Free «Four Questions on Economics» Essay Sample

(1)Letter of credit This is a letter from the bank that guarantees that the payments of the buyer to the seller will be made in the correct amount and on the right time. In the circumstances where the buyer is not able to make the payments on the purchase, the bank takes the responsibility of paying the remaining or full purchase's amount. The parties of the LOC include the applicant who sends the money, the advising bank, the seller/beneficiary and the bank that issues the letter.MagNet's attorney recommended to be paid by the letter of credit because it guarantees a payment which is an advantage to the company. This is because the payment risks rely upon the issuing bank's creditworthiness and not on the Legran's credit worthiness. Secondly, the two companies agree in advance on the payment issues under the LOC such that the seller (MagNet) has no any obligation of shipping against the letter in case it is not issued. Also, the selling company is allowed to ask for a non refundable down payment alongside the letter of credit which safeguards against the buyer's defaults (A Guide to Letters of Credit).

Some of the other documents involved in this kind of transaction include the commercial invoice, bill of lading, insurance document, inspection certificate and certificate of origin. The commercial invoice is issued by the seller to the buyer which records all the transactions between the two parties, identifies all the foreign customs, approves the entry of goods and it confirms the actual value of the goods for the purposes of insurance. The bill of lading is issued by the ship owner and it is used to confirm that the cargo has been loaded on board. The insurance document acts as an evidence of the insurance coverage of the shipment and it may be in form of a policy. The inspection certificate is used to certify that the cargo meets the required specifications. It also certifies that the cargo was in the right amount and good condition at departure. Finally, the certificate of origin attests that the goods in a particular shipment are obtained (Hinkelman G. Pg 345-349).

(2)Issues that should be considered before making the decision to exportBefore making a decision to export goods to other countries, Yount Inc. should consider the following issued. It should consider its management objectives by analyzing the reasons for pursuing the new export markets, analyzing the top managers' commitments in export and reviewing its expectations. The company should consider the experience of exporting mainly from the countries where the business has been conducted in the past and analyze the lessons that it has learned from the past export activities. The production capacity should be considered alongside the costs incurred, the quantity required for export and the suitable designing and packaging of the products for export. Also, Yount Inc should consider its financial capacity. For instance, it should determine the capital needed for the export activities, the operating costs of the export department and the allocation of the export expenses. Finally, the company should consider the credibility and effectiveness of its expertise i.e. check on the personnel's ability to communicate and have the required organizational structure (Export strategy).For more effective exporting activities, I recommend the Yount Inc Company to export their products indirectly through the intermediaries. These intermediaries are able to find the potential foreign buyers for the company's products. For example, the company can incorporate into its system the export management companies, international trade consultants and the export trading companies. These companies are capable of expose the Yount Inc Company to many trade contacts and well established export expertise. The company can still control the whole export process and can be able to learn more about its competitors and other export market opportunities.(3)The term used to refer to the legality of the government to take a private property owned by the foreign investor is expropriation. The property is usually taken for the states purposes without the consent of the owner and it is accompanied by some or no compensation. Usually the government effect expropriation by making some changes to the state's legal codes and tax codes. For the foreign company to invest abroad, it must familiarize itself with the tax codes, legal codes and all the legal laws that define the ownership of properties in the foreign countries. To limit the risks of expropriation and enhance property protection, the foreign investors should pay the required combination of taxes and other charges that are set by the foreign governments.

(4) International dispute resolutionSome of the mechanisms that can be used to resolve the international disputes include negotiation, conciliation, mediation, arbitration among others. Mediation is a process in which the parties in dispute seek the assistance of a neutral entity to help in negotiating the about the dispute's decision. Conciliation is where the neutral entity helps the parties in identifying the roots and the extent of their dispute. Arbitration is a process in which the parties in dispute refer their disputes to an arbitrator who is an independent entity for determination. This mechanism is usually grounded the jurisdiction's statute laws. Finally, negotiation is a mechanism where the parties in disputes discuss and find a solution to their problem (The International Economics Study Center). In my opinion, I would prefer to use conciliation as it identifies the root cause of the dispute, consider the alternatives establish the relevant options and endeavors to find the required agreement.


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