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Business Essays | International Trade Overview

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.[1] 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

1. http://www.odci.gov/cia/publications/factbook/geos/ly.htmlTrade with Libya: 2002
2. http://www.libyansteel.com/index.htm
3. 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/