International Business Studies Module: International Trade
Introduction
The product that is to be exported is Hot Briquetted Iron
(HBI) (See Appendix 1) from Libya to the USA. In recent years
the Libyan businesses have been opening up to American Business
as the government in Libya is now aiming to increase western
investment in the country to improve the country's economy.
The Libyan Iron and Steel Company produce the product, which
is a large industrial complex situated in Misurata City in
Libya. The HBI produced in this industrial complex is of high
quality and is made according to the ISO 2000 standards; this
industrial complex is the largest steel manufacturer in North
Africa.[2]
The HBI can be easily transported from the factory
through the jetty of the factory, which can easily accommodate
any large cargo ship and can load the goods with ease. The
various steel products from this factory are already being
exported to various European, Middle Eastern and South American
countries. This report looks at all the steps necessary to
transport the product from Libya to the US the buyer in this
case is the US government which will then distribute the products
to various industrial complexes in the US, this reports includes
details of all documentary evidence, method of payments and
terms of delivery.
Enquiries and Response
Once the buyer in the USA has made the initial enquiry, it
would be up to the Libyan Iron and Steel Company to respond
to it in a professional business manner. The response should
be polite and as detailed as possible, it should also include
as much relevant information as possible. If the enquiry is
of a general nature then it should be replied to with catalogues
and price lists, and a contact whereby a salesperson or representative
can be reached on. In some instances the buyer might enquire
about a large order, and in this situation it would be advisable
that arrangements are made for negotiations to further the
enquiry. Since this sale to the US would be new and after
a ling gap the management at the Libyan Steel and Iron Company
would have to work hard to establish goodwill with the US
clients.
Customs Procedures
When sending the HBI consignment through to the buyer,
it is vital that the package be labelled and packed correctly,
also providing all the necessary documentation including all
the tariff and identification codes. Also information in detailing
any licenses that would be placed on the product, so that
the goods travel trough customs with the least amount of problems.
Risk
There are a number of risks included in International Trade;
they include a physical risk (that products might get damaged).
The buyer has to make sure the product gets to the point of
delivery undamaged. Other risks that can damage the exporter
are Credit Risk and Exchange Rate fluctuations, which can
result in losses to the Exporter. Since the Libyan government
has not been allowed to trade under the UN sanctions for a
few years the buyers will have to consider all these risks
to be safe.
Titles and Risk
The title of the goods and the all risks that can be associated
to trade pass from the seller to the buyer when the cargo
passes the vessel's permanent hose connections at port. The
Libyan Steel and Iron should provide the US buyers with all
these guarantees before the goods leave the Libyan Port.
Risks in International Trade:
There are a number of risks that are associated with international
trade; these can be divided into two major groups :[3]
Commercial risks
- Risk of insolvency of the buyer, the buyer in the UK
could run into financial, this should not be a problem for
the exporters as they are certain that they will be paid in
time.
- Risk of protracted default - the failure of the buyer
to pay the amount due within six months after the due date
- Risk of non-acceptance, the Libyan company would have
to be very careful in fulfilling all the requirements of the
US government to assure that their payments are made on time
and they can establish a good working relation with their
US partners.
2.2.2Political risks
- Risk of cancellation or non-renewal of export or import
licences
- War risks, the current situation in Iraq has added
a major impact on the insurance costs and uncertainty of the
timings.
- Risk of expropriation or confiscation of the importer's
company
- Risk of the imposition of an import ban after the shipment
of the goods
- Transfer risk - imposition of exchange controls by
the importer's country or foreign currency shortages
http://www.odci.gov/cia/publications/factbook/geos/ly.htmlTrade
with Libya: 2002
http://www.libyansteel.com/index.htm
International Physical Distribution Jim Sherlock
REFERENCES
http://www.odci.gov/cia/publications/factbook/geos/ly.htmlTrade
with Libya: 2002
http://www.libyansteel.com/index.htm
International Physical Distribution Jim Sherlock
Principles of International Trade and Payments Peter
Briggs
International Trade: A Business Perspective, C. J.
Jepma, A. P. Rhoen, 1996
APPENDIX 1
Hot Briquetted Iron (HBI)
Total Iron : 90 - 94 %
Metallic Iron : 84 min
Metallization Degree : 90 - 95 %
Carbon : 1.0% ±0.2
Average Size : 106×48×32 mm
Average Weight : 500 - 600 gm
Bulk Density : 2.4 - 2.8 ton/m³
Apparent Density : 4.9 - 5.5 ton/
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