International Trade (Intl Trade) 101: Export Import Strategy - Government Support, Export Assistance, Trade Missions, Subsidies, EXIM Bank, SBA Export Loans

What This Is

Government support plays a crucial role in international trade by providing exporters with the necessary resources to compete globally. This includes export assistance, trade missions, subsidies, EXIM Bank financing, and SBA export loans. For instance, a US exporter of aerospace components to China may benefit from an EXIM Bank loan to cover the high upfront costs of production, while a Chinese exporter of textiles to the US may participate in a trade mission to establish relationships with potential buyers.

Key Terms & Rules

• Export Assistance: Government programs that help exporters develop their products, services, and marketing strategies.
  • Practical implication: Access to funding, training, and market research to improve export competitiveness.
• Trade Missions: Official government-led trips to promote exports and attract foreign investment.
  • Practical implication: Establish relationships with potential buyers, partners, and investors.
• Subsidies: Financial assistance provided by governments to support specific industries or sectors.
  • Practical implication: Level the playing field for domestic industries, promote economic growth, and create jobs.
• EXIM Bank: The US government's export credit agency, providing financing and insurance to support US exports.
  • Practical implication: Facilitate exports by covering the risks associated with international trade.
• SBA Export Loans: Small Business Administration (SBA) loans to support small businesses in exporting goods and services.
  • Practical implication: Provide access to capital for small businesses to enter the export market.
• Export-Import Bank Act: US legislation governing EXIM Bank's activities and financing terms.
  • Practical implication: Establishes the framework for EXIM Bank's operations and financing terms.
• US Trade and Development Agency (TDA): A US government agency promoting economic development and trade opportunities abroad.
  • Practical implication: Supports US companies in developing countries and emerging markets.
• US Department of Commerce: The US government agency responsible for promoting US trade and commerce.
  • Practical implication: Provides export assistance, trade data, and market research to US exporters.
• Foreign Trade Regulations (FTR): US regulations governing the export and import of goods and services.
  • Practical implication: Ensure compliance with US export controls and regulations.
• Export Control Reform Act (ECRA): US legislation governing the control of dual-use items and emerging technologies.
  • Practical implication: Regulates the export of sensitive goods and technologies.

Step-by-Step Process

1. Identify Export Assistance Programs: Research government programs that support exporters, such as EXIM Bank financing, SBA export loans, and trade missions.
2. Apply for Export Assistance: Submit applications for export assistance programs, providing required documentation and meeting eligibility criteria.
3. Participate in Trade Missions: Join government-led trade missions to establish relationships with potential buyers, partners, and investors.
4. Understand Subsidies: Familiarize yourself with government subsidies and their implications for your industry or sector.
5. Access EXIM Bank Financing: Apply for EXIM Bank financing to cover the risks associated with international trade.
6. Utilize SBA Export Loans: Apply for SBA export loans to access capital for small businesses entering the export market.

Common Mistakes

• Mistake: Assuming "open account" is risk-free.
  • Correction: Open account transactions involve payment risks, and exporters should consider using documentary credits or letters of guarantee.
• Mistake: Misusing "free on board" with air freight.
  • Correction: FOB applies to sea or inland waterway transport, not air freight; use "free at airport" or "free on airport" instead.
• Mistake: Confusing CIF and CIP.
  • Correction: CIF (Cost, Insurance, and Freight) applies to sea or inland waterway transport, while CIP (Carriage and Insurance Paid To) applies to air transport.
• Mistake: Assuming government subsidies are always available.
  • Correction: Subsidies are subject to eligibility criteria, funding limitations, and regulatory requirements.

Exam / Certification Tips

• FOB vs FCA: FOB (Free on Board) transfers risk at the port gate or on the dock, while FCA (Free Carrier) transfers risk at the seller's premises.
• Confirmed vs Unconfirmed LC: Confirmed letters of credit provide additional security, while unconfirmed letters of credit rely on the buyer's creditworthiness.
• DPU (Destination Port Unloaded) vs DAT (Destination Arrival Terminal): DPU applies to sea or inland waterway transport, while DAT applies to air transport.

Quick Practice Scenario

A Chinese exporter sells goods under FOB Shanghai. Who pays for the main carriage?

Answer: The buyer pays for the main carriage.

Explanation: Under FOB, the seller bears the costs and risks until the goods are loaded onto the vessel at the port gate.

Last-Minute Cram Sheet

• Under FOB, risk transfers when goods are on board the vessel – not at the port gate or on the dock.
• EXIM Bank financing covers the risks associated with international trade.
• SBA export loans are available to small businesses entering the export market.
• Subsidies are subject to eligibility criteria, funding limitations, and regulatory requirements.
• Trade missions promote exports and attract foreign investment.
• Export assistance programs support exporters in developing their products, services, and marketing strategies.
• Foreign Trade Regulations (FTR) govern the export and import of goods and services.
• Export Control Reform Act (ECRA) regulates the control of dual-use items and emerging technologies.
• US Department of Commerce promotes US trade and commerce.
• US Trade and Development Agency (TDA) supports US companies in developing countries and emerging markets.