

The bottom line is that private sector firms also provide a wealth of

information to help lower the cost of market entry. Private sector firms and

organizations provide the full range of assistance that is available in the public

sector, plus additional value-added products and services for going global. Table

3 shows the kinds of assistance that is available in the private sector. 

Table 3: Categories of Private Sector Assistance

Export Market Trade Leads Transportation Financing Intermediaries

Counseling Research and Buyer and

Seller Links

“How to” On firms, Statistics on “How to” Financial Export

information on industries, buyers and transport goods advice and management

all aspects of markets, etc. sellers and financing and trading

exporting direct links to companies 

both

Top pick for researching private sector resources:

■ The Trade Information Center (http://www.ita.doc/tic/) – Its Internet

Guide to Trade Leads provides the web addresses for a broad range of trade

lead assistance providers in the private sector. This site also provides the

web address for the American Export Register, an important resource that

contains a list of 45,000 exporting companies and 5,000 product categories.

The Bureau of the Census, Department of Commerce, reported that in 1992, the

latest year for which data are available, that the U.S. exporting community

consisted of 112,854 companies that exported $349 billion in merchandise to

226 foreign countries. 

Wholesalers 

The bottom line is that almost six percent of the nation’s 690 thousand

manufacturers and 5 percent of the nation’s 770 thousand wholesalers exported

in 1992. 

Who are some of the players in the export game?
30 U.S. Department of Commerce

Manufacturers

The bottom line is manufacturers accounted for the largest portion of exports at

$242 billion, followed by “other companies,” and wholesalers at $53 billion and

$51 billion, respectively. The “other companies” category included freight

forwarders and other transportation services firms that often act as agents for the

true exporter. 

Multiple Location Exporters 

The bottom line is that in 1992, about 18 percent (19,967) of all exporters were

multiple location companies. These companies accounted for 81 percent of the

“known” export value. In contrast, the 92,887 single location companies,

although making up 82 percent of the exporting companies, accounted for just

19 percent of the known export value. 

Large Exporting Firms

The bottom line is that companies with 500 or more workers were responsible

for about 71 percent of the known export value, but represented a little over four

percent of all exporters. In fact, the top four firms (ranked by value) accounted

for 11 percent of known exports. 

Small and Medium-Sized Firms (SMEs)

The bottom line is that although a few large companies dominate exports, there

are many active small and medium-sized exporters (those employing fewer than

500 workers). Almost 96 percent, or 108,026 of all exporters, were small or

medium-sized companies. These companies exported $103 billion in goods. 

Companies with Fewer than 20 Employees

The bottom line is that companies with fewer than 20 employees accounted for

roughly 59 percent of all exporters, but were responsible for only 11 percent of

the known export value. Such companies make up about one third of exporting

manufacturers, 75 percent of wholesalers, and 72 percent of “other companies.”

To How Many Countries do Firms Export

The bottom line is that over 91 percent of the exporting community exported to

fewer than 10 countries. In contrast, less than 12 percent of all U.S. exporting

companies shipped goods to 50 or more countries during 1992, but these

companies were responsible for 16 percent of known exports. About 90 percent

of all companies exported to at least one of the top 25 partner countries in 1992.

More companies (49,131) exported to Canada than any other country, followed

by the United Kingdom (23,977), Japan (19,885), and Germany (19,739).

Mexico, while ranking only seventh with 12,766 exporters, ranked third in total

export value at $41 billion. 
U.S. Department of Commerce 31

How do I know if my firm is export-ready? 

In today’s digital economy, when an export order can come over the Internet

from anywhere in the world, the question is not whether a firm is export-ready;

rather, the question is how quickly can a firm get ready to export! 

Ultimately, every firm has to decide whether it believes that it is ready to

export. In making this decision, firms must realize that selling in the foreign

market is more difficult and riskier than selling in the domestic market. Given

the difficulty associated with exporting, it is not surprising that there have been

many attempts to “quantify” readiness. Such tests of “readiness” examine a

number of factors. One example is given below. 

Top pick for assessing “Export Readiness:”

■ TradeCompass – A private firm, TradeCompass has developed an export

readiness assessment system (ERAS) that enables firms to assess their own

readiness by answering selected critical questions. The assessment of

readiness is based on answers to 23 questions about a company’s present

operations, attitudes and products (http://www.tradecompass.com).

The ERAS system distinguishes between firm readiness and product readiness

and can be taken over the Internet at:

http://www.tradecompass.com/iba/eras/intro.html).

The questions are as follows:

ERAS Company Readiness:

1. Whether the firm has an established presence domestically?

2. Degree of domestic market penetration?

3. Methods of selling and distributing in the domestic market?

4. Experience in conducting market research and planning?

5. Extent of advertising in the domestic market?

6. Whether the firm has staff with export experience?

7. Whether the firm has received unsolicited overseas inquiries?

8. Adequacy of inventory to fill foreign orders?

9. Organizational capacity to handle exporting?

10. Experience with exporting?
11. Level of commitment to exporting?

12. Financial resources for supporting export operations?

13. Ability to delay export profitability? 

14. Domestic sales growth in the past three years?

15. Product market share?

16. Price-competitiveness of product?

17. Flexibility to accept a range of payment terms?

18. Competitiveness of product in quality?

19. Flexibility to adapt products and services?

20. Cost to transport products?

21. Difficulty in assembling, installing, operating the product?

22. Requirement for after-sales supports?

23. Adaptability of product to varying environmental conditions?

Chapter Two discusses ways to enter the export arena.

32 U.S. Department of Commerce
U.S. Department of Commerce 33

Chapter Two

Ways of Entering the Export Arena

There are many different ways to enter the export arena. For example, you

can enter as a direct exporter of the products that your firm manufactures;

as an indirect exporter of products manufactured by others, or as a

service exporter of consulting or software services. The initial export planning

process is different for each of these modes of operations. This chapter focuses

on how to conduct the pre-entry market research process for the different ways

of entering into the export business. Three basic questions are answered:

Indirect Exporters

What are the preexport entry market

research and

planning steps?

Service Exporters

What are the preexport entry market

research and

planning steps?

Direct Exporters

What are the preexport entry market

research and

planning steps?

The way a company chooses to export its products has an impact on the

research it must undertake before export activities begin. While there are two

main exporting paths, indirect exporting and direct exporting, there are many

indirect approaches. Indirect exporting is often advantageous for minority firms

because it provides a way of penetrating foreign markets without the

complexities and risks of direct exporting. Several kinds of intermediary firms

provide a range of export services. Each type of firm offers distinct advantages

for the smaller firm. A brief overview of typical indirect exporting approaches is

given below. 

■ Commission or Buying Agents: These entities are finders for foreign firms

that want to purchase U.S. products. They are paid a commission for locating

the product on the best terms.

■ Export Management Companies (EMCs): These companies act as the

export department for one or several producers of similar goods or services, as

they typically specialize by product and foreign markets and have wellestablished networks of foreign distributors already in place. EMCs solicit and
34 U.S. Department of Commerce

transact business in the names of the producers it represents or in its own name

for a commission, salary, or retainer plus commission. Some larger EMCs

provide immediate payment for the producer’s products by either arranging

financing or directly purchasing products for resale. 

■ Export Trading Companies: These companies, like EMCs can either act as

the export department for producers or take title to the product and export for its

own account. A special kind of ETC is a group organized and operated by

producers. These ETCs can be organized along multiple- or single-industry lines

and can represent producers of competing products.

■ Export Agents, Merchants, or Remarketers: This organization may

purchase products directly from the manufacturer and pack and mark them

according to their own label’s specifications. They then sell overseas through

their contacts in their own names and assume all risks for their own accounts.

■ Piggyback Marketing: This is an arrangement in which one manufacturer or

service firm distributes a second firm’s product or service. The most common

piggybacking situation is when a U.S. firm has a contract with an overseas

buyer to provide a wide range of products or services. This first company does

not produce all of the products it is under contract to provide, and it turns to

other U.S. firms to provide the remaining products. The second U.S. firm

piggybacks its products to the international market, generally without incurring

the marketing and distribution costs associated with exporting. Successful

arrangements usually require that the product lines be complementary and

appeal to the same customers.

What steps are involved in the market research and

planning process for Indirect Exporters? 

Among the various indirect approaches for exporting, minority exporters are

typically involved in buying products for export. Firms whose owners have

extensive overseas links or contacts may also seek to serve as an EMC or ETC.

Therefore, this discussion focuses on the research steps involved in identifying

the companies in the U.S. that manufacture the products that minority firms may

wish to source for subsequent sales overseas and on the initial research process

for EMC and ETCs. The initial pre-entry research that should be undertaken by

the subject intermediary exporters is discussed below. 

■ Step A: Research domestic suppliers

■ Step B: Research EMC and ETC mechanisms

■ Step C: Research target markets

■ Step D: Research overseas buyers
U.S. Department of Commerce 35

A

STEP A: Researching Domestic Suppliers

METHOD A

For Indirect Exporters who seek to buy products

in the USA and Sell them Overseas

A1: How to classify the product in international terms?

A2: How to identify product manufacturers in the domestic market?

A3: How to assess the competitiveness of the seller’s product?

A1: How to classify the product? 

Every trade lead that you find from the Internet or from other sources will name

the product and also give its harmonized classification number—this system

was set up to ensure that there was a commonly accepted international standard

of how to classify goods. U.S. exporters are required to provide the Schedule B

(harmonized code) commodity number for all export shipments (excluding

postal shipments) where the value of the commodity classified is $2,500 or

more or for which a validated export license is required. Information on how to

classify products according to the Schedule B harmonized code can be found at:

http://www.census.gov/foreign-trade/www/. In situations where you encounter

difficulty in determining the correct export classification number, the Census

Bureau’s Foreign Trade Division (FTD) will lend assistance.

Bureau of the Census (http://www.census.gov/foreign-trade/www/)

A2: How to identify product manufacturers in the domestic market? 

Once you are clear on exactly what product you are looking for, there are a

number of ways to identify the manufacturers of the products in the USA from

whom you can source the goods to export. Our top pick website for conducting

this research is: 

Michigan State University Center for International Business Education

Research (CIBER) (http://ciber.bus.msu.edu/busres/company.htm)

■ Go to United States and select— GENERAL: Corporate Information

(http://www.corporateinformation.com)

This site identifies resources that offer information about what a particular

company manufactures and other company data. For information about privately

held companies, refer to the United States Private Company Information Page.

The private company page also has databases that have information on both

public and private companies, so even if you’re researching a public company,

there might be some interesting databases on the private company page. For
36 U.S. Department of Commerce

other countries, go to the Main page. For US regionalbased sites, see the US

Regional Page or pick a state from the bar at the left, and for sector-specific

sites, try the US Sector-specific page or choose a sector at the left. The sector

and regional pages may also have information that might be of use if you are

researching a public company. Available information includes: Earnings

Estimates, Ownership Information, Delayed Quotes, Historical Data, Other

Information, Stock Screening, and Comparison to Other Firms

A3: How to Assess the Competitiveness of the Seller’s Product: 

Once you have identified sources of goods, there are a number of ways to assess

the competitiveness of the seller’s firm and/or products. Our top pick website(s)

for conducting this research are: 

The Securities Exchange Commission’s EDGAR

(http://www.sec.gov/edaux/wedgar.htm)

EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system,

performs automated collection, validation, indexing, acceptance, and forwarding

of submissions by companies and others who are required by law to file forms

with the U.S. Securities and Exchange Commission (SEC).

Hoover’s Online (http://www.hoovers.com/hoov/about/whoweare.html)

The company has been dubbed “The Reigning King of Corporate Profiles” by

FORTUNE magazine. Austin, Texas-based Hoover’s provides business

information online through its flagship Web site, Hoover’s Online. Hoover’s

Online also features links to news, lists, stock quotes, and other products such as

Hoover’s Industry Snapshots (global industry overviews). Hoover’s offers

approximately 14,000 company capsules (brief company descriptions and

financials) and approximately 4,000 company profiles (company histories,

strategies, market positions, major events, and other information) available via

online subscription. The profiles cover U.S. and foreign public and nonpublic

companies and are written for executives, investors, job seekers, sales people,

consumers, and scholars. 
U.S. Department of Commerce 37

B

STEP B: Research EMC and ETC Mechanism 

METHOD B

For Indirect Exporters who seek to either serve as EMCs/ETCs

or retain their services 

B1: Know where to go for help in the U.S. Government 

B2: Understand how to use EMCs and ETCs 

B3: Understand how to use the Export Trading Company Certificate

B4: Understand how to team up to maximize the benefits of having an EMC

B1: Know where to go for help in the U.S. Government: 

The Office of Export Trading Company Affairs (OETCA) is part of the Trade

Development Unit of the U.S. Department of Commerce’s International Trade

Administration. OETCA promotes the formation and use of export trade

intermediaries and the development of long-term joint export ventures by U.S.

firms, including joint ventures by U.S. firms that are competitors in the

domestic market. OETCA administers two programs available to all U.S.

exporters or potential exporters. The Export Trade Certificate of Review

program provides antitrust protection to U.S. firms for collaborative export

activities. The U.S. Department of Commerce’s — U.S. Exporters’ Yellow

PagesTM (USEYP) is designed to assist in matching U.S. trade intermediaries

with U.S. producers of exportable goods & services. The USEYP referral

service is available worldwide at (http://www.docexport.com) and as an annual

print directory. Our top pick website for conducting this research is: 

The Office of Export Trading Company Affairs (OETCA)

(http://www.ita.doc.gov/oecta)

B2: Understand how to use EMCs and ETCs 

This approach involves either engaging the services of EMCs or ETCs to find

foreign markets and buyers for its products or becoming an EMC or ETC to

handle the export of products manufactured by others. Export management

companies (EMCs), export trading companies (ETCs), international trade

consultants, and other intermediaries are used to tap into their broad

international experience and to lessen the burden of exporting directly. 

B3: Understand how to use the Export Trading Company Certificate 

Why obtain a Certificate: Joint export ventures undertaken by domestic

competitors might raise questions under U.S. antitrust laws. Fortunately, there is
38 U.S. Department of Commerce

a program that enables U.S. exporters to obtain antitrust protection. Under Title

3 of the Export Trading Company Act, any U.S. resident, business association or

state and local government entity may apply to the Office of Export Trading

Company Affairs in the Department of Commerce for an Export Trade

Certificate of Review. A Certificate of Review provides exporters with

immunity from federal and state government antitrust suits with regard to all

export activities specified in the certificate. The Certificate of Review also

reduces an exporter’s private action liability from treble to single damages for

the certified export conduct, and deters lawsuits of dubious merit by providing

for recovery of attorney’s fees in cases where the certificate holder prevails.

The Process of obtaining a certificate: Under the ETC Act, when an

application for a certificate is received, the DOC, with the concurrence of the

Department of Justice, must issue the certificate or deny the application within

90 calendar days. The application form is treated with strict confidentiality and

is not subject to disclosure under the Freedom of Information Act. At any time,

a firm may withdraw an application, in which case all copies of the documents

submitted are returned. No fees are involved. DOC staff will be assigned to

work with you during the entire process. 

B4: Understand how to maximize the benefits of having an Export Trading

Company Certificate 

Export joint ventures offer firms the opportunity to reduce costs by capturing

economies of scale. Joint ventures also enable participating firms to spread

risks. These benefits are likely to be greatest for small and medium-sized firms

that are either new to exporting or have limited export experience. However,

firms of all sizes and levels of international business experience can use joint

exporting to reduce per unit export costs and develop proactive export strategies

that may not be feasible for individual exporters. The ability to reduce export

costs and risks is especially important when considering entry into a new and

complex export market. Specific areas in which gains can be obtained will vary

with the nature of the product and the targeted foreign markets. The following

examples are suggestive of the kinds of benefits that can be obtained through

using the certificate: 

■ Market Research: U.S. firms can join together to share the costs of

foreign market research (including hiring expertise), travel, and overseas

activities.

■ Market Development: U.S. firms can reduce the average costs of

overseas trade shows and missions through joint activities. Firms with

complementary products can offer more attractive “full line” packages to

prospective buyers. Cost reductions can also be achieved by jointly

conducting generic advertising intended to cultivate or increase demand for

American products.

■ Overseas Bidding: U.S. firms can increase sales and profits through joint

bidding. As a group, the joint venture can respond to foreign orders
U.S. Department of Commerce 39

C

requiring quantities beyond the productive capacity of the individual

member firms, and it can accomplish sales while frustrating a foreign

buyer’s ability to play U.S. sellers off against one another.

■ Non-Tariff Barriers: Joint exporting agreements can be effective in

overcoming some non-tariff trade barriers, such as specific labeling,

packaging, and quality control requirements, as well as certification

standards imposed by foreign governments. By jointly operating a one-stop

facility, firms can reduce average costs of compliance. In addition, by

joining together, U.S. firms secure increased leverage to work for the

reduction of non-tariff barriers.

■ Transportation and Shipping: Volume discounts can be negotiated with

carriers. Through an export joint venture, firms can guarantee carriers

sufficient cargo to make these discounts available. In some cases, longerterm contracts with carriers might be negotiated, enabling export firms to

quote delivered prices to foreign buyers with greater certainty.

■ Joint bidding and Selling Arrangements: Any number of joint venture

partners may join together and submit a single bid on a particular project or

tender. The partners can use the same overseas representative, agree to sell

separate products as a unit, prepare joint catalogs, and allocate among

participating partners the sales that result from joint bidding or selling

arrangements.

■ Pricing Policies: Two or more joint venture partners might agree to

establish uniform minimum export prices for particular products in order to

avoid price rivalry with each other. For some joint ventures, higher profits

might be secured through joint negotiations on prices and on terms of sale

with foreign buyers.

■ Service and Promotional Activities: Joint venture partners may jointly

engage in a variety of activities that will promote or support their combined

export sales. These activities might include establishing joint warranty

service and training centers, conducting joint trade shows or missions, and

joint advertising. In addition the pooling of credit information may open up

new avenues for export financing.

STEP C: Research Target Markets

The National Trade Data Bank provides a one-stop-shop for the most

comprehensive collection of research data on international countries. It combines

data from most U.S. government agencies such as the State Department, the

Treasury, the Commerce Department and the other members of the TPCC. The

NTDB can be accessed free of charge from any federal depository library (often at

universities throughout the country). A brief description of some of the reports the

NTDB provides that can be used for research on target countries follows. 

U.S. Department of Commerce
■ Country Reports on Economic Policy and Trade Practices: These

reports are from the Department of State Country Reports to Congress on

the Economic Policy and Trade Practices in compliance with Section 2202

of the Omnibus Trade and Competitiveness Act of 1988. Each report

contains nine sections, including: key economic indicators; general policy

framework; exchange rate policies; structural policies; debt management

policies; significant barriers to U.S. exports and investment; export

subsidies policies; protection of US Intellectual Property; and, worker

rights. 

■ International Business Practices Guide: International Business

Practices Guides are designed to provide U.S. firms with an overview of

legal practices in 117 countries. The aim is to provide basic information to

solve practical problems. For each country, the Guide reviews issues

concerning: foreign corporations, agents and distributors, joint ventures,

import duties and restrictions, documentation requirements, commercial

policies (free-trade zones, exchange controls, etc.), intellectual property

rights, taxation, regulatory agencies, and foreign investment. 

■ Country Analysis Briefs: These briefs are a compilation of country

profiles prepared by the Energy Markets and Contingency Information

Division (EMCID) of the Office of Energy Markets and End Use. EMCID

maintains Country Analysis Briefs (CABS) for specific countries or

geographical areas that are important to world energy markets. As a general

rule, CABs are prepared for all members of the Organization of Petroleum

Exporting Countries (OPEC), major non-OPEC oil producers (i.e., the North

Sea,Russia), major energy transit areas (i.e., Ukraine), and other areas of

current interest to energy analysts and policy makers. As of January 1995,

EMCID maintained over 40 CABS, updated on an annual schedule and

subject to revision as events warant.

In addition to the foregoing research reports, the NTDB provides up-to-date

market research about current projects and developments in various countries.

Its most popular reports include: 

■ International Marketing Insight (IMI) Reports (Current) 

■ Industry Sector Analysis Reports (Current) 

■ Market Research Reports (IMI & ISA Historical) 

■ Best Market Reports 

■ Foreign Agricultural Market Reports (AGWorld) (Current & Historical) 

■ Country Commercial Guides 

Finally, the exporters can also take advantage of the Commercial Service’s

Customized Market Analysis (CMA). This fee-based service can provide your

company with the detailed information needed to make the most efficient and

beneficial export marketing decisions. Your CMA report will give you an

accurate assessment of how your product or service will sell in a given market,

at a cost much lower than you will find for comparable customized research.

40 U.S. Department of Commerce
U.S. Department of Commerce 41

D

Once you order your Customized Market Analysis, commercial research

specialists in your target country will conduct interviews with knowledgeable

local sources, such as importers, distributors, end-users, and manufacturers of

products comparable to yours. 

STEP D: Research Foreign Buyers

One of the best services in the market to assist exporters in researching their

buyers is the DOC Commercial Service’s International Company Profiles.

These thorough background checks on your potential clients will reduce your

risk and allow you to enter new business relationships with confidence.

Commercial specialists in U.S. embassies and consulates abroad will conduct an

investigation for you and deliver the results in 30 to 45 days, at a very

reasonable cost. Reports include up-to-date information on your potential

clients, such as:

■ Bank and trade references 

■ Principals, key officers and managers 

■ Product lines 

■ Number of employees 

■ Financial data 

■ Sales volume 

■ Reputation 

■ Market outlook 

An International Company Profile may also include information on: 

■ Subsidiary/parent relationships 

■ Recent news items about the firm 

■ The firms’ U.S. customers 

■ Operational problems 

■ Activities of prominent owners 

■ Branch locations 
42 U.S. Department of Commerce

What steps are involved in the market research and

planning process for Service Exporters?

The service sector is one of the fastest growing segments of U.S. exports and of

world exports. Although it would be very difficult to export some personal

services such as waitressing or hairdressing, many other services can be easily

exported. The following services have particularly high export potential, as they

represent the kinds of services that are being procured by major international

funding institutions. 

■ Construction, Design, and Engineering: U.S. firms tend to have

competitive advantages in selling these services internationally because of

U.S. technological leadership in the construction industry and related

specialized fields in electric power utilities, engineering services, and power

plant design services.

■ Banking and Financial Services: U.S. financial institutions are very

competitive internationally, particularly when offering account management,

credit card operations, collection management, and other services they have

pioneered.

■ Insurance services: U.S. insurers offer services that are in demand

internationally including underwriting and risk evaluation, insurance

operations and contracts. 

■ Legal and Accounting Services: As many countries are transitioning to a

market economy from a command economy, they are interested in U.S.

models of legal and accounting systems that underpin the U.S. market

economy. Hence, demand for U.S. legal and accounting services has risen

significantly in the past decade. 

■ Computer and Data Services: Technological developments involving the

computer industry and the expanding digital economy are among the factors

that have given rise to increasing global demand for U.S. expertise in

computer and data services. 

■ Educational Services: The process of change and development that many

countries are undergoing provides an opportunity to restructure and improve

their educational systems to support new market economies. This also

provides an opportunity for U.S. firms to share their experience in 

areas such as management, motivation, curricula development, distance

learning techniques, and teaching methodologies. 

■ Management Consulting Services: As pioneers of the management

consulting field, entities around the world look to U.S. firms to provide

advice on management techniques for managing various aspects of modern

market economies. 
U.S. Department of Commerce 43

A

The initial entry export research process for firms selling services should focus

on:

■ Knowing which institutions procure export-related services 

■ Understanding how the money flows from these institutions 

■ Reviewing past projects to see if there is a match with your services

While there are many institutions and private firms that procure export-related

services, arguably the “big three” are USAID, the international financial

institutions, and the United Nations system.

The discussion below focuses on “the big three” public institutions and on

identifying critical research activities that should be undertaken to help service

firms make inroads into these institutions. 

■ Step A: U.S. Agency for International Development

■ Step B: Multilateral Development Banks

■ Step C: The United Nations Systems

USAID

(http://www.info@usaid.gov)

A1: Understand USAID’s Mission and Priorities

A2: Understand procurement modalities

A3: Follow the money trail

A4: Know where to go for advice

A1: Understand USAID’s Mission and Priorities

Any goods or services procured by USAID are procured for the purpose of

enabling the agency to meet its objectives and goals. Therefore, in order to

forecast what goods and services will be procured, it is important to understand

the mission and priorities of the agency. The primary document that sets forth

the objectives and goals is the Congressional Presentation—this is USAID’s

representation to Congress about what it is doing, has done, and will do to meet

agency’s goals. The primary document for explaining the agency’s operational

strategy is its GPRA document (Government Performance Results Act). The

GPRA document explains the strategic direction being taken by the agency as a

whole and by its organizational units. As a seller of services, it is imperative to

understand these initiatives and to determine how what you are selling may fit

into the needs of the agency. Our “top pick” website(s) for conducting this

research are: 
44 U.S. Department of Commerce

USAID

(http://www.info.usaid.gov/about/) Mission, goals, accomplishments

(http://www.info.usaid.gov/pubs/r4workshop/STRATEG/sld017.htm ) GPRA

In addition to the aforementioned documents, USAID’s Annual Program

Statement (APS) provides detailed information on projects in particular

countries, regions, and sectors. APS(s) as of July 1999 included: 

USAID/West Bank & Gaza Community Services 

USAID/West Bank & Gaza Civil Society 

Activities to Improve the Delivery of Agricultural Services to Small Farmers in

Nicaragua 

APS for USAID/South Africa’s Housing & Urban Development Strategic

Objective 

APS for USAID/South Africa’s Education Strategic Objective 

APS For Democracy and Governance Objective (USAID/Angola) 

Critical Ecosystems Conserved to Sustain Biological Diversity and to Enhance

Benefits (UPDATE)(USAID/Uganda) 

Small Business And Microenterprise Expanding-Small Producers Program 

Madagascar Strategic Objective Agreement 

The Middle East Regional Cooperation Program (MERC) 

The South Africa Annual Program Statement (Strategic Objectives) 

A2: Understand Procurement Modalities 

USAID has many different ways of retaining services. Success in being retained

by USAID will be determined in large measure by how well the bidder

demonstrates an understanding not only of the substance of the work but also of

the USAID “process” (modis operandi, rules, regulations, and legal constraints).

When bidding firms demonstrate knowledge about the “USAID process, ” it

provides a “comfort factor” to those who select the winners and reassures them

that the firms they are choosing “know what they are doing and therefore will

not inadvertently get into trouble down the road.” Essentially, not only does a

firm have to be proficient in its own service area, it also has to be proficient in

understanding the operating environment of the agency. The USAID “process”

concerning procrurements is detailed in the Federal Acquisition Regulations (the

“FAR”). Large firms have staff members who have studied the FAR, who have

experience in bidding on and performing work in accordance with the FAR, and

who often were former government officials in charge of administering

procurements in accordance with the FAR. If you are new to the game, the best

way of becoming familiar with USAID’s procurement modalities is to study the

Guide to Doing Business with USAID. The Guide provides information on the

different rules that pertain to procuring small purchases and large purchases.

Our “top pick” website for conducting this research is:
U.S. Department of Commerce 45

USAID

(http://www.info.usaid.gov/procurement_bus_opp/osdbu/guide7.htm)

Payment procedures

A3: Follow the money trail 

If you want to know how the Congressional Presentation or the GPRA was

acted upon, you have to follow the money trail; this shows you how goals and

objectives have been turned into actual projects that have involved the

procurement of services. There are two essential research objectives in

following this trail: to identify the firms that have been successful in selling

their services to an agency, and to identify whether there is a pattern to the

services purchased by the agency. In the first instance, the purpose of knowing

this information is to be in a position to identify potential strategic alliance

partners. Such partners may be large firms that subcontract work to smaller

firms. Knowing which firms have which contracts allows minority firms to

develop a market strategy for creating strategic alliances and bidding consortia

that may be successful in winning bids. Conducting research to identify “project

types” enables firms to assess their corporate qualifications to determine

whether there is a match between what they have to offer and what the agency

is buying. The definitive single source document that provides a list of all of the

agency’s procurement; it is the “Yellow Book.” Our “top pick” website for

conducting this research is: 

USAID

(http://gemini.info.usaid.gov/yellowbook) Yellow Book

A4: Know where to go for advice

After you have done your own homework and have a handle on the basics, you

may require further guidance about how to strategize in doing business with

USAID. This is where the agency’s OSDBU can assist you. Our “top pick”

website for conducting this research is: 

USAID

(http://www.info.usaid.gov/procurement_bus_opp/osdbu/aboutsdb.htm)

OSDBU
46 U.S. Department of Commerce

B

Step B: Multilateral Development Banks(MDBs)

B1: Know the functions of MDBs

B2: Know the MDBs’ institutional priorities

B3: Know how MDBs retain consultants

B4: Know the MBDO of Commerce

B5: Know who has been getting the money

B6: Know the procurement rules

B1: Know what MDBs are

Multilateral Development Banks (MDBs) are international lending institutions

owned by member countries. They promote economic and social progress in

developing member nations by providing loans, technical assistance, capital

investment, and helping with economic development plans. In the new

millennium, your best business could come from major contracts in developing

markets financed by the MDBs. Annual lending from the MDBs totals

approximately $45 billion, creating excellent long-term export opportunities for

equipment suppliers, contractors and consultants. MDBs mobilize an additional

$50 billion for projects in developing markets, further enhancing these

opportunities. MDBs support clearly defined projects designed to foster

economic and social progress within their specified geographic regions. Projects

usually involve development of one or more of the following sectors:

agribusiness, investment, industry, municipal development, education and

training, and energy. In addition, privatization and financial restructuring are top

priorities for the World Bank affiliate, the International Finance Corporation,

and the European Bank for Reconstruction and Development. An NTDB primer

on how to do business with the MDBs is given in Appendix A. A list of the

MDBs and the web addresses follows.

MDB Website

1. Asian Development Bank 

(ADB) ADB: (http://www.asiandevbank.org)

2. The European Bank for Reconstruction 

and Development (EBRD) EBRD: (http://www.ebrd.com)

3. Inter-American Development Bank 

(IADB) IADB: (http://www.iadb.org)

4. Border Environment Cooperation 

Commission (BECC) BECC: (http://cocef.interjuarez.com/)

5. North American Development Bank 

(NADBank) NADBank: (http://www.quicklink.com/mexico/nadbank/ning1

6. World Bank WB: (http://www.worldbank.org)
U.S. Department of Commerce 47

B2: Know the MDBsinstitutional priorities

1. Asian Development Bank (ADB) 

In 1995, the Bank adopted Medium-Term Strategic Framework (MTSF)

(1995-1998), which sets out five strategic development objectives:

economic growth, reducing poverty, supporting human development,

improving the status of women, and protecting the environment. 

(http://www.asiandevbank.org/About/Objectives/)

2. The European Bank for Reconstruction and Development (EBRD)

The Bank was established in 1991. It exists to foster the transition

towards open market-oriented economies and to promote private and

entrepreneurial initiative in the countries of central and eastern Europe

and the Commonwealth of Independent States (CIS). 

(http://www.ebrd.com/english/index.htm)

3. Inter-American Development Bank (IADB)

The Bank is the oldest and largest regional multilateral development

institution, established in 1959, to help accelerate economic and social

development in Latin America and the Caribbean. 

(http://www.iadb.org/exr/english/ABOUTIDB/about_idb.htm)

4. Border Environment Cooperation Commission (BECC)

(http://cocef.interjuarez.com)

5. North American Development Bank (NADBank)

The (NADB) and its sister institution the (BECC) were created under

the auspices of the North American Free Trade Agreement (NAFTA).

NADB is a bilaterally-funded, international organization, in which

Mexico and the United States participate as equal partners.

(http://www.nadbank.org/english/about_bank/Overview/Overview_Frame.htm)

6. World Bank

The World Bank offers loans, advice, and customized resources to more

than 100 developing countries and countries in transition. The Bank

uses its money and staff, and coordinates with other organizations, to

individually help each developing country onto a path of stable,

sustainable, and equitable growth. The main focus is on helping the

poorest people and the poorest countries. 

(http://www.worldbank.org/html/extdr/whatis.htm)

B3: Know how MDBs retain consultants

MDBs hire consultants for sectoral studies, economic feasibility studies,

preliminary engineering and design studies, government policy analysis,

preparation of bid documents, and evaluation of bidders. Consulting firms may

register with the World Bank’s automated DACON (Data on Consultants) file,

which screens consultants both for the World Bank and for the IDB. The
48 U.S. Department of Commerce

DACON registration program, which serves the World Bank and the IDB, was

revised in July 1998 making it compatible with Windows 95. The new version,

written in ACCESS, allows users to import (cut and paste) data from other

software, such as Word or WordPerfect. The website for World Bank’s DACON

registration is given below. Contact the banks directly or contact the MBDO at

Commerce for further relevant information.

World Bank

(http://www.worldbank.org/html/opr/dacon/terms.html) DACON

B4: Know how Commerce’s MDBO can help

The MBDO staff within the International Trade Administration of the DOC,

offers counseling and referral services. Specifically, the MBDO:

■ Provides data on current projects worldwide 

■ Provides guidance on doing business with the MDBs

■ Assists with pre-award support and procurement disputes

■ Provides on-line information relating to projects

■ Identifies future opportunities 

Commerce

(http://www.ita.doc.gov/mdbo) MDBO

B5: Know who has been getting the money

Contact each MDB individually for detailed information on past procurements.

Each MDB website has a webmaster to whom you can address your email

requests for detailed procurement information. 

B6: Know the procurement rules

Contact each MDB individually for detailed information on their procurement

rules. Each MDB website has a webmaster to whom you can address your email

requests for detailed procurement information. 
U.S. Department of Commerce 49

C

Step C:

United Nations Development Program (UNDP)

United Nations Industrial Development Organization (UNIDO)

C1: Know their functions

C2: Know their institutional priorities

C3: Know how they retain consultants

C4: Know how the NTDB can help

C5: Know who has been getting the money

C1: Know the function of UNDP and UNIDO

UNDP’s mission is to help countries in their efforts achieve sustainable human

development by assisting them to build their capacity to design and carry out

development programs in poverty eradication, employment creation and

sustainable livelihoods, the empowerment of women and the protection and

regeneration of the environment.

UNIDO is the United Nations’ (UN) specialist agency which helps developing

countries and transition economies pursue sustainable industrial development. It

provides tailor-made solutions to industrial problems by offering a package of

integrated services addressing three key concerns – competitive economy, sound

environment, and productive employment at policy, institutional and enterprise

level. UNIDO was established by the UN General Assembly in 1966 and

became the 16th UN specialized agency in 1985. Our “top pick” website(s) for

conducting this research are:

UNDP

(http://www.undp.org)

UNIDO

(http://www.unido.org)
50 U.S. Department of Commerce

C2: Know their institutional priorities

UNDP

Poverty Gender Environment Governance

Sustainable livelihoods Gender mainstreaming in Sustainable energy Civil society

programs and institutional Public-private partnerships Democratization and

processes and (b) women’s for urban environment governance

empowerment

UNIDO

Functions Competitive Economy Sound Environment Productive employment

Policy Industrial policy formulation Energy and climate policies SME policy framework

Statistics and Networks Policies for women 

entrepreneurs

Institutions Standardization Energy efficiency Entrepreneurship

Accreditation Rural energy development

Certification Cleaner production Upgrade of industries

Quality management

Technology promotion

Enterprise — Pollution control

Waste management

UNDP

(http://www.undp.org/toppages/focusareas/index.htm) Focus Areas

UNIDO

(http://www.unido.org/doc/What.htmls) What UNIDO does

C3: Know how they retain consultants

Information for consultants is provided by UNDP on its website. For

information about consulting opportunities with UNIDO, contact their

webmaster or program area specialists (who are listed on the website) via email

to request detailed information on how to identify consulting opportunities. 

UNDP

(http://www.undp.org/toppages/undpjobs/index.html) Consultants

C4: Know how the NTDB can help

The National Trade Development Bank (NTDB) can be accessed for free at any

federal deposit library (typically at most universities) or on a subscription basis.

It provides trade leads from the United Nations system. A sample lead (July

1999) from the NTDB’s UN trade lead site is shown on next page. 
U.S. Department of Commerce 51

FF 07/30 DEMAND: [AE] Acitic Acid.

Source: LEADFF (United Nations free format)

Posted: 07-30-99 | 9907 | 990730 | PD9907 | PD990730

7/29/99 15:54 GMT

We required Acetic Acid please quote your best C&F Karachi prices as soon as

possible.

Contact: Mr. XXXX

Company: XXX General Trading

P. O. Box XXXX

Dubai, United Arab Emirates

email address

Phone: 00971-xxxx

Fax: 00971-xxxx

This offer has been posted to UNTPDC by the Import-Export Bulletin Board System. 

C5: Know who has been getting the money

Contact the webmasters at the UNDP and UNIDO websites and request

information on which firms have been successful bidders in prior procurements. 

What steps are involved in the market research and

planning process for Direct Exporters?

In the direct exporting approach, the manufacturer handles all aspects of the

exporting process from market research and planning to foreign distribution and

collections. This entails not only a significant commitment of management time

and attention, but also quite often, the advice and counsel of others such as the

DOC, state trade offices, freight forwarders, international banks, and other

service groups, and others who can help the exporter avoid common pitfalls.

Although direct exporting is more risky, its advantages include more control

over the export process, potentially higher profits, and closer relationships to the

overseas buyer and marketplace. 

The research steps outlined below follow the format of The Country

Commercial Guides, available through the NTDB.

Step 1: Determine if you have an exportable product

Step 2: Determine target countries 

Step 3: Identify the economic trends of the target countries 

Step 4: Understand the political environment

Step 5: Understand marketing factors 

Step 6: Identify leading sectors for U.S. exports and investment

Step 7: Understand trade regulations and standards

Step 8: Understand the investment climate

Step 9: Understand trade and project financing situation

Step 10: Know business travel environment

Step 11: Research economic and trade statistics

Step 12: Take advantage of market research and trade events
52 U.S. Department of Commerce

STEP 1: Determine if you have an exportable product

The best way to determine whether or not a product will be favorably received

in a foreign market is to know if competitors are exporting the product. Census

data of import and export statistics, country market profiles, and other sources

of government data will allow a researcher to gain a strong working knowledge

of whether selected products are competitive in selected markets. If a product is

successful in the U.S., one strategy for export success may be a careful analysis

of why it sells domestically, followed by a selection of similar markets abroad.

This limits the requirement for product modification. 

If a product is not new or unique, low-cost market research may already be

available to help assess its overseas market potential. In addition, international

trade statistics (available in many local libraries) can give a preliminary

indication of overseas markets for a particular product by showing where

similar or related products are already being sold in significant quantities. One

of the best sources for U.S. export-import statistics is the National Trade Data

Bank (NTDB), which can be accessed at many U.S. Department of Commerce

district offices across the country.

If a product is unique or has important features that are hard to duplicate abroad,

chances are probably good for finding an export market. For a unique product,

competition may be nonexistent or very slight, while demand may be quite high.

Finally, even if U.S. sales of a product are now declining, sizeable export

markets may exist, especially if the product once did well in the United States

but is now losing market share to more technically advanced products.

Countries that are less developed than the United States may not need state-ofthe-art technology and may be unable to afford the most sophisticated and

expensive products. Such markets may instead have a surprisingly healthy

demand for U.S. products that are older or that are considered obsolete by U.S.

market standards.
U.S. Department of Commerce 53

STEP 2: Determine Target Countries 

After utilizing market research resources identified above, follow these steps to

determine target countries:

■ Examine trends for company products and factors that could influence

demand. Calculate overall consumption of the product and the amount

accounted for by imports. Industry Sector Analyses (ISAs), and country

marketing plans which are produced by the Commerce Department give

economic backgrounds and market trends for each country. Demographic

information (population, age, etc.) can be obtained from World Population

(Census) and Statistical Yearbook (United Nations).

■ Utilize ISAs to identify sources of competition, including the extent of

domestic industry production and the major foreign countries the firm is

competing against in each targeted market. Look at each competitor’s U.S.

market share.

■ Analyze factors affecting marketing and use of the product in each market,

such as end user sectors, channels of distribution, cultural factors, and

business practices. ISAs and the Comparison Shopping Service (CSS)

offered by the Commerce Department are useful.

■ Identify any foreign barriers (tariff or nontariff) for the product being

imported into the country. Identify any U.S. barriers (such as export

controls) affecting exports to the country. Country information kits

produced by the Overseas Private Investment Corporation (OPIC) can also

be helpful.

■ Identify any U.S. or foreign government incentives to promote exporting

of the product or service.

STEP 3: Identify Economic Trends

For this step and subsequent steps, the approach taken in the Country

Commercial Guides (CCG), which are available on the NTDB, serves as a

model to use when assessing the market potential in target countries. The CCG

provides information on the economic, political, and market situation in each

country. The complete Country Commercial Guides are available on The

National Trade Data Bank (NTDB) on CD-ROM or through the Internet.

Please call 1- 800-STAT-USA for more information. CCGs can also be ordered

in hard copy or on diskette from the National Technical Information Service

(NTIS) at 1-800-553-NTIS. 

The information provided in the CCG pursuant to identifying economic trends

includes:
54 U.S. Department of Commerce

1. Major Trends and Outlook: The CCG provides information about real

economic growth rates, population growth rates, growth in the industrial,

service, and agricultural sectors, and information about macro economic factors

such as inflation and information on the government’s management of the

economy. 

2. Principal Growth Sectors: This section provides information about growth

in leading sectors of the economy and information on new developments in

government initiatives to spur growth. 

3. Government Role in the Economy: This section focuses on issues

pertaining to the extent of the government’s involvement in the economy.

4. Balance of Payments (BOP) Situation: This part of the guide reports

balance of payments data and analyzes changes in the BOP situation and

explains increases and decreases in imports and exports and their causes,

changes in net capital flows, and analyzes the foreign exchange situation.

5. Infrastructure Situation: This section provides information on major

infrastructure developments pertaining to roads, telecommunication and other

vital infrastructure and identifies new development that may have an impact on

the future infrastructure situation. 

STEP 4: Understand the Political Environment

The CCG approach for helping firms understand the political environment

focuses on:

1. Nature of Political Relationship with the United States: provides

information about the historical and current political relationship between the

country and the U.S. 

2. Major Political Issues Affecting Business Climate: identifies political

factors that affect the business climate such as government efforts to create a

positive enabling environment for business.

3. Brief Synopsis of Political System, Schedule for Elections, and

Orientation of Major Political Parties: provides information about existing

systems and analyzes prominent features of such systems.
U.S. Department of Commerce 55

STEP 5: Understand marketing factors

The CCG approach for understanding marketing factors includes:

1. Distribution and Sales Channels: Identifies the channels of distribution

available to U.S. suppliers of goods and services in the country such as

wholesalers, retail outlets, and agents or distributors. Explains methods

suppliers typically use in the country such as selling directly to the government

or selling to indigenous associations. Identifies the most important trading

centers for U.S. products and the most populous areas of the country. Advises

exporters to consider the requirements of the product and potential market

before choosing a distribution channel.

2. Use of Agents/Distributors; Finding a Partner: Informs whether there are

laws requiring the retention of a local agent or distributors, and advises U.S.

firms on the advisability retaining business persons resident in the country to

market their products. Provides advice on the qualifications the agent or

distributor should possess and pitfalls to avoid in selecting agents and

distributors. In advising the U.S. firm to thoroughly check out the country

before proceeding, the Commercial Service advises that exporters may wish to

use its International Company Profile (ICP) service for checking the reputation,

reliability and financial status of a prospective trading partner. The information

is in the form of a confidential report and provides recommendations from

commercial officers at the U.S. Embassy on the suitability of the company as a

trading partner. 

3. Franchising: Provides information on the level of development of the

franchising industry in the country and identifies constraints and opportunities

pertaining to its further development. 

4. Direct Marketing: Provides information about the concentration of

wholesale establishments and retail outlets. Identifies how entities exist in the

market such as company headquarters, branch banking, supermarkets, specialty

shops, and provides information on strategies these entities have used in

business. 

5. Joint Ventures/Licensing: Provides information on the legislative framework

for joint ventures and licensing and identifies the need for U.S. firms to

understand their responsibilities in each arrangement.

6. Steps to establishing an office: Identifies key organizations in the country

that can provide advice on setting up an office and identifies key provisions of

law that determine how to set up offices. 

7. Selling Factors/Techniques: Provides information about historical

relationships that have existed between the country, the U.S., and other regions;

addresses issues of cultural preferences and protocol for selling; and provides

information on competition to U.S. firms selling in the country.
56 U.S. Department of Commerce

8. Advertising and Trade Promotion: Identifies advertising agencies that exist

in the country and provides information about their readership and position in

the market; identifies major newspapers and business journals and provides

background information about their orientation and position in the market; also

provides information on radio and television stations and other points of sell

such as sale displays, billboards, and trade fairs. Provides insights about

packaging and environmental conditions that affect packaging. 

9. Pricing Product: Discusses buying habits, availability of local sources of

credit and borrowing practices and their impact on product pricing strategies.

Discusses the advisability of extending various credit terms and informs that the

Commercial Service’s International Company Profile (ICP) program is available

to provide specific information on buyers from the country. 

10. Sales Service/Customer Support: provides pertinent information about

sales and service expectations and customer support traditions in the country.

11. Selling to the Government: Identifies government entities that are

responsible for procurement, explains typical procurement practices—including

the requirement to pay to obtain bid documents, and identifies international

institutions that may be involved in financing the procurement. 

12. Protecting your Product from IPR Infringement: explains whether and

how IPR are protected in law and whether the country is a member of the World

Intellectual Property Organization (WIPO) or other similarly concerned

organizations.

13. Need for a Local Attorney: advises whether it is necessary to consult a

lawyer pertaining to various aspects of doing business in the country. The

Commercial Service maintains a list of attorneys, which is available upon

request.

14. Performing Due Diligence/Checking Bona Fides of Banks/

Agents/Customers: advises on how to conduct due diligence.

STEP 6: Identify Leading Sectors for U.S. Exports and Investment

1. The CCG provides information on the best prospects for non-agricultural

goods and service exports to various countries. Taking the country of Ghana as

one example, the CCG provides the following information (July 1999): 

1 - Electrical Power Systems

2 - Telecommunications Equipment

3 - Construction and Earth Moving Equipment

4 - Automobiles/Light Trucks/Vans

5 - Mining Industry Equipment

6 - Computers and Peripherals

7 - Food Processing and Packaging Equipment

8 - Hotel/Restaurant Equipment

9 - Travel and Tourism Services
U.S. Department of Commerce 57

Detailed information is provided for each of the best prospect industry

segments. Using “electrical power systems” in Ghana as an example, the

following information was provided in the CCG as of July 1999:

Electrical power system (Ghana example)

Ghana, since the beginning of 1998, has been undergoing an

energy crisis as a result of the low level of water in the dam of its

hydroelectric plants that supply 80 percent of the nation’s electric power.

Present demand deficit is about 600MW. GOG plans to double generating

capacity to 2600MW by 2001, primarily through gas-fired plants financed

by independent power producers. Capital investment by the utilities is

expected to help stimulate the market for generation, transmission, and

distribution equipment. The current power curtailment program had caused

a sharp increase in demand for electric generators for industries.

Uncertainty about the reliability of supply from the utilities would continue

to spur the demand for both new and used electric generators for

households and industries.

A similar approach is taken in the CCG to providing “best prospect”

information for agricultural products.

2. Significant investment opportunities are also identified in the CCG. Such

opportunities may come from recent privatization initiatives in the country, from

new planned major developments in infrastructure or other sectors, or from

historically productive sectors. The CCG identifies these trends and new

developments and provides information of the activities of American firms in

different sectors.

STEP 7: Understand Trade Regulations and Standards

The CCG approach for understanding trade regulations and standards

requirements includes:

1. Trade Barriers, including Tariffs, Non-Tariff Barriers and Import Taxes: 

Commercial Barriers

The CCG identifies existing commercial barriers such as those that

pertain to purchasing power, the land tenure system, the cost of

financing, foreign competition, bureaucracy, and other barriers. 

Tariffs and Import Taxes

The CCG explains how goods are classified (by harmonized code, for

instance), and how taxes are assessed on the basis of weight, value,

volume, or other systems. The duty system is also explained. Special

requirements to make provision for foreign exchange availability are

also identified. 
58 U.S. Department of Commerce

2. Customs Valuation

The CCG explains the duty regime and how taxes are assessed and levied. Any

special requirements for price verification, through a pre-shipment inspection

system, are also discussed. In addition, the CCG provides information about: 

■ Regulatory agencies that are responsible for regulating business activities

■ Detailed information about the import license system

■ Information on quotas, if applicable

■ Information on export controls, if applicable

■ Detailed information on import/export documentation requirements

■ Detailed information on temporary entry requirements

■ Detailed information on labeling and marking requirements

■ Information on prohibited imports

3. Standards

The CCG identifies authorities that are responsible for developing and

promulgating standards as well as ensuring the quality of goods imported into

the country. Information is provided on whether the country has adopted the

ISO 9000 series and other pertinent data on applicable standards. 

4. Free Trade Zones/Warehouses

The CCG identifies whether any special Free Trade Zones or warehouse custom

regimes exist as a way of lowering the cost to firms that export from the

country. Relevant enabling legislation for these regimes is discussed, along

with the major benefits of the legislation.

5. Membership in Free Trade Arrangements

Membership in international and regional organizations is discussed and the

benefits that such membership affords U.S. exporters or investors are also

analyzed.

STEP 8: Understand Investment Climate

Understanding the investment climate may be relevant to the exporter if the

exporter is considering a partial assembly operation in a foreign country,

typically in a Foreign Trade Zone (FTZ).

1. Openness to Foreign Investment: Reviews provisions of any pertinent

investment acts or other legislation that provides the legal framework for foreign

investments. Identifies areas of differential treatment with regard to taxation, prices,

foreign exchange, imports, credit and other matters. Also identifies requirements, if

any, for minimum equity investment by foreigners, investment promotion agencies,

and investment opportunities pursuant to any privatization programs. 
2. Right to Private Ownership and Establishment: Provides information on

whether the laws of the country recognize the right of foreign and domestic private

entities to own and operate business enterprises and whether there is a positive

history in respect to acquiring and disposing of business interests.

3. Protection of property rights: Discusses the protection of both physical property

and the basis in law for such protection and intellectual property rights and its legal

foundations.

4. Incentives: Identifies the basis in law for providing investment incentives such as

tax holidays, capital allowances, locational incentives and other inducements. 

5. Transparency of the Regulatory System: Identifies measures to deregulate and

liberalize the economy. 

6. Corruption: Identifies the types of corruption that have been reported and the

legal remedies to fight against it. 

7. Labor: Addresses the issue of availability of labor and key provisions in the

Labor Code that affects the hiring, remuneration, and disposition of workers. 

8. Efficient Capital Markets and Portfolio Investment: Discusses degree of

confidence in the financial sector, interest rates, and recent developments in the

banking and non-banking sectors and on the stock exchange. 

9. Conversion and Transfer Policies: Identifies whether there are any restrictions

on the conversion and transfer of funds or problems that limit access to foreign

currency.

10. Expropriation and Compensation: Identifies laws that guarantee protection

and compensation, and comments on the experience of American firms in this

regard.

11. Dispute Settlement, including Enforcement of Foreign Arbitral Awards:

Discusses whether there have been any significant investment disputes in recent

years involving U.S. or other foreign investors. Explains how the legal system of the

country, or participation in international agreements, provides a foundation for

dispute settlement and arbitral awards.

12. Political Violence (as it may affect investment): Provides insights on whether

the country offers a relatively stable and predictable political environment for

American investors and whether there are indications that the level of political risk

in the country will change markedly over the near term.

13. Bilateral Investment Agreements: Identifies major outstanding bilateral

agreements the country has with various trading partners. 

14. OPIC and other Investment Insurance Programs: Identifies whether such

programs as OPIC, the International Finance Corporation, regional facilities of

the World Bank, MIGA, EXIM, and others provide insurance coverage to

the country.

U.S. Department of Commerce 59
60 U.S. Department of Commerce

STEP 9: Understand Trade and Project Financing Situation

1. The Banking System: CCG information analyzes developments in the

banking and non-banking sectors, as well as developments in the stock

exchange, if applicable.

2. Foreign Exchange Controls Affecting Trade: The CCG identifies and

discusses developments concerning the foreign exchange policy regime. 

3. General Availability of Financing: The CCG analyzes the financing situation

and discusses approaches that have been taken to meet financing needs.

4. How to Finance Exports/Methods of Payment: The CCG reviews trade

finance instruments such as Letters of Credit and provides advice on the

advisability of various payments and financing methods. 

5. Types of Export Financing and Insurance Available (Bilateral,

Multilateral and Local Sources): The CCG identifies the types of financing

and insurance that are available. 

STEP 10: Know Business Travel Situation

The basic information businesspeople should know pertaining to travel in the

country to investigate business opportunities is provided in the CCG. 

STEP 11: Research Economic and Trade Statistics

1. Country Data: The CCG provides information on geography, population,

growth rates, religions, government, languages, work habits, and time zones. 

2. Domestic Economy: The CCG provides information on the GDP, real growth

rates, GDP per capita, government spending, inflation, unemployment, exports

and imports, and other macro economic indicators. 

STEP 12: Take advantage of market research and trade events 

Historical market reports are available on the NTDB, as well as information

about upcoming trade events and about U.S. Embassy contacts. 

The next chapter discusses the detailed export planning process.
U.S. Department of Commerce 61

APPENDIX A

A NTDB PRIMER ON DOING 

BUSINESS WITH MDBs

U.S. companies interested in doing business with the Multilateral Development

Banks (MDBs) for the first time sometimes have questions. The following is a

short primer on doing business with the MDBs.

1. Learn how the MDBs work. Familiarize yourself with basic printed materials

such as the Bank’s organization chart, Bank officer telephone lists, and handouts

about the MDBs, and the procurement process. Consulting and engineering

design firms should study the “Guideline for Use of Consultants.” Suppliers of

equipment and contractors should go through the “Rules for Procurement of

Goods and Services.”

2. Become familiar with the role of the Bank and the role of the borrower:

a. The borrower, or borrowing agency, implements or executes

the project and is frequently the originator of a project. It may be a ministry,

a government corporation, or an agency or utility authority under a ministry.

The borrower makes the key decisions throughout the project cycle,

including recommendations on awarding contracts for engineering, design,

project management, works construction, and purchase of capital goods.

b. The Bank monitors the process and the selections made at

each stage to ensure that rules and procedures are followed and the

decisions are transparent. 

3. Determine if your company’s equipment or services are needed in MDB

projects. You can do this by checking several information resources:

a. Quarterly Operational Summary of the MDBs: This lists

projects recently approved and projects which will be presented to the

Board in the next few weeks or months, i.e. current projects. It provides the

name of the borrowing agency, gives a brief description of the project and

the loan amount, indicates whether consultancy services will be required,

and gives the Board presentation date.

b. Project Briefs: These are usually two to three pages and

provide general information on the borrower, project description, and goods

and services to be procured.
62 U.S. Department of Commerce

c. Project Appraisal Reports: These reports provide the

framework for implementation of a project, including a detailed

implementation schedule and list of services and commodities to be

procured. Interested firms can obtain a copy of an appraisal report

once the project has been approved by the MDBs’ Board of Directors.

[NOTE: The Quarterly Operational Summary, Project Briefs, and Project

Appraisal Reports are available through MDBO.]

d. General Procurement Notices and Tender Notices (invitations

to bid): These are published in the publication UN Development Business, in

international trade magazines, and in national newspapers in the borrowing

countries. General Procurement Notices announce the approval of a project

and give general information on the nature of goods and services to be

procured. General Procurement Notices are a way for companies to find out

more about a project’s procurement opportunities and pursue

prequalification for bidding through the listed executing agency. Tender

Notices list the items to be procured for a project, information on where to

purchase bid documents, and the deadlines and addresses for submitting

proposals.

4. Introduce your company to the MDBs and its borrowers. The MDBO can

furnish copies of MDB staff lists which provides names of MDB officers by

operational departments, and telephone and fax numbers.

For consultants:

a. Register with the Bank. The DACON form goes to the Central

Projects Department (address listed below). MDBO can provide the

DACON form as well as a set of instructions for completing the form. 

b. Send your firm’s General Statement of Qualifications to any

country borrowing agencies where there are projects of interest, with an

expression of interest and a request to be shortlisted.

For suppliers and contractors:

a. There is no need to register with the Bank, but get to know the project

officers in countries in your sector at the Bank.

b. Send your firm’s General Statement of Qualifications to the

borrowing agencies in countries where there are projects of interest.

5. Find out about current opportunities in your sector. The Quarterly

Operational Summary lists these. The MDBO compiles current sectoral project

lists. More details can be found in the individual project briefs. Do your

homework on projects.
U.S. Department of Commerce 63

6. Check with your U.S. Department of Commerce District Office. Their

specialists can access information on MDB projects from their computer,

including alert reports, special topical reports, sectoral project lists, Foreign

Government Tenders, industry sector reports, and other market research. These

reports are available on the NTDB.

7. Decide where your chances are best in your subsector and focus on those.

Target the countries and projects where your capabilities, experience and your

local agents give you a comparative advantage over the competition.

8. Check the arrears record of the country. You can do this by contacting

MDBO or the MDB’s Country Programs Department Officer responsible for the

country in question. If a country falls into arrears, sanctions are imposed. 

You may want to direct your marketing efforts away from countries with a very

poor track record with the MDBs. Borrowing countries must continue to repay

existing loans in order to borrow again for new projects. If they fall behind on

their repayment schedules, new projects will be put on hold.

9. Travel to the country and meet the borrower face to face. Learn about the

borrowing agency and let them learn about you. But do not travel before you

check on the latest status of the project of interest with the MDB’s task

manager, or the MDB’s Commercial Liaisons, or the U.S. Executive Director’s

Office at the Bank. Be as well-versed as possible on the projects and the Bank

rules and guidelines before making an appointment to see busy officers.

There is no substitute for face-to-face contact with the borrowing agencies and

with local representatives in-country. This is particularly true for consulting and

engineering firms. 

10. When you are visiting the country doing the project, use the opportunity to

glean early information on other possible future projects while they are still in

the conceptual stage.

11. Check what you learn against the Bank’s Indicative Lending Program (for

1995, 1996, etc.). This is the Bank’s earliest published notification list. It is a

“wish list” of projects that the borrowing countries hope to have financed by the

Bank in the future.

12. While you are in a country, check with the U.S. Embassy (the Economic

and Commercial Officers). If possible, send them a fax before you go, giving

your travel dates and requesting an appointment. They can be a valuable source

of information and advice on the local environment, and may later support your

interests through their contacts with Ministries and Government agencies.

13. A local agent or representative in the country is useful when pursuing

projects. If you need help, get advice from the U.S. Embassy in a given

country, or contact the MDBO. Having a local representative on the ground

gives you eyes and ears on site and someone who will maintain contact with the

borrower and relay information to you. It also enables you to lower your costs.
U.S. companies are generally technically superior, but their financial bids are

sometimes priced too high. Use of a local representative helps companies stay

competitive in their financial proposals. During a bid competition, if

two or more proposals meet the technical requirements of the bid, the

one with the lowest financial proposal will be invited for negotiations.

14. Follow the project through each stage of the cycle. A description

of the project cycle can be found in the MDB document entitled “Basic

Information” which is available at the MDBO.

15. Stay informed. Embassy officers, local representatives, and the borrowing

agency are the best sources for ongoing information. MDB loan and

project officers can sometimes help when a general status report is needed. The

MDBO and the U.S. Executive Director’s Office at the Bank are also prepared

to assist you.

64 U.S. Department of Commerce
U.S. Department of Commerce 65

Chapter Three 

Export Planning Insights 

for Export Market Entry

This chapter provides insights for integrating the market research discussed

in the previous two chapters into the export planning process. Additional

factors to be considered in the export planning process will be discussed

in subsequent chapters. This information is provided to help minority firms

avoid the ten most common exporting mistakes made by new-to-export firms.

1. Failure to obtain qualified export Export counseling

counseling and to develop a master 

international marketing plan before 

starting an export business.

2. Insufficient commitment by top Export readiness

management to exporting. 

3. Failure to have a solid agent/ Agent/Distributor contracts

distributor’s agreement.

4. Blindly chasing “E-orders” from Accidental exporting

around the world.

5. Failure to understand the connection Export financing

between country risk and securing 

export financing.

6. Failure to understand Intellectual Intellectual Property Rights 

Property Rights. (IPR)

7. Insufficient attention to marketing and Marketing and advertising 

advertising requirements. overseas

8. Lack of attention to product Product preparation

preparation needs.

9. Failure to consider legal aspects of Licensing and joint ventures

going global.

10. Failure to know the rules of trade. Regulations
66 U.S. Department of Commerce

1. Failure to obtain qualified export Export Counseling

counseling and to develop a master

international marketing plan 

before starting an export business.

Chapters One and Two identified many resources in the public and private

sectors to help exporters research the export arena. These resources are available

because exporting is not easy and firms need help. When firms fail to take

advantage of this, they often make mistakes when exporting. The subsequent

discussion provides information on how to effectively use some of the

previously identified counseling resources to help firms begin exporting on a

more solid ground.

1. Using export counseling: As shown in previous chapters, there is no lack of

available counseling resources. Each firm must conduct research to learn which

resources best meets its needs. The Department of Commerce (DOC) and the

Small Business Administration (SBA) offer some of the most comprehensive

counseling resources. Firms should fully investigate and utilize these resources.

For in-person counseling, firms are encouraged to use the U.S. Export

Assistance Center (USEAC) network. These centers offer an assistance program

for new-to-export firms called the Export Training Assistance Program (ETAP).

Detailed information on the ETAP program can be accessed on the DOC and

SBA websites. Information on the extensive in-person counseling network of

SBA’s resource partners including the Service Corps of Retired Executives

(SCORE), Small Business Development Centers (SBDCs), and Small Business

Institutes (SBIs), can be accessed through SBA’s website. Use of these

resources, of course, does not preclude the simultaneous use of other resources

in the public or private sectors. 

2. Knowing what questions to ask: In the early stages of considering export

options, firms may not know what questions to ask export counselors. One of the

best ways to learn what to ask is to review the questions others have asked about

exporting. Most export-oriented websites have a Frequently Asked Questions (FAQs)

section. The Trade Information Center (TIC) provides a nationwide call-in service to

answer questions about exporting. The ITC receives approximately 80,000 calls per

month and has extensive experience in addressing questions being asked by

exporters. Firms are advised to review these questions and answers at the TIC

website (http://infoserv2.ita.doc.gov/tic.nsf) or if using a web version of this manual,

click on the questions that follow. 

1. What is the Trade Information Center (TIC)?

2. How do I begin an export business?

3. What should I consider when making the decision to begin exporting? 

How do I begin?
U.S. Department of Commerce 67

4. How do I determine if my company is exportready? 

5. How do I obtain market research for a specific country and/or

product?

6. Where can I obtain information on foreign markets and trade 

opportunities for fish and agricultural products?

7. How do I locate trade leads for my exporting business? How do I 

locate potential distributors in overseas markets?

8. Does the U.S. federal government have any programs to help 

advertise my products overseas?

9. How can I receive information on foreign regulations, standards, or

certification requirements for my product?

10. Is a tariff or quota applied to my product in country X? What is a 

Harmonized Tariff System Classification (Schedule B) Number? How 

do I determine my Schedule B Number?

11. Where can I find statistics?

12. How can I find export financing?

13. Do I need an export license to ship my product to a particular

market? How do I get a license?

14. Where can I find information on trade sanctions?

15. Do you have lists of American manufacturers and suppliers, U.S. 

importers and exporters, and export trading/export management 

companies?

16. Where can I find a list of foreign companies in a particular industry 

or sector?

17. How do I find information about a particular overseas company? 

18. Are there any sources of legal assistance for people who are new to 

exporting?

19. How can I find out about investment practices in a certain country?

20. How can I get information on importing products into the United 

States? 
68 U.S. Department of Commerce

2. Insufficient commitment by top Export readiness

management to overcome the initial 

difficulties and financial requirements 

of exporting

Chapter One raised the question of “export readiness” and identified various

websites to help minority firms assess their “readiness.” The question of export

readiness is important because exporting is more difficult than selling in the

domestic market and firms have to be ready for the challenges they will face

associated with selling in foreign markets. In order to prepare a proper export

plan, firms have to plan the personnel that will be allocated to the process; plan

how the exporting function will be integrated into the overall operations of the

firm; how to establish company procedures; and establish an export budget. A

recommended resource for helping firms to assess their “readiness” to export

follows. 

Michigan State University’s Center for International Business Education

and Research – CIBER: referred to in Chapter Two, the university has an

Export Academy that has developed a state-of-the-art system to assess export

readiness. Called CORE VTM, it is a Windows-based managerial tool for selfassessment of organizational readiness to export. Managers use CORE VTM to

identify company strengths and weaknesses in the context of exporting. Based

on user-provided information, CORE VTM generates ratings of a company along

two dimensions – organization and product readiness. The program was

developed for simplicity of use and is user-friendly. Hundreds of users around

the world, including the U.S. and Foreign Commercial Service of the Commerce

Department, the SBA, the State Department, DOC, World Trade Clubs, SBDCs,

Chambers of Commerce, and trading companies use the CORE VTM program

(http://ciber.bus.msu.edu/dss/).

3. Failure to have a solid agent and/ or Agent/ Distributor

distributor agreement Agreements

The export planning process provides an opportunity to put the basic tools of

the export trade in place. One important such tool is a standard agent and

distributor agreement. Firms that intend to expand in exporting will probably

need an agent or distributor at some point. Key considerations include: 

1. Understanding the Role of Agents: The NTDB website at

(http://www.stat-USA.gov) provides information on agent and distributors. As

explained on this website, agents receive commission on their sales rather than

buying and selling for their own account. As agents do not own the products

they sell, the risk of loss remains with the company the agent represents (the

principal). They may or may not have the power to accept orders or to otherwise
obligate the principal. This means that they might not have the authority to set a

sales price or sales terms, or to bind the principal to a contract. It is also

important to remember that civil code and common law countries treat the

agency relationship very differently. 

Some countries do not allow certain types of sales through agents.

Other countries may require contracts with local agents to be registered and

certain information be disclosed, such as the amount of the commission. Some

countries have limitations on the amount of commissions that may be paid to

local agents and some countries require that the agreements be exclusive. There

may also be restrictions on the termination of agency agreements.

2. Understanding the Role of Distributors: The difference between agents and

distributors is fully explained on the NTDB website. The key legal distinctions

between an agent and distributor are:

■ A distributor takes title to the goods and accepts the risk of loss. A

distributor makes profits by reselling the goods, whereas an agent gets a

commission.

■ Distributors cannot contractually bind the company producing the goods,

whereas an agent can.

■ Distributors establish the price and sales terms of the goods, whereas

agents do not. 

3. Contract Drafting Considerations for Agent/Distributor Agreements:

NTDB sources suggest the first and most important consideration when drafting

an agreement is to ensure that the agreement clearly states whether there is an

agent or a distributor relationship. As discussed above, the rights and duties of

the two different relationships are significant. Given this distinction, the

agreements should state very plainly and clearly what relationship is being

established. The agreement should also clarify the terms and conditions for

selling the products, for example:

■ Determine whether the relationship is exclusive versus non-exclusive.

■ State which geographic regions are to be covered.

■ Outline issues of payment and payment schedules for the products (in the

case of a distributor) and for payments of commissions (in the case of

agents).

■ Determine the currency in which payments are to be made and address

currency fluctuation issues.

■ Provide specific provisions regarding renewal of the agreement, including

specific parameters for performance, promotional activity, and notice of desire

to renew.

■ Establish a specific provision for termination of the agreement and terms for

such termination. (Be careful with this provision. Some foreign countries

restrict or prohibit termination without just cause or compensation.)

U.S. Department of Commerce 69
70 U.S. Department of Commerce

■ Outline the termination process for the end of the agreement period.

■ Provide for workable and acceptable dispute settlement clauses.

■ Assure that the agreement addresses whether or not intellectual property

rights are being licensed or reserved.

■ Do not allow, without seller’s consent, the contract to be assigned to

another party (sub-agents or sub-distributors) to be used to fulfill

obligations in the contract or the contract to be transferred with a change of

ownership or control over the agent/distributor.

■ Assure that your contract complies with both U.S. and foreign laws on

topics such as: export and import licenses; customs duties and sales taxes;

relevant antitrust/competition laws relating to marketing restrictions and

pricing methods; relevant laws on bribery (Foreign Corrupt Practices Act);

and employment and marketing discrimination (Anti-Boycott Law).

4. Using Commerce’s Agent/Distributor Service (ADS): The Commercial

Service of the DOC provides this service to identify qualified agents,

distributors, and representatives for U.S. firms. For each Agent/Distributor

Service, (http://www.ita.doc.gov/uscs/) Commercial officers abroad identify up

to six foreign prospects that have examined the U.S. firms’ product literature

and expressed interest in representing the U.S. firm’s products. 

4. Blindly chasing orders from Accidental exporting

around the world

In our increasingly digital economy, any firm with a website has the potential of

becoming an “accidental exporter.” This means that you may be in your office

when suddenly and unexpectedly, someone from a foreign country contacts you

electronically and wants to buy a line of your products. What do you do next? 

1. Make sure the order is not on the denied list: One of the most important

things a firm can do is to ensure that the order is not for an item listed on the

denied list. Go to the Bureau of Export Administration’s (BXA) website to view

the entire list of denied orders (http://www.bxa.doc.gov/DPL/2_denial.htm). The

table provided at this site lists orders that currently deny export privileges in

whole or in part. Orders are published in full in the Federal Register as cited in

the column entitled, “Federal Register Citation.” New or amended denial orders

are published in the Federal Register as they are issued, and their issuance

announced in Export Administration Bulletins. The Federal Register is the

authoritative source for denial orders.

2. Check BXA’s Entity List: This provides a list of entities that are suspected

of being involved in proliferation activities. To make a long story short, you do

not want to get involved with any entity on this list. Here is the story:
U.S. Department of Commerce 71

Since February 1997, the Federal Register has published several

Commerce Department rules, which added entities to the Entity List, a

listing of foreign end users, involved in proliferation activities. The

Entity List is based on the Enhanced Proliferation Control Initiative

(EPCI), which has been implemented in the Export Administration

Regulations. General Prohibition Five of the EAR prohibits exports to

certain end-users or end-uses without a license. BXA maintains, in the

form of Supplement 4 to the Part 744, an “Entity List” to provide notice

informing the public of certain entities subject to such licensing

requirements.

These end users have been determined to present an unacceptable risk

of diversion to developing weapons of mass destruction or the missiles

used to deliver those weapons. Publishing this list puts exporters on

notice that any products sold to these end users may present concerns

and will require a license from the Bureau of Export Administration.

While this list will assist exporters in determining whether an entity

poses proliferation concerns, it is not comprehensive. It does not relieve

exporters of the responsibility to determine the nature and activities of

their potential customers using BXA’s Know Your Customer and Red

Flags guidance.

Interagency groups involved in the export control process reviewed the

activities of the published entities of concern and determined that

exports to these entities would create an unacceptable risk of use in or

diversion to prohibited proliferation-related activities. Publishing this

entity list allows the U.S. government to identify for U.S. businesses

some of the organizations and companies that may be involved in

proliferation activities.

The development of a list of entities of concern arises from the EPCI

initiative begun in 1990 to stem the spread of missile technology as well

as nuclear, chemical, and biological weapons. Under EPCI the

Commerce Department can impose licensing requirements on exports

and re-exports of normally uncontrolled goods and technology where

there is an unacceptable risk of use in or diversion to activities related

to nuclear, chemical, or biological weapons or missile proliferation,

even if the end user is not primarily weapons-related.

The Bureau of Export Administration requires an export license for

otherwise uncontrolled items subject to the Export Administration

Regulations before allowing shipments to these end users because of

risk in or diversion to prohibited proliferation activities. 

3. Business considerations in checking out the firm making the inquiry:

Major firms around the world typically have long-established relationships with

agents who have the global contacts to source anything their buyer may want to
72 U.S. Department of Commerce

acquire. Opportunities for new companies are limited, but they do exist.

Unfortunately, often when new opportunities arise, they do so in order to find

firms capable of handling “mission impossible.” The mission is deemed

impossible if the opportunity entails sourcing a product for a price that is

unrealistically low, or for providing products off-season when they are not

available, or for providing products according to non-standard specifications.

Make sure the opportunity is a reasonable one and involves something that can

reasonably be handled by your firm, without spending countless hours

researching the requirement or phoning or faxing all over at considerable cost to

your firm. Investigate the inquiry and determine whether your firm can

complete the request. The DOC Commercial Service has a number of services

to help:

■ International Company Profile (ICP) – The ICP service, referred to in

Chapter Two, helps firms investigate the reliability of prospective trading

partners. Information provided in an International Company Profile includes

type of organization, year established, size, general reputation, territory

covered, sales, product lines, principal owners, financial information, and

trade references, with recommendation from on-site commercial officers as

to suitability as a trading partner. 

■ Country Directories of International Contacts (CDIC) – CDIC

provides the name and contact information for directories of importers,

agents, trade associations, government agencies, etc., on a country-bycountry basis. Available on the National Trade Data Bank. It may also be

useful to identify some of these sources that can in turn provide useful

information about the firm making the inquiry.

4. Competitive considerations in checking out the market for the product:

By reviewing industry sector information, firms can obtain useful data to assess

the probability that the inquiry they are investigating is real. One resource that

may be helpful is the DOC Commercial Service’s Industry Sector Analysis

report referred to in Chapter Two.

■ Industry Sector Analysis (ISA) – These are structured market research

reports produced on location in leading overseas markets. These reports

cover market size and outlook, characteristics, and competitive and end-user

analysis for a selected industry sector in a particular country. Industry

Sector Analyses are available on the National Trade Data Bank and the

Economic Bulletin Board. 

5. Contact Commercial Service Officers in the country: Commercial Service

Officers are a valuable resource for information about firms overseas, as

explained in Chapter Two. Contact them to discuss whether a particular deal

sounds legitimate and whether they have any information on the firm making

the inquiry. (If you are using the web edition of the manual, click on the list of

e-mail addresses of U.S. Commercial Service Officers to be connected directly

to them.)
U.S. Department of Commerce 73

■ Abidjan 

■ Abidjan MLB 

■ Abu Dhabi 

■ Alexandria 

■ Amsterdam 

■ Anchorage 

■ Ankara 

■ Ann Arbor 

■ Athens 

■ Atlanta 

■ Auckland 

■ Austin 

■ Baltimore 

■ Bangalore 

■ Bangkok 

■ Barcelona 

■ Beijing 

■ Belfast 

■ Berlin 

■ Bern 

■ Birmingham 

■ Bogota 

■ Boise 

■ Bombay 

■ Bonn 

■ Boston 

■ Brasilia 

■ Bratislava 

■ Brisbane 

■ Brussels 

■ Bucharest 

■ Budapest 

■ Buenos Aires 

■ Buffalo 

■ Cairo 

■ Calcutta 

■ Capetown 

■ Caracas 

■ Casablanca 

■ Charleston,SC 

■ Charleston,WV

■ Chicago 

■ Cincinnati 

■ Clearwater 

■ Cleveland 

■ Columbia 

■ Columbus 

■ Copenhagen 

■ Dallas 

■ Denver 

■ Des Moines 

■ Detroit 

■ Dhahran 

■ Dubai 

■ Dublin 

■ Dusseldorf 

■ Eugene 

■ Florence 

■ Frankfurt 

■ Fukuoka 

■ Geneva 

■ Genoa 

■ Grand Rapids 

■ Greensboro 

■ Greenville 

■ Guadalajara 

■ Guangzhou 

■ Guatemala 

■ Halifax 

■ Hamburg 

■ Harlem 

■ Harrisburg 

■ Helsinki 

■ Hongkong 

■ Honolulu 

■ Houston 

■ Indianapolis 

■ Islamabad 

■ Istanbul 

■ Izmir 

■ Jackson 

■ Jakarta 

■ Jeddah 

■ Johannesburg 

■ Kansas City 

■ Kaohsiung 

■ Karachi 

■ Kiev 

■ Knoxville 

■ Kuala Lumpur 

■ Kuwait 

■ Lagos 

■ Leipzig 

■ Lima 

■ Lisbon 

■ Little Rock 

■ London 

■ Long Beach 

■ Long Island 

■ Los Angeles 

■ Louisville 

■ Lyon 

■ Madras 

■ Madrid 

■ Manila 

■ Marseille 

■ Medan 

■ Melbourne 

■ Memphis 

■ Mexico City 

■ Miami 

■ Middletown 

■ Milan 

■ Milwaukee 

■ Minneapolis 

■ Monterrey 

■ Montpelier 

■ Montreal 

■ Moscow 

■ Munich 

■ Nagoya 

■ Naples 

■ Nashville 

■ Newark 

■ New Delhi 

■ New Orleans 

■ Newport Beach 

■ New York 

■ Oklahoma City 

■ Omaha 

■ Ontario 

■ Oporto 

■ Orlando 

■ Osaka Kobe 

■ Oslo 

■ Ottawa 

■ Panama 

■ Paris 

■ Perth 

■ Philadelphia 

■ Phoenix 

■ Pittsburgh 

■ Pontiac 

■ Port-au-Prince 

■ Portland,OR 

■ Portsmouth 

■ Prague 

■ Providence 

■ Quito 

■ Rabat 

■ Reno 

■ Richmond 

■ Riga 

■ Rio de Janeiro 

■ Riyadh 

■ Rockford 

■ Rome 

■ Salt Lake 

■ San Antonio 

■ San Diego 

■ San Francisco 

■ San Jose,CA

■ San Juan 

■ Santa Clara 

■ Santa Fe 

■ Santiago 

■ Santo Domingo 

■ Sao Paulo 

■ Sapporo 

■ Savannah 

■ Seattle 

■ Seoul 

■ Shanghai 

■ Shenyang 

■ Singapore 

■ Sioux Falls 

■ Sofia 

■ Somerset 

■ St.Louis 

■ Spokane 

■ Stockholm 

■ St.Petersburg 

■ Strasbourg 

■ Stuttgart 

■ Surabaya 

■ Sydney 

■ Taipei 

■ Tallahassee 

■ Tallinn 

■ Tegucigalpa 

■ Tel Aviv 

■ The Hague 

■ Tijuana 

■ Tokyo 

■ Toledo 

■ Toronto 

■ Trenton 

■ Tulsa 

■ Vancouver 

■ Vienna 

■ Vilnius 

■ Warsaw 

■ Wellington 

■ Westchester 

■ Wheaton 

■ Wheeling 

■ Wichita 

■ Yekaterinburg 

■ Zagreb 
74 U.S. Department of Commerce

5. Failure to understand the connection Export financing

between country risk and the 

probability of getting export financing

Many minority firm owners have overseas connections because of their ethnic

heritage. These contacts, including friends and family, can often help create

trade opportunities. However, if the opportunities are in a country that is having

a problem with the U.S., firms might face some difficulty in obtaining financing

for the deal. The best source of information about whether a country is in good

standing with the U.S. is the U.S. Export-Import Bank’s Country Limitation

Schedule. If the ExIm Bank will not offer its services in this market, the chances

are that neither will other government agencies or private financing institutions.

Exporters should keep abreast of changes on ExIm’s Country Limitation

Schedule (http://www.exim.gov). 

1. Access the ExIm’s Country Limitation Schedule (CLS): The CLS

identifies limits, if any, on ExIm’s lending to the public and private sectors in

the short, medium, and long terms. One of the major reasons for limiting a

country’s access to ExIm’s financing and insurance is default on loan

repayment. A negative repayment record tends to make lending to the country a

risky proposition; therefore firms would likely find it difficult to obtain

financing for deals involving these countries.

2. Access Export Financing Options: The SBA, ExIm, and the Agriculture

Department are three of the biggest providers of export financing in the federal

government. In addition, selected state governments also provide export

financing. A description of their programs and the terms of their financing are

given on their respective websites. Preferred Lenders (private banks) that

participate in the financing programs of ExIm and the SBA should also be

contacted directly to discuss their application forms and terms of lending. A list

of the strategic banking partners of the ExIm and SBA export financing and

credit insurance programs can be obtained from ExIm and SBA. 

3. Check out SBA’s Export Financing Products: The SBA’s Export Working

Capital Program (EWCP) provides short-term working capital for up to one

year. The EWCP provides transaction-specific financing for loans of $833,333

or less. Exporters may use this program for pre-export financing of labor and

materials; financing receivables generated from these sales; and/or standby

Letters of Credit used as performance bonds or payment guarantees to foreign

buyers. The EWCP provides repayment guarantees of 90 percent to commercial

lenders and offers exporters preliminary commitments (PCs) that encourage

lenders to provide credit. To be eligible, the small business concern must have

been in operation, though not necessarily exporting, for at least 12 months.

4. Consult the ExIm Bank’s Export Financing Products: The ExIm Bank’s

Working Capital Guarantee Program allows commercial lenders to make

working capital loans to U.S. exporters for various export-related activities by

substantially reducing the risks associated with these loans. ExIm Bank provides

repayment guarantees to lenders on secured short-term working capital loans to
U.S. Department of Commerce 75

qualified exports. The Working Capital Guarantee may be provided for a single

loan or a revolving line of credit. If the exporter defaults on the loan, ExIm

Bank will cover 90 percent of the loan and interest up to the date of the claim

payment. The exporter may use the program to purchase raw materials and

finished goods for export, to pay for materials, labor and overhead to produce

goods for export, and to cover stand-by letters of credit, and bid and

performance bonds.

5. Access ExIm Bank’s Export Credit Insurance: The Export Credit

Insurance program provides protection against losses associated with foreign

buyers or other foreign debtor default for political or commercial reasons. With

an ExIm Bank policy, exporters can also obtain export financing more easily

because, with prior approval by ExIm Bank, the proceeds of the policy can be

assigned to a financial institution as collateral. The cost of the insurance

program is based solely on the actual value of shipments to foreign customers.

The cost, or premium, depends on the amount of the credit, the term of the

credit, and the type of buyer. For example, the premium for a 90-day credit for a

foreign company is 0.94 percent or $940 on a $100,000 order. This premium is

commonly added to the buyer’s invoice. It is important to note that ExIm Bank

has no minimum transaction size.

6. Failure to understand Intellectual Intellectual Property Rights

Property Rights (IPR)

Intellectual property rights (IPRs) refer to the legal system that protects patents,

trademarks, copyrights, trade secrets, and semiconductor mask work

registrations. It is important for exporters to understand how and whether

intellectual property rights are protected in different countries. In the case of

patents, the U.S. is the only country to award patents based on a “first to invent”

standard. All other countries with patent laws employ a “first to file” standard.

The World Trade Organization (“WTO”) Agreement on Trade-Related Aspects

of Intellectual Property Rights (“TRIPS Agreement”) establishes a framework

for recognition between countries of intellectual property rights. Exporters are

advised to keep abreast of the TRIPS Agreement within the WTO to know the

latest developments concerning the protection of IPRs. In addition to the WTO,

however, there are also other important conventions and agreements that pertain

to different IPRs. Some of these are discussed in Chapter Five.

7. Insufficient attention to marketing Marketing and advertising 

and advertising requirements overseas

Just as U.S. firms have to compete in the domestic market for market share,

they also have to compete for a share of the foreign market they are targeting.

While overall competitiveness is ultimately determined by price, quality, and
76 U.S. Department of Commerce

delivery terms, firms can enhance their chances of capturing more market share

through marketing and advertising. Marketing and advertising strategies, and

their cost, should be developed and factored into the export planning process.

Key considerations include: 

1. Options for U.S. Firms to Market Overseas: One option is for U.S.

businesses to participate in trade shows and trade missions sponsored or

supported by the DOC and other agencies. Trade missions target specific

countries or groups of countries with promising export opportunities. For a

description of the trade shows and trade missions the DOC participates in,

consult the Export Programs Guide, which you can receive by calling the TIC.

For additional information on upcoming trade events, contact the TIC at 1-800-

USA-TRAD.

2. Options for Advertising: Exporters can advertise U.S.-made products or

services in Commercial News USA, a catalog-magazine published 10 times a

year to promote U.S. products and services in overseas markets. Commercial

News USA is disseminated to business readers worldwide via U.S. embassies

and consulates and international electronic bulletin boards, and selected portions

are also reprinted in certain newsletters. Advertisement fees are based on the

size of the listing. For more information, call ABP International at (212) 490-

3999, visit the DOC’s Export Marketing Magazine, (http://www.cnewsusa.com)

or contact your local DOC District Office. 

U.S. exporters can also advertise through the International Broadcasting Bureau

(IBB), which is part of the United States Information Agency. IBB is the

umbrella organization which includes Voice of America (VOA), Worldnet TV,

and Radio Free Europe/Radio Liberty. VOA broadcasts almost 700 hours of

programming to an estimated audience of 86 million each week. The

broadcasters can tie a company’s ads to different language broadcasts about a

particular subject, e.g., science and technology, health and medicine, or target

the ads to a specific region or country. For additional information, contact IBB

at (202) 260-9052. 

8. Lack of attention to product Product adaptation and 

adaptation and preparation needs preparation

The selection and preparation of a firm’s product for export requires not only

knowledge of the product, but also knowledge of the unique characteristics of

each market being targeted. Considering that the market research recommended

in the previous chapters has already been carried out and therefore the target

products and target countries have already been identified, the next step is to

determine what needs to be done to prepare the product for the foreign chosen

market. Key considerations include:
1. Product Adaptation to standards requirements: As tariff barriers (tariffs,

duties, and quotas) are eliminated around the world in accordance with the

requirements of participation in the World Trade Organization (WTO), other

non-tariff barriers, such as product standards, are proliferating. Exporters must

understand conformity requirements to operate on an international basis. The

DOC’s National Center for Standards and Certification Information (NCSCI)

provides information on U.S. and foreign conformity assessment procedures and

standards for non-agricultural products. The NCSCI also provides a translation

service for foreign standards, for which there is a charge. NCSCI staff will

respond to requests for information by identifying relevant standards and/or

regulations for your product. The requester is referred to the appropriate

standards-developing organization or private sector organization for additional

technical information and/or copies of the document. 

2. ISO 9000 and ISO 14000: A discussion of product adaptation in an

international context is not complete without a discussion of “ISO 9000” and

“ISO 14000.” This subject will be treated in more detail in Chapter Five. The

ISO 9000 and ISO 14000 designation are standards and guidelines relating to

management systems or standards on terminology and specific tools, such as

auditing (the process of checking that the management system conforms to the

standard). ISO 9000 is primarily concerned with “quality management” – all

those features of a product (or service) which are required by the customer.

“Quality management” refers to what an organization does to ensure that its

products conform to the customer’s requirements. ISO 14000 is primarily

concerned with “environmental management” – essentially what steps an

organization takes to minimize harmful effects on the environment caused by its

activities. Both ISO 9000 and ISO 14000 are processes, and not products. The

International Standards Organization (ISO) (http://www.iso.ch.) and the

American National Standards Institute (ANSI) (http://www.ansi.org) provide

detailed information about standards.

3. Product Engineering and Redesign: The factors that may necessitate reengineering or redesign of U.S. products may include differences in electrical

and measurement systems. While other considerations in the export planning

process may overwhelm these engineering and design issues, they are important

nevertheless and have a bearing on costs. 

4. Branding, Labeling and Packaging: Cultural considerations and customs

may influence branding, labeling and package considerations. For instance, the

following questions might arise:

■ Are certain colors used on labels and packages attractive or offensive?

■ Do labels have to be in the local language?

■ Must each item be labeled individually?

■ What images should be used for advertising purposes?

■ Are name brands important?

U.S. Department of Commerce 77
78 U.S. Department of Commerce

5. Installation: Another important element of product preparation is to ensure that

the product can be easily installed in the foreign location. The need for specially

trained technicians or engineers to help install the product may be problematic.

Pre-assembly and/or pre-testing before shipping might be recommended.

Payments may be held up contingent on product assembly. Exporters need to

know whether they may have to consider providing training or providing manuals

that have been translated into the local language along with the product.

6. Warranties: In order to compete with competitors in the market, firms may

have to include warranties on their products. Levels of expectation for

warranties vary from one country to the next depending upon a country’s level

of development, the activism of consumer groups, local standards of production

quality, and other related factors. The firm’s market research should reveal this

information so that the export plan can factor in the proper warranty

considerations.

7. Servicing: The service that U.S. companies provide for their products is of

concern to foreign consumers. Foreign consumers want to know whether they

can access spare parts, technicians who can service the product, and distributors

of the products in their countries. Exporters have a number of options for

addressing these concerns. For instance, they can engage a local organization to

service the product, or train local distributors. A more expensive option involves

stationing service personnel in the country or entering strategic alliances with

other firms operating in the country that have similar servicing needs. These and

other options should be carefully considered when formulating an export plan. 

9. Failure to obtain legal advice Legal advice

The export planning process provides an opportunity for firms to consider

whether they know how to stay out of trouble and how to optimize their

position when formulating contractual agreements before they begin exporting.

While it is virtually impossible for any firm, no matter how big or small, to

know all of the laws that pertain to exporting from the U.S., as well as the

relevant laws of other countries, there are measures that can be taken by firms in

the planning process to minimize the probability that they will make

unnecessary errors that have grave legal consequences. Firms are advised to

retain legal counsel to address their individual concerns. Some of the measures

that can also be taken in the planning process are: 

1. Utilize SBA’s ELAN service: Under the Export Legal Assistance Network

(ELAN), your local SBA office can arrange a free initial consultation with an

attorney to discuss international trade questions. This service is made possible

through an agreement among the Federal Bar Association, the SBA and the U.S.

DOC. Questions may include contract negotiation, agent/distributor agreements,

export licensing requirements, credit collection procedures, documentation, and

much more. A comprehensive list of regional coordinators who can refer you to

a participating attorney can be found on the National Export Directory. ELAN
also has an internet home page that contains a copy of the SBA brochure, an

article on ELAN, the ground rules for consultations, and the names and numbers

of all of ELAN’s regional contacts.

2. Consult the Commerce/ITA Legal webpage: The DOC, International Trade

Administration’s (ITA) legal website contains papers, memoranda, speeches,

and other materials on international trade and investment law with a focus on

export and investment issues such as transborder bribery. A list of the legal

documents available on the website is provided. (If you are using a web edition

of the manual, click on these to link to the individual topics)

(http://www.ita.doc.gov/legal/). The exporter should seek the advice of counsel

concerning their specific questions.

A. Materials on Transparency and Anti-Bribery

■ Anti-Corruption Review - A summary of international anti-bribery

initiatives 

■ Addressing the Challenges of International Bribery and Fair

Competition - Remarks by Secretary Daley at the OECD Washington

Conference on Corruption, Washington, DC, February 22, 1999 

■ Link to Materials on Vice President’s Anti-Corruption Conference,

February 24 - 26, 1999 

■ Remarks by Secretary Daley to Transparency International/USA Board

of Directors, New York, NY, January 19, 1999 

■ Reporting Cable on West African Legal Conference on Transparency,

etc., December 1998 

■ Foreign Corrupt Practices Act: An Overview 

■ Foreign Corrupt Practices Act - 1998 Amendments to the Foreign

Corrupt Practices Act 

■ Foreign Corrupt Practices Act Text including 1998 Amendments

(unofficial version) 

■ Summary of OECD Anti-Bribery Convention 

■ OECD Convention on Combating Bribery of Foreign Public Officials in

International Business Transactions 

■ Commentaries on the OECD Convention on Combating Bribery of

Foreign Public Officials (Full Text) 

■ Recommendation of the OECD Council on Combating Bribery in

International Business Transactions (1997) 

■ Inter-American Convention Against Corruption 

■ Summary of the Inter-American Convention Against Corruption 

■ APEC Government Procurement Export Group: Non-Binding Principles

on Government Procurement 

■ U.S. Comments on Japan’s Proposed Public Comment Procedures Link

to the U.S. Department of Justice, Fraud Section 

■ Link to OECD Anti-Corruption Initiatives web page 

■ Link to Transparency International - USA web page 

U.S. Department of Commerce 79
80 U.S. Department of Commerce

B. Materials on Trade and Investment

■ Dispute Settlement and the World Trade Organization 

■ Intellectual Property Rights: A Post-Uruguay Round Overview 

■ Inter-American Conventions 

■ Recognition and Enforcement of Foreign Money Judgments 

■ Section 301 of the 1974 Trade Act 

■ The U.S. 1994 Prototype Bilateral Investment Treaty 

■ NAFTA Bibliography 

C. Materials on International Transactions

■ The Apostille: Authentication of Official U.S. Documents for Use in

Foreign Jurisdictions 

■ Foreign Sales Corporations - A Tax Incentive for U.S. Exporters 

■ Inward Investment Reporting Requirements 

■ Outward Investment Reporting Requirements 

■ Letters of Credit 

■ The UN Convention on the International Sale of Goods 

■ International Arbitration 

■ Primer on Alternative Dispute Resolution 

■ A.T.A. Carnet - The Merchandise Passport 

D. Materials on NAFTA and Private Dispute Settlements

■ Background and Establishment 

■ Article 2022 of the NAFTA

■ Terms of Reference of the Committee 

■ Summary of relevant commercial arbitration statutes for the United

States, Canada and Mexico 

■ Alternative Dispute Resolution in International Contracts 

■ Enforcing Agreements to Arbitrate and Arbitral Awards in the NAFTA

Countries 

■ November 1996 Advisory Committee Report to the NAFTA Free Trade

Commission 

■ Conference on Alternative Dispute Resolution in the NAFTA Region 

E. Materials on Commercial Arbitration in China

■ The Ninth Sino - U.S. Commercial Law Seminar, April 7-8, 1998,

Beijing, China 

■ International Arbitration Under the Rules of China International

Economic and Trade Arbitration Commission 

■ An Overview of China’s Legislation and Practice on Arbitration 

■ Chinese Relevant Legislation and Execution of Recognition and

Enforcement of Foreign Arbitral Awards 
U.S. Department of Commerce 81

■ Experience in Arbitration and Recognition and Enforcement of Arbitral

Awards in the P.R.C. 

■ Dispute Resolution in the People’s Republic of China 

■ Recognition and Enforcement of Arbitration Awards in the U.S.A. 

10. Failure to understand export Export licensing 

licensing requirements

Businesses that are new to the export arena may confuse the local and state

rules regarding business taxes, zoning and other issues, i.e., legal registrations,

with the federal requirements governing export licenses. The latter is

particularly important because the export of technology and computer software

could have military applications and may be restricted. The restrictions are

placed on the items by the federal government to ensure the nation’s security,

comply with foreign policy and non-proliferation treaties. In order to export an

item that may be on the restricted list, an export license is required. This allows

the federal government to control the export of the goods. The license is not

required for every item exported. Learn more about the export licensing by

reviewing the Export Administration Regulations (EAR) listed in Title 15, Code

of Federal Regulations, Parts 730-774. This framework for exporting from the

U.S. involves certain procedures and documentation. This will also be discussed

in more detail in the next chapter. 

The DOC’s Bureau of Export Administration (BXA) is the primary licensing

agency for dual use exports (commercial items that could have military

applications). Other departments and agencies have regulatory jurisdiction over

certain types of exports and re-exports. For example, the State Department

licenses the export of defense articles and services, while the Nuclear

Regulatory Commission (NRC) licenses certain nuclear materials and

equipment. Of those exports and re-exports subject to the EAR, a relatively

small percentage requires the submission of a license application to the DOC.

The requirement for a license is determined by the technical characteristics, the

destination, the end-use, and the end-user, and other activities of the end-user.

The first step in determining your license requirements under the EAR is to

classify your product using the Commerce Control List (CCL). Once the

product’s classification is determined, the following five questions will

determine your obligations under the EAR: 

■ What is the item you intend to export or re-export? 

■ Where is it going? 

■ Who will receive it? 

■ What will they do with it? 

■ What are the recipients other activities?
The implications of the answers to these questions and a detailed discussion on

export controls and licensing will be discussed in Chapter Four. 

Chapter Four focuses on export operations, including discussions of export

controls documentation, methods and payments, transportation, financing,

and other important operational concerns. 

82 U.S. Department of Commerce
U.S. Department of Commerce 83

Chapter Four 

Export Operations 

Export operations, the rules, regulations and procedures of the export

process will be examined in this chapter. As soon as your goods and

services move from one country to another, your firm and your buyers

are no longer the only ones who have an interest in the deal. Every entity along

the chain that touches the product or any part of the transaction has its own

rules for doing business. The governments of importing countries, financial

institutions, and transportation services all have their own set of rules for how

the goods must be handled to comply with their processes. Even the language of

the terms of the offer or deal has to be specified in accordance with international

rules! This chapter contains critical information for minority firms about how to

export successfully while following all of the rules and regulations. Critical

operational considerations and the rules that provide an orderly framework for

conducting these export operations include:

Export

Licensing &

Controls

Export

Quotations

Methods of

Payments

Export

Documentation

Export

Financing

Transportation

& Cargo

Insurance

What are the Export Licensing and Control Rules?

History of Export Regulations 

In September 1774, the First Continental Congress convened in Philadelphia.

The following December, the Congress declared the importation of British goods

to be illegal. Twelve months later, the Congress outlawed the export of goods to

Great Britain, thus establishing the first American export controls. Since then,

the U.S. has imposed export controls for a variety of reasons through various

pieces of legislation such as the Embargo Act, the Trading with the Enemy Act,
the Neutrality Act, and the Export Control Act. The Export Control Act of 1949

gave the U.S. Department of Commerce (DOC) primary responsibility for

administering and enforcing export controls on dual-use items, and for the first

time defined three reasons for the imposition of these controls. 

The three primary reasons for U.S. export controls are: 

■ National security

■ Foreign policy

■ Short supply

Several unnecessary and ineffective controls have recently been eliminated,

streamlining the export process. Since 1993, the value of goods requiring an

export license has decreased from $6.1 billion per quarter to $2.7 billion per

quarter at the end of FY 1995. 

On March 25, 1996, the Federal Register published an interim rule simplifying

Export Administration Regulations (EAR). The following information is based

on a modified extract from the EAR and is available at the following web

address: (http://www.access.gpo.gov/bxa/ear_faq.html).

WASHINGTON February 2, 1999 — The DOC’s Bureau of

Export Administration (BXA), which oversees U.S. exports of

dual-use commodities, technology and software, today issued a

reminder to U.S. exporters about the importance of compliance

with export regulations and issued detailed steps it has taken —

and will take — to enhance its licensing process and

enforcement operations. This action reflects BXA’s commitment

to ensure U.S. security concerns are met at a time when the

worldwide demand for U.S. high technology is stronger than

ever. Controlling exports of U.S. technology has become much

more difficult since the end of the Cold War. The globalization

of technology has brought an increased recognition that our

national security depends on controlling exports to entities that

could misuse U.S. technologies and products rather than

country blocs.

This message underscores the importance of export controls in an increasingly

global economy. The subsequent discussion identifies important considerations

to help firms comply with the regulations.

First, it should be noted that references to the Export Administration

Regulations (EAR) are references to 15 CFR (Code of Federal Regulations)

chapter VII, subchapter C. The EAR(s) are issued by the DOC, Bureau of

Export Administration (BXA), under laws relating to the control of certain

exports, re-exports, and activities. In addition, the EAR implements anti-boycott

law provisions. These regulations prohibit U.S. citizens from supporting

boycotts fostered or imposed by a country against a country friendly to the U.S.

84 U.S. Department of Commerce
The five questions that you need to ask to determine your obligations under

the EAR are:

■ What is being exported? What is the item’s (Commerce Control List

(CCL) (Part 774 of the EAR) classification?

■ Where is it going? The country of ultimate destination is a factor in

determining export licensing requirements using the Country Chart in Part

738 and the CCL. Consult Part 746 for restrictions on embargoed countries. 

■ Who will receive it? There are restrictions on certain end-users, such as

persons denied export privileges (discussed in the previous chapter). See

General Prohibition Four in Section 736.2(b)(4) and Parts 744 and 764 of

the EAR on persons that you may not deal with or who have additional

license requirements.

■ What will they do with the item? The ultimate end-use of your item will

affect the licensing requirements. See General Prohibition Five in Section

736.2(b)(5) and Part 744 of the EAR for end-use and end-user restrictions

on activities related to the proliferation of nuclear, chemical, or biological

weapons, and missile delivery.

■ What else is involved in your transaction? You may be restricted from

engaging in a transaction based on conduct such as contracting, financing,

and freight forwarding in support of a proliferation project described in

Section 744.6 of the EAR. 

Except for shipments to U.S. territories and possessions, which are treated as

part of the U.S., most exports outside the U.S. are subject to the EAR. Several

agencies of the U.S. government maintain export controls on items other than

dual-use items. The U.S. State Department controls munitions and arms, and the

U.S. Department of Agriculture controls the export of livestock, dairy, and

poultry items. If an item is subject to the EAR, the exporter must determine

whether or not the item requires an export license. The CCL (referred to

previously) identifies the items that are subject to the export licensing

requirements of the BXA. The CCL is composed of Export Control

Classification Numbers (ECCN) which identifies the licensing requirements for

each item that requires a license. If a license is required, and is approved, that

license number and expiration date must be placed on the Shippers Export

Declaration (SED). The SED is used to inform the U.S. Customs Service about

the type of export authorization being used as an export control document for

BXA. Table 4 explains some of the requirements of the SED and the Automated

Export System (AES) for filing the SED. 

U.S. Department of Commerce 85
86 U.S. Department of Commerce

Table 4: SED Requirements and AES Filing

SHIPPERS EXPORT AUTOMATIC SHIPPER’S

DECLARATION (SED) EXPORT DECLARATION (AES)

1. Forms: There are different forms 1. Paper copies of the Shippers Export

to file depending upon the nature of Declaration (SED) are no longer 

the export operation, (i.e., such as needed and duplicate reporting to 

intransit, re-export, or other). multiple agencies is reduced.

2. Preparation and Signature: 2. There are four ways of filing an 

There are very strict rules on how to AES, known as Options 1,2,3, and 4. 

handle the forms and on who has to These are identified below. 

sign the forms.

3. Separate SEDs are required for 3. Option One: For exporters who do

each shipment, know the filing rules. not want to file electronically.

4. Presentation of the SED: How, 4. Option Two: This is for shippers of 

when in the process, and to whom sensitive goods

to present the SED are important 

factors that are explained.

5. Correction, amendments, or 5. Option Three: This is for shipments

cancellations of data and how to that don’t qualify for Option 4, as they 

handle them are explained. only have partial pre-departure 

information.

6. Exemptions: The circumstances 6. Option Four: This option is for 

under which SEDs are not required repetitive shipments that pose little or

are identified. no risk of being used illegally overseas.

7. Retention of Shipping 

Documents: Exporters or their –– ––

agents must maintain copies of 

shipping documents for 3 years 

after exportation

http://www.customs.ustreas.gov Http://www.customs.ustreas.gov/

/impoexpo/impoexpo.html impoexpo/impoexpo.html

Visit this website for all details on Visit this website for all details on

the issues identified above. the issues identified above. 
U.S. Department of Commerce 87

A

Export Controls on Computers:

As many minority-owned firms are in the Information Technology (IT) sector, it

is important to review the July 1, 1999 White House Press Release on export

controls since computers are of particular interest. Please refer to the following

website for details (http://www.bxa.doc.gov/PRESS/99/HPControl.html). For a

list of the most frequently asked questions about compliance with the EAR go

to: http://www.access.gpo.gov/bxa/ear_faq.html.

How to offer export Quotations?

In order to develop an export quotation, there are a number of important factors

an exporter must consider, including:

A. Incoterms

B. Pricing Factors

C. Pro forma Invoice

What are International Commercial Terms (Incoterms)?

Incoterms represent a codification of international rules for the uniform

interpretation of common contract clauses in export/import transactions

developed and issued by the International Chamber of Commerce (ICC). These

terms should be used in offering your export quotation, as they each have a

different impact on the cost and responsibilities at different points in the export

transaction. The categories of Incoterms are shown in Table 5.

Table 5: Categories of Incoterms

C Terms D Terms E Terms F Terms

CFR - Cost and DAF – Delivered EXW - Ex Works FAS - Free 

Freight At Frontier Alongside Ship

CIF - Cost, DDP – Delivered FCA - Free 

Insurance and Duty Paid Carrier

Freight DDU – Delivered FOB - Free

CIP – Carriage and Duty Unpaid On Board

Insurance Paid To DES – Delivered

CPT – Carriage Ex Ship

Paid To DEQ – Delivered

Ex Quay
88 U.S. Department of Commerce

An explanation of the responsibilities which correspond to the acronyms in the

table is explained in Tables 6 (C Terms), Table 7 (D Terms), Table 8 (E Terms),

and Table 9 (F Terms). The information provided in these tables can be found

on the U.S. Treasury’s International Trade Data System (ITDS) website at: 

(http://www.itds.treas.gov/ITDS/Frames/Build_Frames.cfm?Site=ITRC).

Table 6: “C” Terms

CFR

Cost and Freight

“Cost and Freight” means that the seller must pay the costs and freight

necessary to transfer the goods to the named port of destination. However,

the risk of loss or damage to the goods, as well as any additional costs due

to events occurring after the time the goods have been delivered on board

the vessel, is transferred from the seller to the buyer when the goods pass

the ship’s rail in the port of shipment. The CFR term requires the seller to

clear the goods for export. This term can only be used for sea and inland

waterway transport. When the ship’s rail serves no practical purpose, such

as in the case of roll-on/roll-off or container traffic, the CPT term is more

appropriate to use.

CIF

Cost, Insurance, and Freight

“Cost, Insurance and Freight” means that the seller has the same obligations

as under CFR but with the addition that he has to procure marine insurance

against the buyer’s risk of loss of or damage to the goods during the

carriage. The seller contracts for insurance and pays the insurance

premium. The buyer should note that under the CIF term the seller is only

required to obtain minimum insurance coverage. The CIF term requires the

seller to clear the goods for export. This term can only be used for sea and

inland waterway transport. When the ship’s rail serves no practical purposes

such as in the case of roll-on/ roll-off or container traffic, the CIP term is

more appropriate to use.

CIP

Carriage and Insurance Paid to (destination)

“Carriage and Insurance Paid to...” refers to the seller’s obligations as

under CPT, but with the addition that the seller has to procure cargo

insurance against the buyer’s risk of loss of or damage to the goods during

the carriage. The seller contracts for insurance and pays the insurance

premium. The buyer should note that under the CIP term the seller is only

required to obtain minimum insurance coverage. The CIP term requires the

seller to clear the goods for export. This term may be used for any mode of

transport including multimodal transport. 
U.S. Department of Commerce 89

CPT

Carriage Paid to (destination)

“Carriage Paid to...” means that the seller pays the freight for the carriage of

the goods to the named destination. The risk of loss of or damage to the

goods, as well as any additional costs due to events occurring after the time

the goods have been delivered to the carrier, is transferred from the seller to

the buyer when the goods have been delivered into the custody of the

carrier. “Carrier” refers to any person who, in a contract of carriage,

performs or procures the performance of carriage, by rail, road, sea, air,

inland waterway or by a combination of such modes. If subsequent carriers

are used for the carriage to the agreed destination, when the goods have

been delivered to the first carrier, the risk also transfers. The CPT term

requires the seller to clear the goods for export. This term may be used for

any mode of transport including multi-modal transport.

Table 7: “D” Terms

DAF

Delivered at Frontier

“Delivered at Frontier” means that the seller fulfills his obligation to deliver

when the goods have been made available and cleared for export, at the

named point and place at the frontier, but before the customs border of the

adjoining country. The term “frontier” may be used for any frontier

including that of the country of export. Therefore, it is of vital importance

that the frontier in question be defined precisely by always naming the point

and place in the term. The term is used when goods are to be carried by rail

or road, but it may be used for any mode of transport.

DDP

Delivered Duty PAID Destination

“Delivered Duty Paid” means that the seller fulfills his obligation to deliver,

when the goods have been made available, at the named place in the

country of importation. The seller has to bear the risks and costs, including

duties, taxes and other charges of delivering the goods cleared for

importation. If the parties wish to exclude from the seller’s obligations some

of the costs payable upon importation of the goods (such as value added tax

(VAT)), this should be made clear by adding words to this effect: “Delivered

duty paid, VAT unpaid (...named place of destination).” This term may be

used irrespective of the mode of transport. 

DES 

Delivered Ex Ship

“Ex Ship” means that the seller fulfills his obligation to deliver when the

goods have been made available to the buyer on board the ship uncleared

for import at the named port of destination. The seller has to bear all the

costs and risks involved in bringing the goods to the named port of

destination. This term can only be used for sea or inland waterway

transport. 
90 U.S. Department of Commerce

DEQ

Delivered Ex Quay (duty paid) (port of destination)

“Delivered Ex Quay (duty paid)” means that the seller fulfills his obligation

to deliver when he has made the goods available to the buyer on the quay

(wharf) at the named port of destination, cleared for importation. The seller

has to bear all risks and costs including duties, taxes and other charges of

delivering the goods thereto. This term should not be used if the seller is

unable, directly or indirectly to obtain the import license. If the parties wish

the buyer to clear the goods for importation and pay the duty, the words

“duty unpaid” should be used instead of “duty paid.” If the parties wish to

exclude from the seller’s obligations some of the costs payable upon

importation of the goods (such as value added tax (VAT)), this should be

made clear by adding words to this effect: “Delivered ex quay, VAT unpaid

(... named port of destination).” This term can only be used for sea or inland

waterway transport.

Table 8: “E” Terms

EXW

EX Works

“Ex Works” means that the seller fulfills his obligation to deliver when he

has made the goods available at his premises (i.e. works, factory,

warehouse, etc.) to the buyer. In particular, he is not responsible for loading

the goods on the vehicle provided by the buyer or for clearing the goods for

export, unless otherwise agreed. The buyer bears all costs and risks involved

in taking the goods from the seller’s premises to the desired destination.

This term thus represents the minimum obligation for the seller. This term

should not be used when the buyer cannot carry out, directly or indirectly,

the export formalities. In such circumstances, the FCA term should be used.

Table 9: “F” Terms

FAS

Free Alongside Ship

“Free Alongside Ship” means that the seller fulfills his obligation to deliver

when the goods have been placed alongside the vessel on the quay or in

lighters at the named port of shipment. This means that the buyer has to

bear all costs and risks of loss of or damage to the goods from that moment.

The FAS term requires the buyer to clear the goods for export. It should not

be used when the buyer cannot carry out directly or indirectly the export

formalities. This term can only be used for sea or inland waterway transport.
U.S. Department of Commerce 91

B

FCA

Free Carrier

“Free Carrier” means that the seller fulfills his obligation to deliver when he

has handed over the goods, cleared for export, into the charge of the carrier

named by the buyer at the named place or point. If no precise point is

indicated by the buyer, the seller may choose within the place or range

stipulated where the carrier shall take the goods into his charge. When,

according to commercial practice, the seller’s assistance is required in

making the contract with the carrier (such as in rail or air transport) the

seller may act at the buyer’s risk and expense. This term may be used for

any mode of transport, including multimodal transport. “Carrier” refers to

any person who, in a contract of carriage, undertakes to perform or to

procure the performance of carriage by rail, road, sea, air, inland waterway

or by a combination of such modes. If the buyer instructs the seller to

deliver the cargo to a person, e.g. a freight forwarder who is not a “carrier,”

the seller is deemed to have fulfilled his obligation to deliver the goods

when they are in the custody of that person. “Transport terminal” refers to a

railway terminal, a freight station, a container terminal or yard, a multipurpose cargo terminal or any similar receiving point. “Container” includes

any equipment used to transport cargo, e.g. all types of containers and/or

flats, whether ISO accepted or not, such as trailers, swap bodies, ro-ro

equipment, or igloos and all modes of transportation.

FOB

Free on Board

“Free on Board” means that the seller fulfills his obligation to deliver when

the goods have passed over the ship’s rail at the named port of shipment.

This means that the buyer has to bear all costs and risks of loss of or

damage to the goods from that point. The FOB term requires the seller to

clear the goods for export. This term can only be used for sea or inland

waterway transport. When the ship’s rail serves no practical purpose, such

as in the case of roll-on/roll-off or container traffic, the FCA term is more

appropriate to use.

It is essential to have a working knowledge of these terms in order to

prepare the export quotation. 

Pricing Factors

If you are a manufacturer, you know your cost of production and have

determined your profit objectives. However, there are many factors that might

have an impact on the price at which you should sell your goods in the foreign

market. For instance, some of the additional cost factors to consider include:

■ Costs of modifying the product to comply with standards;

■ Non-market costs such as tariffs and customs fees;
92 U.S. Department of Commerce

■ Insurance costs; 

■ Advertising and promotion costs;

■ Cost of supplies and components;

■ Cost of training foreign distributors;

■ Cost of stocking spare parts in the foreign market;

■ Time sensitivity of price, bearing in mind the longer time cycle of

export sales; 

■ Anticipated volume and its incremental effect;

■ Pre-determined competitor prices in the market;

■ Demand factors;

■ Anticipated problems in filling the order;

■ Payment terms (Incoterms) and the special risks they impose;

■ Packaging, labeling, and shipping costs;

■ Telecommunication costs associated with staying in touch with

foreign partners;

■ Business services (translation, legal, accounting services, sales

commissions, other);

■ Forwarder’s charges;

■ Financing costs;

■ Consular legalization fees;

■ Inspection fees;

■ Import duty as a percent of landed cost;

■ Export documentation cost; and

■ Other factors.

Despite these considerations, few firms are in a position to determine their

prices without considering the pricing policies of competitors. Where a

particular market is being serviced by many competitors, the exporter may have

little choice but to match the going price or even to go lower than the current

price in order to capture market share. This is why the subject of “export

readiness” is often discussed – the question is whether new-to-the-market

exporters can afford to possibly incur losses in order to gain a foothold in the

market. To the extent feasible, “marginal cost” is the preferred pricing method,

as it takes direct out-of-pocket expenses of production into consideration, and

clearly indicates the minimum price for which the goods can be sold without

incurring a loss.
U.S. Department of Commerce 93

Pricing Summary:

Here are a few points to remember when determining your product’s price:

■ Determine your objective in the foreign market;

■ Compute the actual cost of the export product;

■ Compute the final consumer price;

■ Evaluate market demand and competition;

■ Evaluate the cost of modifying the product;

■ Calculate non-market costs; and

■ Determine a competitive price considering all relevant factors.

Export Quotations:

Many export transactions begin with the receipt of an inquiry. Such inquiries are

often followed by a request for an “export quotation.” An export quotation

describes the product, lists the price, sets the time of shipment, and specifies the

terms of sale and the terms of payment. The export quotation should include: 

■ Sellers’ and buyers’ names and addresses;

■ Buyer’s reference number and date of inquiry;

■ List and description of requested products;

■ Price of each item (in U.S. dollars);

■ Gross and net shipping weights (in metric units);

■ Total cubic volumes and dimensions for packing;

■ Trade discount (if applicable);

■ Delivery point;

■ Terms of sale;

■ Terms of payment;

■ Insurance and shipping cost;

■ Validity period of quotation;

■ Total charges to be paid by the customer;

■ Estimated shipping date; and

■ Currency of sale.

It should be noted that when the firm receives an inquiry, it may send an export

quotation, and follow it with a Pro forma invoice, or send a Pro forma invoice. 
C

94 U.S. Department of Commerce

Pro forma Invoice

Pro forma invoices are not used for payment purposes. The Pro forma invoice

may follow an export quotation. This document details the price, quantity,

quality, and terms and conditions of the deal, eliminating the chance of future

misunderstandings. It may also detail the invoicing requirements of the

importing country. Price quotations listed in the Pro forma invoice must state

explicitly that they are subject to change without notice. The Pro forma invoice

should be typed on company letterhead, and state the country of origin of the

goods, clearly state that it is a Pro forma invoice, and it should be certified as

true and correct by the supplier. This is important because Pro forma invoices

are the documents that buyers use when applying for import licenses, opening a

letter of credit or arranging for funds. 

What are Methods of Payment?

Several methods of payment can be used to complete the sale. The important

consideration is – who is bearing the most risk? The best position an exporter

can be in is to require “cash in advance.” However, new-to-export firms are not

typically in a commanding position (i.e., in a seller’s market). Instead, the buyer

may say, “I’ll buy your goods if you give me the best terms.” The best terms for

the buyer often are not the best terms for the seller. A summary of the risk

factors associated with various payment methods is listed in Table 10. 

Table 10: Risk Factors Influencing Payment Terms:

Letter of Credit Cash on Documents Open Account

Customer Relationship New Established Established

Type of Order Custom Production Production

Political Situation Unstable Stable Strong

Economic Situation Unstable Stable Strong

Competition No Yes Yes

Volatility of Price Yes No No

Changing Downwards

for Buyer

Cash Flow Timing Yes Adjustable Adjustable

and Needs

Source: (http://www.itds.treas.gov/ITDS/Frames/Build_Frames.cfm?Site=ITRC).
U.S. Department of Commerce 95

Methods of Payment for International Transactions

The following common methods of payment are discussed below.

■ Letter of Credit (L/C)

■ Cash in Advance (CIA)

■ Draft or Bill of Exchange

■ Credit Cards

■ Open Account

■ Consignment Sales

■ Counter-trade or Barter

The information provided can be found on the U.S. Treasury’s International

Trade Data System (ITDS) website at:

(http://www.itds.treas.gov/ITDS/Frames/Build_Frames.cfm?Site=ITRC).

1) Letter of Credit

A Letter of Credit (L/C) document is issued by an issuing bank It is a commitment to

pay a seller a stated amount of money on behalf of a buyer, if the seller meets the

specific word-for-word terms and conditions outlined on the L/C. Letters of Credit are

more formally called documentary letters of credit. 

Before paying against the L/C, the bank responsible for making payment on behalf of

the buyer verifies that all documents are exactly as required. If an exporter is

unfamiliar with the credit risk of the foreign bank, or if there is concern about the

political or economic risk associated with the country in which the bank is located,

exporters are advised to have the L/C issued by a foreign bank “confirmed” by a U.S.

bank. This means that the U.S. bank adds its pledge to pay to that of the foreign bank.

There is a fee for this service. L/Cs that are not confirmed are called “advised” letters

of credit. The local DOC district office or an international banker can help exporters

determine whether a confirmed or advised letter of credit is appropriate for a particular

transaction.

Types of Letter of Credit

■ Irrevocable (confirmed) - A letter of credit that cannot be amended or

canceled without prior mutual consent of all parties. Such a letter of credit

guarantees payment by the bank to the seller/exporter so long as all of the

terms and conditions of the credit have been met. This is the most popular

form of letter of credit. 

■ Revocable (confirmed) - A letter of credit that can be canceled or altered

by the drawee (buyer) after it has been issued by the drawee’s bank.

Revocable L/Cs are rarely used because of security concerns.
96 U.S. Department of Commerce

■ Transferable 

 An L/C can be redirected at the sellers request. These are

used when an export broker is involved. Once all conditions on the letter of

credit are met, the broker’s bank receives the payment, takes out the

appropriate commission, and completes the transaction as negotiated. 

■ Sight - A letter of credit that requires payment to be made upon

presentation of documents.

■ Time Draft - A letter of credit that states payment is due within a certain

time frame, usually 30, 60, 90, or 180 days.

Changes made to an L/C are called amendments. The buyer or the seller may pay

the fees charged by the banks to amend the L/C, but the letter of credit should

specify which party is responsible. Since changes are costly and time-consuming,

every effort should be made to get the letter of credit correct the first time. An

exporter is usually not paid until the advising or confirming bank receives the funds

from the issuing bank. To expedite the receipt of funds, wire transfers may be used.

Bank practices vary and the exporter may be able to receive funds by discounting

the letter of credit at the bank. The bank will charge a fee to the bank for this

service. Exporters should consult with their international bankers about bank policy

on these issues. Payment risks associated with L/Cs are identified in Table 11.

Table 11: Payment and Risks with Letter of Credits: 

Time of Payment Goods Available to Risk to Exporter Risk to Importer

Importer

Irrevocable At sight of presenta- After payment Risk lies with U.S. None

tion of documents to confirming bank

issuing bank; or 

specified number of 

days after acceptance 

by issuing bank

Revocable Same as Confirmed After payment Risk lies with foreign None

issuing bank and 

economic conditions 

of issuing bank

Sight When shipment is made After payment Risk lies with local Assured shipment i

confirming bank made, but relies on 

exporter to ship goo

described in the doc

ments

Time Draft At maturity of draft, Usually before payment Risk lies with local Assured shipment i

may or may not be confirming bank made, but relies on

discounted exporter to ship goo

described in the doc

ments
U.S. Department of Commerce 97

2) Cash in Advance (CIA)

Cash in advance is always the preferred method of payment for any exporter.

However, being able to command this payment method is rare. If the seller is in

a “seller’s market,” the buyer has compelling reasons to purchase the goods

from the particular seller on the seller’s terms. When used, it typically entails a

wire transfer into the seller’s account before the seller ships the goods. It is

usually used only for small purchases or when the goods are built to specific

order. 

3) Draft (or Bill of Exchange)

An unconditional order in writing from one person (the drawer) to another (the

drawee), directing the drawee to pay a specified amount to a named drawer at a

fixed or determinable future date. The document may be a date, sight, or time

draft. 

4) Credit Cards

Credit cards are used in transactions where the dollar value of the items sold is

low and shipment is to be made directly to the end user. 

5) Open Account

The exporter bills the customer, who is expected to pay under agreed terms at a

future date. Some of the largest firms abroad make purchases only on an open

account, which is a convenient method of payment if the buyer is well

established and has demonstrated a long and favorable payment record.

Red Clause A percentage of total After payment See irrevocable and The percentage of payamount before revocable ment in advance is at

shipment. Balance is total risk. Balance same

same as type of L/C as type of L/C

Revolving Letter Variable Variable See irrevocable and None

of Credit revocable

Standby Letter At time shipment is Usually before Delay in payment. None

of Credit received payment Also see irrevocable

Back-to-back Same as irrevocable After payment None None

Transferable Same as irrevocable After payment Same as irrevocable None

Assignment of Same as irrevocable After payment Same as irrevocable None

Proceeds

Source: (http://www.itds.treas.gov/ITDS/Frames/Build_Frames.cfm?Site=ITRC).
98 U.S. Department of Commerce

6) Consignment Sales

Exporter delivers goods to an agent under agreement that the agent sell the

merchandise for the account of the exporter. The agent sells the goods for

commission and remits the net proceeds to the exporter. 

7) Countertrade/Barter

Sale of goods or services that are paid for in whole or in part by the transfer of

goods or services from a foreign country. 

Payment Problems:

The best solution to a payment problem is to negotiate directly with the

customer. If negotiations fail and the sum involved is large enough to warrant

the effort, obtain the assistance of your bank, legal counsel, and other qualified

experts. If both parties can agree to take their dispute to an arbitration agency,

this step is faster and less costly than legal action. The International Chamber of

Commerce (ICC) handles the majority of international arbitrations and is

usually acceptable to foreign companies because it is not affiliated with any

single country. For more information on these issues, contact the U.S. Council

for International Business, American National Committee of the ICC, 212-354-

4480; American Arbitration Association, 212-484-4000; Trade Remedy

Assistance Office International Trade Commission, (202) 205-2200.

What are the Export Documentation Requirements?

There are a number of important documents that must be properly executed and

included in the export paperwork. The particular export transaction determines

which documents are required. Exporters often contact a freight forwarder to

assist with the export. Freight forwarders advise clients about the logistics of

transporting goods, have information about import laws of foreign countries,

make sure that the exporter’s shipment of goods complies with foreign laws,

and ensures that the proper authorities certify all paperwork. Freight forwarders

also locate the best or less expensive vessel to transport the exporter’s shipment

of goods and ensure that the goods get from the exporter’s location to their

destination. In addition, freight forwarders are aware of the constantly changing

regulations that affect cargo movements, such as foreign documentation

requirements, hazardous materials rules, U.S. government regulations, special

packaging or handling restrictions, and any applicable licensing provisions. 

As each foreign country has different import regulations, the exporter must be

careful to provide proper documentation. The following twelve key documents

are commonly used in exporting. 
1. Packing List: An export packing list itemizes the material in each

individual package and indicates the particular type of packaging used, such

as boxes, crates, drums, or cartons. It also shows the individual net, legal, tare,

and gross weights and measurements for each package. The packing list

should be attached to the outside of a package in a waterproof envelope

marked “packing list enclosed.” Shipper or forwarding agent confirms the

total shipment weight and volume and whether the right cargo is being

shipped against the list.

2. Commercial Invoice: The commercial invoice is a bill for the goods from

the buyer to the seller. A commercial invoice should include basic information

about the transaction, including a description of the goods, the address of the

shipper and seller, the delivery and the payment terms. The buyer needs the

invoice to prove ownership and to arrange payment. Governments often use

the commercial invoice to assess customs duties.

3. Consular Invoice: A consular invoice is a document that is required by

some, but not all, countries to control and identify goods. The document

describes the shipment of goods and contains information such as the

consignor, consignee and the value of goods. The invoice must be purchased

from the consulate of the country to which the goods are being shipped.

Governments that use this document will specify its form, contents, number

of copies, and the language to be used. 

4. Certificate of Origin: A Certificate of Origin is required by some countries

to certify the country of origin of the goods. Local Chambers of Commerce

typically provide the certification for a fee. 

5. Bill of Lading: Bills of lading are contracts between the owner of the

goods and the carrier. There are two types of bills of lading: the Straight Bill

of Lading which is not negotiable, and the Liner Bill of Lading which can be

bought, sold, and traded while the goods are in transit. The customer needs an

original copy as a proof of ownership to take possession of the goods. 

6. Insurance Certificate: If the seller provides insurance, the insurance

certificate states the type and amount of coverage. It is used to assure the

consignee that insurance will cover the loss of or damage to the cargo during

transit. This instrument is negotiable. 

7. Inspection Certification: Some purchasers and countries may require a

certificate of inspection, usually performed by a third party, attesting to the

specifications of the goods shipped. Inspection certificates are often obtained

from independent testing organizations.

8. Dock Receipt and Warehouse Receipt: These receipts are used to transfer

accountability when the export item is moved by the domestic carrier to the

port of embarkation and left with the international carrier for export.

9. Destination Control Statement: This statement appears on the

commercial invoice and ocean or air waybill of lading to notify the carrier

U.S. Department of Commerce 99
100 U.S. Department of Commerce

and all foreign parties that the item may be exported only to certain

destinations.

10. Export License: U.S. export shipments are required by the U.S

government to have an export license, either a general license or an IVL. An

IVL export license is a government document authorizing the export of

specific goods in specific quantities to a particular destination. 

11. Shipper’s Letter of Instruction: This letter from the shipper instructs

the freight forwarder on how and where to send the export shipment. In

preparing this form, the shipper also completes most of the information

required on the Shipper’s Export Declaration, form 7525V. The freight

forwarder will complete the remainder.

12. Shipper’s Export Declaration (SED): The SED, discussed earlier in

this chapter, is a key document used by the U.S. government to control

exports and to provide information for statistical purposes. It is an essential

part of the export documentation process. 

How to obtain financing?

■ Types of Export Financing

■ Sources of Export Financing

■ Government Export Financing Programs

1. Understanding Types of Export Financing

Sellers want to get paid in a hurry and buyers want to delay payment as long as

possible. The right kind of financing can help exporters strike a happy medium

between these opposing objectives. Financing can be used at different stages in

the export deal. For instance, preshipment financing helps exporters produce or

purchase the product or to provide a service in order to complete the transaction.

Postshipment financing focuses on the resulting accounts or account

receivables. 

Factors to Consider

To help you decide on the best financing option for your requirements, consider

the following factors: 

■ The need for financing in order to make (or “close”) the sale.

In some cases, favorable payment terms make a product more competitive.

If the competition offers better terms and has a similar product, a sale can
U.S. Department of Commerce 101

be lost. In other cases, the exporter may need financing to produce the

goods that have been ordered or to finance other aspects of a sale, such as

promotion and selling expenses, engineering modifications, and shipping

costs. Various financing sources are available to exporters, depending on the

specifics of the transaction and the exporter’s overall financing needs. 

■ The cost of different methods of financing.

Interest rates and fees vary. The total costs and their effect on price and

profit should be well understood before a Pro forma invoice is submitted to

the buyer. 

■ The length of time financing is required.

Costs increase with the length of terms. Different methods of financing are

available for short, medium, and long terms. However, exporters also need

to be fully aware of financing limitations so that they can obtain the

financing required to complete the transaction. 

■ The risks associated with financing the transaction.

The greater the risks associated with the transaction, whether they actually

exist or are only perceived by the lender, the greater the costs to the

exporter, making opportunities for financing more difficult to obtain and

more costly. 

The creditworthiness of the buyer directly affects the probability of payment to

the exporter, but it is not the only factor of concern to a potential lender. The

political and economic stability of the buyer’s country also can be of concern.

To provide financing for either accounts receivable or the production or

purchase of the product for sale, the lender may require the most secure

methods of payment, a letter of credit (possibly confirmed), or export credit

insurance. If a lender is uncertain about the exporter’s ability to perform, or if

additional credit capacity is needed, a government guarantee program may

enable the lender to provide additional financing.

Because of the risks involved in exporting, export financing is different from

other types of financing. The seller’s situation and the buyer’s situation will

determine which of the following common types of export financing is needed. 

A. Working Capital

B. Trade Financing

C. Pre-Export Financing

D. Accounts Receivable Financing

E. Market Development Financing
A. Working Capital:

General working capital financing is used to subsidize materials for work in

process or to acquire inventory used for export processing. A firm’s ability to

qualify for general working capital financing depends on the strength of the

firm’s balance sheet and its prospects for generating sufficient earnings over the

life of a loan to repay the loan. 

B. Trade Finance:

Trade finance refers to financing individual transactions or a series of similar

transactions. In addition, trade finance loans are often self-liquidating; the

lending bank stipulates that all sales proceeds are to be collected by it, and then

the bank applies the proceeds to pay down the loan. The remainder is credited to

your account. The self-liquidating feature of trade finance is critical to many

small, undercapitalized businesses. Lenders who may otherwise have reached

their lending limits for such businesses may finance individual export sales, if

the lenders are assured that the loan proceeds will be used solely for pre-export

production; and any export sale proceeds will first be collected by them before

the balance is passed on to the exporter. Given the extent of control lenders can

exercise over such transactions and the existence of guaranteed payment

mechanisms unique to, or established for international trade, trade finance can

be less risky for lenders than general working capital loans. 

C. Pre-Export Financing:

Most small and minority businesses need pre-export financing to help with the

expense of gearing up for a particular export sale. Loan proceeds are commonly

used to finance three different areas: labor, materials, and inventory. Financing

may also be required to fund the construction of new facilities or the expansion

of existing facilities to support an export transaction. 

D. Accounts Receivable Financing:

If you can’t wait for your foreign buyer to make payment, or if you need funds

to support your next order, foreign accounts receivable financing can help. With

such financing, you can borrow an amount from your bank that is based on the

volume and quality of such accounts receivable. Although banks rarely lend 100

percent of the value of the accounts receivable, many will advance up to 80

percent of the value of qualified accounts. Foreign credit insurance (such as

EXIM Bank’s Export Credit Insurance Program) is often used to enhance the

quality of such accounts. 

E. Market Development Financing:

Financing for foreign market development activities, such as participation in

overseas trade missions or trade shows, is often difficult for small businesses to

arrange. Most banks are reluctant to finance such activities because, for many

small firms, their ability to repay such loans depends on their success in

102 U.S. Department of Commerce
U.S. Department of Commerce 103

consummating sales while on a mission. Financing for such activities is

typically through the working capital of the firm or, in certain cases, through the

use of personal credit cards. 

2. Finding Sources of Export Financing

There are many sources of export financing. Some of the sources are familiar,

such as commercial banks, but there are many others that are unique to the

world of exporting. An overview of some of the sources of export financing

follows. 

A. Commercial Banks:

The same type of commercial loans that finance domestic activities, including

loans for working capital and revolving lines of credit, are often sought to

finance export sales until payment is received. However, banks do not usually

extend credit solely on the basis of an order. A logical first step in obtaining

financing is to approach your local commercial bank. If you already have a loan

for domestic needs, then the lender already has experience with your ability to

perform. You may have very similar, if not identical, pre shipment needs for

both your international and your domestic transactions. Many lenders provide

financing for export transactions if there is a reasonable certainty of repayment.

By using letters of credit or export credit insurance, you can reduce the lender’s

risk. When a lender wishes greater assurance than is afforded by the transaction,

a government guarantee program may enable a lender to extend credit.

If your company is new to exporting or is a small minority-owned firm, it is

important to select a bank that is sincerely interested in serving businesses of

similar type or size. If your bank lacks an international department, it will refer

you to a correspondent bank that has one. You may want to visit the

international department of your own bank or a correspondent bank to discuss

your export plans, available banking facilities, and applicable fees. When

selecting a bank, ask the following questions: 

■ What are the charges for confirming a letter of credit, processing drafts,

and collecting payment? 

■ Does the bank have foreign branches or correspondent banks? Where are

they located? 

■ Can the bank provide buyer credit reports? At what cost? 

■ Does the bank have experience with U.S. and state government financing

programs that support small business export transactions? If not, is it willing

to consider participating in these programs? 

■ What other services such as trade leads, can the bank provide? 
B. Private Sources:

Entities in the private sector provide different forms of export financing. Some

of the ways that private entities can provide export financing include, but are

not necessarily limited to, those described. 

■ Factoring - Factoring is the discounting of a foreign account receivable

that does not involve a draft. The exporter transfers the title for its foreign

accounts receivable to a factoring house (an organization that specializes in

the financing of accounts receivable) for cash at a discount of the face

value. Although factoring is often done without recourse to you, you should

verify the specific arrangements. Factoring of foreign accounts receivable is

less common than factoring of domestic receivables. 

■ Forfaiting - Forfaiting is the selling, at a discount, of longer term

accounts receivable or promissory notes of the foreign buyer. These

instruments may also carry the guarantee of the foreign government. Both

U.S. and European forfaiting houses, which purchase the instruments at a

discount from you, are active in the U.S. market. Because forfaiting may be

done either with or without recourse to you, you should verify the specific

arrangements. 

■ Confirming - Confirming is a financial service in which an independent

company confirms an export order in the seller’s country and makes

payment for the goods in the currency of that country. Among the items

eligible for confirmation (and thereby eligible for credit terms) are the

goods themselves; inland, air, and ocean transportation costs; forwarding

fees; custom brokerage fees; and duties. Confirming is a term that means

the entire export transaction, from plant to end user, can be coordinated and

paid for over time. Although confirming is common in Europe, it is still in

its infancy in the United States. 

■ Export Intermediaries - In addition to acting as export representatives,

many export intermediaries, such as Export Trading Companies (ETCs) and

Export Management Companies (EMCs), can help finance export sales.

Some of these companies may provide short-term financing or may simply

purchase the goods to be exported directly from the manufacturer, thus

eliminating any risks associated with the export transaction as well as the

need for financing. Some of the larger companies may make counter trade

arrangements that substitute for financing. 

■ Buyers and Suppliers - Foreign buyers may make down payments that

reduce the need for financing from other sources. In addition, buyers may

make progress payments as the goods are completed, which also reduces

other financing requirements. Letters of credit that allow for progress

payments after inspection by the buyer’s agent, or receipt of a statement

from you that a certain percentage of the product has been completed, are

not uncommon. In addition, suppliers may be willing to offer terms to you if

they are comfortable that they will receive payment. Suppliers may be

willing to accept assignment of a part of the proceeds of a letter of credit or

104 U.S. Department of Commerce
U.S. Department of Commerce 105

a partial transfer of a transferable letter of credit. However, some banks

allow only a single transfer or assignment of a letter of credit. Therefore,

you should investigate the policy of the bank that will be advising or

confirming the letter of credit. 

3. Government Export Financing Programs

Several federal, state, and local government agencies offer programs to assist

exporters with their financing needs. Some are guarantee programs that require

the participation of an approved lender, while others provide loans or grants to

the exporter or a foreign government. Government programs generally are

aimed at improving an exporter’s access to credit. They are not intended to

subsidize the cost of credit at below-market levels. With few exceptions, banks

are allowed to charge market interest rates and fees. A portion of the fees

collected is paid back to the government agency to cover the agencies’

administrative costs and default risks. Government guarantee and insurance

programs are used by commercial banks to reduce the risk associated with loans

to exporters. Lenders, who are concerned with an exporter’s ability to perform

under the terms of sale, and with an exporter’s ability to be paid, often use

government programs to reduce the risks that would otherwise prevent them

from providing financing. If you are using a web version of the document, click

on the links listed for an in-depth overview of the government agencies offering

financing assistance: 

■ Export Import Bank (Ex-Im Bank)

■ Department of Agriculture (USDA)

■ Overseas Private Investment Corporation (OPIC)

■ Small Business Administration (SBA)

A glimpse of the inner workings of the U.S. Export-Import Bank is given in

Box 1 below. 

Box 1: The U.S. Export-Import Bank

“To gain market share, extend credit to your buyers”

By Robert Kaiser, Vice President, ExIm Bank, August, 1999

This basic business principle, so well understood and used by American

companies when dealing with their domestic clients, often stops “at the

water’s edge” when an opportunity to sell abroad arises. And yet, that

shouldn’t be. Although extending credit to a foreign buyer may be riskier

than extending credit to a domestic customer, there are a variety of

programs available to mitigate the perceived risk. Enter the Export-Import

Bank of the United States (ExIm Bank). ExIm, as it is popularly known, is

the export credit agency of the United States. Its mission is to help

American companies export more of their goods and services abroad by

providing the financing that they, or their foreign buyers, need to
106 U.S. Department of Commerce

successfully conclude international sales opportunities. There are neither

minimums nor maximums at ExIm Bank. We are presently supporting

shipments as small as $2000 per month and have supported exports in the

multi-billion dollar range. Since 1983, ExIm Bank has been actively

recruiting and supporting small to medium, minority- or women- owned

businesses. Last year, ExIm support for these small businesses totaled in

excess of $2 billion. A more significant indicator of our support of the

smaller exporter is the fact that, of all the individual transactions we

supported in Fiscal Year 1999, 81 percent of them were small business

transactions.

What programs does ExIm have that are particularly useful to small

businesses?

Let’s take a look at a couple of the financial issues that confront the

successful small business entrepreneur:

Successful small businesses exhibit common characteristics:

Their sales grow faster than the net worth of their business, and as a result

they borrow frequently to finance the growth in their sales. Typically, they

borrow from commercial banks in order to buy the raw materials or

components they need to fulfill their sales opportunities. It is not

uncommon for these rapidly growing companies to be told by their banks

that they are borrowing too much or are rapidly approaching the point

where the commercial bank will become unwilling to extend them any

more credit. Yet the sales opportunities continue to come in the door. And,

when it comes to international sales opportunities, commercial banks

frequently decline to provide working capital. 

Another characteristic that we frequently encounter, is the reluctance

on the part of a small company to extend credit to foreign buyers.

And that’s understandable. You are not familiar with foreign business

practices, and you concern yourself with being paid by a foreign buyer,

and how you would recover your money if the foreign buyer does not pay.

And you also concern yourself with foreign business practices; their way

of doing business can be different from the way that you conduct your

business. But you also recognize that your lack of interest in extending

credit to foreign buyers is impeding your international sales opportunities. 

So, given that brief background, let’s now discuss ExIm Bank services. All

of our programs are open to any exporter, or foreign buyer, that needs them,

but two have been found to be particularly beneficial to small businesses:

the Working Capital Guarantee and our Insurance policies:

The ExIm Bank Working Capital Guarantee

This guarantee is a 90 percent full faith and credit guarantee of the United

States Government which acts as a powerful inducement for commercial

banks to extend working capital loans in support of export opportunities,
U.S. Department of Commerce 107

that, absent the ExIm Bank Working Capital Guarantee, the commercial

banks are unlikely to support at their own risk. 

How does it work? Well, let’s take a look at a very typical scenario:

Your company receives a letter from a Chinese buyer indicating their

interest in buying your product and the letter quotes a price the Chinese

buyer is willing to pay, a delivery schedule that the buyer needs for this

order, and other terms and conditions. You analyze the potential order, and

it’s a good one. You can manufacture, package and ship the order within the

required frame time, and the profit margins are very attractive. The only

problem will be that you need another, let’s say, $250,000 in order to buy

the raw materials in order to fabricate the products. Now, you know that

your bank has been making some noises about your borrowing activity, but

this is too good an order to pass up, so you go visit your commercial banker

to solicit his or her support.

The banker reviews the opportunity and tells you that this loan would put

you over the amount of credit that the bank feels comfortable extending

you, or you don’t have enough acceptable collateral available to support the

transaction. Most commercial banks will accept only domestic accounts

receivable or finished goods inventory as collateral. Or perhaps the bank

may explain that the relationship between your borrowing and your

company’s net worth, the so-called debt equity ratio will be, as a result of

this loan, higher than the ratio with which the bank is comfortable.

However, we hope the banker will say, if you could get me an ExIm Bank

Working Capital Guarantee, we, the bank, may be willing to reconsider

your loan request. And why would they do that? Because the United States

Government will be guaranteeing 90 cents on the dollar, of both interest and

loan amount, and because the commercial bank will have to reserve only

against 20 percent of the loan, whereas if they extended the credit at their

own risk, the bank would probably have to reserve against 100 percent of

the loaned amount. 

If you receive a working capital guarantee, the likelihood of your bank

lending you the money for your Chinese sale is very good indeed!

Now let’s take this transaction one step further and talk about repayment

terms that you might extend to the foreign buyer:

Currently, if you are selling abroad, it may be on a cash in advance (CIA) or

confirmed, irrevocable letter of credit (L/C) basis. In either case, you’re not

extending credit to the foreign buyer, and you will be paid either before you

ship (CIA) or immediately upon shipment (L/C). If your foreign customers

will do business with you on those terms, by all means, do it that way! In

such cases, you have no foreign risk; you receive payment quickly and can

pay off your working capital loan right away.

However, what will most likely happen is one of two things. First, your

foreign buyer may, after doing business with you on a CIA or L/C for
108 U.S. Department of Commerce

perhaps a few months or a year, announce that if you wish to continue to

sell your product to them, you must begin extending them credit terms,

perhaps, 30, 60, 90 days or longer; whatever is appropriate for your

type of product. And the reason for that is because by opening L/Cs in

your favor or paying CIA, it ties up the foreign buyers credit facilities

at their bank, and reduces the amount of loans that the foreign customer

may wish to utilize for other purposes.

The second thing that may happen – and let’s go back to the “Chinese

buyer” I discussed earlier, is that the foreign buyer in his/her initial

approach to you, may state in their letter that they require you to extend

them credit terms as a condition of selling to them in the first place. So,

in either case, what are you going to do?

Here we will talk about ExIm Bank Insurance.

ExIm Insurance allows you to sell more to your existing foreign

customers or begin to do business with a foreign buyer that you have

never done business with before, and perhaps even in a country where

you have never done business before.

ExIm insurance takes away the political and commercial risk you

associate with doing business abroad.

What’s “political risk?” War, insurrection, civil war, failure of the

foreign government to make foreign exchange available (that is,

refusing or failing to convert the local currency into dollars to pay the

obligation that the foreign buyer has to you).

What’s “commercial risk?” Those business factors that make it

impossible for the foreign buyer to meet their financial commitments;

bankruptcy, denial of credit, natural disasters that disrupt the

companies’ operations such as earthquakes, floods, fire, etc., so that

they are unable to operate and meet their obligations.

By using ExIm insurance, you can safely extend credit to a foreign

buyer, knowing that if they fail to pay for either political or commercial

reasons, you can claim against your insurance and be reimbursed.

Typically, ExIm’s insurance policies cover 100 percent of the political

risk and 90 percent of the commercial risk.

What are our most popular policies? The Multi-buyer Policy which

covers several foreign buyers in, perhaps, several foreign countries is

our most popular policy. Policies are typically written for up to one

year, and are renewable. We can also write a single buyer policy for

sales to one single foreign buyer. Perhaps you are already doing

business abroad on open account terms, and have a potential new

customer. 
U.S. Department of Commerce 109

Because you have never done business with that customer before,

perhaps it would be wise for you to insure that business with ExIm Bank.

Let me share two additional thoughts with you Perhaps you are already

doing business abroad and extending credit to your foreign buyers, and you

might also need additional working capital, but your bank will not let you

add your foreign accounts receivable to your collateral pool. 

You may wish to consider taking out ExIm insurance on your existing

foreign receivables and assign the insurance policy proceeds to your

commercial bank. Most banks that we deal with will permit you to add the

insured foreign receivables to your collateral pool, which may help you get

the short term funds from your bank that you need.

The second thought is again you may be doing business on open account

terms abroad, but you have limits on how much credit you are prepared to

extend to your customers. Suddenly, a good customer to whom you are

extending credit, wants to place a big order with you, but the size of the

order is greater than the internal credit limit you have set for this customer.

Here again, a single buyer insurance policy may solve the problem. You get

the big order, and the customer gets the credit terms that they require.

We have been discussing the programs that are specifically designed for,

and most commonly used by, smaller exporters. However, ExIm Bank is

also a provider of medium and long-term guarantees, and long-term loans to

support large transactions, generally in the multi-million dollar range. You

may be fortunate as your business expands to receive a 3, 4, 5 million dollar

order or more, where you are going to need ExIm Bank’s Working Capital

Guarantee to fabricate the order and your foreign buyer will need an ExIm

Bank medium term guarantee to get the bank loan they need to finance the

purchase of your goods or services. 

For full information about the wide array of services ExIm Bank can

provide to help you in your export efforts, please call our toll free number,

1-800-565-EXIM, visit our website, listed above, or call a United States

Export Assistance Center (USEAC), which can be found in the blue pages

of your telephone book under “United States Government.” 

In addition to the federal agency programs referred to above, many state,

regional, county, and local governments also have programs to assist a small

business in financing exports. Contact your local government agencies for

information on export assistance programs in your area. In addition, many state

governments provide export financing through their international trade offices.

A list of all state trade offices is available in the National Export Directory. The

Bankers Association for Foreign Trade, a non-profit association of

approximately 450 banks, matches exporters in need of trade financing with

interested banks. They can be reached by telephone at (202) 452-0952. Also,
110 U.S. Department of Commerce

many regional and local banks provide financing for businesses interested in

exporting. Contact your local bank to see what kind of programs they provide.

Finally, the TIC produces an Alternative Finance Guide that lists other options

to pursue for export financing. The guide can be retrieved from the TIC web

site, from the fax retrieval system at 1-800-USA-TRAD, or by calling a trade

specialist. 

How to arrange transportation and cargo insurance?

The freight forwarder holds the key to sorting out the best transportation and insurance

options. Customizing services to fit the clients’ operational needs are the forwarder’s

specialty. Forwarders coordinate arrangements for storage, pick-and-pack operations,

consolidations or full-container movements as well as inland transportation to provide

clients with true door-to-door service. From assisting with initial quotations or

preparation of pro-forma invoices, the banking clients’ documents for collection, the

full-service, professional freight forwarder is the most reliable partner one can have in

international trade. 

For more than 100 years, the National Customs Brokers & Forwarders

Association of America, Inc. (NCBFAA) has been the voice of the customs

brokering and freight forwarding industry. Based on its experience, the

NCBFAA has recommended Terms and Conditions of service for all of it

members, including freight forwarders. These Terms and Conditions list each of

the responsibilities of the forwarder and the responsibilities of the client. It may

be useful for exporters to examine the NCBFAA’s recommended Terms and

Conditions of Service. These Terms and Conditions embrace the NCBFAA

members’ extensive experience and anticipate the types of problems that can

arise in exporting and importing. These Terms and Conditions also refer to a

large body of laws, regulations, and procedures and brings together the entire

exporting process to finally move the goods from here to there! 
U.S. Department of Commerce 111

TERMS AND CONDITIONS OF SERVICE

(as recommended by the NCBFAA)

(Please refer to http://www.ncbfaa.org)

All shipments to or from the Customer, which term shall include the exporter,

importer, sender, receiver, owner, consignor, consignee, transferor or transferee of

the shipments, will be handled by (herein called the “Company”) on the following

terms and conditions:

1. Services by Third Parties. Unless the Company carries, stores or otherwise

physically handles the shipment, and loss, damage, expense or delay occurs during

such activity, the Company assumes no liability as a carrier and is not to be held

responsible for any loss, damage, expense or delay to the goods to be forwarded or

imported except as provided in paragraph 8 and subject to the limitations of

paragraph 9 below, but undertakes only to use reasonable care in the selection of

carriers, truck men, lightermen, forwarders, customs brokers, agents,

warehousemen and others to whom it may entrust the goods for transportation,

cartage, handling and/or delivery and/or storage or otherwise. When the company

carries, stores or otherwise physically handles the shipment, it does so subject to

the limitation of liability set forth in paragraph 8 below unless a separate bill of

lading, air waybill or other contract of carriage is issued by the Company, in which

event the terms thereof shall govern.

2. Liability Limitations of Third Parties. The Company is authorized to select

and engage carriers, truck men, lightermen, forwarders, customs brokers, agents,

warehousemen and others, as required, to transport, store, deal with and deliver the

goods, all of whom shall be considered as the agents of the Customer, and the

goods may be entrusted to such agencies subject to all conditions as to limitation of

liability for loss, damage, expense or delay and to all rules, regulations,

requirements and conditions, whether printed, written or stamped, appearing in

bills of lading, receipts or tariffs issued by such carriers, truck men, lightermen,

forwarders, customs brokers, agents, warehousemen and others. The Company

shall under no circumstances be liable for any loss, damage, expense or delay to

the goods for any reason whatsoever when said goods are in custody, possession or

control of third parties selected by the Company to forward, enter and clear,

transport or render other services with respect to such goods.

3. Choosing Routes or Agents. Unless express instructions in writing are received

from the Customer, the Company has complete freedom in choosing the means,

route and procedure to be followed in the handling, transportation and delivery of

the goods. Advice by the Company to the Customer that a particular person or firm

has been selected to render services with respect to the goods shall not be

construed to mean that the Company warrants or represents that such person or

firm will render such services.
112 U.S. Department of Commerce

4. Quotations Not Binding. Quotations as to fees, rates of duty, freight charges,

insurance premiums or other charges given by the Company to the Customer are

for informational purposes only and are subject to change without notice and shall

not under any circumstances be binding upon the Company unless the Company in

writing specifically undertakes the handling or transportation of the shipment at a

specific rate. 

5. Duty to Furnish Information. (a) On an import at a reasonable time prior to

entering of the goods for U.S. Customs, the Customer shall furnish to the Company

invoices in proper form and other documents necessary or useful in the preparation

of the U.S. Customs entry and, also, such further information as may be sufficient

to establish, inter alia, the dutiable value, the classification, the country of origin,

the genuineness of the merchandise and any mark or symbol associated with it, the

Customer’s right to import and/or distribute the merchandise, and the

merchandise’s admissibility, pursuant to U.S. law or regulation. If the Customer

fails in a timely manner to furnish such information or documents, in whole or in

part, as may be required to complete U.S. Customs entry or comply with U.S. laws

or regulations, or if the information or documents furnished are inaccurate or

incomplete, the Company shall be obligated only to use its best judgment in

connection with the shipment and in no instance shall be charged with knowledge

by the Customer of the true circumstances to which such inaccurate, incomplete, or

omitted information or document pertains. Where a bond is required by U.S.

Customs to be given for the production of any document or the performance of any

act, the Customer shall be deemed bound by the terms of the bond notwithstanding

the fact that the bond has been executed by the Company as principal, it being

understood that the Company entered into such undertaking at the instance and on

behalf of the Customer, and the Customer shall indemnify and hold the Company

harmless for the consequences of any breach of the terms of the bond. (b) On an

export at a reasonable time prior to the exportation of the shipment the Customer

shall furnish to the Company the commercial invoice in proper form and number, a

proper consular declaration, weights, measures, values and other information in the

language of and as may be required by the laws and regulations of U.S. and the

country of destination of the goods. (c) On an export or import the Company shall

not in any way be responsible or liable for increased duty, penalty, fine or expense

unless caused by the negligence or other fault of the Company, in which event its

liability to the Customer shall be governed by the provisions of paragraphs 8-10

below. The Customer shall be bound by and warrant the accuracy of all invoices,

documents and information furnished to the Company by the Customer or its agent

for export, entry or other purposes and the Customer agrees to indemnify and hold

harmless the Company against any increased duty, penalty, fine or expense

including attorneys’ fees, resulting from any inaccuracy, incomplete statement,

omission or any failure to make timely presentation, even if not due to any

negligence of the Customer. 

6. Declaring Higher Valuation. Inasmuch as truckers, carriers, warehousemen and

others to whom the goods are entrusted usually limit their liability for loss or

damage unless a higher value is declared and a charge based on such higher value

is agreed to by said truckers, etc., the Company must receive specific written

instructions from the Customer to pay such higher charge based on valuation and
U.S. Department of Commerce 113

the trucker, etc. must accept such higher declared value; otherwise the valuation

placed by the Customer on the goods shall be considered solely for export or

customs purposes and the goods will be delivered to the truckers, etc. subject to the

limitation of liability set forth herein in paragraphs 8-10 below with respect to any

claim against the Company and subject to the provisions of paragraph 2 above.

7. Insurance. The Company will make reasonable efforts to effect marine, fire,

theft and other insurance upon the goods only after specific written instructions

have been received by the Company in sufficient time prior to shipment from point

of origin, and the Customer at the same time states specifically the kind and

amount of insurance to be placed. The Company does not undertake or warrant that

such insurance can or will be placed. Unless the Customer has its own open marine

policy and instructs the Company to effect insurance under such policy, insurance

is to be effected with one or more insurance companies or other underwriters to be

selected by the Company. Any insurance placed shall be governed by the certificate

or policy issued and will only be effective when accepted by such insurance

companies or underwriters. Should an insurer dispute its liability for any reason,

the insured shall have recourse against the insurer only and the Company shall not

be under any responsibility or liability in relation thereto, notwithstanding that the

premium upon the policy may not be at the same rates as that charged or paid to

the Company by the Customer, or that the shipment was insured under a policy in

the name of the Company. Insurance premiums and the charge of the Company for

arranging the same shall be at the Customer’s expense. If for any reason the goods

are held in warehouse, or elsewhere, the same will not be covered by any

insurance, unless the Company receives written instructions from the Customer.

Unless specifically agreed in writing, the Company assumes no responsibility to

effect insurance on any export or import shipment which it does not handle.

8. Limitation of Liability for Loss, etc. (a) The Customer agrees that the

Company shall only be liable for any loss, damage expense or delay to the goods

resulting from the negligence or other fault of the Company; such liability shall be

limited to an amount equal to the lesser of fifty dollars ($50.00) per entry or

shipment or the fee(s) charged for services, provided that, in the case of partial loss,

such amount will be adjusted, pro rata; (b) Where the Company issues its own bill

of lading and receives freight charges as its compensation, Customer has the option

of paying a special compensation and increasing the limit of Company’s liability

up to the shipment’s actual value; however, such option must be exercised by

written agreement, entered into prior to any covered transaction(s), setting forth the

limit of the Company’s liability and the compensation received; (c) In instances

other than in (b) above, unless the Customer makes specific written arrangements

with the Company to pay special compensation and declare a higher value and

Company agrees in writing, liability is limited to the amount set forth in (a) above;

(d) Customer agrees that the Company shall, in no event, be liable for

consequential, punitive, statutory or special damages in excess of the monetary

limit provided for above. 

9. Presenting Claims. Company shall not be liable under paragraph 8 for any

claims not presented to it in writing within 90 days of either the date of loss or

incident giving rise to the claim; no suit to recover for any claim or demand here
114 U.S. Department of Commerce

under shall be maintained against the Company unless instituted within six (6)

months after the presentation of the said claim or such longer period provided for

under statute(s) of the State having jurisdiction of the matter. 

10. Advancing Money. The Company shall not be obliged to incur any expense,

guarantee payment or advance any money in connection with the importing,

forwarding, transporting, insuring, storing or coopering of the goods, unless the

same is previously provided to the Company by the Customer on demand. The

Company shall be under no obligation to advance freight charges, customs duties

or taxes on any shipment, nor shall any advance by the Company be construed as a

waiver of the provisions hereof.

11. Indemnification for Freight, Duties. In the event that a carrier, other person or

any governmental agency makes a claim or institutes legal action against the

company for ocean or other freight, duties, fines, penalties, liquidated damages or

other money due rising from a shipment of goods of the Customer, the Customer

agrees to indemnify and hold harmless the Company for any amount the Company

may be required to pay such carrier, other person or governmental agency together

with reasonable expenses, including attorneys’ fees, incurred by the Company in

connection with defending such claim or legal action and obtaining reimbursement

from the Customer. The confiscation or detention of the goods by any

governmental authority shall not affect or diminish the liability of the Customer to

the Company to pay all charges or other money due promptly on demand.

12. C.O.D. Shipments. Goods received with Customer’s or other person’s

instructions to “Collect on Delivery” (C.O.D.) by drafts or otherwise, or to collect

on any specified terms by time drafts or otherwise, are accepted by the Company

only upon the express understanding that it will exercise reasonable care in the

selection of a bank, correspondent, carrier or agent to whom it will send such item

for collection, and the Company will not be responsible for any act, omission,

default, suspension, insolvency or want of care, negligence, or fault of such bank,

correspondent, carrier or agent, nor for any delay in remittance lost in exchange, or

during transmission, or while in the course of collection. 

13. General Lien on Any Property. The Company shall have a general lien on

any and all property (and documents relating thereto) of the customer, in its

possession, custody or control or en route, for all claims for charges, expenses or

advances incurred by the Company in connection with any shipments of the

Customer and if such claim remains unsatisfied for thirty (30) days after demand

for its payment is made, the Company may sell at public auction or private sale,

upon ten (10) days written notice, registered mail (R.R.R.), to the Customer, the

goods, wares and/or merchandise, or so much thereof as may be necessary to

satisfy such lien, and apply the net proceeds of such sale to the payment of the

amount due to the Company. Any surplus from such sale shall be transmitted to the

Customer, and the Customer shall be liable for any deficiency in the sale. 

14. Compensation of Company. The compensation of the Company for its

services shall be included with and is in addition to the rates and charges of all

carriers and other agencies selected by the Company to transport and deal with the

goods and such compensation shall be exclusive of any brokerage, commissions,
U.S. Department of Commerce 115

dividends or other revenue received by the Company from carriers, insurers and

others in connection with the shipment. On ocean exports, upon request, the

Company shall provide a detailed breakout of the components of all charges

assessed and a true copy of each pertinent document relating to these charges. In

any referral for collection or action against the Customer for monies due the

Company, upon recovery by the Company, the Customer shall pay the expenses of

collection and/or litigation, including a reasonable attorney fee. 

15. No Responsibility for Governmental Requirements. It is the responsibility of

the Customer to know and comply with the marking requirements of the U. S.

Customs Service, the regulations of the U. S. Food and Drug Administration, and

all other requirements, including regulations of Federal, state and/or local agencies

pertaining to the merchandise. The Company shall not be responsible for action

taken or fines or penalties assessed by any governmental agency against the

shipment because of the failure of the Customer to comply with the law or the

requirements or regulations of any governmental agency or with a notification

issued to the Customer by any such agency.

16. Indemnity Against Liability Arising from the Importation of Merchandise.

The Customer agrees to indemnify and hold the Company harmless from any

claims and/or liability arising from the importation of merchandise which violates

any Federal, state and/or other laws or regulations and further agrees to indemnify

and hold the Company harmless against any and all liability, loss, damages, costs,

claims and/or expenses, including but not limited to attorney’s fees, which the

Company may hereafter incur, suffer or be required to pay by reason of claims by

any government agency or private party. In the event that any action, suit or

proceeding is brought against the Company by any government agency or any

private party, the Company shall give notice in writing to the Customer by mail at

its address on file with the Company. Upon receipt of such notice, the Customer at

its own expense shall defend against such action and take all steps as may be

necessary or proper to prevent the obtaining of a judgment and/or order against the

Company. 

17. Loss, Damage or Expense Due to Delay. Unless the services to be performed

by the Company on behalf of the Customer are delayed by reason of the negligence

or other fault of the Company, the Company shall not be responsible for any loss,

damage or expense incurred by the Customer because of such delay. In the event

the Company is at fault, as aforesaid, its liability is limited in accordance with the

provisions of paragraphs 8-9 above.

18. Construction of Terms and Venue. The foregoing terms and conditions shall

be construed according to the laws of the State of _____________________.

Unless otherwise consented to in writing by the Company, no legal proceeding

against the Company may be instituted by the Customer, its assigns, or subrogee

except in the City of ___________________________________. 

Approved by the National Customs Brokers & Forwarders Association of America,

Inc. (Revised 6/94) 

* * *

Chapter Five examines “Hot Export Issues.” 

U.S. Department of Commerce 117

Agreements Intellectual

Property

Rights (IPR)

Standards Foreign

Corrupt

Practices

Tariffs Foreign Trade

Zones

Chapter Five 

“Hot” Export-Related Issues 

Many of the “hot” export-related issues of the day pertain to trade

barriers and trade incentives. These issues are actually mirror images

of each other; trade barriers to one side of the trading partnership are

trade incentives to the other side, and vice versa. The objective of this chapter is

to help minority exporters take advantage of available incentives, while avoiding

the trade barriers. Six of the “hot” export-related issues of the day include:

What are the “Hot” Agreements?

World Trade Organization (WTO)

In November 1999, the United States will host the WTO Ministerial

Conference in Seattle, WA. The meeting will bring together the heads of

several countries to address such key issues as market access in agriculture,

services, and industrial goods. In addition, E-commerce, the environment,

trade and labor, institutional reform, accession to the WTO, and dispute

settlement will on the agenda. 

The U.S. Role in Shaping the Trading System

Since the creation of the General Agreement on Tariffs and Trade (GATT) in

1948, the U.S. has played a leading role in helping to shape the global trading

system. Since that time eight successive negotiations were concluded,

culminating in the Uruguay Round which created the WTO. The objective of the

WTO is to advance the basic principals of the rule of law, transparency, and fair

play in the world economy. Despite the accomplishments of the Uruguay Round,
118 U.S. Department of Commerce

the Ministerial will have many issues for discussion and agreement. The hot

issues are discussed as follows. For details see: (http://www.wto.org).

The World Trade Organization (WTO) came into being in 1995. One of the

youngest of the international organizations, the WTO is the successor to the

General Agreement on Tariffs and Trade (GATT) established in the wake of

the Second World War. The system was developed through a series of trade

negotiations, or rounds, held under GATT. The first rounds dealt mainly with

tariff reductions but later negotiations included other areas such as anti-dumping

and non-tariff measures. The latest round, the 1986-94 Uruguay Round, led to

the WTO’s creation. The negotiations did not end there. Some continued after

the end of the Uruguay Round. In February 1997 agreement was reached on

telecommunications services, with 69 governments agreeing to wide-ranging

liberalization measures that went beyond those agreed in the Uruguay Round.

In the same year, 40 governments successfully concluded negotiations for tarifffree trade in information technology products, and 70 members concluded a

financial services deal covering more than 95% of trade in banking, insurance,

securities and financial information. Further negotiations will be held during a

WTO Ministerial to be held in Seattle, Washington, in November, 1999.

The “hot” issues identified in recent testimony by U.S. Ambassador Susan

Esserman, Deputy U.S. Trade Representative (http://www.ustr.gov), before the

House Ways and Means Subcommittee on Trade, Aug. 5, 1999. They can be

found in a USTR document entitled “The American Goals in the Trading

System.”

1. Compliance with Agreements: A key objective of the WTO Ministerial

is to effectively implement existing agreements. WTO members have a Jan.

1, 2000 deadline to meet the Uruguay Round commitments concerning

Intellectual Property, TRIMs, subsidies, and customs valuation. In

succeeding years, final liberalization commitments under the Agreement on

Clothing and Textiles, Uruguay Round tariff commitments are expected to

be realized. WTO members that have not ratified the Basic

Telecommunications and Financial Services Agreements are also being

encouraged to adopt the agreement. 

2. Developing an Agenda for the New Round: The core of the agenda will

address market access concerns including agriculture, services and industrial

goods, with benchmarks to ensure that the negotiations remain on schedule

for completion within three years. The agenda will pay special attention to

areas in which trade policy can encourage technological progress, notably

E-commerce. The agenda will also support efforts to improve worldwide

environmental protection, transparency, and citizen access. 

3. Key issues: are shown in Table 12. 
U.S. Department of Commerce 119

Table 12: Key WTO Issues for the November 1999 WTO Ministerial 

in Seattle, WA

■ Market Access in Agriculture

— Eliminate export subsidies

— Reduce trade-distorting supports

— Lower tariffs and “bind” them

— Improve market access for least developed WTO members

— Ensure that trade in agricultural biotechnology products is based on 

transparent, predictable and timely processes

■ Market Access in Services

— Liberalize restrictions in a broad range of services sectors

— Ensure GATS rules anticipate the development of new technologies

— Prevent discrimination against E-Commerce and other modes of delivering 

services

— Develop disciplines to ensure transparency and good governance in the 

regulation of services

■ Market Access in Industrial Goods

— Reduce tariff disparities

— Recognize WTO members for tariff liberalization measures

— Address non-tariff issues

— Improve market access

■ Electronic Commerce

— Ensure that artificial barriers do not delay or block E-commerce developments

— Ensure technological neutrality in the development of WTO rules and capacity

building for the Internet

— Ensure that cyberspace is duty and tariff free

■ Trade and Labor

— Address trade issues relating to labor standards

— Enhance institutional links between the WTO and the International Labor

Organization (ILO)

— Utilize the General System of Preferences (GSP) to promote core labor

standards

■ Institutional Reform

— Strengthen transparency and build support for the WTO

— Provide technical assistance and capacity-building programs to ensure

that least developed WTO members can implement their commitments

— Ensure that SMEs benefit from market-opening commitments of 

the Round

■ Accessions

— Expedite processing of the applications of 31 new WTO members 

■ Dispute Settlement Review

— Involve stakeholders in the process of review
120 U.S. Department of Commerce

In addition to visiting the WTO website at (http://www.wto.org), readers are also

encouraged to visit the U.S. Department of Commerce Market Access

Compliance (MAC) website at (http://www.mac.doc.gov) for a comprehensive

list of other existing agreements between the U.S. and its trading partners.

Readers are further encouraged to learn more about the NAFTA agreement by

visiting the MAC website or the NAFTA website at (http://ww.nafta.org).

What are the “Hot” IPR Issues?

Intellectual Property Rights (IPR) were briefly discussed in previous chapters.

This chapter provides further information about IPR and identifies the “hot” IPR

issues within the context of the WTO. An overview of the WTO agreement on

Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) is

provided. For a detailed discussion of these issues, visit the WTO website at:

(http://www.wto.org/wto/intellec/intell2.htm).

Main features of the TRIPS Agreement

The TRIPS Agreement, which came into effect on 1 January 1995, is the

most comprehensive multilateral agreement on intellectual property. The

areas of intellectual property that it covers are copyright and related rights

(i.e. the rights of performers, producers of sound recordings and

broadcasting organizations); trademarks including service marks;

geographical indications including appellations of origin; industrial designs;

patents including the protection of new varieties of plants; the layoutdesigns of integrated circuits; and undisclosed information including trade

secrets and test data.

The three main features of the TRIPS Agreement are:

(i) Standards. The TRIPS Agreement defines the minimum standards of

protection provided by each WTO member. The main elements of protection

include the subject matter to be protected; the rights to be conferred and

permissible exceptions to those rights; and the minimum duration of protection.

The Agreement requires compliance with the substantive obligations of the main

conventions of the World Intellectual Property Organization (WIPO), the Paris

Convention for the Protection of Industrial Property (Paris Convention) and the

Berne Convention for the Protection of Literary and Artistic Works (Berne

Convention). With the exception of the provisions of the Berne Convention on

moral rights, the main provisions of these conventions are incorporated and thus

become obligations under the TRIPS Agreement between TRIPS member

countries. The TRIPS Agreement adds additional obligations in areas where the
U.S. Department of Commerce 121

preexisting conventions are absent or inadequate. The TRIPS Agreement is

sometimes referred to as a “Berne and Paris-plus agreement.” 

(ii) Enforcement. The second set of provisions deals with domestic procedures

and remedies for the enforcement of intellectual property rights. The Agreement

sets certain general principles applicable to all IPR enforcement procedures. In

addition, it contains provisions on civil and administrative procedures and

remedies; provisional measures; special requirements related to border measures

and criminal procedures, which specify in detail, the procedures and remedies

that must be available so that right holders can effectively enforce their rights. 

(iii) Dispute settlement. Under the Agreement, all disputes between WTO

members are subject to the WTO’s dispute settlement procedures. 

Substantive Standards of Protection

1. Copyright: The Berne Convention provides adequate basic standards of

copyright protection. WTO negotiations allow developing countries, under

certain conditions, to make some limitations to the right of translation and the

right of reproduction. Other important issues include, but are not limited to the

following: 

■ Computer software programs, whether in source or object code, shall be

protected as literary works under the Berne Convention (1971). This

provision confirms that computer programs must be protected under

copyright and that those provisions of the Berne Convention that apply to

literary works, shall also be applied to computer software. The protection

extends to the software regardless of whether it is source code or object

code. Only those limitations that are applicable to literary works may be

applied to computer programs including coverage up to 50 years. Possible

shorter terms applicable to photographic works and works of applied art

may not be applied. 

■ Databases and other compilations of data or other material shall be

protected under copyright even where the databases include data that are not

protected under copyright. The copyright protection for databases includes

the selection or arrangement of their contents. The provision also confirms

that databases have to be protected regardless of whether they are machinereadable or in some other form. The provision also clarifies that the

protection shall not extend to the data or material itself, and that it shall be

without prejudice to any copyright subsisting in the data or material itself. 

■ The term of protection shall be the life of the author and 50 years

after death. 

2. Industrial designs: Article 25.1 of the TRIPS Agreement obligates members

to protect independently created industrial designs that are new or original.

Members may provide that designs are not new or original if they do not

significantly differ from known designs or combinations of known design
features. Members may provide that such protection shall not extend to designs

dictated essentially by technical or functional considerations.

■ Shorter life cycle of designs: Article 25.2 contains a special provision

aimed at the short life cycle and great number of new designs in the textile

sector: requirements for protecting of these designs, in particular in regard

to any cost, examination or publication, must not unreasonably impair the

opportunity to seek and obtain such protection. Members may meet this

obligation through industrial design law or through copyright law.

■ Protection from third parties: Article 26.1 requires members to grant the

owner of a protected industrial design the right to prevent third parties who

do not have a license from the design’s owner from making, selling or

importing articles for sale bearing or embodying a design which is a copy,

or substantially a copy, of the protected design.

■ Exceptions: Article 26.2 allows members to provide limited exceptions to

the protection of industrial designs, provided that such exceptions do not

unreasonably conflict with the normal exploitation of protected industrial

designs and do not unreasonably prejudice the legitimate interests of the

owner of the protected design, taking account of the legitimate interests of

third parties. The duration of protection available shall amount to at least 10

years. The wording “amount to” allows the term to be divided into, for

example, two periods of five years.

3. Patents: The TRIPS Agreement requires member countries to grant patents

for any inventions, whether products or processes. The patents should be

granted under the normal tests of novelty, inventiveness, and industrial

applicability. Article 27.1 of the Agreement requires patents be granted and

patent rights extended regardless of where the items were invented, imported, or

produced. Patents may be denied if the item or process is contrary to public

order or morality; if it involves diagnostic, therapeutic and surgical methods for

the treatment of humans or animals; or if it involves plants and animals other

than micro-organisms and biological processes for the production of plants or

animals other than non-biological and microbiological processes. Other key

issues include, but are not limited to, the following:

■ Exclusive rights of protection that extend to the production, use, sale and

importation of an item or process.

■ Process patent protection covers the process and products obtained

directly by the process. 

■ Patent owners shall also have the right to assign, or transfer by

succession, the patent and to conclude licensing contracts. 

■ The term of protection shall be for a period of not less than 20 years

from the filing date. 

■ Compulsory licensing and government use without the authorization

of the right holder is allowed, but is subject to conditions aimed at

protecting the legitimate interests of the patent holder. 

122 U.S. Department of Commerce
U.S. Department of Commerce 123

4. Layoutdesigns of integrated circuits: Article 35 of the TRIPS Agreement

requires member countries to protect the layout designs of integrated circuits in

accordance with the provisions of the Treaty on Intellectual Property in Respect

of Integrated Circuits (IPIC Treaty) of 1989. These provisions define “integrated

circuit” and “layout-design (topography),” requirements for protection,

exclusive rights, and limitations, as well as exploitation, registration and

disclosure. An “integrated circuit” is a group of tiny electronic components and

their connections in or on a small slice of materials such as silicon.

A “lay out design” or topography is defined as the three-dimensional drawing or

representation depicting an action element and some or all of the

interconnections of an integrated circuit. Patent protection extends to original

layout designs that are not common to other designs or manufactures of

integrated circuits when the designs are created. The owner has exclusive rights

to reproduce, import, sell, and distribute the designs.

5. Protection of undisclosed information: The TRIPS Agreement requires

members to protect trade secrets and company sensitive process. The protection

extends to information that has commercial value because it is secret and the

efforts taken to keep it secret. The Agreement does not require undisclosed

information to be treated as a form of property. However, it does require that

people lawfully in control of secret information keep the information from being

disclosed to, acquired by, or used by others. This is to be done in a “manner

contract to honest commercials practices,” including the breach of contract,

breach of confidence and inducement to breach, as well as the acquisition of

undisclosed information by third parties who knew or were grossly negligent in

failing to know that these practices were used to obtain the information.

6. Control of anti-competitive practices in contractual licenses: Article 40 of

the agreement on this issue states that WTO Member countries may adopt

licensing practices preventing abusive or anti-competitive intellectual property

rights practices. The Agreement provides a mechanism for one country to take

action against another member country if that country is involved in abusive or

anti-competitive practices. Countries can enter into consultations with other

countries and exchange non-confidential information relevant to the abusive or

anti-competitive or practices in question. Similarly, a country that companies

are subject to such action can consult with those members.

7. Enforcement of intellectual property rights: Five sections in the

Agreement cover enforcement. For details refer to the WTO website

(http://www.wto.org).
A

124

What are the “Hot” Standards Issues?

Standards, Testing, Labeling, and Certification

Standards are intended to help protect consumers, but standards can pose

Technical Barriers to Trade (TBTs). As historical trade barriers such as

tariffs are abolished, through the World Trade Organization (WTO) forum,

TBTs are increasingly taking their place. The latest issues and agreements

related to standards follows. 

What are standards?

Standards are documented agreements of technical specifications or other

precise criteria used consistently to ensure that materials, products, processes,

and services are uniform. The format used for credit cards, phone cards, and

“smart” cards is an example of an ISO International Standard. Each card is

produced to a standard, for example, the card’s thickness (0.76 mm), which

allows the cards to be used worldwide. International standards contribute to

making life simpler, and to increasing the reliability and effectiveness of the

goods and services we use. An outline of ISO standards and WTO standards

follow.

A. ISO 9000 AND ISO 14000

B. STANDARDS and the WTO

ISO 9000 and ISO 14000

Most firms are familiar with ISO requirements. ISO compliance is one of the

“hottest” issues in trade, and in the overall context of a firm’s competitiveness.

The information provided is summarized from the ISO web site and provides a

basic introduction of the main ISO concepts. For detail information, readers are

encouraged to visit the ISO website at (http://www.iso.ch.org). 

Background: 

ISO has been developing voluntary technical standards for business, industry

and technology since 1947. With the exception of ISO 9000 and ISO 14000, the

vast majority of ISO standards are highly specific. They are documented

agreements containing technical specifications or other precise criteria to be

used consistently as rules, guidelines, or definitions of characteristics to ensure

that materials, products, processes, and services are uniform. Before ISO 9000

and ISO 14000 standards were in place, standards were principally of concern to

engineers and other technical specialists.

124 U.S. Department of Commerce
B

What exactly are ISO 9000 and ISO 14000?

Both “ISO 9000” and “ISO 14000” are families of standards. Both families

consist of guidelines relating to management systems and related supporting

standards on terminology and specific tools, such as auditing (the process of

checking that the management system conforms to the standard).

ISO 9000 is primarily concerned with “quality management.” The standardized

definition of “quality” in ISO 9000 refers to all those features of a product (or

service) which are required by the customer. “Quality management” refers to an

organization’s processes and procedures to ensure that its products conform to

the customer’s requirements. 

ISO 14000 is primarily concerned with “environmental management” or what

an organization does to minimize possible harmful effects made to the

environment by its activities.

Visit the ISO website for further details (http://www.iso.ch.org).

Standards and the WTO 

Higher standards of living which boost consumer demand for safe and highquality products coupled with growing concerns about water, air and soil

pollution have fueled the adoption of technical regulations and standards by

countries throughout the world. Although it is difficult to provide a precise cost

estimate of the impact of these standards on international trade, it is a significant

for producers and exporters. The factors contributing to these costs include

translation services, additional staff to explain, follow and provide proof that all

foreign regulations are met, and adjustments to production facilities needed to

comply with the requirements. The high costs may discourage manufactures

from entering the export arena. WTO and other international agreements

prevent countries from adopting technical regulations and standards strictly to

protect domestic industries.

A new WTO Agreement on Technical Barriers to Trade (TBT) has strengthened

and clarified the provisions of previous Tokyo Round Standards Code. The TBT

Agreement, negotiated during the Uruguay Round, is an integral part of the

WTO Agreement. In order to understand the TBT Agreement, it is necessary to

define the meaning of “technical regulations,” “standards,” and “conformity

assessment procedures.” For detailed information on the terms of the

Agreement, which are focused on protection of human safety or health,

protection of animal and plant life or health, protection of the environment,

prevention of deceptive practices, and other objectives, visit the WTO website

at: (http://www.wto.org). 

1. Technical regulations and standards in the TBT Agreement: Technical

regulations and standards set out specific characteristics of a product - such

as its size, shape, design, functions and performance, or the way it is labeled

U.S. Department of Commerce 125
126 U.S. Department of Commerce

or packaged before it is offered for sale. In certain cases, the way a product

is produced can affect these characteristics. It may be more appropriate to

draft technical regulations and standards in terms of a product’s process and

production methods rather than its characteristics. The TBT Agreement

allows for both approaches when it defines technical regulations and

standards. 

2. Conformity assessment procedures: Conformity assessment procedures

are technical procedures - such as testing, verification, inspection and

certification - which confirm that products fulfill the regulations and

requirements. Generally, exporters bear the cost, if any, of these procedures.

Moreover, non-transparent and discriminatory conformity assessment

procedures can become effective protectionist tools.

3. Loss of Economies of Scale: If a firm must adjust its production

facilities to comply with diverse technical requirements in individual

markets, production costs per unit are likely to increase. This can impose a

handicap on small and medium enterprises.

4. Compliance Assessment Costs: Compliance with technical regulations

generally needs to be confirmed through testing, certification or inspection

by laboratories or certification bodies, usually at the company’s expense. In

addition, information costs include the costs of evaluating the technical

impact of foreign regulations, translating and disseminating product

information, and the training of experts.

What are the “Hot” Foreign Corrupt Practices Issues?

Foreign Corrupt Practices

U.S. firms conducting business in foreign markets need to be familiar with

the Foreign Corrupt Practices Act (FCPA) of 1977. The FCPA prohibits U.S.

nationals and firms from making corrupt payments to foreign officials to

obtain or retain business. Investigations by the Securities and Exchange

Commission (SEC) in the mid-1970s, led to the enactment of the FCPA.

The investigation revealed that more than 400 U.S. companies admitted

making questionable or illegal payments in excess of $300 million to

foreign government officials, politicians, and political parties. Abuses

disclosed ran the “gamut from bribery of high foreign officials to so-called

facilitating payments that allegedly were made to ensure that government

functionaries discharged certain ministerial or clerical duties.” Congress

enacted the FCPA to bring a halt to the bribery of foreign officials and to

restore public confidence in the integrity of the American business system.
U.S. Department of Commerce 127

An extensive review of the antibribery provisions of the FCPA is provided at the

following website: (http://www.ita.doc.gov/legal). The information provided in

the manual is from the website and focuses on the antibribery provisions of the

FCPA. 

Introduction

The FCPA makes it unlawful to bribe foreign government officials to obtain or

retain business. The antibribery provisions apply both to certain issuers of

registered securities and to their businesses and individuals referred to as

“domestic concerns.” A “domestic concern” is defined as any individual who is

a citizen, national, or resident of the U.S., or any corporation, partnership,

association, joint stock company, business trust, unincorporated organization or

sole proprietorship which has its principal place of business in the U.S., or

which is organized under the laws of a state of the U.S., or a territory,

possession, or commonwealth of the U.S. The basic prohibition is against

making bribes directly; a second prohibition covers responsibility of a domestic

concern and its officials for bribes paid by intermediaries. 

A. Basic Prohibition. It is unlawful for a firm and any officer, director,

employee, or agent of a firm or any stockholder of a firm acting on behalf

of the firm, to use the mails or means or other trade vehicle to offer a bribe

or any payment to any foreign official. A bribe includes an offer, payment,

promise to pay, or authorization of the payment of any money, or offer, gift,

promise to give, or authorization of the giving of anything of value to any

foreign official for the purposes of influencing any act or decision. This

includes assistance to obtain or retain business with any person. A similar

prohibition applies to payments to a foreign political party or official

candidates for political office. 

B. Payments by Intermediaries. It is also unlawful to give a bribe to any

person, knowing that all or a portion of the payment will be offered, given,

or promised, directly or indirectly, to any foreign official (or any foreign

political party or official thereof, or to any candidate) to influence an act or

decision which results in the firm obtaining or retaining business.

“Knowing” encompasses “conscious disregard” and “willful blindness.” 

C. Enforcement. The SEC is responsible for civil enforcement of the

accounting provisions and the antibribery provisions. The Department of

Justice is responsible for all criminal enforcement and for civil enforcement

of the antibribery provisions with respect to domestic concerns. 

There are five elements which must be met to constitute a violation of the Act:

1. Who – The FCPA applies to any firm, officer, director, employee, or

agent of the firm, and any stockholder acting on behalf of the firm using

the mails and any other trade mechanisms. Individuals and firms may also

be liable if they aid, abet, counsel, command, induce, procure, or willfully

cause another to violate the antibribery provisions or if they conspire to

violate those provisions. 
128 U.S. Department of Commerce

2. Corrupt intent  Legislation states that the word corruptly

“connotes an evil motive or purpose, an intent to wrongfully influence the

recipient.” Legislation also notes that the FCPA “does not require that the

act be fully consummated or succeed in producing the desired outcome.”

The FCPA prohibits the corrupt use of the mails or means or instruments

of interstate commerce, to send a payment that influences any act or

decision of a foreign official in his official capacity. The FCPA also

prohibits any action to induce such official to act in violation of the lawful

duty of such official, or to induce a foreign official to use his influence

with a foreign government to affect or influence any act or decision of

such government. 

3. Payment - The FCPA prohibits paying, offering, promising to pay, or

authorizing to pay or offer, money or anything of value. 

4. Recipient - The prohibition extends to corrupt payments to a foreign

official, a foreign political party or party official, or any candidate for

political office. The FCPA defines “foreign official” as any officer or

employee of a foreign government or any department, agency, or

instrument, or any person acting in an official capacity for or on behalf of

such government or department, agency, or instrument. 

5. Business Purpose Test - The FCPA prohibits payments made in order

to assist the firm in obtaining, or retaining business for or with, or

directing business to, any person. The business to be obtained or retained

does not need to be with a foreign government or foreign government

instrumentality. 

In addition, the FCPA is concerned with corruption by third party payments. In

particular, the FCPA prohibits the firm and its officers, directors, employees,

agents, and stockholders from making corrupt payments through intermediaries.

It is unlawful to make corrupt use of the mails or any means of interstate

commerce in furtherance of a payment to a third party, knowing that all or a

portion of the payment will go directly or indirectly to a foreign official. The

elements of an offense are essentially the same as described previously, except

in this case the “recipient” is the intermediary who is making the payment to the

“foreign official.” The “knowledge standard” encompasses the concepts of

“conscious disregard” or “willful blindness.” The requisite state of mind for this

category of offense includes a conscious purpose to avoid learning the truth.

The knowledge standard, consequently, covers both prohibited actions that are

taken with “actual knowledge” of intended results as well as other actions that,

while falling short of what the law terms ‘positive knowledge,’ show a

conscious disregard or deliberate ignorance of known circumstances that should

reasonably alert one to the high probability of violations of the Act. For further

details please visit the aforementioned website.
U.S. Department of Commerce 129

What’s “Hot” about Tariffs and Taxes?

Tariffs and Taxes

Tariffs and tax issues are always a “hot” issue because they are constantly

changing and they have a significant impact on costs. As many minorityowned firms are in the IT sector, an example of how tariffs and taxes would

be applied to computer hardware and software exports is provided.

A. TARIFF CATEGORIES

Tariffs are defined as a comprehensive list or “schedule” of merchandise with

applicable rates to be paid or charged for each listed article; or a schedule of

shipping rates charged, together with governing rules and regulations. There are

three categories of rates used for tariffs and taxes on computers. Tariffs and

taxes are applied on computer hardware to the cost, insurance, and freight

(C.I.F.) value, unless noted otherwise. Tariffs are applied on computer software

based on the value of the floppy disk or tape (media) only, or the full market

value of the software (content). Computer services such as training and

maintenance are uniformly tariff-free. 

B. WITHHOLDING TAX ON SOFTWARE ROYALTIES

For taxation purposes, software sales are treated as income from royalties.

Income derived from international software sales is subject to foreign income

tax laws. Forty-eight countries have tax treaties with the U.S. A number of

countries have withholding taxes listed as “exempt,” meaning that software

sales in that country are subject to tax only in the U.S. Each rate was taken

directly from the country-specific Double Taxation Treaty. Countries that have a

tax treaty with the U.S. but are not listed in the tables are Malta and Netherlands

Antilles/Aruba.

If a country has no bilateral tax treaty with the U.S., the table will read

“unknown.” In this case, the U.S. company is entitled to a foreign tax credit. For

more information on the tax that will be charged in that country, call the

individual country’s embassy. For more information on bilateral tax treaties or

withholding taxes, contact the Internal Revenue Service, Tax Payer Service and

Compliance at (202) 874-1460.

C. OTHER TAXES

Value added taxes (VATs) are applied to the C.I.F. value of the item plus the

duty charged on the item, unless otherwise noted: [C.I.F. plus (tariff rate times

C.I.F.) times VAT rate]. For information on the tax basis of other taxes listed in

this column, contact the appropriate U. S. Department of Commerce country
130 U.S. Department of Commerce

desk officer. It is important to remember that tariffs and taxes for IT products

will be applied differently. Although a country may have a zero tariff for

hardware or software products, taxes may be levied on the merchandise.

Since customs officials will assess tariffs (if applicable) and taxes based on

different information, it is important for U.S. companies to include a variety of

information on their Shippers Export Declaration (SED) to allow these

officials to expeditiously process shipments. If information is missing or

incomplete, customs may bar entry of the product until they are satisfied that

their country’s regulations and conditions have been met. It is recommended

that U.S. companies include separate information on the invoice for the

customer and for customs officials. The following information has proven to be

helpful in previous instances: price charged to the foreign customer, quantity,

value of the media, value of manuals and other supplementary materials, and the

value of the intellectual property on the media. (The value of the media plus

manuals plus intellectual property should equal the price charged to the foreign

customer.)

Although tariffs (if applicable at all) will most often apply only to the media

(i.e. the disk or CD-ROM), taxes are often levied on the total value or on the

intellectual property. Understanding the difference between these concepts, and

providing customs officials with complete information, can substantially ease

potential problems at the border.

DOC Contact List for Tariff and Tax Information 

For tariff and tax rates to countries in:

■ Asia, the Western Hemisphere, Africa, the Near East, and Western

Europe, contact the Trade Information Center at 1-800-USA-TRADE (1-

800-872-8723) or by fax at 202-482-4473.

■ Russia and the Newly Independent States, contact the Business

Information Service for the Newly Independent States at 202-482-4655.

■ Central and Eastern Europe, contact the Central and Eastern European

Business Information Center at 202-482-2645.

■ For shipments to Puerto Rico, call 202-482-0704.

TIC Tariff and Tax Information

Contact the Trade Information Center (TIC) at (http://www.ita.doc.gov/TIC) for

detailed tariff and tax information and for links to sites providing tariff rates for

120 countries. 
U.S. Department of Commerce 131

What are the “Hot” FTZ Issues?

What’s “Hot” about Foreign Trade Zones?

Foreign Trade Zones (FTZs) are “hot” because they allow firms to defer

tariff and duty payments until the goods enter the regular customs area in

the U.S. FTZs are designated sites licensed by the FTZ Board at which

special customs procedures may be used. FTZ procedures allow domestic

activity involving foreign items to take place as if it were outside U.S.

customs territory, offsetting customs advantages available to overseas

producers who export in competition with products made in the U.S.

Subzones are special purpose zones, usually at manufacturing plants.

What are the benefits to users of foreign trade zones?

■ No duties or quota charges on re-exports

■ Customs duties and federal excise tax deferred on imports

■ Products can be entered at duty rate on product on condition it leaves zone

when lower than component rate

■ Foreign goods and domestic goods held for export are exempt from

state/local inventory taxes

What are the public benefits?

■ Attracts offshore activity and encourages retention of existing business

■ Creates employment opportunities

■ Helps local firms to compete with the foreign competition

■ Encourages and facilitates exports

Who is interested in FTZs?

■ States, communities, and public agencies sponsor and operate

■ Private firms operate FTZs under contract

■ More than 2,500 companies use FTZs including such firms as GE, AT&T,

Kodak, Xerox, Polaroid, IBM, Apple, Smith-Corona, Caterpillar,

SmithKline, DuPont, Dow, Alcoa, Chevron, Shell, Ford, GM, Chrysler, and

foreign firms such as Honda, Toyota, Nissan, Bayer, Sharp, Hitachi, and

Mitsubishi.
How significant are FTZs?

■ 48 states have FTZs

■ More than $90 billion in merchandise has been handled in FTZs

■ More than 300,000 employees work in FTZs

What are the eligibility criteria for FTZ designation?

■ Each U.S. port of entry is entitled to at least one zone

■ The need for the proposed zone must be shown in terms of local economy

and overall economic development objectives

■ Applicants must have a suitable plan including provisions for facilities and

financing

■ Zone activities must be consistent with “public interest” criteria

■ Subzone applicants must demonstrate a positive public benefit 

How does the FTZ Board grant FTZs?

■ The Board typically grants less than 100 requests annually, which involve

expansions of existing zones, sub-zone designations, as well as new zones.

“Public interest” criteria are paramount

■ 25 percent of the cases involving manufacturing are denied

■ Denials are typically associated with operations involving products subject

to special import restrictions such as sugar, textiles, and steel

For more information contact the USDOC/ FTZ Office at:

(202) 482-2862, or visit their website at:

(http://www.ita.doc.gov/import_admin/records)

Chapter Six will provide a review of E-commerce. 

132 U.S. Department of Commerce
U.S. Department of Commerce 133

Chapter Six 

E-commerce and Exporting 

This manual’s final chapter examines developments in electronic

commerce (E-commerce) and explores the impact of E-commerce on

conducting business globally. E-commerce reduces the distance between

buyers and sellers and enables minority businesses to leapfrog over many

existing constraints by drastically reducing transaction and search costs. Key

questions answered in this chapter include:

■ What is E-commerce?

■ What are the technologies of E-commerce?

■ How fast is E-commerce growing?

■ What are the economic drivers of E-commerce?

■ What are the social implications of E-commerce?

■ How connected are minorities to E-commerce?

■ Why is E-commerce important for exporters?

■ How will E-commerce help minority firms compete for international

markets?

■ What impact will E-commerce have on intermediaries?

■ How can I make my firm “E-commerce ready?”

■ What are some Internet resources that facilitate global E-commerce 

business transactions?

What is E-commerce?

The World Trade Organization (WTO) defines electronic commerce as products

that are bought and paid for over the Internet but are delivered physically, and

products that are delivered as digitized information over the Internet. Electronic

commerce, or the production, advertising, sale, and distribution of products via

telecommunication networks can be divided into three broad categories:

■ The research or search stage where producers and consumers, or buyers

and sellers, first interact; 
134 U.S. Department of Commerce

■ The ordering and payment stage once a transaction has been agreed upon;

and

■ The delivery stage. 

In the business world, four distinct types of E-commerce mingle and interact: 

■ Information access provides search and retrieve capability for public

domain and proprietary data archives; 

■ Interpersonal communication services provide methods for parties with

mutual interests to exchange information, “discuss” ideas, and improve their

cooperation;

■ Shopping services allow people to seek and purchase goods or services

though electronic networks; and

■ Virtual enterprises are business arrangements in which trading partners

separated by geography and expertise are able to engage in complex joint

business activities as if they were a single enterprise.

What are the technologies involved in E-commerce?

While many technologies can fit within the definition of “electronic commerce,”

the most important are:

■ Electronic data interchange (EDI) 

■ Bar codes 

■ Electronic mail (e-mail) 

■ Internet 

■ World Wide Web 

■ Product data exchange 

■ Electronic forms 

1. EDI is the computer-to-computer exchange of structured business

information in a standard electronic format. Information stored on one

computer is translated by software programs into standard EDI format for

transmission to one or more trading partners. The trading partners’ computers,

in turn, translate the information using software programs into a form they can

understand and use.

2. Bar codes are used for automatic product identification and scanning. The

bar codes are a rectangular pattern of lines of varying widths and spaces.

Almost every product offered for sale has a bar code somewhere on the label.
Specific characters are assigned unique patterns, thus creating a 

font. The

pattern is designed to be read when a laser light passes across the bar. The

pattern is recognized by the computer, which then processes the information. 

3. Electronic Mail is one or more messages composed and sent in digital form

to one or more recipients via the Internet. 

4. The Internet is a decentralized global network of millions of diverse

computers and computer networks. These networks can all “talk” to each other

because they use a common communications protocol called TCP/IP. 

5. The World Wide Web is an information center accessible by anyone with a

personal computer and a modem. It contains collections of documents written

and encoded with the Hypertext Markup Language (HTML). With the aid of

software called a “browser,” a user can search and request for any document.

The document is displayed on the user’s computer, although the document

resides on a computer on a totally different network somewhere else in the

world. HTML documents (or “pages,” as they are called) can contain many

different kinds of information such as text, pictures, video, and sound. They

may have links to take users immediately to other web pages. Because web

pages are continually available through the Internet, these pointers may call up

pages from anywhere in the world. It is this ability to jump from site to site

that gave rise to the term “World Wide Web.” The World Wide Web is by far

the most heavily used application on the Internet. 

6. Product Data Exchange. Product data refers to any data that is needed to

describe a product. Sometimes that data is in graphical form, as in the case of

pictures, drawings and Computer Aided Drawing (CAD) files. In other cases,

the data may be character-based numbers and letters, as in the case of

specifications, bills of material, manufacturing instructions, engineering change

notices and test results. Product data exchange differs from other types of

business communications in two important ways. First, because graphics are

involved, users must contend with large computer files and with problems of

compatibility between software applications. Second, version control very

quickly gets very complicated. Product designs, even late in the development

cycle, are subject to a great deal of change, and because manufacturing

processes are involved, even small product changes can have major

consequences for moving a product into production.

7. Electronic forms are a technology that combines the familiarity of paper

forms with the power of storing information in digital form. Imagine an

ordinary paper form, a piece of paper with lines, boxes, check-off lists, and

places for signatures. An electronic form is a digital analogue of a paper form.

It is an image which looks like a form but which appears on a computer screen

and is filled out using a mouse and a keyboard. Behind the screen are

numerous functions that paper and pencil cannot provide. Because the data

from electronic forms are captured in digital form, it allows for storage in

databases, automatic information routing, and integration into other

applications. For more information visit (http://www.ecommerce.gov) or go to

the NTDB Library and research Electronic Commerce. 

U.S. Department of Commerce 135
136 U.S. Department of Commerce

How fast is E-commerce growing?

Electronic commerce (business transactions on the web) and the information

technology (IT) industries that make “E-commerce” possible are growing and

changing at breathtaking speed, fundamentally altering the way Americans

produce, consume, communicate, and play. In the Economic and Social Impact

of Electronic Commerce (1999), the Organization for Economic Cooperation

and Development (OECD) provides the estimates of E-commerce sales

compared to various benchmarks that are shown on Table 13. 

Table 13: OECD Estimates of E-commerce Sales Compared to Various 

Benchmarks 

Estimated As a % of As a % of As a % of As a % of

revenue U.S. U.S. credit direct G-7 retail

from E-Com catalogue card marketing sales

(Billions) sales purchases

$

Current

1996-1997 $26 37 3 2 .05

Near term

2001-2002 $330 309 24 18 5

Future

2003-2005 $1,000 780 54 42 15

In addition, information extracted from the U.S. DOC’s The Emerging Digital

Economy II (1999), that is available at (http://www.ecommerce.dov), shows that: 

■ Growth in the available measures of E-commerce (e.g., estimates of the

value of E-commerce business transactions) is outpacing last year’s most

optimistic projections. As a share of the retail portion of the economy,

however, E-commerce remains quite small – less than one percent.

■ OECD figures indicate that while E-commerce over the Internet is

currently at $26 billion, this amount is relatively small and estimated to

approach a trillion dollars by 2003-05. 

■ IT-producing industries (i.e., producers of computer and communications

hardware, software, and services) that enable E-commerce to play a

strategic role in the growth process. Between 1995 and 1998, these ITproducers, while accounting for only about eight percent of U.S. Gross

National Product (GNP), contributed on average 35 percent of the nation’s

real economic growth.

■ In 1996 and 1997 (the last years for which detailed data are available),

falling prices in IT-producing industries brought down overall inflation by

an average 0.7 percentage points, contributing to the remarkable ability of

the U.S. economy to control inflation and keep interest rates low in a period

of historically low unemployment. 
U.S. Department of Commerce 137

■ IT industries have achieved extraordinary productivity gains. From 1990

to 1997, IT-producing industries experienced robust 10.4 percent average

annual growth in Gross Product Originating, or value added, per worker

(GPO/W). In the goods-producing subgroup of the IT-producing sector,

GPO/W grew at the extraordinary rate of 23.9 percent. As a result, GPO/W

for the total private non-farm economy rose at a 1.4 percent rate, despite

slow 0.5 percent growth in non-IT-producing industries. 

■ By 2006, almost half of the U.S. workforce will be employed by

industries that are either major producers or intensive users of information

technology products and services. Innovation has increased demand for high

paid “core IT workers” (e.g., computer scientists, engineers), created new IT

occupations, changed skill requirements for some non-IT occupations, and

raised minimum skill requirements for many other jobs. Wage gaps between

workers in IT industries and all other workers continue to widen. 

■ The pervasiveness of information technology, the variety of its benefits to

producers and consumers, and the speed of economic change in the digital

era have tested the limits of established indices of economic performance.

Federal statistical agencies have taken steps to improve data collection and

analysis, but much remains to be done.

What are the economic drivers of E-commerce?

The Paris-based OECD (http://www.oecd.org) states that five broad themes have

emerged as important for understanding the economic impact of E-commerce:

1. Electronic Commerce transforms the marketplace. E-commerce will

change the way business is conducted; traditional intermediary functions will

be replaced, new products and markets will be developed, new channels of

knowledge diffusion and interactivity will be opened, and more flexibility and

adaptability will be needed.

2. Electronic Commerce has a catalytic effect. E-commerce will serve to

accelerate and diffuse changes that are already underway in the economy such

as the reform of regulations, the establishment of links between businesses, and

the globalization of the economy. 

3. Electronic Commerce increases interactivity in the economy. These

linkages extend down to small and minority businesses and households and

reach out to the world at large. Business can be transacted anywhere, anytime,

essentially eroding economic boundaries. 

4. Electronic Commerce alters the relative importance of time. Many of the

routines that help define the “look and feel” of the economy and society are a

function of time. E-commerce is reducing the importance of time by speeding

up production cycles, allowing firms to operate in close coordination, and

enabling consumers to conduct transactions around the clock. 
138 U.S. Department of Commerce

5. Electronic Commerce promotes strategic alliances and openness. The

widespread adoption of the Internet is a platform for business growth.

What are the social implications of E-commerce?

Although primarily an economic phenomenon, E-commerce is part of a broader

process of social change, characterized by the globalization of markets, the shift

toward an economy based on knowledge and information, and the growing

prominence of technology in all realms of life. The major societal

transformations that are now under way will continue far into the future. As

both a product and manifestation of such transformations, E-commerce is being

shaped by, and is shaping, modern society, including domestic and global

business. Societal factors merit increasing attention from a public policy

viewpoint to ensure that E-commerce reaches its full potential and to ensure that

its benefits are realized by society as a whole. 

How connected are minorities to E-commerce?

Falling Through the Net: Defining the Digital Divide, a report in the DOC’s Falling

Through the Net series is a collection and analysis of wide-ranging data about

Internet use by Americans. The report is available at (http://www.ecommerce.gov)

or at (http://www.ntia.doc.gov/ntiahome/fttn99/contents.html). These statistics

broaden the knowledge base about who, when, where and how people in this

country use the Internet. 

These data provide concrete evidence that the Internet is being used by an

increasing number of Americans. More than one-third of Americans go online

from any point, either at home or outside the home. Approximately one-quarter

access the Internet at home. For those households with a computer,

approximately two-thirds have Internet access. Households that do not have

Internet access most frequently explain that they either do not want the service

or that it is too expensive; for those households that have dropped off the net,

cost is given as the most important reason. However, while Americans are

becoming increasingly connected, there are still significant discrepancies in

access: Blacks and Hispanics, for example, are less connected anywhere than

Whites are at home. Those groups with lower access rates at work or home are

much more likely to use the Internet at a public place such as a school, library,

or community center. They are also more likely to use the Internet to take

courses or to conduct job searches than other groups. While the information

provided below (from the DOC website) does not strictly focus on business

usage of “the net,” it nevertheless provides useful information about overall

connectivity by different racial groups – which may spill over into business

practices. 

1. The impact of income on Internet access. Among similarly-situated

families (two parents, same race), a family earning more than $35,000 is

two to almost six times as likely to have Internet access as a family earning
U.S. Department of Commerce 139

less than $35,000. The most significant disparity is among Hispanic

families: two-parent households earning more than $35,000 annually are

nearly six times as likely to have Internet access as those earning less than

$35,000. 

2. Race/Origin. As with telephone penetration, race also influences

connectivity. Unlike telephone penetration, however, households of

Asian/Pacific Island descent have the clear lead in computer penetration

(55.0 percent) and Internet access rates (36.0 percent), followed by White

households (46.6 percent and 29.8 percent, respectively). Black and

Hispanic households have far lower PC penetration levels (at 23.2 percent

and 25.5 percent), and Internet access levels (11.2 percent and 12.6 percent).

The role of race or ethnic origin is highlighted when looking at similarly

situated families. A White, two-parent household earning less than $35,000

annually is nearly three times as likely to have Internet access as a

comparable Black household and nearly four times as likely to have

Internet access as Hispanic households in the same income category.

3. Geography and income influence these trends. Urban Asians/Pacific

Islanders have the highest computer penetration rates (55.6 percent) and

Internet access rates (36.5 percent). By contrast, rural Black households are

the least connected group in terms of personal computer ownership (17.9

percent) or Internet access (7.1 percent). Black households earning less than

$15,000 are also at the opposite end of the spectrum from high income

Asians/Pacific Islanders for personal computer ownership (6.6 percent

versus 85.0 percent). 

Why is E-commerce important for exporters?

By virtue of the Internet’s architecture, electronic commerce was “born

global!” Geographical and political boundaries mean little in this networked

environment.

E-commerce is growing because it is an excellent tool to deal with forces that

are increasingly presenting small and minority firms with new problems and

new opportunities. Just as foreign competition for the traditional markets of

small and minority firms will increase, so will the opportunities to sell to the

overseas markets of both industrialized and industrializing countries. 

Developments in global network technologies and graphic-based Internet

applications make transmission of all kinds of digitized data fast, cheap, and

simple, while at the same time public consumption of computer technologies is

increasing. This environment offers lower barriers to entry for electronic

commerce. Today, for a few thousand dollars, anyone can become a merchant

and reach consumers throughout the world. As a result, electronic commerce has

expanded from business-to-business transactions between known parties to a

complex web of commercial activities that can involve vast numbers of

individuals, many of whom may never meet. 
140 U.S. Department of Commerce

Because Ecommerce provides a fundamentally new way of conducting

commercial transactions, it has potentially far-reaching economic and social

implications for many facets of life, including the nature of work, the role of

governments, and even the environment. Looking more narrowly at the world of

commercial transactions, it is clear that accepted ways of doing business will be

profoundly modified: traditional intermediaries will be replaced, new products

and markets will be created, and new and more direct relationships will be

forged between businesses and consumers. These changes require new

procedures for conducting business and questioning both the effectiveness of

government policies pertaining to commerce and of traditional commercial

practices and procedures, most of which were formed with a much different

image of commerce in mind.

How can E-commerce help minority firms to compete for

international markets?

A key reason why E-commerce is growing so quickly is its significant impact

on business costs. It is less expensive to maintain a cyber-business than a

physical one. The cyber business is always open, has a global market, and has

fewer variable costs. In addition, E-commerce merchants who maintain one

“location” instead of many reduce their inventory costs. A key factor in reducing

inventory costs is adopting a “just-in-time” inventory system that forecasts

demand more accurately. Additional benefits of E-commerce are that it increases

the efficiency of the sales process, facilitates the ordering process, reduces

errors in filling small purchase orders, and reduces distribution costs. Ecommerce can further benefit firms, especially minority firms, by leveling the

competitive playing field. E-commerce allows minority firms to extend their

geographical reach and secure new customers in ways formerly restricted to

much larger firms. As E-commerce increasingly facilitates the ease of forming

business networks and blurs traditional boundaries, the opportunities for

minority-owned firms to penetrate the global market place will increase. 

What impact will E-commerce have on intermediaries?

The OECD’s Economic and Social Impact of Electronic Commerce (1999)

report states that while E-commerce can dramatically reduce some production

costs, it does not offer a “friction-free” environment. Rather, because of new

costs associated with establishing trust and reducing risks inherent in Ecommerce, it requires new intermediaries. Widespread “disintermediation”

(producers selling directly to consumers without the aid of intermediaries) is

unlikely to be any more pronounced than what has already occurred through

direct mail, telephone, newspapers, TV, and radio. A potentially larger impact

involves the ease of access to information previously only possessed by

intermediaries. However, rather than eliminating intermediaries, E-commerce

will restructure and redefine the role of intermediaries. Opportunities exist for

minority firms to get in on the ground floor to add value in the exporting
U.S. Department of Commerce 141

process as intermediaries. Precisely how they will do that is up to their own

ingenuity, research, and business acumen.

How can I make my business E-commerce Ready?

The question of how to identify a target of opportunity for electronic commerce

is as broad and difficult to answer as the question of how to make a business

more competitive. Brainstorming and inspiration are useful methods for

answering this question, but the best solution will come from combining these

methods with a systematic approach that includes asking: 

■ What is my competitive advantage? 

■ How much more or less business is likely to be available from my current

markets? 

■ Are my products and services appealing to markets I have not tapped? 

■ What economic or technological trends will affect the appeal of my

products or services? 

■ How will demand for my current product change? and 

■ What business or manufacturing process changes will I need to do to

remain competitive? 

The more unfamiliar the territory, the greater the importance of system over

inspiration. Ultimately, the key to discovering how E-commerce can help your

business is to answer two questions.

■ How can my business benefit from changes in how information flows

between me and my trading partners?

■ Which of the changes should I implement?

A useful way to answer these questions is to identify the list of possible changes

that E-commerce can have on your business in the following regards:

■ Primary business impact implementation; 

■ Product/process operations;

■ Existing customers;

■ Developing new markets ability to foresee benefits risk of failure potential

payoff; 

■ Improve established process; 

■ Enable a new process to be established; and 

■ Allow a new type of product or service to come into existence.
142 U.S. Department of Commerce

Firms may also need to address whether technology is applicable to their

business and address the issues of funding for equipment, personnel, and

training; procedures for the start up process; and plans for future growth. For

advice on these issues, refer to the E-commerce primer that is available from the

NTDB library and visit Commerce’s E-commerce website. 

What are some Internet resources that facilitate

global E-commerce business transactions?

Some of the resources firms might find useful to help them keep apprised of

latest E-commerce developments include, but are not limited to, the following:

1. Unibex (http://www.unibex.com): Unibex is a creator and operator of

electronic marketplaces and exchanges for business communities from around

the world. It offers a comprehensive business-to-business (B2B) E-commerce

and electronic marketplace service to businesses, in partnership with leading

business communities such as vertical trade associations, regional chambers of

commerce, and online electronic business communities.

2. Stern (http://www.stern.nyu.edu): Papers about E-commerce, including

Getting Complex Products Online in Different Cultural Environments. Available

at: http://www.stern.nyu.edu/JMIS/rmm/hicss33/emarketing/potential/potential.html.

3. Techweb (http://www.techweb.com): Information about the e-strategies of

various companies.

4. Ernst & Young (http://www.ey.com): Case studies on different aspects of

conducting E-commerce.

http://www.eyi.com/int.nsf/web/homepages/Frame?opendocument.

5. European Union (http://www.ispo.cec.be/ecommerce): Comprehensive

information on E-commerce developments in the European community and in

other regions of the world. 

* * *

A comprehensive glossary of international trade terms is provided on the

pages which follow.
Glossary

This glossary is extracted from the U.S. Department of Treasury’s

International Trade Data System (ITDS) glossary. It provides a

comprehensive reference of trade terms, including many terms that have

not been used in this book but which may be useful to readers. The ITDS trade

glossary can be found at:

(http://www.itds.treas.gov/ITDS/Frames/Build_Frames.cfm?Site_Node=31)

Abandonment 

The act of refusing delivery of a shipment so badly damaged in transit that it is

worthless; OR damage to a vessel that is so severe that it is considered a

constructive total loss. 

Abbrochment 

The purchase at wholesale of all merchandise that is intended to be sold in a

particular retail market for the purpose of controlling that market. 

Absolute Advantage

An advantage of one nation or area over another in the costs of manufacturing

an item in terms of used resources. 

Absorption

Investment and consumption purchases by households, businesses and

governments both domestic and imported. 

Acceptance 

An unconditional assent to an offer; OR an assent to an offer conditioned on

only minor changes that do not affect any material terms of the offer; OR

receipt by the consignee of a shipment thus terminating the common carrier

liability. 

Accepted Draft 

A bill of exchange accepted by the drawee (acceptor) by putting his signature

(acceptance) on its face. In doing so, he commits himself to pay the bill upon

presentation at maturity. 

Accepting Bank

A bank who by signing a time draft accepts responsibility to pay when the draft

becomes due. In this case the bank is the drawee (party asked to pay the draft),

but only becomes the acceptor (party accepting responsibility to pay) upon

acceptance (signing the draft). 

Acceptor

The party that signs a draft or obligation, thereby agreeing to pay the stated sum

at maturity. 

U.S. Department of Commerce 143
Access Control 

The process of limiting access to the resources of a system to only authorized

programs, processes, or other systems (in a network).

Accession 

The process by which a country becomes a member of an international

agreement, such as the General Agreement on Tariffs and Trade (GATT). 

Accessions 

Goods that are affixed to and become part of other goods. 

Accessorial Charges 

Charges made for additional, special, or supplemental services, normally over

and above the line haul services. 

Accessorial Services

Services performed by a shipping line or airline in addition to the normal

transportation service. 

Accommodation 

An action by one individual or legal entity that is taken as a favor, without any

consideration, for another individual or legal entity. 

Accord and Satisfaction 

A means of discharging a contract or cause of action by which the parties agree

(the accord) to alter their obligations and then perform (the satisfaction) the new

obligations. 

Account Number

An identifying number issued by a carriers accounting office to identify a

shipper and/or consignee. 

Accounts Payable 

A current liability representing the amount owed by an individual or a business

to a creditor(s) for merchandise or services purchased on an open account or

short-term credit. 

Accounts Receivable 

Money owed a business enterprise for merchandise or services bought on open

account. 

Accrual of Obligation 

The time at which an obligation matures or vests, requiring the obligor to

perform. 

ACE 

Automated Commercial Environment: A U.S. Customs electronic data system

which when complete, will provide support for enforcing trade and contraband

laws, ensuring trade compliance, and providing service and information to the

international trade community. 

144 U.S. Department of Commerce
Acquisition 

The purchase of complete or majority ownership in a business enterprise,

usually by another business enterprise. 

ACS 

Automated Commercial System: The comprehensive tracking, controlling, and

processing system of the U.S. Customs Service. ACS is composed of many

different modules or systems. 

Act Of God 

“An act of nature beyond man’s control such as lightning, flood, earthquake or

hurricane. Many shipping and other performance contracts include a “force

majeure” clause which excuses a party who breaches the contract due to acts of

God.” 

Action Ex Contractu 

A legal action for breach of a promise stated in an express or implied contract. 

Action Ex Delicto 

(a) A legal action for a breach of a duty that is not stated in a contract but arises

from the contract. (b) A legal action that arises from a wrongful act, such as

fraud. 

Ad Valorem Duty. 

A U.S. Customs duty assessed as a percentage rate or value of the imported

merchandise. 

Add 

Antidumping duties which are assessed when merchandise is sold to purchases

in the U.S. at less than fair value resulting in material injury to a U.S. industry. 

Address Of Record 

The official or primary location for an individual, company, or other

organization. 

Adhesion Contract 

Contract with standard, often printed, terms for sale of goods and services

offered to consumers who usually cannot negotiate any of the terms and cannot

acquire the product unless they agree to the terms. 

Adjustment Assistance 

Financial, training and re-employment technical assistance to workers, and

technical assistance to firms and industries, to help them cope with adjustment

difficulties arising from increased import competition. 

Admiralty 

Any civil or criminal issue having to do with maritime law. 

U.S. Department of Commerce 145
Admiralty Court 

A court of law that has jurisdiction over maritime legal issues. 

Admission Temporaire 

The free entry of goods normally dutiable. 

Advance Arrangements 

The shipment of certain classes of commodities that require arrangements in

advance with carriers. 

Advice 

A form of letter that relates or acknowledges a certain activity or result with

regard to a customers relations with a bank. 

Advised Credit 

A letter of credit whose terms and conditions have been confirmed by a bank. 

Advising Bank 

The bank which receives a letter of credit or amendment to a letter of credit

from the issuing bank and forwards it to the beneficiary. 

Affiliate 

A business enterprise located in one country which is directly or indirectly

owned or controlled by a person of another country. 

Affiliated Foreign Group 

Equivalent of the foreign parent or any foreign person associated with the

foreign parent which is owned more than 50 percent by the person above it. 

Affreightment 

The hiring or chartering of all or part of a vessel for the transport of goods. 

Affreightment Contract 

A contract with a ship owner to hire all or part of a ship for transporting goods. 

Afloat 

Refers to a shipment of cargo which is currently on board a vessel between

ports (as opposed to on land). 

Aft 

Direction toward the stern of the vessel (ship or aircraft). 

After Date 

A notation used on financial instruments (such as drafts or bills of exchange) to

fix the maturity date as a fixed number of days past the date of drawing of the

draft. 

After Sight 

A notation on a draft that indicates that payment is due a fixed number of days

after the draft has been presented to the drawee. 

146 U.S. Department of Commerce
Agent 

A person or legal entity with the proper authorization to act on behalf of another

person or legal entity. 

Agent Bank 

A bank acting on behalf of a foreign bank. 

Aggregated Shipments 

Several shipments from various shippers that are consolidated and treated as a

single consignment. 

Agreed Valuation

The set value of a shipping load that is agreed upon by both the shipper and the

carrier to define rate and/or liability. 

Agreement 

A contract between two entities to buy or sell goods, perform services or

exchange information.

AIES 

Automated Information Exchange System: A module of ACS which provides an

automated method of exchanging information between Field Import Specialist

and National Import Specialists. 

Air Cargo 

Property of any kind that is transported by aircraft (excluding passenger

baggage). 

Air Express 

Expedited air freight service. 

Air Parcel Post 

Term used to describe priority mail, consisting of first class mail which weighs

more than 13 ounces. 

Air Waybill 

Shipping document used for the transportation of air freight: includes

conditions, liability, shipping instructions, description of commodity, and

applicable transportation charges. 

Alienable 

Ability to be transferred or conveyed. 

Aliquot 

A fractional share. 

All-Cargo Aircraft 

Any aircraft that is used for the sole purpose of transporting cargo. 

U.S. Department of Commerce 147
Allowance 

An amount paid by the seller as restitution or reimbursement if the receiving

party was dissatisfied with the shipment for any number of reasons: faulty

packaging, late arrival, etc. 

Alternative Tariff 

A tariff with two or more rates for the same goods, to and from the same points,

with the discretion to use the lowest of the charges. 

Amendment 

An addition, deletion, or change in a document. 

Amidships 

In the middle of the vessel; often preferred by shippers because of the minimal

motion and the benefits to fragile freight. 

Amortization 

The gradual diminishment of any amount over a period of time. 

AMS 

Automated Manifest System: A module of ACS designed to control imported

merchandise from the time a carriers cargo manifest is electronically transmitted

to U.S. Customs until control is relinquished to another ACS module. 

Antidumping 

The opposite of dumping as defined by the system of laws to remedy dumping. 

Any Quantity

A cargo rating that applies to an article without consideration of weight. 

Application 

A computer program designed to perform a specific function or process for a

user. An application is generally used by itself, but may be designed to

exchange information with other applications, thus making it sharable. Sharable

applications are called services. 

Appreciation 

An increase in the value of one form of currency as compared to the currency of

another nation. 

Appurtenance 

An accessory connected to a primary property used in conjunction with the

primary property; usually permanently affixed (i.e. a crane on a ship). 

Apron 

Area of the airport where planes are parked for loading and unloading. 

Arrivals 

Imported goods which have been placed in a bonded warehouse for which duty

has not been paid. 

148 U.S. Department of Commerce
As Is 

Indicates goods for sale do not include a warranty or guarantee. 

Assembly Service 

A service under which an airline combines multiple shipments from multiple

shippers into one shipment to one receiver. 

Assessment 

The placement of antidumping duties on imported goods. 

Athwartships 

Across a vessel from side to side. 

Authentication

Process of assuring the identity of the user.

Authorization

Process of confirming whether the user or agent has been sanctioned or has the

necessary privileges or rights to perform an operation.

Avoidance Of Contract 

The legal cancellation of a contract because an event occurs that makes

performance of the contract terms impossible or inequitable and that releases the

parties from their obligations. 

Back Haul 

To haul a shipment back over part of a route which it has traveled. 

Back Order

That portion of an order that cannot be delivered at the scheduled time, but will

be delivered at a later date when available. 

Back-To-Back Borrowing 

The process whereby a bank brings together a borrower and a lender so that

they agree on a loan contract. 

Back-To-Back Loan 

Operations whereby a loan is made in one currency in one country against a

loan in another currency in another country. 

Bad Faith 

The intent to mislead or deceive. It does not include misleading by an honest,

inadvertent or uncalled-for misstatement. 

Bagged Cargo 

Goods shipped in sacks. 

Bailment 

A delivery of goods or personal property by one person (the bailer) to another

(the bailee) on an express or implied contract and for a particular purpose

U.S. Department of Commerce 149
related to the goods while in possession of the bailee, who has a duty to

redeliver them to the bail. 

Balance Of Payments 

A statement identifying all the economic and financial transactions between

companies, banks, private households and public authorities of one nation with

those of other nations of the world over a specific time period. 

Balance of Trade

The difference between a country’s imports and exports. 

Balanced Economy 

A condition of national finances in which imports and exports are equal. 

Bale 

A large bundle of compressed and bound goods, such as cotton. 

Bale Cargo 

Bulky cargo shipped in bales, usually of burlap. 

Ballast 

Heavy material placed on a ship to improve its stability. 

Bank Draft 

A check drawn by one bank against funds deposited to its account in another

bank. 

Bank Guarantee 

Unilateral contract in which the bank commits itself to pay a certain sum if a

third party fails to perform or if any other form of default occurs. 

Bank Holding Company 

Any company which directly controls, with power to vote, more than five

percent of voting shares of one or more other banks. 

Bank Holiday 

A day on which banks are closed. 

Bank Note 

Paper issued by a bank, redeemable as money, and considered to be full legal

tender. 

Bank Release

A document issued by a bank, after it has been paid or given an acceptance,

giving authority to a person to take delivery of goods. 

Bankers Bank 

A bank that is established by mutual consent by independent and unaffiliated

banks to provide a clearinghouse for financial transactions. 

150 U.S. Department of Commerce
Bankers Draft 

A draft payable on demand and drawn by, or on behalf of, a bank upon itself. 

Bankruptcy 

The condition of a legal entity that does not have the financial means to pay

their incurred debts as they come due. 

Bareboat Charter

The charter of a vessel where the character party has the right to use his own

master and crew on the vessel. 

Barge

A flat bottomed cargo vessel primarily used on rivers and canals. 

Barratry 

The intentional misconduct of the ship’s master or crew; includes theft,

intentional casting away of vessel, or breach of trust. 

Barter

Trade of goods for other goods without the use of money or a third party. 

Baseline 

A specification of a product or service that has been formally reviewed and

agreed upon, that thereafter serves as the bases for further development.

Basing Point 

A location which is used to determine rates between other points. 

Basing Rate 

A rate which is used for the sole purpose of determining other rates. 

Basket of Currencies 

A means of establishing value for a composite unit consisting of the currencies

of designated nations. 

Battens 

The protruding fixtures of the inside walls of a vessel’s hold which keep cargo

away from the walls of the vessel. 

Bearer

The person in possession. 

Belly Pits or Holds 

Compartments beneath the cabin of an aircraft used for the transport of cargo or

baggage. 

Beneficiary 

An individual or company who gains upon the opening of a letter of credit. 

U.S. Department of Commerce 151
Berth 

The place beside a docking area where the ship is secured and cargo can be

loaded or unloaded. 

Bid Bond 

Guarantee established in connection with international tenders. Guarantees

fulfillment of the offer. 

Bilateral Trade 

The commerce between two countries. 

Bill 

A written statement of contract terms. 

Bill of Credit 

A written statement that authorizes the recipient to receive or collect money

from a foreign correspondent. 

Bill of Exchange 

Draft or bill.

Bill of Health 

A certificate issued by customs declaring the proper health of crew or

passengers of a vessel or airplane upon arrival or departure from port. 

Bill of Lading 

A document issued by a carrier to a shipper that provides written evidence

regarding receipt of the goods, the conditions on which transportation is made,

and the engagement to deliver goods at the prescribed destination to the lawful

holder of the bill of lading. 

Bill of Parcels 

A statement sent with a shipment that gives descriptions and prices for included

items; often referred to as a packing slip. 

Bill of Sale 

A written document by which a party legally transfers ownership of goods to

another party. 

Bill of Sight 

A Customs document which allows a party to see the goods before they pay

duties on them. 

Bill-To Party 

Refers to the party designated on a bill of lading as the one responsible for

payment of the freight charges. 

Billed Weight 

The designated weight shown on the freight bill. 

152 U.S. Department of Commerce
Billing Third Party 

The transference of transportation charges to a party other than the shipper or

consignee. 

Biological Agents 

A biologically active material. 

Black Market 

Buying or selling of products that violate government restrictions. 

Blanket Rate

A special single rate applied to multiple articles in a single shipment. 

Blockade

Prevention of commercial exchange by physically preventing carriers from

entering a specific port or nation. 

Bona Fide

In or with good faith, honesty, and sincerity. 

Bond

An interest-bearing certificate of debt by which the issuer is obligated to pay the

principal amount at a specific time and interest periodically. 

Bond of Indemnity 

An agreement made with a carrier that relieves them of any liability incurred

under stated conditions. 

Bond System 

A computerized bond control system (part of ACS). 

Bonded 

Goods stored by customs until the import duties are paid or the goods are

exported. 

Bonded Terminal 

An airline terminal approved by the U.S. Treasury Department for storage of

goods until Customs duties are paid or released. 

Bonded Warehouse

An approved warehouse used for the storage of goods until duties are paid or

the goods are properly released. 

Booking 

The act of recording arrangements for the movement of goods by vessel. 

Border Operations 

Functions related to the processing of export and import declarations; collecting

duties, taxes and fees; and determining admissibility or exportability of

international cargo. 

U.S. Department of Commerce 153
Bounties 

Government payments to producers to strengthen their competitive position. 

Box 

Colloquial term referring to a trailer, semi-trailer, or container. 

Box Car

A closed freight car. 

Boycott 

Refusing to deal commercially with a person, firm, or country. 

Breakage 

In marine insurance, “breakage” refers to breakage of fragile goods such as

glass and china and is excluded from coverage, unless the policy specifically

covers breakage. 

Breakbulk 

Unloading or distributing portions of a consolidated shipment for delivery. 

Breakbulk Cargo 

Cargo that is shipped as a unit but not containerized. 

Bribe 

A payment that results in a benefit that would not have been received except for

receipt of that money; a bribe is a criminal offense. 

Broker

One that acts as an agent for others, as in negotiating contracts, purchases, or

sales in return for a fee or commission. 

Bulk Cargo 

Cargo that is made up of one commodity; examples include grain, oil, and ore. 

Bulk Carrier

A vessel designed for the shipment of bulk cargo. 

Bulk Freight 

Freight not in packages or containers. 

Bulk Sale 

The transfer of a large amount of inventory in a single transaction not in the

usual course of business. 

Bulk Solids 

Dry cargo shipped loose in containers. 

Bunker

A compartment on a ship for storage or fuel. 

154 U.S. Department of Commerce
Bunker Adjustment Factor

An adjustment in shipping charges to offset price fluctuations in the cost of

bunker fuel. 

Bunker Fuel 

The fuel used to power a ship. 

Business Function 

A group of business activities, which together completely support one aspect of

furthering the mission of the organization, describing what is done within the

organization independently from the organization’s structure.

Business Process 

Defined business activity, executions of which may be identified in terms of the

input and/or output of entities of specific types or of data about entities of

specific types - a process can be executed, a function cannot; or an ordering of

work activities across time and place, with a beginning, an end, and clearly

identified inputs and outputs. 

Buy American Acts 

U.S. federal and state government statutes that give a preference to U.S.

produced goods in government contracts. 

Cabotage 

Coast-wide water transportation, navigation or trade between ports of a nation. 

Call 

A demand of payment on a loan, often because of failure on the part of the

borrower to comply with conditions of the loan. 

Call Money 

Currency lent by banks on a very short-term basis, which can be called the same

day, at one day’s notice or at two days notice. 

Capacity To Contract 

Legal competency to make a contract. 

Capital Goods 

Manufactured goods that are productive industrial use. 

Capital Market 

The market for buying and selling long term loans, in the form of bonds,

mortgages, etc. 

Captains protest 

A document prepared by the captain of a vessel upon arrival in port that notes

any unusual conditions encountered during the voyage; relieves the ship owner

of liability. 

U.S. Department of Commerce 155
Cargo 

Merchandise hauled by transpiration lines. 

Cargo Agent 

An agent appointed by an airline shipping line to solicit and process

international air and ocean freight for shipments. 

Cargo Manifest 

A list of a ship’s cargo or passengers but without a listing of charges. 

Cargo Selectivity System 

An ACS module which is used to sort high risk cargo from low risk cargo and

to determine the type of examination required. 

Cargo Tonnage 

The weight of a shipment or of ships total cargo expressed in tons. 

Carnet 

A Customs document permitting the holder to carry or send merchandise

temporarily into certain foreign countries (for display, demonstration, or similar

purposes) without paying duties or posting bonds. 

Carrier

A legal entity that is in the business of transporting passengers or goods for hire. 

Carriers Certificate 

A document issued by the shipping company which certifies the ownership of

the goods to a named individual. 

Cartage Agent 

A ground service which provides transport and delivery of freight in areas not

directly served by air or ocean. 

Cartel 

A collection of independent producers formed to regulate production, pricing,

and marketing of members to maximize market power and limit competition. 

Casus Major

A major casualty that is usually accidental, such as flood or shipwreck. 

Category Groups 

Groupings of controlled products. 

Caveat Emptor

The purchaser buys at his own risk. 

CEBB 

Customs Electronic Bulletin Board: An electronic bulletin board sponsored by

U.S. Customs that provides the trade community with up-to-date information,

requirements, and operation instructions. 

156 U.S. Department of Commerce
Cell 

The on board storage space for one shipping container on a ship. 

Census Interface 

An ACS module that captures U.S. Bureau of Census data. 

Central Bank 

An institution with the sole right to issue bank notes and power to dictate the

monetary policy for a currency zone. 

Certificate of Inspection 

A certificate issued by an independent third party verifying the condition of

cargo (or of other property). 

Certificate of Weight 

A document stating the weight of a shipment. 

Certification 

Official proof of authenticity. 

Cession of Goods

A surrender of goods. 

Chargeable Weight 

The weight of a shipment used in determining freight charges. 

Charter Service 

Temporary hiring of an aircraft for the transportation of cargo or passengers. 

Chartered Ship 

A ship leased by its owner for a stated time, voyage, or voyages. 

Chassis 

A special trailer or undercarriage on which containers are moved over the road. 

City Terminal Service 

A service provided by some airlines that involves transporting cargo to in town

terminals at lower rates than charged for door to door delivery. 

Claim 

A demand of payment of money or property. 

Classification 

The categorization of merchandise. 

Claused Bill of Lading 

A notation on the bill of lading which denotes a deficient condition of the goods

or packaging. 

U.S. Department of Commerce 157
Clean Bill of Lading 

A bill of lading received by the carrier for goods delivered in “apparent good

order and condition.” 

Clearance 

The completion of customs entry requirements which results in the release of

goods to the importer. 

Closed-End Transaction

A credit transaction with a fixed amount of time for repayment. 

Coastal Trade 

Trade between ports of one nation. 

Coding Standard 

The format in which a specified data element is reported.

Coding Standard Source 

The documentation of a coding standard.

Collar

An agreement that puts upper and lower limits on the interest rate of an

agreement that is binding even if the market rate falls outside of this range. 

Collect Charges 

Transportation practice where the receiver of the goods pays the charges. 

Collect on Delivery 

A service where the purchase price of a good is collected by the carrier upon

delivery of the shipment and subsequently paid to the shipper. 

Collection 

The presentation for payment of an obligation and the payment thereof. 

Collection Papers 

All the documents given to the buyer in order to receive payments for a

shipment; includes invoices, bills of lading, etc. 

Collection System 

An ACS module that controls and accounts for payments collected by the U.S.

Customs Service. 

Combination Aircraft 

An aircraft capable of transporting both cargo and passengers on the same

flight. 

Combined Bill of Lading 

A bill of lading covering a shipment of goods by more than one mode of

transportation. 

158 U.S. Department of Commerce
Combined Transport 

Consignment sent by means of various modes of transport. 

Comity 

Courtesy, respect, and good will. 

Command Economy 

An economic system where decisions about resources are made by a central

government authority. 

Commercial Bank 

A bank that specializes in accepting demand deposits and granting loans. 

Commercial Invoice 

A document which identifies the seller and buyer of a shipment; also includes

invoice number, date, shipping date, mode of transport, delivery and payment

terms, and description of goods. 

Commercial Officers 

Embassy officials who assist businesses through arranging appointments with

local business and government officials and providing counsel on local trade

regulations, laws, and customs. 

Commercial Paper

Negotiable instruments used in commerce. 

Commercial Set

The primary documents required to ship goods; usually includes an invoice, bill

of lading, bill of exchange, and certificate of insurance. 

Commercial Treaty 

An agreement between two or more countries that establishes the conditions

under which business may be contracted. 

Commingling 

The packing or mingling of various goods subject to different rates of duty so

that the value of each class of goods cannot be readily determined. 

Commission 

The amount paid to an agent for their role in the completion of a transaction

involving the sale of goods or services. 

Commodity Code 

The system of identifying a commodity by a certain number to determine its

commodity rate for transport. 

Commodity Rate

The rate applicable to shipping a given commodity between points. 

U.S. Department of Commerce 159
Common Data Element 

Basic requirements that are normally occurring and routinely used, commonly

found in commercial level data, for import and export transactions.

Common Point 

A location serviced by two or more transportation lines. 

Compensatory Trade 

A form of countertrade where any combination of goods and services are

bartered. 

Competitive Rate 

Rate determined by one transportation line to compete with the rate of another

transportation line. 

Complementary Imports 

Imports of raw materials or products that a country does not internally possess

or produce. 

Compradore 

An agent in a foreign country employed by a domestic businessman to facilitate

transactions with local businesses within the foreign country. 

Concealed Damage 

Damage to the contents of a package which is not apparent from the condition

of the exterior. 

Concealed Loss 

Damage, loss, or shortage of goods within a package which is not apparent from

its exterior condition. 

Conditional Data Element 

A specific data element required to be reported only under certain conditions

specified by an agency or trade entity.

Configuration 

The way components of a system are set up - form, fit, and function.

Connecting Carrier

A carrier which has direct physical connection with another carrier or forms a

connecting link between two or more carriers. 

Consignee 

The person or firm named in a freight contract to whom goods have been

shipped or turned over for care. 

Consignment 

Delivery of merchandise from an exporter to an agent for sale by the agent,

credited to the exporters account, with a commission earned by the agent. 

160 U.S. Department of Commerce
Consignor

The entity that ships goods to another for care; the exporter in a consignment

relationship. 

Consolidated Container

A shipping container that contains cargo from numerous shippers for delivery to

numerous consignees. 

Consolidation 

The combining of smaller shipments from a central location into a single

shipment that is sent to a destination point at a lower shipping rate. 

Consolidator

A company that provides consolidation services. 

Consular Invoice 

An invoice covering the shipment of goods certified by the counsel of the

country for which the merchandise is destined. 

Consulate 

The offices representing the commercial interests of one country located within

the borders of another country. 

Consumer Goods 

Any goods produced for the expressed use of individuals rather than the

production or manufacturing of other goods. 

Consumption Entry 

A customs entry where the importer pays the applicable dues and the goods are

released from customs custody. 

Container

A single rigid, sealed, reusable metal “box” in which merchandise is shipped by

vessel, truck, or rail. 

Container Freight Charge 

Charge made for the packing or unpacking of cargo from ocean freight

containers. 

Container Load 

A shipment of cargo that according to weight or volume, will fit any number of

standard containers. 

Container on Flatcar

A container without wheels put on railcars for transport. 

Container Part Load 

A shipment of cargo that according to weight or volume, will not fit into any

number of standard containers. 

U.S. Department of Commerce 161
Container Vessel 

An ocean going vessel designed specifically to handle the loading, storage, and

removal of freight containers. 

Contraband 

Any product that a nation has labeled as unsuitable to possess, produce, or

transport. 

Contract Carrier

Excluding common carriers, any person who under special contract will

transport passengers or goods for agreed upon compensation. 

Convertibility 

Ease of exchanging one currency for that of another nation or for gold. 

Conveyance 

Means of transport (e.g., rail, truck, or air vessel).

Cooperative Processing 

Computing that requires two or more distinct processors to complete a single

transaction; or a client/server configuration in which application components are

distributed across different processors.

Core Inflation 

The basic level of inflation over a period of time as opposed to temporary

fluctuations. 

Corporate Dumping 

The practice of exporting banned or out of date goods to a foreign market where

restrictions on that product are not as severe. 

Cost Plus 

A pricing method where the purchaser agrees to pay the production cost of the

good plus a fixed percentage to the seller for profit. 

Cost/Benefit Analysis 

An analysis that compares the tangible benefits generated by a system with the

costs associated with that system’s development and operation. 

Country of Departure 

The country from which a ship or shipment has or is scheduled to depart. 

Country of Destination 

The country that is the ultimate destination for a ship or shipment of goods. 

Country of Dispatch 

The country from which cargo was shipped. 

162 U.S. Department of Commerce
Country of Exportation 

Usually the country in which the merchandise was manufactured and produced

and from where it was first exported. 

Country of Origin 

The country where merchandise was grown, mined or manufactured. 

Country Risk 

The financial risks of a transaction which relate to the political, economic, or

social instability of a country. 

Courier

Operation characterized by small package delivery or express mail service of a

large number of shipments to a variety of deliveries to parties on a single

conveyance. 

Critical Success Factor

Risk assessment process based upon specific data elements within a transaction.

Critical Success Factor

Identification of a performance measure that must be achieved if the

organization is to succeed in its environment.

CUSCAR 

This is a type of UN/EDIFACT message that is used to convey data about a

U.S. Customs goods declaration.

CUSDEC 

This is a type of UN/EDIFACT message that is used to convey data about a

U.S. Customs goods declaration.

Custody Bill of Lading 

A bill of lading issued by American warehouses as a receipt for goods stored. 

Customs 

A government authority designated to regulate the flow of goods to/from a

country and to collect duties levied upon imports and exports. 

Customs House Broker

A person or entity licensed by Customs who acts as an agent for another to clear

merchandise through Customs and other agencies.

CVD 

Countervailing duties which are accessed when bounties or grants are paid or

bestowed on merchandise exported to the U.S. from a foreign country with

material injury to a U.S. industry. 

Damages 

Money compensation for loss or damage. 

U.S. Department of Commerce 163
Dangerous Goods 

Goods which are capable of posing a health or safety risk when transported by air. 

Data Mart 

Subsets of the data warehouse (see below for definition).

Data Warehouse 

An organized store of data designed to support access to data in order to enable

analyses and decision making. 

Date Draft 

A draft which matures a specified number of days after the date it is issued,

without regard to the date of acceptance. 

Dating 

Extended credit terms granted by the seller to induce buyers to receive goods in

advance of required delivery dates. 

DBMS: Database Management System

An integrated collection of programs that enables users to store, modify and

extract information from a database. It provides the ability to manage data

separately from the application programs that use the data. 

Deadweight 

The maximum carrying capacity of a ship. 

Dealer

An individual or firm who acts as principal in the sale of merchandise. 

Debt-For-Nature Swap 

Swap arranged by private conservation group to use the proceeds of debt

conversions to finance conservation projects relating to park land or tropical

forests. 

Debtor Nation 

A nation that is owed less foreign currency obligations than it owes other

nations. 

Decision Support 

Software-supported process to substantiate a conclusion.

Deck Cargo 

Cargo that is shipped on the deck of a vessel rather than in holds below. 

Declaration 

Legal submission of government-required data by the importer, exporter, broker

or carrier that satisfies laws and regulations and meets all import or export

requirements.

164 U.S. Department of Commerce
Deductive Value 

A valuation of merchandise that is the resale price of imported merchandise in

U.S. with deductions for certain items. 

Deferred Air Freight 

Air freight with less urgency, delivered over a period of days. 

Del Credere Risk 

Risk that a counterparty is either unable or unwilling to fulfill his payment

obligations. 

Deliver to Party 

Party who physically receives the shipped merchandise (also known as the ship

to party).

Delivery 

The act of transferring physical possession of merchandise; or the act of actual

or of constructive placement of goods or property within the possession or

control of another. 

Delivery Carrier

The transport carrier whose responsibility it is to place a shipment at the

disposal of the buyer. 

Delivery Instructions 

Specific delivery instructions for the freight forwarder or carrier stating exactly

where the goods are to be delivered, the deadline, and a contact person should

problems arise. 

Delivery Order

A document from the consignee, shipper, or owner of freight ordering the

delivery of freight to another party. 

Demise 

A lease of property; a demise charter is a bareboat charter. 

Demurrage

The detention of a freight car or ship beyond time permitted for loading or

unloading. 

Design 

Arrangement of constituent parts to fulfill the identified purpose according to

specifications provided by the user. 

Destination 

The place to which a shipment is consigned. 

Detention

Delay in clearing goods through customs, usually resulting in storage fees and

other charges. 

U.S. Department of Commerce 165
Devanning 

The unloading of cargo from a container. 

Developed Countries 

A term used to describe more industrialized nations. 

Developing Countries 

A term used to describe countries that lack strong amounts of industrialization,

infrastructure, and sophisticated technology. 

Differential 

An amount added to or deducted from a base shipping rate between two given

locations to determine a new rate for another location. 

Discharge 

The unloading of passengers or cargo from a vessel, vehicle, or aircraft. 

Discounting 

The sale at less than original price value of a commodity or monetary

instrument, often for immediate payment. 

Discrimination 

The preferential rates or privileges granted to some shippers but not to others

under similar conditions. 

Dispatch 

An amount paid by a vessel’s operator to a charter if loading or unloading is

completed in less time than stipulated in the charter agreement. 

Disposition 

The determination by the government regarding admissibility of cargo,

conveyance, and persons associated with an international transaction. The

determination may include release, rejection, refusal, or other action. 

Distributed Database

A database that consists of two or more data files located at different sites on a

computer network, which can be accessed without interfering with one another. 

Distribution License

A license that allows multiple exports of authorized commodities to foreign

consignees approved in advance by the U.S. Bureau of Export Administration. 

Distribution Service 

A service that accepts one shipment from a single shipper and at a point of

destination, separates the shipment and distributes it to many receivers. 

Distributor

An agent who sells directly for a supplier and maintains an inventory of the

suppliers products. 

166 U.S. Department of Commerce
Diversion 

Any change in the billing of a shipment once it has been received by the carrier

at point of origin and prior to delivery at destination. 

DOC 

Department of Commerce. 

Dock 

Loading or unloading platform at an industrial location or carrier terminal. 

Dock Examination 

A U.S. Customs examination that requires the goods to be opened for a

thorough inspection rather than just a visual one. 

Dock Receipt 

A receipt issued by a port officer that certifies that goods have been received by

a shipper. 

Dolly 

A piece of equipment with wheels used to move freight with or without a

tractor. 

Domestic Exports 

Exports which were grown, produced, or manufactured in the U.S. 

Domicile 

The place where a draft or acceptance is made payable. 

Door-To-Door

Shipping service from shippers door to consignees door. 

Double-Column Tariff 

A tariff schedule with two rates, one for preferred trading partners and one for

imports from non-preferred trading countries. 

Download 

Copy data (usually an entire file) from a main source to a peripheral device or

another computer. 

Downstream Dumping 

The sale of products by a manufacturer below cost to a secondary producer in

its domestic market where the product is then further processed and shipped to

another country. 

Drawback 

A refund of 99 percent of duties (and taxes) paid on imported merchandise

which is immediately exported, subjected to manufacture or production, and

then exported, or destroyed in the same condition as it was imported. 

U.S. Department of Commerce 167
Drawback System 

An ACS module that provides the means for processing and controlling all types

of drawback entries. 

Dray 

A vehicle used to haul cargo or goods. 

Drayage 

The charge made for hauling freight or carts, drays, or trucks. 

Drop Shipment 

A shipment of goods from a manufacturer directly to a dealer or consumer,

avoiding shipment to the wholesaler. 

Dropoff 

The delivery of a shipment by a shipper to a carrier for transportation. 

Dropoff Charge 

A charge made by a transportation company for delivery of a container. 

Dry Cargo 

Cargo which does not require temperature controls. 

Dry-Bulk Container

A container designed to carry any of a number of free flowing dry solids such as

grain or sand. 

Dry-Cargo Container

Any shipping container designed to transport goods other than liquids. 

Dual Exchange Rate 

The existence of two or more exchange rates for a single currency. 

Dual Pricing 

The selling of identical products in different markets for different prices. 

Dumping 

The sale of a commodity in a foreign market at less than fair value, usually

considered to be a price lower than that at which it is sold within the exporting

country or to third countries. 

Dunnage 

Materials placed around cargo to prevent breakage or movement. 

DUNS : Data Universal Numbering System

Identification system maintained by Dun & Bradstreet. 

Durable Goods 

Any product which is not consumed through use. 

168 U.S. Department of Commerce
Dutiable List 

Items listed in a country’s tariff schedule for which it charges import duty. 

Duty 

A tax levied by a government on the import, export, or consumption of goods. 

Easement 

A right to use another persons property. 

Edge Act Corporations 

Banks that are subsidiaries either to bank holding companies or other banks

established to engage in foreign business transactions. 

EDI 

Electronic Data Interchange. 

EDIFACT Record Location 

(Electronic Data Interchange for Commerce and Transport) Refers to the

specific EDIFACT data segment identifier (see UN/EDIFACT for definition of

EDIFACT).

Edit 

Evaluate the validity of data in a single data field or a combination of data

fields; or a means to specify electronically the requirements for a data element

to be accepted by an automated system.

Electronic Commerce

A system of integrated communications, data management, and security services

that allows business applications within different organizations to automatically

interchange information. 

Electronic Funds Transfer

System of transferring funds from one account to another using electronic

pulses instead of paper. 

ELVIS 

Electronic Visa Information System: An electronic data prototype which

provides information on non-U.S. issued textile visas. 

Embargo 

A prohibition upon exports or imports with respect to specific products or

specific countries. 

En Route 

In transit (referring to goods, passengers, or vessels). 

Encryption 

The process of translating data into an electronic code to achieve data security

during data interchange.

U.S. Department of Commerce 169
Entrepot 

An intermediary storage facility where goods are kept temporarily for

distribution. 

Entrepot Trade 

The import and export of goods without the further processing of the goods.

Usually refers to a party that buys and sells as a middleman. 

Entry

A statement of the kinds, quantities, and values of goods imported together with

duties due and declared before a customs officer. 

Entry Documents 

The documents required to secure the release of imported merchandise. 

Entry Summary 

Documentation which is necessary to enable U.S. Customs to assess duties,

collect statistics, and determine whether other requirements of law or

regulations are met upon importation. 

Entry Summary System 

An ACS module that automates the entry processing cycle. 

Equalization 

Money allotted to the customer if the goods are picked up at a destination other

than the one named on the bill of lading. 

Escape Clause 

A provision in a bilateral or multilateral commercial agreement permitting a

signatory nation to temporarily violate their obligations when imports threaten

serious harm to the producers of competitive domestic goods. 

ETA

The expected date and time of arrival. 

ETD 

The expected date and time of departure. 

Eurobond 

A bond issued in a foreign currency, different than the one in which the bond is

sold. 

Ex Factory 

A sale term where the buyer gains ownership of goods when they leave the

vendor’s dock. 

Exception Rates 

Shipping rates set higher because the commodity requires special handling and

care (i.e. live animals). 

170 U.S. Department of Commerce
Exchange Rate 

The price of one currency expressed in terms of another. 

Excise Tax 

A selective tax; sometimes referred to as a consumption tax. 

Exculpatory Clause 

A contractual clause that releases one party from liability in case of wrong

doing by the other party involved. 

Expiry Date 

A foreign exchange term for the last day that options can be executed; an

expiration date. 

Export 

To send or transport merchandise abroad, especially for sale or trade. 

Export Broker

A firm that specializes in bringing buyers and sellers together for a fee, but does

not participate in the actual business transaction. 

Export Control 

Retaining control over exports for statistical and strategic purposes. 

Export Declaration 

A required customs document for exportation from the U.S. 

Export Draft 

An order for the importing party to pay the seller for the exported goods. 

Export Duty 

A tax imposed on exports of some nations. 

Export License

A government document which gives permission to export a specified quantity

of a specified commodity. 

Export Management Company 

A private firm that serves as the export department for several manufacturers

and handles the exporting aspect of the business for a commission or salary. 

Export Merchant 

A company that buys products directly from manufacturers, then packages and

marks the merchandise for resale under its own name. 

Export Processing Zone 

Industrial parks designated by a government to provide tax and other incentives

to export firms. 

U.S. Department of Commerce 171
Export Quotas 

Specific restrictions on the value or volume of exports from a nation. 

Export Restraints 

Restrictions as to the number of exports that are allotted for certain foreign

markets. 

Export Statistics 

The statistics that contain the total volume or value of all exports leaving the

U.S. 

Export Subsidies 

Government payments to induce exportation by domestic producers. 

Export Trading Company 

A corporation organized for the principal purpose of exporting goods and

services. 

Exporter

An individual or company that transports goods or merchandise from one

country to another in the course of trade. 

External Value 

The purchasing power of a currency abroad, converted using the exchange rate. 

Extradition 

The return of an alleged criminal from one country to the country that has

jurisdiction. 

Extranet 

An intranet that allows controlled access by authenticated outside parties.

FACET : Future Automated Commercial Environment Team

Group established by the Deputy Commissioner of Customs in 1993 to develop

a concept for redesigning the Customs Automated Commercial System (ACS).

Facilitation 

Any program designed to expedite the flow of international commerce. 

Factor

An agent who receives merchandise under a consignment or bailment contract,

who sells it for the principal or in the factor’s own name, and who is paid a

commission for each sale. 

Factorage 

The commission or other compensation paid to a factor. 

Factors Lien 

The right of a factor to retain the principal’s merchandise until the factor

receives full compensation from the principal. 

172 U.S. Department of Commerce
Fair Value 

The weighted average of a products domestic market prices. 

FDA

Food And Drug Administration. 

Federal Inspection Site 

A location at which international merchandise is processed and inspected by one

or more federal agencies.

Federal Reserve System 

The central banking system of the U.S.; coordinator of monetary policy. 

Feeder Vessel 

A vessel which is used to connect to a line vessel which directly services a port. 

FEU 

Forty foot equivalent units (Two 20 ft containers = 1 FEU). 

File Server

Functions to develop information about international trade and transportation

through the compilation and analysis of statistical data.

File Server

A computer/storage device dedicated to storing files. Any user on the network

can store files on the server.

Filer

The process of issuing a user identification and password along with the other

necessary security identifiers (also, unique user identification).

Filer

The entity responsible for submission of data to the government; or name and

addresses of parties licensed to act as a representative in the transaction of

business (ITDS Standard Data Set).

Financial Instrument 

A document which has monetary value or is evidence of a transaction. 

Financial Market 

Market for the exchange of capital and credit in an economy; it is divided into

money markets and capital markets. 

Firewall 

A protective barrier that is a collection of components configured to enforce a

specific access control policy between a trusted network and an untrusted

network. 

First World Countries

Western, industrialized, non-communist countries. 

U.S. Department of Commerce 173
Five Dragons 

Term used to describe the emerging economies of Hong Kong, Singapore, South

Korea, Taiwan, and Thailand. 

Fixed Charges 

Charges which do not increase or decrease with a change in volume. 

Fixed Exchange 

An administratively fixed exchange rate where no rate fluctuations are possible. 

Fixing 

Establishing of the official exchange rate of a domestic currency against other

negotiable currencies. 

Flag 

A reference to the country or registry of a vessel. 

Flag of Convenience 

The national flag flown by a ship that is registered in a country other than that

of its owners. 

Flight of Capital 

The movement of capital to avoid loss or increase gain. 

Floating 

Free determination of exchange rates based on supply and demand with no

intervention on the part of the central bank. 

Flotsam 

Floating debris or wreckage of a ship and its cargo. 

Force Majeure 

A superior or irresistible force, such as an “Act of God,” that makes it

impossible to perform a contract. 

Foreign Bond 

An international bond denominated in the currency of the country where it is

issued. 

Foreign Commerce

Trade between individuals or legal entities in different countries. 

Foreign Currency 

The currency of any foreign country which is the authorized medium of

circulation. 

Foreign Exchange 

Currency of countries exchangeable for other currencies according to their

relative values based on supply and demand.

174 U.S. Department of Commerce
Foreign Exchange Contract 

A contract for the sale or purchase of foreign exchange specifying an exchange

rate and delivery date. 

Foreign Exchange Rate 

The rate or price of the currency of country in terms of the currency of another. 

Foreign Exports 

The U.S. export of foreign merchandise consisting of foreign commodities and

goods in Customs bonded warehouses. 

Foreign Flag 

A reference to a carrier not registered in a country but flies that country’s flag. 

Foreign Income 

Income earned by Americans from work performed in another country. 

Foreign Investment 

The purchase of assets from abroad. 

Foreign Market Value 

The price at which merchandise is sold in the principal markets of the country

from which it is exported. 

Foreign Parent 

The first foreign person or entity outside the U.S. in an affiliate’s ownership

chain that has direct investment in the affiliate. 

Foreign Person 

A person who resides outside of the United States or is subject to the

jurisdiction of a country other than the U.S. 

Foreign Remittances 

The transfer of any monetary instrument across national boundaries. 

Forward Foreign Exchange 

An agreement to purchase or sell an amount of foreign currency at a future date

at a predetermined price.

Foul Bill of Lading 

A receipt for goods with the indication that they were received damaged or short

in quantity. 

Fractional Currency 

Any currency that is smaller than a standard money unit. 

Franco 

Free from duties, transportation charges and other levies. 

U.S. Department of Commerce 175
Free Domicile 

Term to describe when the shipper pays all the transportation charges and

applicable duties. 

Free In 

A pricing term indicating that the loading charges are for the account of the

supplier. 

Free In and Out 

A pricing term indicating that the vessel operator is responsible for the cost of

loading and unloading. 

Free List 

A statement of items that are not liable to the payment of duties. 

Free Market 

Unrestricted movement of items in and out of a market, unhampered by the

existence of tariffs or other trade barriers. 

Free Out 

A pricing term indicating that unloading charges are for the account of the

receiver. 

Free Port 

An area where imported goods may be brought without payment of duties. 

Free Time 

The time allowed shippers and receivers to load or unload cars before

demurrage or detention. 

Free Zone 

An area within a country (a seaport, airport, warehouse or any designated area)

regarded as being outside its customs territory where importers may bring goods

of foreign origin without paying customs duties and taxes, pending their

eventual processing, transshipment or re-exportation. 

Free-Astray 

A shipment dropped off at the wrong location is forwarded to the proper

location free of charge. 

Freight 

All merchandise, goods, products, or commodities shipped by rail, air, road, or

water, other than baggage, express mail, or regular mail. 

Freight Charge 

The charge assessed for transporting freight. 

Freight Claim 

A demand upon a carrier for the payment of overcharge or loss or damage

sustained by shipper or consignee. 

176 U.S. Department of Commerce
Freighter

A ship or airplane used primarily to carry freight. 

Front end 

A series of initial system events pertaining to data submission. Also used to

refer to the user interface portion of a system. 

Function 

A major work element to accomplish the mission or business of an organization,

such as accounting, marketing, etc. A sub-function is defined as a component of

a function such as accounts receivable, accounts payable, etc. in the accounting

function; or in data processing, a process performed by the computer on data. 

Fungibles 

Goods that are identical with other goods of the same nature. 

Futures Contract 

A contract for the future delivery of a specified commodity, currency or security

on a specific date at a rate determined in the present. 

Gang 

A group of stevedores under a supervisor who are assigned to load or unload a

portion of a vessel. 

Gangway 

The opening through which a ship is boarded. 

Gantry Crane

A specialized machine for the raising or lowering of cargo mounted on a

structure spanning an open space on a ship. 

Gateway 

A major airport or seaport; or the port where customs clearance takes place; or a

point at which freight moving from one territory to another is interchanged

between transportation lines. 

GATT

General Agreement on Tariffs and Trade. 

Geisha Bond 

Bond issued on the Japanese market in currencies other than yen. 

General Average 

An internationally accepted rule of the sea which says when a peril threatens the

survival of the ship, there may be sacrificed (thrown overboard) any cargo or

supplies or ships furnishings, and any expense incurred necessary to save the

ship. If the vessel is saved, all cargo owners, ship owner, and owners of the

freight revenue share pro rata in the loss. 

U.S. Department of Commerce 177
General Cargo Rate 

The rate a carrier charges for the shipment of cargo which does not have a

special class rate or commodity rate. 

General Cargo Vessels 

A vessel designed to handle breakbulk cargo such as bags, cartons, cases, crates,

and drums, either individually or in unitized or palletized loads. 

General Commodity Rate 

A freight rate applicable to all commodities except those for which specific rates

have been filed. 

General Imports 

The total physical arrivals of merchandise from foreign countries, whether such

merchandise enters consumption channels immediately or is entered into bonded

warehouses or Foreign Trade Zones under U.S. Customs custody. 

General Liability 

Unlimited responsibility for an obligation, such as payment of debts of a

business. 

General License 

Authorized licenses by the U.S. Bureau of Export Administration that permit the

export of non-strategic goods to specified countries without the need for a

validated license. 

General Order

Merchandise not entered within five working days after arrival of the carrier and

stored at the expense of the importer. 

General Order Warehouse 

Warehouse where customs sends merchandise that has not been claimed within

five days of arrival. 

General Partnership 

A partnership where all partners have joint ownership and liability. 

General Tariff 

A tariff that applies to countries that do not enjoy either preferential or most

favored nation tariff treatment. 

GITS 

Government Information Technology Services Working Groups. 

Global Bond 

A bond that can be traded immediately in any United States capital market and

in the Euromarket. 

Global Quota 

A quota on the total imports of a product from all countries. 

178 U.S. Department of Commerce
Gold Exchange Standard 

A monetary system adopted by some countries which did not have enough gold

to go onto the gold standard and make their currency freely convertible into

gold. Instead, they made their currency freely convertible into the currency of a

country which was on the gold standard. This system only lasted about 10 years

from 1922.

Gold Reserves 

Gold, retained by a nation’s monetary agency, forming the backing of currency

that the nation has issued. 

Gold Standard 

A monetary agreement whereby all national currencies 100 percent by gold and

the gold is utilized for payments of foreign activity. 

Gondola Car

An open railway car with sides and ends, used principally for hauling coal,

sand, etc. 

Goods 

Merchandise, supplies, raw materials, and completed products. 

Grantee 

A corporation to which the privilege of establishing, operating, or maintaining a

foreign trade zone has been given. 

Green Card 

An identity card (visa) issued by the U.S. Immigration and Naturalization

Service entitling a foreign national to enter and reside in the U.S. as a

permanent resident. 

Grey List 

A list of disreputable end users in nations of concern for missile proliferation

from the U.S. intelligence community. 

Grid 

Fixed margin within which exchange rates are allowed to fluctuate. 

Gross 

Twelve dozen or 144 items. 

Gross Domestic Product 

A measure of the market value of all goods and services produced within the

boundaries of a nation. 

Gross National Product 

A measure of the market value of all goods and services produced by the labor

and property of a nation. 

U.S. Department of Commerce 179
Gross Weight 

The full weight of a shipment, including goods and packaging. 

Hallmark 

An impression made on gold and silverware introduced in the beginning of the

fourteenth century in England to identify the quality of the metal used. 

Harbor Fees 

Charges assessed to users for use of a harbor, used generally for maintenance of

the harbor. 

Harbor Master

An officer who attends to the berthing, etc. of ships in a harbor. 

Hard Loan 

A foreign loan that must be paid in hard money. 

Hard Money 

Currency of a nation having stability in the country and abroad. 

Harmonized System (HS) 

A multipurpose international goods classification system designed to be used by

manufacturers, transporters, exporters, importers, customs, statisticians, and

others in classifying goods moving in international trade under a single

commodity code. 

Harter Act 

Legislation protecting a ship’s owner against claims for damage resulting from

the behavior of the vessels crew, provided the ship left port in proper condition. 

Hatch

The opening in the deck of a vessel which gives access to the cargo hold. 

Haulage 

The local transport of goods. Also the charge(s) made for hauling freight on

carts, drays, or trucks. Also called cartage or drayage. 

Hazardous Materials

A substance or material which has been determined by the U.S. Secretary of

Transportation to be capable of posing an unreasonable risk to health, safety,

and property when transported in commerce and which has been so designated. 

Heavy Lift 

Articles too heavy to be lifted by a ship’s tackle. 

Heavy Lift Charge 

A charge made for lifting articles too heavy to be lifted by a ship’s tackle. 

180 U.S. Department of Commerce
Heavy Lift Vessel 

A vessel with heavy lift cranes and other equipment designed to be selfsustaining in the handling of heavy cargo. 

Hedge 

To offset. 

Hedge Ratio 

The amount of an underlying instrument or the number of options which are

needed to hedge a covered option. 

High Density 

The compression of flat or standard bales of cotton to high density of

approximately 32 pounds. 

Hitchment 

The combination of portions of a shipment with different geographical regions

that move under one bill of lading from shipper to consignee. 

Hold

The space below deck in a vessel used to carry cargo. 

Hold For Pickup 

Freight to be held at the carrier’s destination location for pickup by the

recipient. 

Hold Harmless Contract 

An agreement by which one party accepts responsibility for all damages and

other liability that arise from a transaction, relieving the other party of any such

liability. 

Honor

To pay or to accept a draft complying with the terms of credit. 

House Air Waybill 

A bill of lading issued by a freight forwarder for consolidated air freight

shipments. 

House-To-House 

A term usually used to indicate a container yard to container yard shipment. 

HTML: Hypertext Markup Language

The coding language used to create hypertext documents for use on the World

Wide Web. A block of text is surrounded with codes that indicate how it should

appear. Additionally, in HTML you can specify that a block of text, or a word, is

linked to another file on the Internet. HTML files are meant to be viewed using

a World Wide Web Client Program, such as NetscapeTM or MosaicTM. 

U.S. Department of Commerce 181
HTS (of the U.S.): Harmonized Tariff Schedule

An organized numeric listing of goods and duty rates used by the U.S. Customs

Service to classify imports, to determine the duty rate of those imports and to

assemble statistics. HTS is based on the international Harmonized System

Convention.

HTTP: Hypertext Transport Protocol

The protocol for moving hypertext files across the Internet; requires an HTTP

client program on one end, and an HTTP server program on the other end.

HTTP is the most important protocol used in the World Wide Web. 

Hub And Spoke Routing 

Aircraft routing service pattern that feeds traffic from many cities into a central

hub designed to connect with other flights to final destinations. The system

maximizes operating flexibility by connecting many markets through a central

hub with fewer flights than would be required to connect each pair of cities in

an extensive system. 

Hull 

The outer shell of a vessel. 

Hump 

That part of a rail track which is elevated so that when a car is pushed up on

“the hump” and uncoupled it runs down the other side by gravity. 

Hundredweight Pricing 

Special pricing for multiple-piece shipments traveling to one destination which

are rated on the total weight of the shipment as opposed to rating on a per

package basis. 

Hypertext 

Generally, any text that contains links to other documents - words or phrases in

the document that can be chosen by a reader and which cause another document

to be retrieved and displayed.

I.C.P.O.: Irrevocable Corporate Purchase Order

A purchase order completed by a buyer on corporate letterhead that indicates the

type and quantity of products being ordered from a supplier.

Identical Merchandise 

Used by U.S. Customs in establishing the customs value of merchandise

exported to the U.S., identical merchandise is merchandise that is: (1) Identical

in all respects to the merchandise being appraised, (2) Produced in the same

country as the merchandise being appraised, and (3) Produced by the same

person as the merchandise being appraised. 

Immediate Delivery 

An alternate U.S. Customs entry procedure which provides for immediate

release of a shipment in certain cases. 

182 U.S. Department of Commerce
Immigration 

The entry of foreign nationals into a country for the purpose of establishing

permanent residence. 

Implied Conditions 

Certain implied conditions are not written into marine insurance policies, but

they are so basic to understanding between underwriter and the assured that the

law gives them much the same effect as if written. (In many other types of

contracts there also may be “implied conditions.” For example, a seller of goods

implies that they are fit for the purpose they purport to serve.) 

Import 

To bring in (goods or services) from a foreign country for trade or sale. 

Import Substitution 

A strategy which emphasizes the replacement of imports with domestically

produced goods to encourage the development of domestic industry. 

Import Credit 

A commercial letter of credit issued for the purpose of financing the importation

of goods. 

Import Duty 

Any tax on items imported. 

Import License 

A document required and issued by some national governments authorizing the

importation of goods. 

Import Quota 

A protective ruling establishing limits on the quantity of a particular product

that can be imported. 

Import Quota Auctioning 

The process of auctioning the right to import specified quantities of quotarestricted goods. 

Import Relief 

Any of several measures imposed by a government to temporally restrict

imports of a product or commodity to protect domestic producers from

competition. 

Import Restrictions 

Any one of a series of tariff and non-tariff barriers imposed by an importing

nation to control the volume of goods coming into the country from other

countries. 

Importer

The individual, firm, or legal entity that brings articles of trade from a foreign

source into a domestic market in the course of trade. 

U.S. Department of Commerce 183
Importer Number

An identification number assigned by the U.S. Customs Service to each

importer to track entries and other transactions. 

Imports 

Commodities of foreign origin as well as goods of domestic origin returned to

the producing country with no change in condition, or after having been

processed and/or assembled in other countries. 

Imports For Consumption 

The total of merchandise that has physically cleared through U.S. Customs

either entering domestic consumption channels immediately or entering after

withdrawal for consumption from bonded warehouses under U.S. Customs

custody or from U.S. Foreign Trade Zones. 

Impost 

A tax, usually an import duty. 

Importers Manual USA

A reference book detailing specific requirements for importing 135 different

product groups into the U.S. and other important information. 

Impound 

To seize or hold; or to place in protective custody by order of a court. 

In Bond 

A procedure under which goods are transported or warehoused under customs

supervision until they are either formally entered into the customs territory of

the U.S. and duties paid, or until they are exported from the U.S. 

In Bond Shipment 

An import or export shipment which has not been cleared by U.S. Customs

officials. 

In-Bond System 

A part of U.S. Customs Automated Commercial System, controls merchandise

from the point of unloading at the port of entry or exportation. 

In-Transit 

Refers to an international shipment that passes through the territory of a

particular country without entering the commerce of that country.

Incentive 

A motivational force that stimulates people to greater activity or increased

efficiency. 

Income 

Money or its equivalent, earned or accrued, arising from the sale of goods or

services. 

184 U.S. Department of Commerce
Incoterms 

A codification of international rules for the uniform interpretation of common

contract clauses in export/import transactions. 

Indemnify 

To compensate for actual loss sustained. 

Indemnity 

An agreement to reimburse another individual or legal entity who incurs a loss

that is covered by the agreement. 

Independent Action 

The right of a conference member to depart from the common freight rates,

terms or conditions of the conference without the need for prior approval of the

conference. 

Industrial List 

The Coordinating Committee for Multilateral Export Controls industrial list

contains dual-use items whose export are controlled for strategic reasons. 

Industrial Policy 

Encompasses traditional government policies intended to provide a favorable

economic climate for the development of industry in general or specific

industrial sectors. 

Infant Industry Argument 

The view that “temporary protection” for a new industry or firm in a particular

country through tariff and non-tariff barriers to imports can help it to become

established and eventually competitive in world markets.

Inflation 

Loss of purchasing power of money caused by growth of the amount of money

in circulation. 

Informal Entry 

A simplified import entry procedure accepted at the option of Customs for any

baggage or commercial shipment that does not exceed $2,000. 

Information Management 

The planning, budgeting, manipulating, and controlling of electronic and paper

information throughout its lifecycle as defined by OMB Circular A-130. 

Informed Compliance 

A term that describes the improved ability of an entity (such as a company) to

comply with federal rules and regulations through easy access to up-to-date

information. 

Infrastructure 

The basic structure of a nation’s economy. 

U.S. Department of Commerce 185
Inherent Vice 

The inherent physical properties of goods which may cause them to suffer

deterioration or damage without outside influence. (For example: spontaneous

combustion.) 

Injury 

A finding by the U.S. International Trade Commission that an import is causing

harm or going to cause harm to a U.S. industry. 

Inland Bill of Lading 

A bill of lading used in transporting goods overland to the exporters

international carrier. 

Inland Carrier

A transportation line which hauls import/export traffic between ports and inland

points. 

Inspection Certificate 

A document confirming that goods have been inspected for conformity. 

Instrument 

Any written document that gives formal expression to a legal agreement or act. 

Integrated Cargo Service 

A blend of all segments of the cargo system providing the combined services of

carrier, forwarder, handlers, and agents. 

Integrated Carriers 

Carriers that have multiple varieties of fleets (i.e. air and ground, truck and rail,

etc.). 

Intellectual Property 

An original piece of work that can be copyrighted or trademarked to confirm

ownership. 

Interbank Dealings 

Dealings between the banks. 

Interchange Agreement 

An agreement that specifically lays out the terms of leasing equipment from a

carrier. 

Interchange Point 

A location where one carrier delivers freight to another carrier. 

Interface 

A computer program that enables linkage between two or more computer

programs; or the boundary between any two systems, especialy where

information is transferred.

186 U.S. Department of Commerce
Interline Shipping 

The movement of a single shipment in two or more carriers. 

Intermodal Compatibility 

The capability of a shipment of goods to be transported from one form of

transportation to another. 

Intermodal Transport 

Coordinated transport of freight using multiple methods of transportation. 

International Trade 

The business of buying and selling commodities outside of national borders. 

Internet 

A global, decentralized web that connects more than a million independent

computers whose operators choose services for web and local use. 

Interoperability 

The capability to allow users to use any set of hardware and software to share

data readily among applications residing on varying combinations of hardware

and software within and between existing networks.

Interstate Carrier

A common carrier whose business extends beyond the boundaries of one state. 

Interstate Commerce 

Trade between or among several states of the U.S.; includes facsimile across

state lines or transport by rail and roads. 

Intranet 

Intranet is a closed internal network.

Invisible Trade Balance 

The balance of trade created by the import and export of services. 

Invoice 

A document identifying the buyer and seller; includes all relevant information

such as number, date, shipping date, mode of transport, etc. 

Invoice Line Item 

The way of identifying the commodity, price and quantity being sold and/or

bought.

ISO Code 

Refers to the standardization codes established by the ISO to identify countries,

currencies, standard units of measure, and other data elements. 

Issuance 

The establishment of a letter of credit by the issuing bank based on the buyers

application and credit relationship with the bank. 

U.S. Department of Commerce 187
IT06: Information Technology Initiative 6

Refers to the sixth initiative of the National Performance Review calling for the

development of an international trade data system sponsored by the U.S.

government that will meet the needs of federal agencies involved in

international trade as well as the trade information needs of businesses and the

general public. 

ITC: International Transaction Number

A unique identifier that ITDS will associate with an international trade

transaction; or a unique number assigned by the initiating party that identifies an

international trade transaction.

ITDS Data Elements 

The specific data list used by the International Trade Data System to facilitate

the entry, exit and in-transit movement of goods between the U.S. and foreign

countries.

Jetsam 

Articles from a ship or ships cargo which are thrown overboard, usually to

lighten the load in times of emergency or distress and that sinks or is washed

ashore. 

Jettison 

The act of throwing overboard at sea part of a vessels paraphernalia or cargo or

hull - usually in hopes of saving the ship from sinking. 

JIG 

Joint Industry Group. 

Joint Agent 

A person having authority to transact business for two or more transportation

lines. 

Joint Rate 

A single through-rate on cargo moving via two or more carriers. 

Joint Stock Company 

An unincorporated business association with ownership interests represented by

shares of stock. 

Joint Venture 

A combination of two or more individuals or legal entities who undertake

together a transaction for mutual gain or to engage in a commercial enterprise

together with mutual sharing of profits and losses; or a form of business

partnership involving joint management and the sharing of risks and profits as

between enterprises based in different countries. 

Jurat 

A statement signed by a person authorized to take oaths certifying to the

authenticity of a document or affidavit. 

188 U.S. Department of Commerce
Juristic Act 

Action intended to, and capable of having, a legal effect, such as the creation,

termination, or modification of a legal right. 

Just In Time 

The principle of production and inventory control that prescribes precise

controls for the movement of raw materials, component parts, and work-inprogress. Goods arrive when needed for production for use rather than

becoming expensive inventory that occupies costly warehouse space. 

Keelage 

The charges paid by a ship entering or remaining in certain ports. 

Key Currency 

A major currency in the global economy. Key currencies include the U.S. dollar,

the British pound sterling, the German mark, the Swiss franc, the French franc,

the Dutch gilder, the Japanese yen, and the Canadian dollar. 

Kiosk 

A small structure which incorporates a computer screen and input devices such

as a keyboard or touch screen. Usually found in public places such as libraries

or museums, it is used for the dissemination of information to the public. 

Knocked Down 

An article taken apart and folded or telescoped in such a manner as to reduce its

bulk at least 66 2/3 percent from its normal shipping cubage when set up or

assembled. 

Known Loss 

An evident loss (as opposed to a concealed loss or damage to contents within a

package). A loss of which the insured and/or the insurer is aware at the time the

insurance is effected. 

Laissez-Faire 

A term used to describe minimal governmental involvement in an economy,

allowing market forces and individuals to make their own decisions, with little

or no regulation. 

Landbridge 

The movement of containers from a foreign country by vessel, transiting a

country by rail or truck, and then being loaded aboard another vessel for

delivery to a second foreign country. 

Lanham Act Of 1947 

Federal legislation governing trademarks and other symbols for identifying

goods sold in interstate commerce. 

Lay Order

The period during which imported merchandise may remain at the place of

unloading without some action being taken for its disposition. 

U.S. Department of Commerce 189
Legacy System 

An existing automated system that continues to function within an agency at the

time of transition to a different system. 

Legal Entity 

Any individual, proprietorship, partnership, corporation, association, or other

organization that has, in the eyes of the law, the capacity to make a contract or

an agreement, and the abilities to assume an obligation and to discharge an

indebtedness. 

Legal Tender

Any money that is recognized as being lawful for use by a debtor to pay a

creditor, who must accept same in the discharge of a debt unless the contract

between the parties specifically states that another type of money is to be used. 

Less Than Truckload 

A shipment weighing less than the weight required for the application of the

truck load rate. 

Letter Of Assignment 

A document with which the assignor assigns rights to a third party. 

Letter Of Credit 

A document issued by a bank stating its commitment to pay someone a stated

amount of money on behalf of a buyer so long as the seller meets very specific

terms and conditions. Letters of credit are more formally called documentary

letters of credit. 

Letter of Indemnity 

A document which serves to protect the carrier/owner financially against

possible repercussions in connection with the release of goods without

presentation of an original bill of lading. 

Letter of Intent 

A document that describes the preliminary understanding between parties who

intend to make a contract or join together in another action. 

License, Permit, Etc. 

Abbreviation for License, Permit, Certificate or Visa; refers to data provided

when license, permit, etc. is applied for, issued or renewed. 

Licensing 

Grant of permission to import or export merchandise within a specified time

limit, up to defined quantity or through certain location(s)

Licensing Agreement 

A contract whereby the holder of a trademark, patent, or copyright transfers a

limited right to use a process, sell or manufacture an article, or furnish

specialized services covered by the trademark, patent, or copyright to another

firm. 

190 U.S. Department of Commerce
Lift Van 

A wooden or metal container used for packing household goods and personal

effects. 

Lighter

A barge towed by a tugboat and used mainly in harbors and inland waterways

for the transport of cargo. 

Lighter Aboard Ship 

A floatable large container (lighter) used in the combined ocean and inland

waterway transport of goods. 

Lighterage 

The loading or unloading of a ship by means of a lighter, especially when

shallow waters prevent an ocean going vessel from entering a waterway. 

Limitation Period 

A maximum period set by statute within which a legal action can be brought or

a right enforced. A statute may prohibit, for example, any individual or legal

entity from bringing an action for breach of contract more than one year after

the breach ccurred. 

Limited Appointment 

Persons appointed to U.S. and Foreign Commercial Service (or to other foreign

services) from the private sector or from the federal government who are noncareer officers assigned overseas for a limited time. 

Limited Liability 

Restricted liability for the obligations of a business. 

Limited Partnership 

A partnership in which at least one partner has general liability and at least one

of the other partners has limited liability. 

Line Haul 

The direct movement of freight between two major ports by a single ship. 

Line Haul Vessel 

A vessel which is on a regularly defined schedule. 

Line Release System 

A part of the U.S. Customs Automated Commercial System that is designed for

the release and tracking of shipments through the use of personal computers and

bar code technology. 

Liner

A vessel carrying passengers and cargo that operates on a route with a fixed

schedule. 

U.S. Department of Commerce 191
Liner Terms 

Conditions under which a shipping company will transport goods, including the

amount payable for freight and the cost both for loading and discharge of the

vessel. 

Liquidated Damages 

A sum of money that a contracting party agrees to pay to the other party for

breaching an agreement, particularly important in a contract in which damages

for breach may be difficult to assess. 

Liquidation 

The final review of a U.S. Customs entry, and determination of the rate of duty

and amount of duty by Customs. 

Liquidation System 

A part of U.S. Customs Automated Commercial System, closes the file on each

entry and establishes a batch filing number which is essential for recovering an

entry, for review or enforcement purposes. 

Liquidity

(Economics) (a) A company’s ability to meet its obligations at all times. (b) The

availability of liquid funds in an economy. (c) The possibility of being able to

carry out financial transactions without influencing the market. 

Lloyds Of London 

An English association of insurance underwriters, the oldest of its kind in the

world. Not in itself an insurance company. 

Lloyds Registry 

An English society, independent of Lloyds of London, which surveys and

classifies the ships of the world according to their description, condition,

seaworthiness, and compliance with codes and protocols. Also establishes

standards for maintenance and construction. (Correct name is: Lloyds Register

of Shipping.) 

Loading 

The physical placing of cargo into carrier’s container or onto a vessel. 

Local Area Network 

(LAN) A user-owned and operated data transmission facility connecting a

number of communication devices (e.g., computers, terminals, printers, storage

devices) within a single building or campus of buildings.

Longshoreman 

A laborer who loads and unloads ships at a seaport. 

Lose Of Intent 

A document, such as a written memorandum, that describes the preliminary

understanding between parties who intend to make a contract or join together in

another action, such as a joint venture or a corporate merger. 

192 U.S. Department of Commerce
Lot Labels 

Labels attached to each piece of multiple lot shipment for identification

purposes. 

Lower Deck Containers 

Carrier owned containers specially designed as an integral part of the aircraft to

fit in the cargo compartments of a wide body aircraft. 

Macroeconomics 

The study of statistics of the economy as a whole rather than as single economic

units. 

Mail Entry 

A means of shipping and entering goods into the Customs territory of the U.S. 

Mala Fide 

In bad faith; a seller’s representation that goods are usable for a particular

purpose when in fact the seller knows that the goods are not. 

Manifest 

A document giving the description of a ship’s cargo or the contents of a car or

truck. 

Maquiladora 

A program which allows foreign manufacturers to ship components into Mexico

duty free for assembly and subsequent reexport. 

Margin 

The difference between the cost of sold items and the total net sales income. 

Marginal Cost 

The increase in the total cost of production that results from manufacturing one

more unit of output. 

Maritime 

Business pertaining to commerce or navigation by sea. 

Market Access 

The openness of a national market to foreign products. 

Market Disruption 

A situation where a surge of imports of a certain product causes a sharp decline

in the domestic sales of that product and creates a hardship for domestic

producers. 

Market Economy 

An economic system where resources are allocated and production of products

determined by market forces rather than by government decree. 

U.S. Department of Commerce 193
Market Price 

The price established in the market where buyers and sellers meet to buy and

sell similar products. 

Marks 

Information placed on outer surface of shipping containers or packages such as

address labels, identifying numbers, box specifications, cautions, or directional

warnings. 

Matador Bond 

Bond issued on the Spanish market, denominated in currencies other than the

peseta. 

Material Contract Terms 

Terms in a contract that describe the goods, fix the price, and set the delivery

date. 

Mates Receipt 

A declaration issued by an officer of a vessel in the name of the shipping

company stating that certain goods have been received on board his vessel. 

Measurement Cargo 

A cargo on which the transportation charge is assessed on the basis of

measurement. 

Medium of Exchange 

Any commodity which is widely accepted in payment for goods and services

and in settlement of debts. 

Memorandum Bill of Lading 

The duplicate copy of the bill of lading. 

Memorandum Tariff 

Publications which contain rule and rate information extracted from official

tariffs. 

Merchants Credit 

A letter of credit issued by the buyer himself with no commitment on the part of

a bank. 

Merchants Haulage 

The inland move from or to a port that has all arrangements made by the

exporter. 

Merry-Go-Round 

The circulation of money through various sources, ending up where it started. 

Message 

An organized, well-defined set of data that one computer or application sends to

another.

194 U.S. Department of Commerce
Microbridge 

A landbridge movement in which cargo originating/destined to an inland point

is railed or trucked to/from the water port for a shipment to/from a foreign

country. 

MID 

Originally Manufacture Identification Number: A data element used by

Customs. 

Minibridge 

Movement of cargo from a port over water then over land to a port on an

opposite coast. 

Minimum Charge 

The lowest rate applicable on each type of cargo service no matter how small

the shipment. 

Mission 

General statement of the purpose, nature and functions of an organization. (The

reasons to be in business, why the organization exists.)

Mixed Credit 

The combining of concessional and market-rate export credit as an export

promotion mechanism. 

MOD Act 

Customs Modernization and Informed Compliance Act: Passage 1992, HR

3935. 

Money 

Any denomination of coin or paper currency of legal tender that passes freely as

a medium of exchange; anything that is accepted in exchange for other things. 

Money Creation 

The increase in money supply by the central or commercial banks. 

Money Market 

The market for short term financial instruments (i.e. commercial paper, treasury

bills, discount notes). 

Money Market Operations 

Comprises the acceptance and relending of deposits on the money market. 

Money Supply 

The amount of domestic cash and deposit money available in an economy. 

Moor

To secure a vessel to an anchor, buoy, or pier. 

U.S. Department of Commerce 195
Moorage 

Charges assessed for mooring a vessel to a pier or wharf. 

Most Favored Nation 

A non-discriminatory trade policy commitment on the part of one country to

extend to another country the lowest tariff rate it applies to any other country. 

Motor Carriers Terminal 

The place where loaded or empty shipping containers are received or delivered

by a motor carrier. 

Multilateral Agreement 

An international compact involving three or more parties. 

Multimodal Transport 

Shipping which includes at least two modes of transport, such as shipping by

rail and by sea. 

Multinational Corporation 

A corporation having subsidiaries in more than one country. 

Multiserver

A hardware configuration consisting of multiple computers or devices on a

network that manages network resources.

NAFTA

North American Free Trade Agreement. 

NATAP

(North American Trade Automation Prototype) A trinational initiative to

harmonize government processes and standardize data elements across the

North American Free Trade Agreement (NAFTA) countries (i.e., United States,

Mexico and Canada) and proof of concept for the International Trade Data

System

National Treatment 

National treatment affords foreign individuals and firms the same competitive

opportunities, including market access, as are available to domestic parties. 

Nationalization 

Takeover by the government without compensation of a public or private

activity. 

NCBFAA

National Customs Brokers and Forwarders Association of America. 

Negotiable 

Anything that can be sold or transferred to another for money or as payments of

a debt. 

196 U.S. Department of Commerce
Negotiable Bill of Lading 

Bill of lading transferred by endorsement. 

Nested 

Packed one within another. 

Net Cash 

Payment for goods sold usually within a short period of time with no deduction

allowed from the invoice price. 

Net National Product 

The market value of the net output of goods and services produced by the

nations economy. 

Net Price 

Price after all discounts, rebates, etc. have been allowed. 

Net Weight 

The weight of goods without packaging. 

Network Server

A computer that manages network traffic.

Neutral Air Waybill 

A standard air waybill without identification of issuing carrier. 

NII 

National Information Infrastructure Task Force. 

No Show 

Freight that has been booked to a ship, but has not physically arrived in time to

be loaded to that ship. 

Non-repudiation 

To be added at a later time.

Notary Public 

A person commissioned by a state for a stipulated period to administer certain

oaths and to attest and certify documents. 

Notify Address 

Address mentioned in the transport document to which the carrier is to give

notice when goods are due to arrive. 

Notify Party 

Name and address of a party in the transport document to be notified by the

shipping company of the arrival of a shipment. 

NPR 

National Performance Review. 

U.S. Department of Commerce 197
NTDB 

National Trade Data Bank: A data base used as the central collection point for

U.S. government generated export promotion information. 

Objective 

A measurable result that management has agreed to accomplish within a specific

time frame. Strategic objectives generally have time frames of 5 to 10 years.

Ocean Bill of Lading 

A receipt for the cargo and a contract for transportation between a shipper and

the ocean carrier. 

Offer

A proposal that is made to a certain individual or legal entity to enter into a

contract, that is definite in its terms, and that indicates the offers intent to be

bound by an acceptance. 

Offshore 

A reference to financial operations transacted outside the country in question. 

Offshore Bank 

Bank located outside the country in question. 

Offshore Banking Center

Financial center where many of the financial institutions have little connection

with that country’s financial system; usually done for tax purposes. 

Old-To-Market 

Committed to export, experienced, larger scale firm with export sales volume in

excess of 15 percent. 

On Board 

Notation on a bill of lading indicating that the goods have been loaded on board

or shipped on a named ship. In the case of received for shipment bills of lading,

the following four parties are authorized to add this “on board” notation: (1) the

carrier, (2) the carriers agent, (3) the master of the ship, and (4) the master’s

agent. 

On Deck 

Notation on a bill of lading which indicates that the goods have been loaded on

the deck of the ship. 

On Deck Bill Of Lading 

Bill of lading containing the notation that goods have been placed on deck. 

Open Account 

Credit extended that is not supported by a note, mortgage, or other formal

written evidence of indebtedness. 

198 U.S. Department of Commerce
Open Conference

A shipping conference in which there are no restrictions upon membership other

than ability and willingness to serve the trade. 

Open Economy 

An economy free of trade restrictions. 

Open System 

A software environment consisting of products and technologies which are

designed and implemented in accordance with standards - established and de

facto - that are vendor independent and commonly available; OR an information

processing environment based on application programming interfaces and

communication protocol standards, which transcend any one vendor and have

sufficient vendor product investment to ensure both multiple platform

availability and industry sustainability.

Open-End Contract 

An agreement by which the buyer may purchase goods from a seller for a

certain time without changes in the price or the contract terms. 

Operator

A corporation that operates a foreign trade zone under the terms of an

agreement with a foreign trade zone grantee. 

Order

A request to deliver, sell, receive, or purchase goods or services. 

Order Bill 

A bill of lading that states that goods are consigned to the order of the person

named in the bill. 

Order Notify 

A bill of lading term to provide for surrender of the original bill of lading before

freight is surrendered. 

OSI 

(Open Systems Interconnect) A system devised to define standards for all levels

of communication. Each layer is aware only of the level above and below it. It

takes information from the layer above, adds control information to it, and

passes it to the layer below.

Outright 

A forward purchase or sale of foreign exchange which is not offset by a

corresponding spot transaction. 

Outward Swap 

Spot purchase of foreign exchange and forward resale of the same currency

against domestic currency. 

U.S. Department of Commerce 199
Over the Counter

Securities trading which takes place outside the normal exchanges. 

Overnight 

Swap from settlement date until the following business day. 

Packing List 

A document prepared by the shipper listing the kinds and qualities of

merchandise in a particular shipment. 

Pallet 

A platform with or without sides, on which a number of packages or pieces may

be loaded to facilitate handling. 

Pallet Loader

A device employing one or more vertical lift platforms for the mechanical

loading or unloading of palletized freight at planeside. 

Pallet Transporter

A vehicle for the movement of loaded pallets between the aircraft and the

freight terminal. 

Palletizing 

The loading and securing of a number of sacks, bags, boxes or drums on a pallet

base. 

Par Balue 

The official fixed exchange rate between two currencies or between a currency

and a specific weight of gold. 

Par Exchange Rate 

The free market price of one country’s money in terms of the currency of

another. 

Par Of Exchange 

The market price of money in one national currency that is exchanged at the

official rate for a specific amount in another national currency, or another

commodity of value (gold, silver, etc.). 

Parcel Post Air Freight 

An airline service through which a shipper can consolidate a number of parcel

post packages, with destination postage affixed by the shipper, for shipment as

air freight to the postmaster at another city for subsequent delivery within local

postal zones or beyond. 

Parent Bank 

A bank in a major industrial country that sets up a subsidiary in a developing

country. 

200 U.S. Department of Commerce
Parity

Equality in amount or value. 

Parol 

Oral expression. A parol contract is one that is verbal only and that has not been

put into writing by the parties. 

Particular Average 

A partial loss of cargo or hull which falls entirely upon the interest concerned.

See also “General Average.” 

Partnership 

An unincorporated business owned and operated by two or more persons, who

may have general or limited liability according to the agreement of the

partnership. 

Patent 

A grant by law to an inventor of a device of the right to exclude other persons

from making, using, or selling the device. 

Payable In Exchange 

The requirement that a negotiable instrument be paid in the funds of the place

from which it was originally issued. 

Payee 

The person or organization to whom a check or draft or note is made payable. 

Payer

The party primarily responsible for the payment of the amount owned as

evidenced by a given negotiable instrument. 

Payments Surplus 

The excess of the value of a nation’s exports over its imports. 

Penalties 

The charges assessed or action taken by customs in response to a violation of a

customs-enforced regulation or law. 

Performance 

The proper fulfillment of a contract or obligation. 

Peril Point 

A hypothetical limit beyond which a reduction in tariff protection would cause

serious injury to a domestic industry. 

Perishable Freight 

Freight subject to decay or deterioration. 

U.S. Department of Commerce 201
Petrodollars 

Huge sums of money from oil-producing nations other than the U.S. or United

Kingdom. 

Pickup Order

An order from a broker to a carrier to pick up freight at a location. 

Pier-to-Pier

Shipment of cargo by carrier from origin pier to discharge pier. 

Piggyback 

The transportation of truck trailers and containers on specially equipped railroad

flat-cars. 

Pilferage 

Taking of property by stealth or clandestine theft, usually in small quantities. 

Pilot 

A person whose occupation is to steer ships, particularly along a coast, or into

and out of a harbor. 

Plimsoll Mark 

The horizontal line on the outside of a ship which represents the depth to which

a vessel may be safely loaded; this mark must stay above the water surface. 

Point of Origin 

The location at which a shipment is received by a transportation line from the

shipper. 

Point-to-Point 

Represents service and rates for shipments in door-to-door service. 

Port 

A harbor or haven where ships may anchor and discharge or receive cargo. 

Port Charge 

A charge made for services performed at ports. 

Port of Discharge 

The port at which a shipment is off loaded by a transportation line. 

Port of Entry 

A port at which foreign goods are admitted into the receiving country. 

Port of Export 

The port, airport, or customs point from which an export shipment leaves a

country for a voyage to a foreign country. 

202 U.S. Department of Commerce
Portfolio Investment 

In general, any foreign investment that is not direct investment is considered

portfolio investment. 

Postdated Check 

A check bearing a date that has not yet arrived. 

Pre-Arrival Data 

Data transmitted, processed, and resident on a government computer before the

shipment arrives at the port of entry.

Pre-License Checks 

Checks that are conducted to determine that a request for a license to export a

controlled commodity represents a legitimate order. 

Preferences 

A creditor’s right to be paid before other creditors of the same debtor. 

Premium 

1) The amount above a regular price, paid as incentive to do something. 2) The

price of insurance protection for a specified risk for a specified period of time.

Comment: Meaning number 1 above correctly indicates that one meaning of

“Premium” is something in addition to the regular price. In meaning number 2,

“Premium” is the price. 

Prepaid 

A notation on a shipping document indicating that shipping charges have

already been paid by the shipper to the carrier. 

Prepaid Charges 

The transportation trade practice under which the shipper pays transportation

charges. 

Price Support 

Subsidy or financial aid offered to specific growers, producers, or distributors,

in accordance with governmental regulations to keep market prices from

dropping below a certain minimum level. 

Priority Air Freight 

Reserved air freight or air express service wherein shipments have a priority

after mail and the small package services. 

Private Corporation 

A business corporation with shares that are not traded among the general public. 

Procurement and Lead Time 

The time required by the buyer to select a supplier and to place and obtain a

commitment for specific quantities of materials at specified times. 

U.S. Department of Commerce 203
Product Groups 

Commodity groupings used for export control purposes. 

Productivity 

A measurement of the efficiency of production. 

Project License 

A U.S. license which authorizes large-scale exports of a wide variety of

commodities and technical data for specified activities. 

Promotional Rate 

A rate applying to traffic under special conditions and usually confined to

movement between a limited number of cities. 

Proof of Delivery 

Evidence that one party has turned over something (cargo) to another.

Commonly, in transportation, a signed, dated acknowledgment of receipt. 

Proprietor

A person who has an exclusive right or interest in property or in a business. 

Proprietorship 

A business owned by one person. 

Protectionism 

The deliberate use or encouragement of restrictions on imports to enable

relatively inefficient domestic producers to compete successfully with foreign

producers. 

Protective Service 

Many airlines offer a protective service where shippers can arrange to have their

shipments under carrier surveillance at each stage of transit. 

Protective Tariff 

A duty or tax on imported products to make them more expensive in

comparison to domestic products. 

Protest 

The means by which an importer, consignee, or other designated party may

challenge a customs decision. 

Public Corporation 

A business corporation with shares traded among the general public, such as

through a stock exchange. 

Published Rate 

The charges for a particular class of cargo as published in a carriers tariff. 

204 U.S. Department of Commerce
Purchase Order

A purchaser’s written offer to a supplier formally stating all terms and

conditions of a proposed transaction. 

Quadrilateral Meetings 

Meetings involving trade ministers from the U.S., European Community,

Canada, and Japan to discuss trade policy matters. 

Quantitative Restrictions 

Explicit limits, or quotas, on the physical amounts of particular commodities

that can be imported or exported during a specified time period, usually

measured by volume but sometimes by value. The quota may be applied on a

selective basis, with varying limits set according to the country of origin, or on

a quantitative global basis that only specifies the total limit and thus tends to

benefit more efficient suppliers. 

Quarantine

The term during which an arriving ship or airplane, including its passengers,

crew and cargo, suspected of carrying a contagious disease, is held in isolation

to prevent the possible spread of the disease. 

Quay

A structure built for the purpose of mooring a vessel; also called a pier. 

Query 

Borrowings in a foreign currency where the rate of interest is linked to an

agreed scale, and/or the rate of exchange at repayment is linked to an agreed

scale.

Query 

Note denominated and paying interest in one currency but whose redemption

value is linked to an exchange rate for another currency.

Query 

A request for information from a database

Queue 

A line or group of people waiting for service, such as a line of people waiting in

a teller line at a bank; or paperwork in a stack waiting for processing; or items

on a waiting list waiting for processing or repair. 

Quid Pro Quo

A mutual consideration; securing an advantage or receiving a concession in

return for a similar favor. 

Quota 

A limitation on the quantity of goods that may be imported into a country from

all countries or from specific countries during a set period of time. 

U.S. Department of Commerce 205
Quota System 

A part of the U.S. Customs Service Automated Commercial System, controls

quota levels (quantities authorized) and quantities entered against those levels. 

Rail Waybill 

Freight document that indicates goods have been received for shipment by rail. 

Random Selectivity 

Indiscriminate risk assessment process.

Rate Of Exchange 

The amount of funds of one nation that can be bought, at a specific date, for a

sum of currency of another country. 

Real Rights 

Rights in real estate or in items attached to real estate. 

Realignment 

Simultaneous and mutually coordinated re- and devaluation of the currencies of

several countries. 

Receipt 

Any written acknowledgment of value received. 

Receiving Papers 

Paperwork that accompanies a shipment when it is brought to the dock. 

Reciprocity 

The process by which governments extend similar concessions to each other. 

Reconsignment 

A change in the name of the consignor; a change in the place of delivery; or

relinquishment of shipment at point of origin. 

Redeliver

A demand by U.S. Customs to return previously released goods to Customs

custody for reexamination, reexport, or destruction. 

Reefer Container

A controlled temperature shipping container (usually refrigerated). 

Reengineer

Redesign based on basic process needs.

Reexport 

The export of imported goods without added value. 

Refund 

An amount returned to the consignor as a result of the carrier having collected

charges in excess of the originally agreed upon charges. 

206 U.S. Department of Commerce
Relay 

A shipment that is transferred to its ultimate destination port after having been

shipped to an intermediate point. 

Remittance 

Funds forwarded from one person to another as payment for bought items or

services. 

Replevin 

A legal action for recovering property brought by the owner or party entitled to

repossess the property against a party who has wrongfully kept it. 

Request For Quotation 

A negotiating approach whereby the buyer asks for a price quotation from a

potential seller for specific quantities of goods. 

Rescind 

To cancel a contract. 

Reserved Freight Space 

A service by some airlines enabling shippers to reserve freight space on

designated flights. 

Retaliation 

Action taken by a country to restrain its imports from a country that has

increased a tariff or imposed other measures that adversely affect its exports. 

Reevaluation 

The restoration of the value of a nation’s currency that had once been devalued

in terms of the currency of another nation. 

Reverse Preferences 

Tariff advantages once offered by developing countries to imports from certain

developed countries that granted them preferences. 

Risk Assessment 

See Selectivity for definition.

Risk Position 

An asset or liability which is exposed to fluctuations in value through changes

in exchange rates or interest rates. 

Road Waybill 

Transport document that indicates goods have been received for shipment by

road haulage carrier. 

Roll-On, Roll-Off 

A category of ships designed to load and discharge cargo which rolls on wheels. 

U.S. Department of Commerce 207
Rollover Credit 

Any line of credit that can be borrowed against up to a stated credit limit and

into which repayments go for crediting. 

Route 

The course or direction that a shipment moves. 

Royalty 

Compensation for the use of a person’s property based on an agreed percentage

of the income arising from its use. 

Rule-Based Selectivity 

Risk assessment process based upon user-defined criteria and weights assigned

according to established regulations or processes as selection factors.

Sales Agreement 

A written document by which a seller agrees to convey property to a buyer for a

stipulated price under specified conditions. 

Sales Tax 

A tax placed by a state or municipality on items at the time of their purchase. 

Salvage 

Compensation paid for the rescue of a ship, its cargo, or passengers from a loss

at sea; or the act of saving a ship or its cargo from possible loss; or property

saved from a wreck or fire. 

Samaurai Bond 

Bond issued on the Japanese market in yen outside Japan. 

Sanction 

An embargo imposed against an individual country by the United Nations or a

group of nations in an effort to influence its conduct or its policies. 

Seal 

A mark or sign that is used to witness and authenticate the signing of an

instrument, contract, or other document. 

Seaworthiness 

The fitness or safety of a vessel for its intended use. 

Secured 

Guaranteed as to payment by the pledge of something valuable. 

Security 

Property pledged as collateral. 

Seizure 

The act of taking possession of property. 

208 U.S. Department of Commerce
Selectivity 

Process to identify a commodity, conveyance or persons associated with the

conveyance for further inspection based on a set of criteria.

Sellers Market 

Exists when goods cannot easily be secured and when the economic forces of

business tend to cause goods to be priced at the vendors estimate of value. 

Selling Rate 

Rate at which a bank is willing to sell foreign exchange or to lend money. 

Server

A computer, or a software package, that provides a specific kind of service to

client software running on other computers. The term can refer to a particular

piece of software, such as WWW server, or to the machine on which the

software is running. A single server machine could have several different server

software packages running on it, thus providing many different servers to clients

on the network.

Service A Loan 

To pay interest due on a loan. 

Service Commitments 

Pickup and/or delivery commitments agreed to by carrier and shipper. 

Settlement Date 

The date on which payment for a transaction must be made. 

Shipment 

Cargo tendered by one shipper, on one bill of lading, from one point of

departure, for one consignee, to one destination, at one time, via a single port of

discharge. 

Shipment Record 

A repository of information for each shipment that reflects all activity

throughout each step of the shipment life cycle. 

Shipped On Deck 

Annotation in a bill of lading that the goods have been shipped on the deck of a

vessel. 

Shipper

The company or person who ships cargo to the consignee. 

Shipping Order

Instructions of shipper to carrier for forwarding of goods. 

Ships Manifest 

A list of the individual shipments constituting the ship’s cargo. 

U.S. Department of Commerce 209
Ships Papers 

The documents a ship must carry to meet the safety, health, immigration,

commercial and customs requirements of a port of call or of international law. 

Ships Stores 

The food, medical supplies, spare parts and other provisions carried for the dayto-day running of a vessel. 

Short Form Bill of Lading 

A bill of lading on which the detailed conditions of transportation are not listed

in full. 

Short of Exchange 

The position of a foreign exchange trader who has sold more foreign bills than

the quantity of bills he or she has in possession to cover sales. 

Short Weight 

Notation of a shipment’s weight as less than noted on the original bill of lading,

indicating loss during shipment. 

Shortage 

A deficiency in quantity shipped. 

Signature Service 

A service designed to provide continuous responsibility for the custody of

shipments in transit, so named because a signature is required from each person

handling the shipment. 

Sling 

A contrivance into which freight is placed to be hoisted into or out of a ship. 

Slip 

A vessel’s berth between two piers. 

Small Package Service

A specialized service to guarantee the delivery of small parcels within specified

express time limits. 

Smuggling 

Conveying goods or persons across borders without permission. 

Soft Currency 

The funds of a country that are controlled by exchange procedures, thereby

having limited convertibility into gold and other currencies. 

Soft Loan 

A loan made with easy or generous terms such as low or no interest and long

payback. 

210 U.S. Department of Commerce
Software 

A combination of associated computer instructions and computer data

definitions required to enable the computer hardware to perform computational,

data manipulation, and control functions (to include parameters and procedures

associated with software products).

Sovereign Credit 

A borrowing guaranteed by the government of a sovereign state. 

Sovereign Risk 

The risk to a lender that the government of a sovereign state may default on its

financial obligations. 

Special Rates 

Rates that apply to cargo traffic under special conditions and usually a limited

number of cities. 

Specific Commodity Rate 

Rate applicable to certain classes of commodities, usually commodities moving

in volume shipments. 

Specific Rate of Duty 

A specified amount of duty per unit of weight or other quantity. 

Spot Cash 

Immediate cash payment in a transaction. 

Spot Exchange 

The purchase and sale of foreign exchange for delivery and payment at the time

of the transaction. 

Spot Exchange Rate 

The price of one currency expressed in terms of another currency at a given

moment in time. 

Spot Market 

The market for a commodity or foreign exchange available for immediate

delivery. 

Spot Operations 

Foreign exchange dealings in which settlement of the mutual delivery

commitments is made, at the latest two days after the transaction was carried

out. 

Spot Price 

A price quotation for immediate sale and delivery of a commodity or currency. 

Spot Rate 

The rate for purchase or sale of a commodity for immediate delivery. 

U.S. Department of Commerce 211
Spotting 

The placing of a container where required to be loaded or unloaded. 

Standard of Living 

The level of material affluence of a nation as measured by per capita output. 

Standby Commitment 

A bank commitment to loan money up to a specified amount for a specific

period, to be used only in a certain contingency. 

Steamship Indemnity 

An indemnity received by an ocean carrier issued by a bank indemnifying him

for any loss incurred for release of goods to the original bill of lading. 

Stevedore 

A person having charge of the loading and unloading of ships in port. 

Storage 

The keeping of goods in a warehouse. 

Storage Demurrage 

A charge made on property remaining on the dock past the prescribed “free-time

period.” 

Storage in Transit 

The stopping of freight traffic at a point located between the point of origin and

destination to be stored and reforwarded at a later date. 

Store-Door Delivery 

The movement of goods to the consignee’s place of business, customarily

applied to movement by truck. 

Stowage 

The arranging and packing of cargo in a vessel for shipment. 

Stowage Instructions 

Specific instructions given by the shipper or his agent concerning the way in

which cargo is to be stowed. 

Stowplan 

A diagram showing how cargo containers have been placed on a vessel; also

known as stowage plan. 

Straight Bill of Lading 

A nonnegotiable bill of lading that designates a consignee who is to receive the

goods and obligates the carrier to deliver the goods to that consignee only. 

Strike Clause 

An insurance clause which may be included in policies to cover against losses

as a result of strikes, riots, and civil commotions. 

212 U.S. Department of Commerce
Stripping 

The unloading of cargo from a container; also called devanning. 

Stuffing 

The loading of cargo into a container. 

Subsidiary 

Any organization of which more than 50 percent of whose voting stock is

owned by another firm. 

Subsidy 

A grant paid by a government to producers of goods to strengthen their

competitive position. 

Supply Access 

Assurances that importing countries will, in the future, have fair and equitable

access at reasonable prices to supplies of raw materials and other essential

imports. 

Surcharge 

A charge above the usual or customary charge. 

Surety 

A bond, guaranty, or other security that protects a person, corporation, or other

legal entity in cases of another’s default in the payment of a given obligation,

improper performance of a given contract, malfeasance of office, and others. 

Survey 

A report by an independent third party, generally a surveyor, who determines the

condition of vessels, cargo, or property (often to support an insurance claim). 

Sushi Bond 

Eurodollar bonds issued by Japanese corporations on the Japanese market for

Japanese investors. 

Swap (transaction) 

A spot purchase of foreign exchange, fixed or floating rate funds, or assets with

simultaneous forward sale or vice versa. 

Switch Arrangements 

A form of countertrade in which the seller sells on credit and then transfers the

credit to a third party. 

Table Of Denial Orders 

A list of individuals and firms which have been disbarred from shipping or

receiving U.S. goods or technology. Firms and individuals on the list may be

disbarred with respect to either controlled commodities or general destination

(across-the-board) exports. 

U.S. Department of Commerce 213
Tare Weight 

The weight of a container and/or packing materials, but without the goods being

shipped. The gross weight of a shipment less the net weight of the goods being

shipped. 

Tariff

A comprehensive list or “schedule” of merchandise with applicable rates to be

paid or charged for each listed article; or a schedule of shipping rates charged,

together with governing rules and regulations. 

Tariff Anomaly 

A tariff anomaly exists when the tariff on raw materials or semi-manufactured

goods is higher than the tariff on the finished product. 

Tariff Escalation 

A situation in which tariffs on manufactured goods are relatively high, tariffs on

semi-processed goods are moderate, and tariffs on raw materials are nonexistent

or very low. 

Tariff Quotas 

Application of a higher tariff rate to imported goods after a specified quantity of

the item has entered the country at a lower prevailing rate. 

Tariff Schedule 

A comprehensive list of the goods which a country may import and the import

duties applicable to each product. 

Tariff War

When one nation increases the tariffs on goods imported from, or exported to

another country, and that country then follows by raising tariffs itself in a

retaliatory manner. 

Tax Haven 

A nation offering low tax rates and other incentives for individuals and

businesses of other countries. 

TCP/IP

(Transmission Control Protocol/Internet Protocol) A standard set of

communications network protocols developed by the U.S. Department of

Defense and accepted as a standard network protocol worldwide, especially for

UNIX Ethernet systems.

Tender

A small vessel which serves a larger vessel in a port for the purpose of

supplying provisions and carrying passengers from ship to shore. 

Tenor

The period between the formation of a debt and the date of expected payment. 

214 U.S. Department of Commerce
Terminal 

The area at the end of a rail, ship, air, or truck line which serves as a loading,

unloading, transfer point, and storage/repair facility. 

Terminal Charge 

A charge made for services performed at terminals. 

Terms of Trade 

The volume of exports that can be traded for a given volume of imports. 

Third World Countries 

Developing countries, especially in Asia, Africa, and Latin America, but

excluding communist countries. 

Through Bill of Lading 

A single bill of lading covering receipt of cargo at the point of origin for

delivery to the ultimate consignee. 

Through Rate 

A shipping rate applicable from point of origin to destination. 

Tied Loan 

A loan made by a government agency that requires a foreign borrower to spend

the proceeds in the lender’s country. 

To Order

A term on a financial instrument or title document indicating that it is negotiable

and transferable. 

Tracer

A request upon a transportation line to trace a shipment for the purpose of

expediting its movement or establishing delivery. 

Tracking 

A carriers system of recording movement intervals of shipments from origin to

destination. 

Trade Community 

Importers, exporters, manufacturers, brokers, freight forwarders, freight

consolidators and carriers directly involved in the sale and transport of

international trade.

Trade Deficit 

A nation’s excess of imports over exports over a period of time. 

Trade Name 

The name under which an organization conducts business, or by which the

business or its goods and services are identified. 

U.S. Department of Commerce 215
Trade Promotion 

Encouragement of the progress, growth, or acceptance of trade. 

Trade Surplus 

A nation’s excess of exports over imports over a period of time. 

Trade Terms 

The setting of responsibilities of the buyer and seller in a sale including sale

price, shipping, insurance, and customs. 

Trader

The party who buys, sells, owns, sends, receives or contracts for the shipment of

the goods being traded.

Trailor

A vehicle without motor power designed to be drawn by another vehicle. 

Tramp Line 

A transportation line operating tramp steamers. 

Tramp Steamer

A steamship which does not operate under any regular schedule from one port

to another, but calls at any port where cargo may be obtained. 

Trans-Ship 

To transfer goods from one transportation line to another, or from one ship to

another of different ownership. 

Transaction 

Information collected from other government agencies or calculated from data

provided to ITDS.

Transaction 

Performance or carrying out of a piece of business or the processing of

documentation related to that business; OR an event like querying a database or

submitting a declaration.

Transaction Value 

The price actually paid or payable for merchandise. 

Transfer Of Technology 

The movement of modern or scientific methods of production or distribution

from one enterprise to another. 

Transit Zone 

A port of entry in a coastal country that is established as a storage and

distribution center for the convenience of a neighboring country lacking

adequate port facilities or access to the sea. 

216 U.S. Department of Commerce
Transmittal Letter

A list of the particulars of a shipment and a record of the documents being

transmitted together with instructions for disposition of documents. 

Transparency 

The extent to which laws, regulations, agreements, and practices affecting

international trade are open, clear, measurable, and verifiable. 

Transport Documents 

All types of documents evidencing acceptance, receipt and shipment of goods. 

Traveler

A person who stays for a period of less than one year in a country of which he

or she is not a resident. 

Travelers Checks 

A form of check especially designed for travelers, including persons on vacation

and business trips. 

Tri-Temp 

A container that can maintain three exact temperature zones in different

compartments simultaneously. 

Triangular Trade 

Trade between three countries, in which an attempt is made to create a favorable

balance for each. 

Trip 

The act of moving cargo from one point to another using a conveyance.

Trip Initiation 

An order for transportation services

Tropical Products 

Agricultural goods of export interest to developing countries in the tropical

zones of Africa, Latin America, and East Asia (coffee, tea, spices, bananas, and

tropical hardwoods). 

Trust Receipt 

A declaration by a client to a bank that ownership in goods released by the bank

are retained by the bank, and that the client has received the goods in trust only. 

Turnkey 

A method of construction whereby the contractor assumes total responsibility

from design through completion of the product. 

Turnkey Contract 

An agreement under which a contractor agrees to complete a product so that it

is ready for use when delivered to the other contracting party. 

U.S. Department of Commerce 217
Two

Tier Market 

An exchange rate regime which normally insulates a country from the balance

of payments effects of capital flows while it maintains a stable exchange rate for

current account transactions. 

Tying Arrangement 

A condition that a seller imposes on a buyer, requiring that if the buyer desires

to purchase one product (tying product), the buyer must also agree to purchase

another product (tied product), which the buyer may or may not want. The laws

of some countries prohibit certain tying arrangements. 

Ultimate Consignee 

The person who is the true party in interest, receiving goods for the designated

end use. 

Ultimo Day 

The last business day or last stock trading day of a month. 

UN/Edifact 

United Nations Electronic Data Interchange for Administration, Commerce and

Transport: A nationally accepted Electronic Data Interchange standard. 

Unconfirmed 

A documentary letter of credit where the advising bank makes no commitment

to pay, accept, or negotiate. 

Unconscionable 

Unfair or oppressive. 

UNCTAD 

(United Nations Conference On Trade And Development) A part of the UN

General Assembly which promotes international trade and seeks to increase

trade between developing countries and countries with different social and

economic systems.

Underdeveloped Country 

A nation in which per capita real income is proportionately low when contrasted

with the per capita real income of nations where industry flourishes. 

Unfair Trade Practice 

Unusual government support to firms such as export subsidies to certain anticompetitive practices by firms themselves such as dumping, boycotts or

discriminatory shipping arrangements that result in competitive advantages for

the benefiting firms in international trade. 

Uniform Commercial Code 

A set of statutes purporting to provide some consistency among state

commercial laws. 

218 U.S. Department of Commerce
Unit Load 

The strapping or banding together of a number of individual cargo containers in

order to create a single unit. 

Unit Load Device 

Term commonly used when referring to containers and pallets. 

United States Code (USC) 

A set of volumes containing the official compilation of U.S. law are also

available at local offices of the U.S. Government Printing Office in major U.S.

cities. 

United States Price 

In the context of dumping investigations, this term refers to the price at which

goods are sold in the U.S. compared to their foreign market value. The

comparisons are used in the process of determining whether imported

merchandise is sold at less than fair value. 

Unitization 

The practice or technique of consolidating many small pieces of freight into a

single unit for easier handling. 

Unloading 

The physical removal of cargo from carrier’s container. 

Uruguay Round 

The eighth round of multilateral trade negotiations concerning the General

Agreement on Tariffs and Trade (GATT). The Uruguay Round (so named

because meetings began in Punta del Este, Uruguay in 1987) concluded in

December, 1993 after seven years of talks with 117 member nations. 

USCS 

United States Customs Service. 

USDA

United States Department of Agriculture. 

Users Fee 

Assessments collected by the U.S. Customs Service as part of the entry process

to help defray various costs involved in the importation of goods to the United

States. 

Usuance 

The time allowed for payment of an international obligation. 

Validated Export License 

A document issued by the U.S. Government authorizing the export of

commodities for which written export authorization is required. 

U.S. Department of Commerce 219
Validity 

The time period for which a letter of credit is valid. 

Valuation 

The appraisal of the worth of imported goods by customs officials for the

purpose of determining the amount of duty payable in the importing country. 

Valuation Charges 

Transportation charges assessed shippers who declare a value of goods higher

than the value of the carriers limits of liability. 

Value Added

That part of the value of produced goods developed in a company. It is

determined by subtracting from sales the costs of materials and supplies, energy

costs, contract work, and so on, and it includes labor expenses, administrative

and sales costs, and other operating profits. 

Value-Added Tax 

An indirect tax on consumption that is assessed on the increased value of goods

at each discrete point in the chain of production and distribution, from the raw

material stage to final consumption. The tax on processors or merchants is

levied on the amount by which they increase the value of items they purchase

and resell. 

Vendor

A company or individual that supplies goods or services. 

Vessel Ton 

A unit of measurement in the shipping industry assuming that 100 cubic feet of

cargo equals one ton. 

Visa 

A license issued by the government of an exporting country for the export to a

specific importing country of a certain quantity of a quota controlled commodity

subject to a voluntary export restriction or a voluntary restraint agreement. 

Visa Waiver

A program of selected countries to eliminate their visa requirement on a test

basis. 

Volatility 

The measure of the relative deviation of a price from the mean. 

Volume Rate 

A rate applicable in connection with a specified volume of freight. 

War Clause 

A marine insurance provision excluding the liability of an insurer if a loss is

caused by war or hostile action. Bills of Lading and charter parties may contain

220 U.S. Department of Commerce
a 

War Clause giving the vessel options to maintain its safety in case of

hostilities. 

War Risk 

The risk to a vessel, its cargo and passengers by aggressive actions of a hostile

nation or group. 

War Risk Insurance 

Insurance covering loss or damage caused by war or other hostile actions,

usually a separate policy from a marine insurance policy, or a special attachment

to it. 

Warehouse Receipt 

A document listing the goods or commodities deposited in a warehouse. It is a

receipt for the commodities listed, and for which the warehouse is the bailee.

Warehouse receipts may be either non-negotiable or negotiable. 

Warranty 

A promise by a contracting party that the other party can rely on certain facts or

representations as being true. 

Warsaw Convention 

An international multilateral treaty which regulates, in a uniform manner, the

conditions of international transportation by air. 

Waybill 

A document prepared by a transportation line at the point of a shipment,

showing the point or origin, destination, route, consignor, consignee, description

of shipment and amount charged for the transportation service, and forwarded

with the shipment, or by direct mail, to the agent at the transfer point or waybill

destination. 

Webb-Pomerene Act of 1918 

Federal legislation exempting exporters associations from the antitrust

regulations. 

Webb-Pomerene Association 

Associations engaged in exporting that combine the products of similar

producers for overseas sales. These associations have partial exemption from

U.S. anti-trust laws but may not engage in import, domestic or third country

trade, or combine to export services. 

Weight Break 

Levels at which the freight rate per 100 pounds decreases because of substantial

increases in the weight of the shipment. 

Wharfage 

A charge assessed by a pier or dock owner for handling incoming or outgoing

cargo. 

U.S. Department of Commerce 221
Without Reserve 

A term indicating that a shipper’s agent or representative is empowered to make

definitive decisions and adjustments abroad without approval of the group or

individual represented. 

World Bank 

The International Bank for Reconstruction and Development (IBRD),

commonly referred to as the World Bank, is an intergovernmental financial

institution located in Washington, DC. Its objectives are to help raise

productivity and incomes and reduce poverty in developing countries. 

World Bank Group 

An integrated group of international institutions that provides financial and

technical assistance to developing countries. 

World Trade Clubs 

Local or regional based organizations in the U.S. and around the world of

importers, exporters, customs brokers, freight forwarders, attorneys, bankers,

manufacturers, and shippers. 

WTO 

World Trade Organization. 

Zip Code 

A numerical code, established by the U.S. Postal Service, used for the purpose

of routing and to identify delivery zones. Some U.S. carriers apply this code for

freight in the same manner. 

Zone 

Any one of a number of sections or districts in the U.S. or of the world used for

the purpose of establishing proper rates for parcels, mail, pickup, and delivery. 

Zone Status 

The legal status of merchandise which has been admitted to a U.S. foreign trade

zone, thereby becoming subject to the provisions of the Foreign Trade Zone Act

(FTZA). 

Zone User

A corporation, partnership or party that uses a U.S. foreign trade zone for

storage, handling, processing, or manufacturing merchandise in zone status,

whether foreign or domestic.

222 U.S. Department of Commerce