UNIVERSITY OF CALIFORNIA AT LOS ANGELES PRACTICAL EXPORTING A Handbook for Manufacturers and Merchants By B. OLNEY HOUGH Editor, American Exporter AXJTHOB OF "elementary LESSONS IN EXPORTIMO,* "ocean traffic AND XaADE," ITC. Seventh Edition AMERICAN EXPORTER Johnston Export Publishing Co. Penn Terminal Building S70 Seventh Avenue New York City Boston, Philadelphia, Cleveland. Detroit, Chicago, St. Louis, San Francisco 1921 76 14 6 ^ Copyright, 1921 By JOHNSTON EXPORT PUBLISHING CO. PENN TERMINAL BUILDING 370 Seventh Avenue Hf.w York City U. S. A. First Edition, September 1915 Second Edition, January 1918 Third Edition, January 1919 Fourth Edition, February 1919 Fifth Edition, January 1920 Sixth Edition, December 1920 Seventh Edition, September 1921 3560 3 0ZJd H ai CONTENTS PAGE Introduction 1 CHAPTER I Ways and Means 9 The Many Facilities for Export Trade Available to American Manufacturers — What IStudies and Methods are Advantageous — The Basic Rules in Exporting — How to Learn if One's Goods Can be tSold in Other Countries — High Priced Goods even More tSuitable for Export than Cheap Goods. CHAPTER II Some Mistaken Impressions 37 Popular Misunderstandings About Export Problems — ^Mistaken Ideas as to Credit Terms — Foreign Branches of American Banks Desirable but not Essential — Lack of American Ships not a Handicap to Foreign Trade Expansion — Combinations of Manu- facturers to Get Export Business by no Means a New Scheme — When American Goods May be Adapted to Market Tastes or Preferences. CHAPTER III Markets for American Goods 68 Tlie Relative Values of Foreign Markets — When Patents and Trademarks in Other Countries are Required — Statistics of American Export Trade — Our Principal Foreign Customers — Trade Practices Which Are Strange to Us — The Moneys of Other Lands and Their Values. CHAPTER IV The Export Department 96 Specialized Attention Necessary — A Separate Department not Always Required — Who and What an Export Manager Should Be — When and Where an Export Department May Be Established — Reducing Expenses Through a "Combination" Export De- partment and Manager — Office Systems for the Export Depart- ment — Foreign Languages, Translators and Translations. CONTENTS CHAPTER V PAGE Foreign Trade Correspondence 123 Correspondence a Vital Element in Getting and Handling Export Business — General Character of Letters to and from Foreign Comitries — Inquiries for Goods and Replies to Them — Sales Letters, Circular Letters and Follow-Up Systems — The Use of the Cable. CHAPTER VI Traveling Salesmen Abroad 158 Employment of Traveling Salesmen Depends on Growth of Ex- port Business — Successful Factory Salesman Preferred to an Ex- pert in Foreign Languages — Qualities Desirable in the Man to Represent Americans Abroad — Travelers Who Carry Lines from Several Factories — Conditions Encountered in Selling Goods in Other Lands — Duties on Samples — Salesmen's Licenses in Some Countries. CHAPTER VII Advertising to Get Export TrzVde 196 The Modern Export Trade Paper and Its Service Department — Sundry Export Advertising Propositions and Special Export Editions — Local Advertising in Foreign Markets — The Best Copy for Export Announcements — Advertising for General Publicity and Prestige Abroad — Results from Export Advertising — Com- ment and Advice as to Export Catalogues. CHAPTER VIII Export Commission Houses ......... 242 Importance and Usefulness of Export Houses — Commission Houses, Merchants and American Buying Offices of Foreign Con- cerns — Their Operations as Buyers and Shippers of Goods — Com- mission Houses Considered as Agents and Introducers of New Lines — Policy of Giving Such Houses Preferential Treatment and Granting Special Prices. , CHAPTER IX Local Foreign Sales Agents, Distributors and Branch Offices 284 Ix)oal Sales Agents Established Everywhere — Used More Gen- erally by European than by American Manufacturers — Are not Buyers of Goods and Hence to be Distinguished from Wholesale CONTENTS PAGE Distributors — Their Functions as Salesmen and Otherwise — Giving Agencies to Merchants, Advantages and Disadvantages — When and How Manufacturers Should Establish Their Own Branch Offices Abroad. CHAPTER X The Export Order 317 What Samples Mean in tlie Export Tlade and How They Should be Treated — Ways of Quoting Prices and Discounts — Meaning and Attractiveness of C. I. F. Prices — Terms of Sale Customary or Advisable in Export Business — Foreign Credit Ratings and Responsibility of Customers — Acceptance or Refusal of Orders — The ilanufacture of Goods for Export Shipment. CHAPTER XI Preparing Shipments 350 How steamer Differ from Rail Shipments — How Cargo Is Loaded on Board Steamships, Unloaded and Transshipped — Pack- ing Required for Adequate Protection of Goods- -The Packing Which is Sometimes Desirable on Account of Local Foreign Conditions — How Export Wciglits and Measurements Are Cal- culated — ^larks and Addresses on Packages for Foreign Ship- ment — flaking Export Invoices. CHAPTER XII Making the Shipi^ent 384 Parcel Post Facilities in Foreign Trading — Starting an Ex- port Shipment by Rail from an Inland Factory — Steamship Serv- ices Available to All Parts of the World — Ship Chartering — Ocean Freight Rates, How Governed and on What Based — Ad- vantages Offered by Foreign Freight Forwarders and How They Operate — The Various Formalities Necessary in Making an Export Shipment — Shipments in Bond — Drawback — The Steam- ship Bill of Lading — Consular Invoices, What They Are and When Required. CHAPTER XIII Marine Insurance 432 Why Marine Insurance Is Necessary — When the Duty of Ef- fecting Insurance Devolves on Manufacturers — The Principles In- volved in Marine Insurance — An Explanation of "General Aver- CONTENTS PAGE age" and "Particular Average" — Insurance Policies and Cer- tificates Issued Under Them — Peculiar Phraseology of Policies Explained — Insurance Against War Kisk — How Insurance Claims Are Collected. CHAPTER XIV Financing Foreign Business 458 Many Manufacturers Accept Foreign Orders Only on Cash Terms — Direct Remittances of Cash Compared with Letters of Credit Through American Bankers — Open Accounts Are on the Whole Unusual in Export Trade — When and How They May Safely Be Extended to Foreign Customers — Drawing Foreign Drafts or Bills of Exchange, and Their Various Forms — How Foreign Exchange Bankers Advance Cash Against Such Drafts. CHAPTER XV Credits, Acceptances and Collections 496 Credit to Foreign Customers May be Extended on Drafts While Shippers Secure Cash — How Drafts are "Accepted" by Customers — Advantages and Security of Acceptances — Principles and Rates of Foreign Exchange — Facilities of Discount Markets —Ways of Collecting Past Due Foreign Accounts. INDE;^. . , . r 521 LIST OF FORMS Note. — Documents illustrating the text are reproductions of forms in actual use. The transactions which these forms have been made to record are purely lictitious — devised by the author only as types to illustrate procedure. \Miere names of established companies appear none of them is responsible for either style or phraseology employed. FOBM FACING NUMBER PAGE 1 — Inquiry for Prices from an Export Commission House . . . 258 2 — Order for Goods from an Export Commission House .... 260 3 — C. I. F. Contract Conditions 332 4 — Form of Export Invoice -. . . . 378 5 — Statement of Charges Applying to Export Invoice 382 G — Memorandum of Weights, Measurements and Rates .... 382 7 — Letter of Shipping and Financial Advice 382 8 — Through Railroad Bill of Lading 392 9 — Instructions for Shipping Given to Forwarding Agents . . . 404 10 — Foreign Freight Forwarder's Bill of Lading 404 11 — Way Bill of Forvs^arding Agents 404 12 — Steamship Company's Shipping Permit 410 13 — Steamer's Dock Receipt 410 14 — Shipper's Export Declaration 412 15— Ocean Bill of Lading, "To Order," Endorsed in Blank . . . .416 16 — Ocean Bill of Lading, Delivery Direct to Consignees .... 418 17 — Ocean Bill of Lading, Endorsed to Foreign Bankers .... 420 18 — Steamship Parcel Receipt 422 19 — Consular Invoice, Cuban Form 424 20 — Consular Invoice, Brazilian Form 428 21 — Certificate of Origin 428 22 — Policy of Marine Insurance 440 23 — Certificate of Marine Insurance 442 24 — Certificate of Insurance Against War Risk 450 25 — Example of Captain's Protest 454 LIST OF FORMS FOEM FACmO NUMBEK PAGE 20 — Banker's Commercial Letter of Credit 402 27 — Banker's Notice of Irrevocable Credit 464 28 — Banker's Permission to Draw for Customer's Account .... 464 29— Drawee's Guaranty to Banker's 466 30 — Banker's Authority to Draw, Far Eastern Form 466 31 — Simple Sight Draft, in Original and Duplicate ...... 476 32— Draft Endorsed for Collection Only by Bankers Abroad . . . 478 33— Draft Against New York Banker's Credit . 482 34 — Letter of Hypothecation Given to Bankers 486 35 — Draft Naming Specific Bank . . 488 36 — Instructions Given Banker as to Handling Drafts 490 37— Draft with "Colonial" and "In Case of Need" Clauses . . .492 38— Draft with "Interest" Clause .492 39 — Draft wath Drawee's "Acceptance" 500 Forms 4, 5, 6, 7, 12, 13, 14, 15, 23, 24 and 31 have been made to apply to one and the same imaginary transaction, forming a complete set of the papers usually involved in making an export shipment by manufacturer direct to foreign customer. PREFACE TO THE SEVENTH EDITION Since the publication of the first edition of this book the export trade of the United States has undergone many and notable changes, both in conditions and in practices. The tre- mendous, the unprecedented, demands upon American manufac- turers and exporters arising out of the war created an export trade in American goods never before dreamed of and never approximated by any other nation of the world. The Armis- tice of 1918 was succeeded by an era of expansion and of highly speculative activity which continued and even increased the wartime export trade of this country. A collapse inevitably followed. Restricted bank credits, depreciated and unstable exchanges, falling price levels, contributed to produce something like a temporary crisis in international trade and to develop situations calling for wise and diplomatic treatment. The ad- vantages of training, of keen intelligence, broad knowledge, wide sympathies, were never before so emphatic. It is easy at any given time to forget relative values. It was easy in 1921 to complain of dull export trade in face of the fact that for the fiscal year ending June of that year, the United States exported merchandise to a total value of $6,519,365,734. It was easy to forget that before the outbreak of the war, in 1913 and in 1914, what we then boasted of as the largest export trade in the history of the country amounted (fiscal year ending June 30, 1914) to $2,364,579,148 only. A comparison of our export trade of 1921 with that of the pre-war trade of 1914 is certainly far from discouraging, no matter what allowances be made for higher prices of merchandise. Meanwhile the necessity for the maintainance and the further development of export trade is now more nearly vital than it ever was before. No matter if, in the case of the United States as of all other countries, export trade constitutes only a comparatively PREFACE small fraction of the total commerce of the nation, still that small fraction may and usually does mean the difference between profit and loss. Inviting opportunities for trade expansion still beckon to us. Innumerable kinds of American manufactured goods have been introduced to buyers in other markets of the world. If we do not keep a goodly share of this trade, we shall have no one to blame but ourselves. It is difficult to discover or to foresee more danger in the future than in the past from possible competition on the part of European manufacturers. That competition has always existed ; American exports have progressively and rapidly increased in spite of it. We need no more fear British or German competitors than in 1913-14. Our foreign banking practices and organization are being greatly improved, as are American shipping and marine insur- ance facilities. All phases of our export trade relations re- quire new and more serious study so that it may be so estab- lished and developed as to be not only profitable but perma- nently profitable. We need not only to sell our goods but to make sure that they "stay sold," that our customers continue customers. These chapters may help some exporters to achieve that result. While this volume is intended as a complete whole, consecu- tively arranged in logical progression so far as possible, yet the author has attempted to make each chapter self-contained. One object in thus designing the book has been the hope that through this arrangement, with the further guide of the side heads and the assistance of a carefully prepared index, to which attention is especially directed, the export manager or his assistant will be able to make direct references to special problems. The author thinks it may not be out of place to remark that these chapters are based on an actual experience of more than twenty years in practical exporting, rather wide travels up and down and around the world, some knowledge of the experiences, trials and successes of several hundred manufacturers. Because of the frequent discussions of American export trade problems in the past few years, it has been possible to substan- tiate tlie anther's own ideas in many respects by liberal quota- tions from the opinions of prominent men of affairs. B. 0. H. INTRODUCTION We need not attempt a definition — we know export trade as the business which lands our goods in the show windows of Paris and Rio de Janeiro, which puts them in the bazars of Constantinople and Bombay, piles them up in the warehouses of Melbourne and London, puts them at work in the wheat fields of Russia and Ar- gentina and in the factories of Germany, makes happier life in the thatched huts of Fiji, adds to conveniences and luxuries in the palaces of Rome and Venice. Thirty years ago as a very young man journeying in Europe the author thrilled with pride as he stood before a showcase in the Brussels Exposition where samples of American goods from his father's factory were on display. Many times in the years that have followed has he experienced greater pride and satisfac- tion as he has seen American goods which he and others have in- troduced in shop windows of the world's capitals ranged side by side with the best products of older countries, has gloried in being the first to explore some new markets, has actually initiated busi- ness in goods never known before and watched the growth of those new American interests in succeeding years. So the Ameri- can manufacturer of to-day finds not only profit but pride as he notes the marks on cases which his shipping department is dis- patching up and down and around the world, as he follows them across the seas to their destinations in strange and distant coun- tries and learns that American ingenuity and manufacturing methods enable us to compete with the older countries of Europe. So, too, the youth of to-day, deciding upon his life's work, is cer- tain more and more to be attracted by the possibilities and the al- lurements of business with foreign countries. Trade with foreign countries beckons to us. No other business is so broadening, no other aspect of affairs so draws out manufac- turer or merchant from the uninspiring humdrum rut into which he is all too apt to fall. In doing business with England, with China, with Cuba, he is brought face to face with new con- 1 2 PRACTICAL EXPORTING ditions and new problems. lie learns a good deal about the na- tions of the earth, their peoples, their commerce, their ways of doing business, which are seldom our ways. He has new lessons in geography and in languages. He learns something about new aspects of business to which his domestic trade will never intro- duce him, about ocean shipping, about marine insurance, about international banking and exchange. The successful exporter will become, must become, a broad-gauge business man in the highest sense of the term. The man of small or petty ideas can- not be successful long or continuously in doing business with the biggest and best merchants of other countries in competition with the ablest manufacturers and producers of the world. A single order is useless for any purpose. Export trade to be profitable must be permanent and growing year by year, initial orders of to-day must and will be followed, if they are handled wisely and intelligently, by larger and repeated orders for ten, fifteen, twenty years to come. The fact that a customer is lo- cated 10,000 miles across the sea by no means implies that busi- ness with him is hard or impossible. It actually costs less to ship goods by ocean steamer to him, 10,000 miles distant, than it costs the manufacturer to send the same goods to a customer in this country only 1,000 miles away. A manufacturer's feeling on being first approached by a for- eign buyer is almost always one of pride and pleasure. Origi- nally, probably three quarters if not more of our American ex- port trade came to us ; in the first instance, we did not go out to seek it. Scores and hundreds of our manufacturers cannot to- day say how this or that foreign customer ever happened to hear of them. Yet the sale of American goods does not properly begin abroad. It begins at home. It is this aspect which must now claim the thought and maturest consideration of our manufac turers. We have now to make due preparations, to determine upon our policies, to organize our efforts, to establish in our own factories and offices the systems that will result in success. Vogue of Imported Goods. — In the windows of some New York candy shops is displayed the sign, "Imported European Gum Drops. ' ' But gum drops is one of those varieties of Ameri- can confectionery that are most freely exported— carload ship- ments go to Europe with some frequency. Australian wines are INTRODUCTION 3 listed by some hotels and restaurants in London, while Cali- fornian wines are by no means unknown in Sj^dney and Mel- bourne. We used to consume a good deal of imported German lager beer in the United States. At the same time shipments of American lager beer to foreign countries were valued at about one million dollars a year. Jams and crackers made in England are sold in New York shops. American manufacturers of similar goods enjoy a large foreign demand for their products. We sometimes wear English hats. In London we find no difficulty in buying American hats. Sticks of English shaving soap are sold in our drug stores, sticks of several kinds of American soap are sold in Loudon. There is a certain glamour that diffuses itself about the adjec- tive "imported" in other countries as well as in the United States. A manufacturer who is annoyed by a preference some- times shown "imported goods" over his own right here in the United States, in his home markets, may console himself with that reflection. Customers will not be found wanting in other lands who will there give preference to his American goods for the selfsame if for no other reason — because "imported." This is one of the foibles of human nature the world over, and im- portant enough actually to influence the movement of trade to a perceptible degree. All in all, what good and sufficient reason is there that should deter any manufacturer from attempting foreign business? Why not? The world was once fairly familiar with half frightened, half contemptuous, wholly envious reports of Germany's systematic and scientific organization and pursuit of her export business.. We know something, too, of the highly developed state of some British export trade — a trade not of yesterday nor of last week, but strong in a century's growth. We have heard of the big and rich foreign trade that little Belgium had quietly but steadily been accumulating. But it comes as a surprise to some of us to learn that Spain has shipped steel rails across the Atlantic, and that Italy's railway rolling stock was once in part built by Russian shops. Immensity of the World Market.— It is not altogether a bat- tle for commercial supremacy that is so sure to engage the manu- facturing nations of the earth ; rather is it a battle for commercial 4 PRACTICAL EXPOBTING existence. It is too often the custom in this country either to speak of export trade for American goods as something merely in- cidental, or to rub our hands in smug satisfaction over the enor- mous volume and astounding growth of our foreign shipments. Nine out of every ten American manufacturers have but a very hazy idea of what the country as a whole is doing in export trade ; even of the harvest their own competitors are gathering in the way of foreign orders. Those manufacturers who do know the facts in these matters often overlook the immensity of markets that may be, that ought to be, open to us. Our shoe manufac- turers have contemplated with some satisfaction exports of Amer- ican boots and shoes to South Africa amounting, in 1914, to about two hundred thousand dollars per annum. They overlook the fact, if, indeed, they have taken interest enough in the subject to investigate it, that England was shipping four million dollars' worth a year to that same South African market — twenty times as much as did we. We have shipped machinery to little Belgium, before the war, to the value of over $1,200,000 a year. But Belgium in the same year bought machinery worth over $3,000,000 from England in addition to almost $4,000,000 worth from France. In scores of other lines of industry and in dozens of other foreign markets American manufacturers have barely begun to nibble at tempting trade that we ought to dominate. Dominate the world's mar- kets in many lines of manufactured goods we can, if we try. We have not seriously tried as yet. An absolutely insignificant per- centage only of American manufacturers have so much as lifted a little finger to get or to develop a foreign market for their goods. This remains essentially true despite the enthusiasm with which enormous war orders have been accepted by hundreds of Ameri- can manufacturers. Most of these orders also have come to us without solicitation. Where efforts have been made to secure such business they have usually been restricted to efforts with commissions of various foreign countries, visiting the United States for the purpose of making purchasers, or, if they have ex- tended abroad, they have been sporadic and tempted by the ex- traordinary conditions existing, not least among which have been the undoubted creditability and the cash terms involved. INTRODUCTION 5 It rarely happens even here at home that orders besiege the manufacturer unsought. Few factories in the United States or elsewhere are kept at work except on orders strenuously and eagerly sought and urged by their proprietors through liberal advertising and a force of competent salesmen. Foreign business also must be sought. In no other way, it should be remarked, will a similar amount of energy and intelli- gence pay better than in its devotion to the development on per- manent and profitable lines of export relations. American goods are still very new in many foreign markets. Even in countries where some products of American factories are well known, others are strange and even unheard of. When a foreign merchant buys a new article from the United States it is not as John Smith & Go's manufacture that he knows it, thinks of it, or calls it. It is the new *' American" this or that. Woe then to the American name if the goods are not like sample, or equal to advertised description, or disappointing in any way ! It is not John Smith that is cursed — it is "those rotten American goods." John Smith & Co. is an incident, a negligible factor in the transaction. John Smith & Co.'s goods, in the eyes of the foreign merchant, are simply American goods — purely typical, as the case may be, of good or bad products to be qualified by that adjective. How true this is will be acknowledged by any manu- facturer of considerable personal experience in foreign markets. His conceit may have been severely jolted in arriving at a recog- nition of the fact, just as another manufacturer's national pride will certainly rebel against the injustice of arguing from insuf- ficient premises against the worth of any similar American goods. These reflections carry with them several lessons which it may be worth the while of exporting manufacturers to take to heart. It is highly desirable, for example, that manufacturers attempt to learn as much as possible regarding the principal, even the petty, characteristics of foreign markets and their especial re- quirements, and endeavor to cater to these prejudices and de- mands. An American consul writes: "The American business man thinks that half the world outside the United States is populated by * Dutchmen' and the other half by 'dagoes.' " Customers in other lands do not walk on four legs. 6 PRACTICAL EXPORTING THE GROWTH OF OUR AMERICAN EXPORT TRADE According to Col. 0. P. Austin, formerly Chief of the Bureau of Statistics of the Department of Commerce, in a consideration of the trade of the world as it existed prior to the outbreak of war, "only one hundred years ago, in the year 1813, after men had been engaged in international trade for 4,000 years, and had utilized the compass for more than 300 years, the value of the international commerce of the whole world was less than that of the Port of New York to-day. The international trade of the world in 1813 was $1,500,000,000 ; the foreign trade of the Port of New York in 1913 was practically $2,000,000,000 (or, to be exact, $1,986,000,000), and of the entire world $40,000,000,000." Prior to 1870 the United States had almost always imported more than they exported. Since 1874 there is an almost un- broken record of an excess of exports over imports, the total excess from 1870 to 1912 being over $9,000,000,000. From 1790 to 1870 our exports averaged $122,000,000 a year; from 1870 to 1912 over $1,000,000,000, in 1913 and 1914 over $2,400,000,000 per year. In the forty years prior to 1914, while our population increased 150 per cent., our exports increased from $9.77 to $24.66 per capita. Our Exports of Manufactured Goods. — The change in the character of our exports was even more marked. And here, as always in considering statistics, we can pay no attention to the enormous but abnormal figures for our trade during the war years. Manufactured goods, exclusive of foodstuffs, in 1880 constituted only 14.78 per cent, of our total exports but in 1913 amounted to 48.8 per cent. Crude foodstuffs, which in 1880 accounted for 32 per cent, of our exports, diminished gradually until in 1912 they were but 4.6 per cent, of the total. Foodstuffs partly or wholly manufactured fell from an average of 25 per cent, to 13.23 per cent, in 1913. Crude materials make about 30 per cent, of our total figures, but the development of the export trade in manufactured goods is that which is the striking figure in our statistics. While exports of all other American merchan- dise increased only. 39 per cent, from 1900 to 1913, the export of our manufactured goods grew 126 per cent., a far greater and INTRODUCTION 7. more notable percentage of increase than is to be found in the figures of the United King'dom, Germany or any other manufac- turing country, while the actual value of the total manufactures of the United States is almost double that of the United King- dom and was about equal, in normal times, to those of Germany, France and Russia combined. There is but one lesson to be drawn from these figures. The United States will remain not only the world's greatest pro- ducer and manufacturer, but our foreign commerce is unques- tionably bound to continue its expansion. If any proof be need-ed of our ability to compete in the markets of the world, it is to be found in the fact that despite competition on the ground, our exports of manufactured goods to Europe alone, competing in manufacturing countries with their own products and those of the whole world, were, in 1914, more than our exports of such goods to the entire world in 1899. This lesson is amplified by the doubling and trebling of our exports during the course of the war, speaking now of exports to neutral countries of the world and not of exports of munitions or war supplies. We have had the opportunity of introducing many new goods into old markets and of enormously developing trade with comparatively new markets. American manufactured goods which were previously unknown in practically every one of our foreign markets are now in use and demand, owing to the impossibility of securing goods from Teutonic sources of supply and the restricted supplies which only could be obtained from other European manufacturing countries. The usual "sample orders" for new goods have been magnified into real business of extraordinary dimensions. Undoubtedly many of these new American articles will have made names and places for them- selves and trade in them will continue in years to come, even after the restoration of European manufacturing industries. What will happen in the case of others of our goods which have thus, virtually in spite of ourselves, been introduced into neutral markets no one can predict ; but this may be asserted without fear of contradiction — our prospects for a continuance of trade will chiefly depend upon the satisfactory or unsatisfactory fashion in which the individual manufacturers have handled the new 8 PRACTICAL EXPORTING trade and their new customers, and upon the earnestness and in- telligence shown in their individual efforts to maintain and culti- vate the prestige they have gained. Certain it is that factory capacities will, now and in tho future, cry for "more business," capacities vastly enlarged, many of them, to meet the demands of warring nations and our own, for old products and new. Foreign commercial demands will fill those factories again, if stimulated and wisely cultivated. A continuing favorable balance of trade, our surplus of exports over imports, will redound to the prosperity of the nation, will help pay war taxes, in increasing the output of factories will reduce the overhead percentage and thus help in meeting in- creased wage demands of labor. Foresight, study, enterprise, are demanded as never before. Our tremendous war exports, 1914-1920, with consequent favorable balances of trade, so called, probably cannot, indeed should not, continue in similar propor- tion.' No thinking man anticipates or hopes for that result. Yet certain it is that the export trade of the United States will for years to come, doubtless permanently, exceed anything we dreamed of before the war, and in imposing -volume, if we handle our new business wisely. PRACTICAL EXPORTING CHAPTER I WAYS AND MEANS The Many Facilities for Export Trade Available to American Manufacturers — What Studies and Methods Are Advantageous — The Basic Rules in Exporting — How to Learn if One's Goods Can Be Sold in Other Countries — High Priced Goods even more Suitable for Export than Cheap Goods. TO the man who knows nothing about it, to break into the export trade might seem a difficult and perhaps an ex- pensive operation. It is neither.^ There does not exist a single great exporter of to-day, even among the biggest firms and corporations which rank among our largest individual exporters, who began campaigning for business in foreign markets on an expensive basis. One and all, as shrewd business men, planning their foreign relations as they conduct their domestic affairs on a sound and reasonable basis, first looked carefully into possi- bilities, angled cautiously and wisely for trial orders, built up the succeeding business gradually until the point was reached when no business concern calling itself progressive could avoid the positive necessity that had developed — the necessity to spend a part of the new profits in building more ambitiously than before on the advantage of the trade that had been started and the prospects it so invitingly held out. THE MACHINERY OF EXPORT TRADING In succeeding chapters there will be discussed the several means of starting as well as developing trade in other countries. 1 "There is no essential difference between increasing business in St. Louis and increasing it in Rio or Buenos Aires, and there will be no more difficulty in doing so if the same care and efforts are devoted to it" (Alba B. Johnson, writing when President Baldwin Locomotive Works.) 9 10 PRACTICAL EXPORTING They may here be summarized as (1) correspondence, (2) traveling salesmen, (3) advertising, (4) export commission houses. For the conduct of his export trade the manufacturer has at his disposal : agents permanently resident in foreign markets, American export agents and foreign freight forwarders. Selling Through Traveling Men. — We are constantly hearing a great deal about the necessity for American manufacturers to send out their own traveling men to foreign markets, that otherwise it is impossible to get any business from them. No one yet has instanced an example in proof of the statement. No such instance can be pointed to, for it does not exist. Foreign travelers are sent out by any concern only after it has been defi- nitely proven that sufficiently remunerative markets exist to justify such a course. Certainly the cultivation of possible trade by such means is the ideal way. Any manufacturer, even the smallest, may contemplate such a course, may look forward to it and plan for it — but he will not inaugurate it until he has become thoroughly convinced from actual results obtained in other and simpler fashion that the experiment may be, ought to be, profitable. Moreover, there does not exist a manufacturer or exporter, whether in the United States or in the great in- dustrial countries of Europe, who sends traveling men into every market where he does business. The maker of a certain article may deem it wise to send a traveling man to England while he will think it absurd to contemplate sending one to China. An- other manufacturer may send a traveling man to Brazil and Argentina, but he will not think it worth while spending money in sending that man, or any man, to Ecuador and Bolivia. A multi-millionaire corporation will exercise precisely the same discretion in this respect as does the manufacturer capitalized at $10,000. The latter may send a traveling man to California or to England. His course in either case will be dictated by what he believes from experience and from investigation will prove profitable. A traveling man 's expenses in the last instance are no greater than in the other. Selling by Correspondence. — Working up an export trade through correspondence is necessary no matter what other means, traveling salesmen or other, are adopted. And it is a feature of export business which is of peculiar educational value in the WAYS AND MEANS 11 conduct of a manufacturer's domestic business as well. To learn how to handle distant customers whom he cannot possibly visit in person, how to provoke inquiries and how to turn inquiries into orders through the mails is something which it is well worth while learning. This, be it noted, is a radically different proposi- tion from our all too familiar mail order and peddling agent work with consumers here at home. To get business, to keep business, to increase business, all purely through correspondence, with big, rich merchants, the most desirable possible customers in great foreign markets, present quite another form of effort, call for the exercise of the highest intelligence and ability. To assert that it is impossible to get any export business through correspondence alone is supremely ridiculous in the face of the experience of thousands of American exporters. There is not an exporter in the country who does not carry on his records some customers whom he has never seen, whose business he se- cured and whose patronage he retains solely by means of cor- respondence. Many there are who have never done any export business whatsoever with anybody in any other fashion. Advertising to Get Foreign Trade. — Similarly, in advertising for foreign trade thought ought to be given to the habits, per- sonality and intellectuality of peoples of other countries, their languages, their ways of doing business. Such a study also is educational in the highest degree, and, like every other aspect of the export trade, tends to broaden the man who undertakes it and fit him the better for the development and the conduct of his home trade. Export Commission Houses. — Doing export business through what we commonly call export commission houses, which are established in New York and at various ports of the United States, might be thought to offer the royal road to success. These houses do indeed offer valuable help to manufacturers who wish to increase their foreign trade and no one should disregard their facilities. On the other hand, no manufacturer should de- pend exclusively on them. Few of them in the United States are merchants properly so-called, buying and selling goods for their own account. If some of them do operate in some of our foreign markets as merchants, stocking or "jobbing" goods, it will be found that such activities are restricted to a few special lines 12 PRACTICAL EXPORTING only, and it must never be forgotten that tliere is no such house in existence which does business in all of the world's markets and that the business done by any such house varies radically according to the market where it is active, selling one kind of goods in one market while in another an entirely different sort of business is carried on. There are buying agencies in the United States for merchants established in some foreign countries. Each such house is to be regarded as a jobber in the market where he is established. They are not to be regarded as "agents" for carrying on a propaganda in behalf of any special one of the lines which they handle. The great majority of ex- port houses, however, belong in the classification of export com- mission houses. As such they are buying agents in this country for independent merchants of other lands, rather than selling agents for American manufacturers in foreign markets. This will be explained in greater detail in the chapter devoted to this means of carrying on an export trade. Resident Foreign Agents. — In every foreign market where American goods can be sold there are domiciled scores if not hundreds of commission agents who depend for their bread and butter on their success in selling the products of oversea fac- tories. European manufacturers are almost a unit in utilizing their services to introduce new wares and keep alive and pro- mote, as well as safeguard, trade already established. These agents are salesmen, not buyers of goods. The professional export houses of the United States have long made free use of them. It is only in comparatively recent years that American manufacturers have begun to realize how they may safely and advantageously be employed. Perhaps it is not too much to say that one of the surest ways of developing this country's great export opportunities lies in the more general recognition and employment of the facilities offered by the best class of these foreign commission agents. Care and discretion without limit must be exercised in the selection of such an agent, but finding the right one in each market is ({uite sure to be worth all the time and effort it may cost. American Export Agents. — The manufacturer who does not wish to create an Export Department of his own, who prefers to be relieved wholly, or in large part, of the details of developing WAYS AND MEANS 13 and carrying on a business with other countries, may entrust his foreign interests to one of hundreds of so-called "manufac- turers' export agents" who are established in New York and some other American cities devoting themselves solely to foreign sales. Each such agent represents a number of different manu- facturers, usually in non-competing lines. The pro rata expense of each manufacturer thus represented is, therefore, somewhat less than might be that of his own individual effort. The scope of the activities as well as the methods employed by these "manufacturers' export agents" vary and require special in- vestigation in each case. Furthermore, those manufacturers who employ them must themselves manifest a lively interest in their own export trade, its promotion and its conduct, if they seek success. In no aspect of his foreign business relations can a manufacturer relieve himself of personal interest and duty. Like other facilities at his disposal the manufacturers' export agents will be considered at length in later chapters. Foreign • Freight Forwarders. — Finally the exporting manu- facturer has at his disposal the services of the all-important for- eign forwarding agents. He may, if he choose, through them be relieved of almost every detail connected with the shipping of his export goods. They will despatch to any part of the world small packages or car-load lots. They will take care of every detail at port of shipment, ocean bills of lading, custom house formalities, marine insurance, etc. The foreign freight for- warders, or as some of them wrongly call themselves "foreign expresses, ' ' are not agencies for the introduction or sale of goods abroad — they are purely shipping agents. As such they may often be practically indispensable to any exporter. Their op^ erations and facilities require study. How they may be utilized profitably and advantageously will form the subject matter of many pages in this volume. SCIENTIFIC STUDY AND METHODS OF EXPORTING For years American manufacturers have been plagued by a never ending procession of critics who have told us that we did nothing right and that we were by no means the equal of, nor indeed qualified to compete in the world's great markets with manufacturers of Europe. Strangely enough, our export trade, 14 PRACTICAL EXPORTING particularly our trade in manufactured goods, has grown at the extraordinary rate already mentioned, had grown much faster before the war than had the similar trade of England, Germany or France. Curiously enough, too, very similar criticisms were made by British and by German consuls, newspapers and lec- turers, of the practice of British and German manufacturers. A German text book used in the commercial high schools of Ger- many berates manufacturers and holds up American practices to their emulation. A British trade paper waxes indignant over the fashion in which English hardware manufacturers send out their goods and declares that "The American manufacturers were the first to show Australian dealers what can be done in the way of putting up goods. They still lead in this particular. There are some British manufacturers to whom 'modernism' (in the business sense) makes no appeal. Either they regard it as a heresy, or, what is more likely, they have little or no ac- quaintance with the thing. Their attitude or ignorance, which- ever it be, is regrettable. It is costing them business. The methods of their fathers may serve on the spot. We do not know. In Australia they certainly will not serve." Mistakes of American Manufacturers. — First, among hin- drances to the successful building up of export trade are, in the language of a recent writer: "Impatience for quick returns, ignorance of conditions in the foreign field, and the lack of sus- tained effort." These fundamental blunders were put in con- crete form not long ago by a large foreign merchant, who re- marked : **We would like very much to do business with Ameri- can manufacturers for a good many reasons, but whenever we have begun to do business with them we have immediately seen that we had made a mistake. They are not the makers for us. They do not treat us right — they do not cooperate with us and the worst of all is that they seem to think they are doing us a great favor in supplying us with their goods." It seems frequently to be the case that the manufacturer is un- duly anxious merely to get an order. Strange as such a 'Criti- cism may seem, it is none the less well founded. Obtaining an order is but the first step, and sometimes the easiest step, toward the upbuilding of an export business. Upon the satisfactory execution of the order may depend every future possibility. WAYS AND MEANS 15 Upon the selection of customers and the arrangements made for the thorough cultivation of a territory and the supply of its re- quirements may hinge the profit, as well as the volume of busi- ness, to be obtained. In writing a letter to the American Exporter, commending certain articles which it had recently published, a prominent New York export house used the expression, "American manu- facturers seem to be hypnotized by the receipt of a letter bearing a foreign stamp, ' ' and went on to state that "it is no uncommon thing for a manufacturer to quote his absolutely rock bottom ex- port prices to a small retail dealer in a foreign city, who is prob- ably not even our customer, but the customer of a customer of ours. ' ' Still other manufacturers seem to be anxious for nothing so much as to get their "cash in advance" — an order with check enclosed seems to commend itself to them as the desidera desid- eratum of commercial transactions. But what about a second order from the same customer? The check is very satisfactory, indeed, but the single transaction, unless it paves the way to a regular business, is of the smallest importance. Many foreign importers speak bitterly on this subject. Machinery, automo- biles, new makes of typewriters are ordered, arrive minus essen- tial parts, with parts broken, or break down in service. No extra supplies have been shipped, no nearby depot of supplies established for the prompt replacement of necessary parts. The parts must be ordered from the United States, three months, six months elapse before their receipt; meanwhile the machine is idle and useless, and when received they are frequently the wrong parts. The importer finds business with the United States "too difficult." The original order itself, in itself, pleas- ing or flattering as it may be regarded, is of only minor impor- tance. It must be executed in such a manner as to satisfy the customer thoroughly and encourage future business. To discover that his goods can be sold profitably in one mar- ket ought not unduly to elate a manufacturer. It ought merely to serve as an incentive to study that market carefully and find how to get the greatest possible amount of business from it. The discover}^ that no market at all exists for the same manu- facturer's goods in another country ought not to discourage him. 16 PRACTICAL EXPORTING He doubtless finds very much the saine state of affairs existing right here in the United States. In one of our States he may have a large trade, in another State or perhaps a certain district, owing to local conditions, he may find it possible to do little if any business. His failure to find a market in one direction has no bearing whatsoever upon the development of business in a more promising field. Customers' Interests Considered.— The foreign customer must be put in a position to make profits on his American goods. Breakages, delays, loss of time, patience and money, even when in no way chargeable to the American manufacturer, constitute a serious handicap to the expansion of his business. To reduce to a minimum the annoyances necessarily undergone by any im- porter of foreign goods is to insure future patronage. The au- thor writes with feeling on this subject. It was too often forci- bly and painfully emphasized in the course of many years' ex- perience in doing business abroad. Serious study should not alone be given the subject of handling the first order, far more important is the question of laying a broad and firm foundation for the development of foreign busi- ness after receipt of the first order. Speaking of what he calls "order intoxication," some one remarks: "With the first order a manufacturer often loses his perspective and forms it into a temporary block to future progress." Writing from a Latin American country, a business man estab- lished there, who had previously spent many years in the United States, offers the following comment: "It is naturally difficult to induce dealers here to throw over a line they have been han- dling for years in order to take up a new and untried line. Con- cessions and inducements of every sort must be offered. If nec- essary for the American manufacturer to find other agents than the established houses of first importance, they surely cannot expect any man of ordinary business ability to undertake to compete with old established and powerful houses unless he is well backed in every way. Even if an active, honest and re- sponsible agent is found he will further require the heartiest co- operation of the manufacturer himself, a feature in the business of equal importance with the energy and activity of the agent. I believe it is true that many American manufacturers are will- WAYS AND MEANS 17 ing under suitable couditions to extend favorable terms of credit, but something more is needed; that is a personal in- terest in the market and in the operations of the agent on the part of the manufacturer and the heartiest good will to co- operate in every possible manner for mutual success." SOME BASIC RULES Very likely, iDcrhaps, it has been due to the fact that export trade is exceptionally profitable, possibly to the widespread but utterly mistaken impression that that trade comes to us without an ett'ort, that a good many manufacturers seem to expect in it to "get something for nothing." In their convers^ion, in fact in their correspondence, one hears : ' ' We 'd like to get the orders, but we don't feel that we should pay any commission or expenses, or run any risks. ' ' And this from people of reputation as shrewd and successful business men ! But it loses business in the export field. To reduce expenses to the minimum is un- deniably good policy. That goes without saying. But neither in work for foreign orders nor in the execution of such orders can something for nothing be expected. The exporter must be fair-minded if not liberal-minded ; above all he must avoid the very appearance of anything to the contrary. Moreover, the exporter has something more to guard than his own dignity, reputation and success. He should guard the in- terests of his country in the same respects. The exporter who is not equally as jealous of the American name and reputation as of his own deserves to be suppressed by law, and unfortunately there have been times when honest Americans have bitterly la- mented the absence of any machinery to keep over-sharp speci- mens out of the export trade. The general rule that should govern our business relations with other countries may perhaps be : Put yourself in the other man's place. If you will treat your foreign customers on this basis, striving to understand their situation and their point of view, and endeavoring by every possible means consistent with a profitable conduct of your own business to meet their terms and wishes, you will not go far wrong, cannot very well avoid building up a growing and successful trade. Another basic rule may be : Never guess ; be exact invariably, 18 PRACTICAL EXPORTING and dignified, even formal also. Far better to refuse an order, or to hold it for instructions when each and every item and con- dition is not clear beyond the peradventure of a doubt. Make no promises which you will not be willing to fulfil, cost what it may. Adhere implicitly to offers that you have made, follow without deviation every promise in your contract as well as every clause in conditions accompanying contracts which your customers make with you. Meet your customers frankly and openly, stand your ground firmly when there is an apparent effort to impose upon you, but give your clients the benefit of every doubt. Be not too cock- sure that you and your clerks are invariably right and the only ones who can be right. TO LEARN ABOUT EXPORT CHANCES In times gone b}^ a large share of our export orders came to us unsolicited, as has already been remarked. We owe our start in foreign markets, in some instances, to foreigners who have merely visited this country and have been impressed by what they have seen and heard ; in others, to foreign mechanics who have spent some time in American factories and afterwards re- turned to their original homes carrying with them lessons of experience in American practice gained during their stay here, and in yet others, and in perhaps even more numerous instances, to stories of American progress in some industrial lines told by our export and trade journals. For these and other reasons many inquiries formerly came to our factories unsolicited ; even to-day many a manufacturer reports that he occasionally re- ceives orders from foreigners but has no idea how they ever heard' of his existence or of the goods he makes. None the less, the times are changed. Inquiries of this sort, unprovoked and unsolicited, grow and must grow rarer and rarer. In any event, such chance orders aggregate a mere bagatelle and cannot be con- sidered as constituting a business. Moreover, with the increase in the application of the principles of scientific management and general efficiency in American factories, it is becoming more and more impossible for intelligent manufacturers to rest con- tent with such sporadic orders, more and more it is being recog- nized that one foreign order is only a clue to many possible WAYS A^'D MEANS 19 orders in the same city or iu neighboring cities, in the same country or in many countries. The question at issue, then, is how to develop to its limit every possible market — first, of course, those where goods have in one way or another already been introduced and recognized. The manufacturer who gives any thought at all to export possibilities for his line is likely first of all to ask himself, "Can my goods be sold in foreign countries?" then, "Where can they be sold?" and "How to sell them?" CAN GOODS BE SOLD? To the first inquiry there is but one answer. Yes. Svery article made in the United States can be sold in some foreign country. There is not an American factory which is able to do a considerable business here at home in general competition with other factories, which cannot also find outlets for its products of no matter what nature, somewhere beyond our own borders — if nowhere else, in nearby countries where proximity, the saving of time in transit, ability to obtain fresh supplies quickly and similar considerations offset advantages which otherwise compet- ing manufacturing nations m^'ght be able to offer. There is not one of our peculiar American customs which have gradually grown up in the United States and have entailed the manufac- ture of peculiar goods which has not already spread, to some extent at least, to neighboring countries and some of them have already penetrated far afield. To talk of selling American pic- kles in Germany seems very much like carrying the proverbial coals to Newcastle, but it has been done and successful!}'. Our essentially national and quite modern prepared breakfast cereals have actually been sold around the world. Do Competitors Export? — One of the extraordinary features of the attitude of some American manufacturers toward foreign possibilities is not merely their skepticism as to possibilities for their own goods, but their extraordinary^ ignorance of the fact that their immediate competitors in this country are already acutally enjoying some of that export trade which they would like to have but hesitate to seek. A manufacturer of plows is found, for example, who seems not to know that other American plow manufacturers with whom he is constantly competing here 20 PRACTICAL EXPORTING at home are actually doing to-day, as some of them have for half a century past, a large and profitable foreign trade. This, it may be granted, is an extraordinary illustration, but strange as such ignorance in this particular trade may seem, it is none the less a true statement of fact. It is an illustration of a wide- spread condition which may be especially striking, since one might suppose, as a matter of course, that no plow manufacturer in the United States can very well avoid knowing something of the past and the existing export trade in American plows. One of the first means available to a manufacturer to answer his own question, "Can my goods be sold for export?" may be inquiry of his own competitors — guarded, diplomatic inquiry perhaps — yet not in all branches of industry is trade jealousy so acute that no information, or misleading information, will be given. With our many and strong trade associations it would seem that immediate information is "^available to any manufac- turer in reply to an inquiry as to whether any one else in his particular line is already shipping foreign orders. Information from Suppliers. — Very especially, however, any manufacturer has at his command for the securing of this same information, the friendship and the acquaintance of his sup- pliers, the people from whom he buys raw materials or parts. The manufacturers of boots and shoes can learn something from the traveling man who sells him and his competitors upper leather, or sole leather, or findings ; the making of carriages and wagons can learn something of the foreign trade which other makers of similar vehicles may have on inquiry from his friends who sell him springs, wheels and upholsterj^ materials. The mere fact, which can readily enough be ascertained, that competitors actually ship goods to foreign markets, will or should, as a matter of course, lead to further and more detailed inquiries. WHERE CAN GOODS BE SOLD? Information obtained by the manufacturer from his suppliers, as has just been suggested, may be more or less detailed as to the operations in foreign fields oi the competitors of the manu- facturer as his acquaintance with the supplier may be more or less intimate. It will very likely be found that the supplier WATS AND MEANS 21 himself is carrying on an export trade in the same parts or ma- terials which the manufacturer is buying here at home. In this case the supplier can tell not only something about what other manufacturers of the completed article are doing abroad, but he may also be able to give, in the light of his own experience, valuable hints to the manufacturer as to some foreign markets and as to ways of conducting an export trade. Here is an illus- tration of one phase of the broad mindedness which it has been remarked must characterize the exporter. Markets for Raw and Finished Products. — The fact that the supplier of materials or parts is himself selling to foreign coun- tries the selfsame goods as those bought by the American manu- facturer, or goods essentially similar to them, by no means im- plies that there is not an attractive and a permanent market in the very same as well as in other foreign countries for the manu- facturer 's finished product. The fact that for twenty or thirty years American makers of shoe machinery, of glazed kid and box calf, of lasts and of other requirements of shoe manufac- turing, have been selling increasing quantities of their products in every country of Europe and in every country the world over where shoes are manufactured, has not prevented the steady, healthy, even surprising growth year by year of Ameri- can export trade in manufactured boots and shoes. The leather and the machinery that we have sold to England and Germany have not interfered with our increasing sales to the very same countries of boots and shoes made by the same machinery and of the same leather in American factories. That our makers of tanning machinery have pushed hard and successfully to intro- duce their apparatus in England and Germany, to teach tanners in those countries how to make American leather, has not re- stricted the wonderful growth of our exports of finished leather to the same countries. That certain manufacturers of lathes for turning lasts find profitable foreign markets for their machinery has not prevented manufacturers of finished lasts from finding, in their turn, markets in sundry foreign countries well worthy attention and cultivation, even despite the further fact that the maple wood from which our lasts are turned is also exported in crude or half finished form. Therefore, if (for example) the manufacturer of carriages, 22 PRACTICAL EXPORTING carts or wagons, learns that the makers of practically every part that goes into his finished product have for a long time been ex- porting those very parts and supplies to sundry foreign mar- kets, he must by no means argue that there is no chance left for him to find foreign customers for his finished vehicles. He can- not even argue that were he to find customers to-day they would be only temporary and that there would be "no future" to the trade. The history of the last half century of our foreign trade argues against this point of view. Export Statistics — The study of statistics is often ae barren of profitable result as it is puzzling and tedious. Yet that study may be helpful in those lines where government figures are closely classified and subdivided. Our official American export statistics are as finely classified as are any others but still leave a great deal to be hoped for. It is expected that studies now under way looking to reclassification of our export statistics may result in figures more helpful to manufacturers of many special lines. The Bureau of Foreign and Domestic Com- merce of the Department of Commerce issues every year several publications detailing statistics of our export trade to all the world, which are available at nominal costs. These statistics may give a general idea of the volume of our export trade in certain goods, particularly those classed together under general heads, and the distribution of such exports through various for- eign markets. It is possible to analyze such statistics, learning, for example, from a comparison of the values per unit of goods exported, the general class or quality of goods bought by dif- ferent countries. The man fond of statistical investigation may go farther and study the export statistics of other manufacturing countries, such as England and Germany, learning to what markets their products are shipped. He may also look into the import statis- tics published by countries where he thinks or has reason to sup- pose similar goods are not manufactured but are purchased from oversea. Some information in such regards may be had from authorities and publications of the Government at Washington. Sometimes statistical works of this sort may be found in public libraries. WAYS AND MEANS 23 Local Conditions Affect Markets. — All statistics, however, are apt to be niisleadiug, as they are often disappointing, when re- liance is placed on them for information as to specific articles. The imports of a certain line of goods into any market are often affected by local conditions which specialized products in the line in question may be able to overcome. In modern industry products fast change, not only in specific details but even in gen- eral character. Lack of imports into a certain market in a given line may be due to inadequate introduction of this line, or even to populaV ignorance regarding it. In studying foreign markets it will constantly be found that certain articles sell well in one market while in a neighboring market of similar or pre- cisely identical character the same articles are not known at all. American seamless hosiery was early and satisfactorily in- troduced into Chile but, whatever may be the case to-day, it was for a long time impossible to introduce these same goods into the Argentine Republic. At least one manufacturer found the reason in his own case. It was that the agent upon whom he de- pended in Buenos Aires was representing European hosiery of a different character which he had already introduced. Ameri- can lamps for years enjoyed a considerable trade in the city of Constantinople, but at Smyrna, only a few hours distant in the same country and subject to identical conditions, the same lamps never obtained a footing. The prospects of trade in some lines may occasionally depend on varying geographic and climatic conditions in the same coun- try. Compare, for example, the relative altitudes in Mexico of the coast cities of Vera Cruz and Tampico with Mexico City, 8,000 feet higher. Throughout Central America and in many of the countries of South America similar conditions are encount- ered with an emphatic difference in temperature and general climate between the hot, tropical regions at sea level and the temperate regions among the mountains in the interior where many of the populous and important trade centers are located. It might, for example, be possible to develop business in oil or gas heaters, for use during the cool evenings, in the regions of high altitudes, while it would be quite impossible to sell a single heater in the low-lying coast cities of the same country. The 24 PRACTICAL EXPORTING question of where goods can be sold is not therefore a question always of "what countries." Many another consideration of varying nature must be taken into account. American Consuls. — One of the first sources of information likely to suggest itself to the average manufacturer contemplat- ing a stud}^ of possibilities in his line is sure to be the American consular service. The manufacturer's thought is, "I'll write to the American consuls, send them my catalogue and see what they say of my chances." Before the manufacturer takes this step he should not neglect inquiring first of the Bureau of For- eign and Domestic Commerce, Washington, to which all con- sular reports of trade ultimately come through the Department of State. This Bureau has on file thousands of reports from all parts of the world relating to almost every imaginable sort of business, some of which have been published and some of which have never been put into type. The chances are strong that much of the information which the manufacturer wants is al- ready on file and immediately available. Duplicates of such re- ports may be found in the branch offices of the Bureau of For- eign and Domestic Commerce which have been established at New York, Boston, Chicago, St. Louis, New Orleans, San Fran- cisco and Seattle. If no reports are already on file, or if special information not included in the reports is required, then the Bureau itself will, if desired, send out for the manufacturer a special request for fresh information. Of course, the manufacturer can do this for himself if he chooses, but in any event he must not forget that he will not receive confidential information for his own exclusive use and benefit. Because our consuls are government officials acting for the benefit of American commerce, and not exclusively for the benefit of any individual citizen or manufacturing concern, in- formation that is gathered in response to inquiries will be pub- lished or otherwise placed at the disposal of any one interested. Furthermore, American consuls are not located in "practically every city of the world," as a recent writer reported. There are about 300 consulates. Their addresses may be obtained from the Consular Bureau, Department of State. In correspondence with these officials letters should not be ad- WAYS AND MEANS 25 dressed personally — the address should be the American Consul, or the American Consul General, as the case may be, in such and such a city and country. This in order to avoid delay, if the individual holding the office chances to be absent from his post. Some curious blunders are made by manufacturers in seeking information directly from our officials abroad. In one instance a manufacturer addressed a circular letter not only to the consul general at a certain foreign capital, but to the vice consul gen- eral, to the deputy consul general, to the clerk at the consulate general, and then capped the climax by sending that identical circular letter to the American Ambassador, to the first secre- tary, the second secretary and the third secretary of the embassy. Only one letter is, of course, required — to the chief consular official. It will not usually be found desirable to address such letters of inquiry to the "consular agents" who are located at minor points under the jurisdiction of a neighboring consul. The consular agents are not always of American birth and they received their appointments chiefly in order to have some repre- sentative to look after the occasional requirements of the ser\"ice at points where it is not worth while maintaining a regular consul. They are not paid salaries, depend on chance fees and, although almost invariably men of character and standing in their respective communities, they have neither the time nor often the inclination to take up trade inquiries that may be ad- dressed to their relatively insignificant markets. Again, it must by no means be fancied that American consvils are salesmen. Do not ask them to take your samples around among the merchants in their city or district and try to get you some orders. Do not offer a consul your agency on a com- mission basis. Do not ask him to endorse your draft or guar- antee an account. Nor to deliver packages and collect payment. The consul is a government official and has a good many other duties than those of looking after the requests, even for re- ports, made by our manufacturers. No greater insult can be offered than an attempt to subsidize a consul. He will be anxious and glad to do what he can when properly approached. We have to remember that we are not the only ones who are seeking help, that very likely ten or twenty other manufac- 26 PRACTICAL EXPORTING turers in our own line, or ten or twenty different lines, may be asking a single consul, at almost the same time, to give them very much the same sort of service that we want. Other Sources of Information. — The Bureau of Foreign and Domestic Commerce of the Department of Commerce maintains ** District" or "Cooperative" offices in eighteen of our large cities and ten or twelve Commercial Attaches in as many capitals of foreign countries which are important markets for American goods. In addition there is also located in Washing- ton the Pan American Union which is available for information regarding any of the Latin American republics. Furthermore, the seeker for information may address himself to a representa- tive export trade paper which may have a good deal of valuable information and advice to offer. There are a number of Ameri- can Chambers of Commerce abroad which will be glad to give such information as they may have in reply to specific inquiries. Some information may sometimes be had from export com- mission houses in New York, New Orleans or San Francisco, but it is not to be forgotten that concerns of this sort are not infor- mation bureaus. They are business houses looking primarily after their own profits. They may or may not be able to give the information requested, and if able they may or may not be willing to give it ; that depends to some extent on advantages' or disadvantages to themselves which they may see in a proposal. Some of the international banking houses may be able at times to give advice or information in regard to business in certain markets with which they have large relations or may send abroad for such information. This, however, is not the proper function of a banking house and its foreign correspondents are busy people not particularly likely to have either time or in- clination to look carefully or specifically into any inquiry. With all of these many sources of information available to the manufacturer there remains little excuse for the man genu- inely interested in looking into profitable foreign outlets for his products if he fails to gain a general idea of chances. GEOGRAPHY Undoubtedly the first essential in the education of a man, young or old, for the export trade is a thorough knowledge of WAYS AND MEANS 27 the geography of the world. Dr. J. Russell Smith, of the Whar- ton School, University of Pennsylvania, has said: "It is im- possible to discuss the industries of a country, its commerce, its prospects, to give any reliable information of value to the student of commerce without we know the fundamental geo- graphical facts that have made it, and since knowledge is so peculiarly and unexpectedly useful I should say 'that the young man who prepared to go into work in connection with the ex- port trade would do well to spend a half hour a day for a period of years in a study of geography." A Foreig"n Atlas Needed.^A paper acquaintance with for- eign countries, capitals, sea-ports, commercial centers, is easily enough obtained and should be sought by the intending exporter during every leisure moment. A thoroughly good atlas of the world, not one chiefly devoted to the United States with a few condensed plates of foreign countries, should be the nucleus of any manufacturer's export library. Above all it should include a complete index enabling ready reference regarding any town the whole world over to appropriate maps where its location may be readily identified. Too many Americans have the hazi- est of ideas about the Dutch East Indies, too many "guess" that Jamaica is somewhere in the Pacific Ocean. A manufacturer asks: "In what country is Mauritius?" Very likely the ques- tion will stump many a reader. Yet ships occasionally take cargo from New York direct to this island, famous and impor- tant in our commerce a hundred and fifty years ago as the Isle of France. It is still one of our export markets, although, of course, far from being of first importance. None the less the manufacturer expecting to develop foreign sales for his goods ought to know as much as possible about this, as about every other market of the world. Arm-chair Tours with Books. — Most of us promptly forgot a good part of our geography when we left school or progressed to so-called "higher" branches. We may all of us very well begin afresh, and there is no more fascinating study imaginable than that of other countries, what and where they are, how they are reached, their relations physical and geographical one to an- other, the people who inhabit them, their languages and customs. Evening tours at home with atlas, guide books, books of travel, 28 PRACTICAL EXPORTING illustrated steamship folders and sailing lists, mapping out imaginary or possible future trips, will prove quite as interest- ing as the latest novel to the business man who has in view the increase of business and profits through orders to be secured from the various countries and peoples of the earth. In any public library such works as the "Exporter's Gazetteer of Foreign Markets" will be fornd with details of a country's financial and economic organizations. A casual inspection of the hun- dreds of books of travel which have flooded the market in re- cent years will suffice to determine what books of this class give information of real use to the business man who wants to know something of the people and the commerce of a country where he expects to seek orders and the relative importance and loca- tion of that country's principal towns and cities. Travel lectures and moving pictures will give the man who has never set foot outside his ow^i country some idea of foreign lands, their cities and their life. THE QUESTION OF PRICES Who makes the cheapest goods in the world? Can anybody tell? Does anybody care? Is it not acknowledged that the price argument is always the last desperate resort of selling in- efficiency? If this is true at home, it is also true in foreign countries. And yet we hear a great deal about the necessity of American manufacturers meeting competitive prices in foreign markets. American Competition not on Price Basis. — No doubt this is true in a few lines of staple goods — but in how many lines? It may be the case in rosin, sometimes in petroleum, it is very likely often the case in some of the cruder products of iron and steel mills, yet instances are not unknown where certain wdre nails have been given the preference in export markets, even when quoted at slightly higher prices than competitors, because that certain brand of nail had been found invariably to be re- liable, well made and finished, and full weight. It may be, there- fore, that reputation and fame count for something even in such highly competitive articles. Granted, however, that there are a few staples in which competition is almost if not quite resolved down to a price basis, yet it must also be granted that in the WAYS AND MEANS 29 great bulk of trade in articles which the United States can supply competition is not and should not be considered to be one of price. There is hardly such a thing known in many trades as such competition. One watch is different from another watch of sepa- rate origin just as one manufacturer's chair differs in some re- spects from another manufacturer's chair, or one shoe from an- other shoe, one engine from another engine, and so on. A certain famous American dollar watch is not the cheapest watch in the world by any means. It has found many imitators but it still maintains its sale alongside of watches that retail for the price at which its makers wholesale it. The advent of the dollar watch did not kill the sale in the United States or in any other country of watches at $20, $50 or $100 each. We have already observed our American sales in the most highly competitive markets of the world, the several manufactur- ing countries of Europe. Analyze the figures for our former ex- ports to Germany. You will find among our most important items agricultural implements, machine tools, automobiles, type- writing machines, sewing machines, leather and boots and shoes. These items have amounted to an annual total of $14,000,000 or $15,000,000. Each and every one of them competed on German soil with big and important German manufacturing industries which, in their turn, actually exported their own products to many markets foreign to them. Yet our goods paid ocean freights and German duties and sold in Germany to the big an- nual amounts just named in spite of local German competition. Incidentally, it is again to be observed that ocean freights offer no obstacle at all to selling possibilities in foreign countries. A manufacturer can lay his goods down in China as cheaply, and usually more cheaply, than in Colorado. Although not suscep- tible of actual demonstration, it is for good reasons believed to be a fact that most American manufacturers who export their goods make rather better profits in that trade than they do in the home trade. Both Cheap and Expensive Goods Sold. — In every city the whole world over both high priced goods and cheap goods are bought and sold. Paris and New York are no different in this respect from Constantinople and Cape Town. Always there are 30 PRACTICAL EXPORTING some merchants who want the very best obtainable irrespective of price; indeed, some who demand only the highest priced goods they can find, successfully do business alongside of others who can use nothing but very cheap goods. Probably, as there are more poor people in the world than rich, there is a greater demand for goods that cost little. Then, too, there is the important demand for intermediate grades. The point at issue is that, so far as price is concerned, there are merchants in every country and in every city to buy any given article no matter what its price. Caracas, Venezuela, papers publish the announcement of a local flour im- porter advertising a certain well known brand of American flour and boasting in big black letters that that flour is the most costly of any imported into Venezuela. An American manufacturer of high grade steam packing has worked up a large and profitable trade in Europe. He used to sell his product in Germany at two or three times the price which the highest cost native Ger7 man packing commanded. He succeeded in doing this because he demonstrated to buyers and users of packing that his is worth what he asks for it. The reluctance manifested by some American manufacturers to seek foreign outlets for their wares because they fear local or European competition, or because their goods are not "cheap," would be amusing were it not even more irritating. An American cutlery manufacturer says he used to sell high grade, expensive tailor's shears and other specialties to Germany because the Germans make nothing so good. Cheap German shears and scissors have paid American duties and stocked a large proportion of American cutlery shops and department stores. There is not a country in the world where quality is not appreci- ated and paid for. Single orders amounting to thousands of dollars were, before the war, received from Germany for Ameri- can safety razors, perhaps because they are novelties. But prac- tically every, manufacturer in the United States makes "novel- ties," that is, scarcely any one manufacturer exactly duplicates goods made by any other manufacturer. Selling goods means something more, at home or abroad, than offering lower prices than any one else can offer. Quality and novelty are telling factors in influencing orders in any part of the world. Quality Versus Price. — It is widely acknowledged that in no WAYS AND MEANS 31 other country is the efficiency to be found in our American fac- tories equaled or approached. It is this, which, coupled with quantity production, organization, system and automatic ma- chinery, all backed by American inventive genius and versatility, enables us to maintain high wages and a high standard of living for our employees and yet produce goods of quality at reasonable prices, which means prices that commend themselves in competi- tion no matter whether higher or lower than prices at which some other manufacturers offer their own goods. It is, however, notably in the way of quality goods that Ameri- can manufacturers exceFand have made their footing firm in the world's markets. No buyers of experience in international trad- ing look to the United States for trash. It should remain the am- bition of every manufacturer who enters export markets to maintain the standing and the prestige of the American nation in this regard. He who transgresses should be torn limb from limb by his indignant neighbors. Quality Builds Up Business. — The Hon. William C. Redfield, before becoming Secretary of Commerce, was, as is well known, for years actively engaged in the export business as foreign representative of certain American manufacturers of engineering appliances. Addressing an annual convention of the National Canners Association, Mr. Redfield, among other things, took up the question of competing prices in foreign markets. "An amusing ignorance of the factors in foreign competition is frequently exhibited in our public discussions. What you hear is* price, price and again price. Goods compete in price? Well, that is true, but it is not the whole truth. Indeed, there are places where it is a very small part of the truth, else there would not be different qualities of goods at varying prices in the market. There are men in every country who are willing to pay for quality if they know it is there and always kept there. ... I re- call a business house that deliberately started in to develop a foreign trade. There were two courses open to them — the temporary and the permanent — the dime course and the dollar course. They could get rather quickly a lot of dimes they did not have, but they believed it would be better in the long run to defer those dimes even a few years and wait for the dollars, and so they went at it that way. They did not make the cheapest 32 PRACTICAL EXPORTING article they could produce and endeavor by that means to rush the market. On the contrary, they preferred to make a rather better article than was for sale in their particular markets and slowly and gradually build up a business on those lines, and this policy succeeded. They found people enough to pay for good quality and while there were times when more goods could have been sold if they had been cheaper, the truth was never lost sight of that business done on that plane would very likely be confined to that single transaction or at least to but a few more. Cheapness is not the main thing to be achieved. Cheapness in relation to high quality is all very well, but quality will build up a business that will stay while cheapness goes out of the door. ' ' ^ American Improvements and Innovations. — The element of novelty, as has just been suggested, exists in practically every article known to commerce, or by the exercise of a little ingenuity can be made to apply, effectively advocated and advertised. The reply to the question whether we shall be able to keep new trade in foreign markets is that so doing will depend on the ability of our manufacturers to impress the actual desirability of their goods, no matter if they cost a little more than former favorites. Our standard goods are not as a rule like goods used for the same purposes perhaps, made by European manufacturers. We could not, if we would, produce some of the goods sold all over the world by our competitors in Europe. Certainly we would not offer many of them, for we have developed in this country other goods of the same application which we consider, for rea- sons conclusively good to us, far better than the others. 1 E. C. Simmons, head of the great St. Tyjiiis hardware house which bears his name, in a paper presented to the first Foreign Trade Convention de- clared, relative to his own business: "We have found our greatest suc- cess in selling goods of extraordinary value, or the very best quality; that it was entirely useless to send cheap stuff abroad, or to make any effort to sell it in foreign lands; biit when we came to offer goods that were superlative in quality, and better than were made in other countries, it was not very difficult to sell them, and those sales have continued to in- crease each year." Tn his review of the trade of Austria-Hungary for 1014, the American consul-general at Vienna wrote: "American goods must find their market hero more by superiority of quality, greater tastefuliiess in packing and in the details of offering to purchasers, and the exercise of more skilful arts of salesmanship than their competitors. It is not so essential to offer cheaper articles." WAYS AND MEANS 33 It is the distinctive and advantageous characteristics of our trade and industry which all of us ought to preach and empha- size, and which ought to gain for us new trade everywhere and hold for us the footing so secured. Lightness and grace coupled with ample strength character- ize many an American piece of hardware which must compete with heavy if substantial, but often crude and rough, European articles of the same description. We should indignantly refuse to supply some of the locks which, until recently at least, French and English manufacturers have shipped to some markets where we compete with them, and our scorn and ridicule would know no bounds if we were asked to make their great jointed keys weighing a pound apiece which have to be folded together like a jack-knife to get them into the pocket. Our threshing machines work on a different principle alto- gether from that of British machines. The British "rub out" the grain, ours thresh it out with "teeth and concaves." Ours are light, sometimes they are called flimsy ; they are not, like the British, intended to be bequeathed as heirlooms to posterity. The American cost much less than the British, have double or treble their capacity, require only half the crew. They art built to do lots of work and do it fast, and to last a reasonable length of time. Wherever "hands" are scarce and "time is money," there the American threshing machine will come into its own. The same sort of argument applies with equal force to many, probably to most other kinds of x\merican machinery. The marvelous growth of our great export trade in boots and shoes was partly due to the fact that we supplied six or eight different widths and in each width a full range of sizes and half sizes. Our dealers had found it possible by carrying suitable stocks to fit neatly any normal foot that presented itself. The growth of the retail shoe trade in the United States, encouraged by this system of manufacturing, almost wholly put out of busi- ness the custom shoemaker here. In Europe and in other coun- tries no such elaborate assortment of sizes and widths had been available, and the discriminating buyer, finding it impossible to fit himself in a ready-made shop, betook himself in desperation to the custom shoemaker. It is a question \^hether with our pres- ent elaboration in the ready-made clothing industry our clothing 34 PRACTICAL EXPOBTING makers might not achieve somewhat similar results were an ag- gressive effort to be made. We do a great many things differently in the United States. Quarter-size collars were first made to order for certain exclusive retail shops in New York by German manufacturers, who were doubtless vastly amused at the novelty of the orders. Those makers never had enterprise enough to try to introduce quarter sizes in their own or in any other market. They plodded along making up quarter-size orders for these American shops and forgetting all about them as soon as their bills were paid. Mean- while, American manufacturers were quick to see the point. The system was introduced throughout the country, and it was one of those strange facts encountered in traveling abroad that Euro- pean tourists could find no other quarter-size collars in Berlin shops than those of American manufacture. The Germans themselves had not been "shown." IMen's shirts may be taken as another out of hundreds of illustrations. The different sizes, with varying sleeve lengths, represent practice utterly unknown in other countries. Making Prices Attractive. — It is clear enough, almost without stopping to take thought, that there may be a great difference in the effect of prices named in different ways. A bald statement of dollars and cents certainly can never appeal to possible buyers as would the same net returns to the manufacturer if put in a different way. In later pages we shall examine some of the forms in which quotations may be made. Meanwhile, it should be noted that a price delivered at some interior railway station of the United States can never appeal to a foreign buyer as would a price delivered on board outgoing steamer at New York or other port, for buyers in foreign countries know little about distances or railway freights in the United States and are quite unable to guess what charges to and at ports will amount to, and, in conse- quence, judge of what the goods they wish to buy will probably cost them when they are received. Similarly, what are known as c.i.f. quotations (cost, insurance and freight) are still more likely to bring orders from foreign customers because with such quotations in hand the buyer is still better enabled, as we shall see, to estimate what he can resell the goods for at a profit. Quotations of prices may also be affected WAYS AND MEANS 35 by the currencies in which the prices are named. Dollars may not be so effective sometimes as pounds or francs. It seems probable that our German competitors have often excelled in the tact shown in the quotation of prices especially in combination with some credit terms that have been extended, where buyers of the goods have had no suspicion that the prices were actually modified by the credits extended, that they were paying for these credits in the prices named. Higher or Lower Prices for Export. — "Export prices" has sometimes been adopted as a slogan on the assumption that the term is equivalent to "rock bottom prices," indicating an espe- cially and unusually low quotation. It is, indeed, a fact that many manufacturers name lower prices to foreign than to domestic customers. It is also a fact that other manufacturers realize higher prices and make larger profits on their export shipments. Perhaps the principle of "all the traffic will bear" is that which usually governs. Whether that is a sound prin- ciple in any business, domestic or foreign, is widely questioned nowadays. Those who make their export lower than their domestic quota- tions may be governed by two considerations : necessity in foreign markets on account of competition with the world's producers; revised cost calculations, eliminating all or nearly all of the sell- ing expense charged against domestic goods. It is clear that lower export prices, if they succeed in winning trade, fill vacant time in the factory, keep otherwise idle machines at work, and carry a share of the overhead expense. They are therefore to be regarded as justified in any case, when necessity or policy dic- tates their quotation. Yet the element of profit is never to be lost sight of, whether in actual surplus of returns over costs or in the taking care of a part of the "overhead" and thus enhanc- ing profits (or reducing costs) on other products. In one way or another export trade must be profitable. High export prices are justifiable — when they are obtainable, and many American manufacturers get them. Obviously, how- ever, there is the possibility of restricting sales and output. The manufacturer who is accustomed only to his home and highly pro- tected market has to take into consideration the increased cost of his goods when landed in a foreign market, through import 36 PRACTICAL EXPORTING duties which have to be paid, carriage and other expenses in- separable from any importing business, the investment of capital in doing business on the scale required in oversea transactions, etc. It is probable that an increase over domestic prices in quo- tations to the export trade is oftenest a mistake, unless warranted by the extra expense involved in adequate export packing or something of that sort. "Good value for the money" is just as sure a claim to favor abroad as at home. CHAPTER II SOME MISTAKEN IMPRESSIONS Popular Misunderstandings about Export Problems — Mistaken Ideas as to Credit Terms — Foreign Branches of American Banks Desirable but not Essential — Lack of American Ships Not a Handicap to Foreign Trade Expansion — Combinations of Manufacturers to Get Export Business by no Means a New Scheme — When American Goods may be Adapted to Market Tastes or Preferences. SPEAKERS and writers on export trade problems, whose numbers have grown so astonishingly in recent years, have given wide currency and popular credence to many mis- taken notions. It is worth our while examining some of these misapprehensions both to clear our own minds and arrive at an appreciation of the real state of affairs, because they have been widely reprinted and read throughout the world. Those who travel abroad or who meet foreign buyers in this country should be in position to present the true state to them. This should be a part of our propaganda in favor of the United States and its position in international markets. Every American who ever meets foreigners, whether engaged in commerce or not, should be able to argue the case of our country intelligently, present its claims forcefully, uproot prejudices and mistaken ideas — many of which our own people have been instrumental in ignorantly advertising, some of which our competing traders in the world's markets have been quick to seize and emphasize. A rather full consideration of facts as regards the trade and position of the United States seems to be called for at this point. AMERICAN TRADE WAS NEVER LAGGING Statistics and comments already offered demonstrate the falsity of the impression which may be general, which has even been deliberately conveyed by some speakers and writers who ought to 37 38 PRACTICAL EXPORTING know better, that the export trade of the United States in times of peace has been small or lagging. It was most emphatically nothing of the sort. It was big, important and growing — was growing at a good deal faster rate than was the export trade of any other manufacturing country even before the outbreak of the European War. The fact that the total export trade of the United States was, before the war, actually larger than the export trade of Germany is seldom known or referred to. As a matter of fact we ranked, in normal times, second only and close up to the United Kingdom as an exporting nation.^ It is certain that our position as an exporter will not be less important in the future than hitherto. It is usually speakers from the platform, rather than writers entrusting themselves to black and white, who expatiate learnedly on the disadvantages and unfavorable economic conditions of the United States, repeating even after many corrections the absurdest of misstatements easily enough disproved by any one who cares to ask for official statistics. The "smallness" of our export trade, as it was sometimes called, is only one of the general misapprehensions and popular mistakes which we may here note. LONG CREDITS Among such notions, perhaps that which contrasts American cash terms with European long credits is the most mistaken and most harmful. We are constantly encountering stories of the twelve or eighteen months' credits which it is said European manufacturers and exporters have, hitherto, habitually extended to their customers in markets where American manufacturers attempt to compete. It is seldom that reports to this effect are intelligently made or qualified. The excessive credits just men- tioned, when extended at all by European shippers, seldom apply to more than two branches of trade, namely, the piece-goods trade and the agricultural machinery business. In the latter, Ameri- can manufacturers also have frequently extended credit facilities and certainly, in view of the universal sale of American agri- cultural machinery, have not suffered through failure to com- pete in any respect with Europeans. 1 RpfoiPTKo is mado to exports of doinestic merchandise. Care must al- ways be taken to make comparisons of exports on the same basis. SOME MISTAKEN IMPRESSIONS 39 To a considerable extent, however, the talk of "long credit" terms refers to former German practice in oversea trade. With rare exceptions this talk is really based, not on extraordinary length of credit periods, but on indiscriminate and reckless selec- tion of risks which were granted credits. Three or at most four months was the customary extreme limit of the term extended by the German manufacturer or exporter — longer terms were extraordinary and exceptional. But the Germans in their eager- ness to get business undertook direct relations with small, even insignificant firms in many countries, which ought not to rank as importers at all but should buy their requirements from larger local houses. Because such individual transactions have been small, scant attention has been paid to financial risks involved, little if any enquiry made as to the standing or even the char- acter of the customers, and what we regard as conservative, pru- dent business practices discarded. A German salesman for illus- trated post cards sold $40 or $50 worth to any and every news- stand he happened across, and drew a draft at ninety days for his payment. Local bankers through whom such a draft was passed spent hours in trying to locate the drawee of whom they never before heard as a " business house. ' ' This is an illustration from actual experience in small towns in Cuba. It is talk from such sources which of tenest reaches tourist and other non-commercial critics of ours ; seldom are remarks at all similar made by large and responsible importers — the kind we Americans want as our customers. It goes without saying that German, British or any other relations with foreign branches of their own houses, and credits locally extended by the latter, have always been and will be in a totally different category. Cash Terms. — Our American "cash" terms are by no means unusual even in international trade. They are more often than not demanded even by our European competitors. No conserva- tive or successful business house in any country will grant ex- tended credit to a new or unknown customer in any land. The extent and growth of facilities must always depend primarily on the creditors' acquaintance and experience with his debtors. Credits and general business relations of great British houses with their foreign customers may depend on an acquaintance and trade reaching back fifty or even a hundred years. These are 40 PRACTICAL EXPORTING extended under exceptional conditions. What is known as the ninety days' sight draft, documents for acceptance, may be re- garded as the general principle on which the international com- merce of the whole world is founded. What those terms mean and how credit may thus be extended to thoroughly desirable and responsible foreign connections, without at the same time losing the use of capital, will be explained when we reach the appropri- ate cliapter in this book. It is the German trade which has popularly been charged with the general over extension of credit facilities in foreign markets, yet even in Germany strictly cash terms were in force in con- nection with the export trade, particular!}^ in that large propor- tion of Germany's export trade which was not done direct by manufacturers but was handled through export merchants in Hamburg. The German machinery manufacturer when he sold one of these export merchants demanded one-third cash with or- der and balance upon delivery of the machinery. Practically all German mining and agricultural products as well as imports re- sold for export, were strictly cash lines in Germany. The trade of Germany with the United States was practically a cash trade, not because American importers do not deserve credit but because they found attractive economies in paying cash. When German shippers extended credit, interest was al- ways charged at 6 per cent, from date of invoice, while the prices at which export goods were sold and invoiced varied materially according to the risk involved and the credit term extended. Foreign buyers of German woolens on six months' credit found they could obtain 10 per cent, discount when they proposed to pay cash. In years not long preceding the war, German manu- facturers met with some very severe losses in extending credits in direct business relations with certain markets of the Far East and the whole system of long term credits was generally con- demned b}^ bankers as well as by public opinion.^ 1 "Everywhere in Germany voices are heard ajrainst the undue expan- sion of long term credits at home and abroad. In times of financial stringency, such as prevailed in Germany during the Morocco controversy with France, the result of looseness in credit dealings was plainly ap- parent. "The English attitude on the subject of losing occasional orders to the German export trade where the latter holds out better credit terms is SOME MISTAKEN IMPRESSIONS 41 So far as British shippers are concerned it will be found that they have been blamed just as frequently as have American manu- facturers in regard to their attitude toward extending credit accommodations to foreign customers. American manufacturers were actually held up as a model to British manufacturers in the report of the British Commercial Mission to Canada. "Then there is the matter of terms of credit. American firms are said in particular to be much more elastic than their British competi- tors in regard to the requirements of their customers and to do all in their power to facilitate matters for them. " Few if any of our competing European manufacturers can af- ford to carry any large number of foreign credit risks, to tie up capital in such transactions with customers indiscriminately. They, like American manufacturers, must secure cash within a reasonable time after shipments of goods or thej^ cannot continue in business. Credits extended by export merchants, profession- ally and solely devoted to this branch of commerce, with large capital invested for the single and express purpose of taking care of credits, or through intimate alliance with foreign bankers, is a form of business totally unlike tliat of a manufacturer's export trade relations, whether that manufacturer be American, British or German. Our American principle of quickly and frequently turning over capital through cash returns, for which large discounts are offered, or reasonably short credit terms and prompt collections, is more than sound — it is enviable. When thirty days, or sixty days, is the normal trade limit at home we can and we do stretch it to ninety days in the export trade, and rare is the foreign cus- tomer of desirable character whom that term will not satisfy. In later chapters we shall learn how three months and double three months terms are easily to be granted, are to-day readily extended by experienced exporters — but, of course, customers pay for the time they demand. Meanwhile, here are some comments of Americans of practical experience which may serve to support the author's contentions. worth noting. The English oxporters feel that longer credit is a poor selling argument and most lilcely to appeal to customers whose business is less desirable." (Archibald J. Wolfe, Report on Foreign Credits, De- partment of Commerce.) 42 PRACTICAL EXPORTING Credit Delusions. — In regard to credits, James A. Farrell, President of the United States Steel Corporation and Chairman of the National Foreign Trade Council, has said: "A delusion has existed that the trade of the United States with foreign coun- tries is carried on within narrow limits ; that we will not extend credits, and, in consequence, a large volume of trade goes to Europe which would come here were we to grant credits of six to nine months. Where there is a substantial basis for credit, American manufacturers will not be found lacking in devising means to grant reasonable and proper accommodation. It will be invariably found that where extended credits are given, the seller charges an increased price and buyers do not benefit to the extent which reasonably prompt payment entitles them to." Short Term Principle Right.— T. W. Van, speaking at the St. Louis Foreign Trade Convention, stating that from nothing he had worked up an export business of a quarter of a million dollars for the Koken Barber Supply Company, said on the subject of credits: "I haven't much sympathy with the theory that we have got to copy after any other nation in regard to credits. . . . I will admit that if we go ahead on our regular American system, if we establish credits of the kind that the American manu- facturer feels necessary for him to work under, it is going to take longer but it is only a question of taking a little longer and having it right, than going a little faster and having it wrong. I know that in our business we have not had to do it. And, again, I will say that our line was a luxury, yet we insisted on regular credits with ninety days as the limit. ' ' ^ FOREIGN BRANCH BANKS Another misapprehension regarding our export trade and its possibilities which is ail too general, has to do with the lack here- tofore existing of branches of American banks in foreign markets. We have been told of the many branches of British, German, French, Spanish, Italian and other European banks, al- though not always with great clearness or exactness; we have been warned that these bankers discriminate against American shippers; it has been asserted that European shippers through 1 Yet in the industry represented by this speaker extended credits are common in the home markets of this as of other countries. SOME MISTAKEN IMPRESSIONS 43 such foreign branches of their own banks enjoy better facilities than have we in regard to credit information about customers and in regard to rates of exchange and extension of credits. Some of our advisers have gone so far as to declare that it is im- possible for our American trade "to expand" until we have long chains of our own banks abroad, quite forgetful of the marvelous growth of American export trade in recent years in the face of the lack of these facilities. We have heard tales of the betrayal of American interest by branches of European banks in South American countries, of copies of American invoices sent by such banks to their fatherland for the information of their own manu- facturer. How true are these allegations? Credit Report Facilities. — No one who knows will deny that there are actually available in the United States to American manufacturers more credit reports on the standing of houses in foreign markets than are available to the Manufacturers of France, Germany, Great Britain, or any other country. Such re- ports in this country are in the hands of commercial reporting agencies, of many associations and even local Chambers of Com- merce, are supplied to its advertising clients by the modern ex- port trade paper, and thousands upon thousands of them have been collected by international bankers having headquarters or branches in this country. Invoices and Foreign Bankers. — How much information is likely to be gathered from the ordinary manufacturer's invoice as it passes through bankers' hands in this or in any other coun- try ? It may be possible that in rare instances information thus available has seemed to be of value and has actually been trans- mitted to our competitors in Europe by branches of European banks in South America. Let any manufacturer, however, ask himself of what value even an exact copy of his ordinary in- voice would be to a competitor not familiar with his individual styles or numbers or qualities — that is, with the ordinary descrip- tion of his goods as it appears on an invoice without reference to catalogue or sample collection. In any event, it is most seriously to be doubted if the mere fact that such-and-such an American manufacturer is doing business with Messrs. So-and-So in a cer- tain market is of vital importance to the manufacturer's com- petitor abroad, or could not be learned equally as well, and with 44 PRACTICAL EXPORTING a mass of far more interesting and intimate detail (including samples of the actual goods), from the local agents of these competing manufacturers as from the foreign bankers said to be addicted to "betraying" American interests. A competing na- tion might be interested in learning prices at which American rapid-fire field guns or cartridges are supplied to the Brazilian Government. But would invoices of padlocks or shoes interest the manufacturers of another country? Banking Facilities. — American shijjpers have always enjoyed equally as many and as good facilities for disposing of their ordinary foreign drafts in the New York market as European shippers have enjoyed in their local markets. Foreign exchange bankers in New York have always been willing to take any prof- fered quantity of bills on any market of the world, when offered by responsible manufacturers or exporters, and have taken them at entirely satisfactory rates of exchange. It is true, however, that in very large shipments, say shipments of $10,000, $50,000, $100,000 at a time, better financial facilities have been available abroad, have indeed actually been secured abroad by American exporters, than were available in New York. This has been due to the lower rates of interest prevailing in Europe and to the existence, especially in London, of a discount market which, until late years, has been an unknown quantity in our own country. Ordinary shippers, those whose foreign orders amount to $1,000 to $2,000 or something of that sort, have been unaf- fected by such conditions and probably will continue unaffected, even with the development in New York of the discount market which it is hoped will grow with financial develop- ments under the Federal Reserve Act. Such a discount market will be highly desirable from many points of view, but its opera- tions will probably for some time be chiefly of interest and value as affecting transactions involving large amounts of money. "Dollar Exchange." — Our ambition to see more branches of American banks established in foreign commercial centers is a laudable one from every point of view. Our trade, however, has never suffered from the lack of such branches. Moreover, while New York will certainly take its place as one of the great inter- national exchange centers of the world, yet it will never entirely supplant London, nor is it likely that "dollar exchange" will SOME MISTAKEN IMPRESSIONS 45 ever wholly replace sterling exchange. That result is neither to be sought nor hoped for. Londou will continue a great, if not the greatest, commercial and financial center. Sterling cur- rency is too well known and recognized the world over. The Germans themselves, in spite of their foreign banks and their own hope to carry on international operations so far as possible in marks instead of pounds sterling, found themselves obliged to continue the use of sterling denominations in their dealings with Australia, South Africa, China, Japan, the British and Portu- guese Colonies in Africa and to a large extent in Central and South America, the greater part of such German export business being cleared through London, where all German banks were forced to maintain branches. In Egypt, Turkey and generally throughout the Mediterranean, the Germans emploj'ed French currency. Our own ambition should not be to impose dollar ex- changes, or the dollar symbol, but to utilize that form of ex- • change which is cheapest or otherwise thought most desirable by our customers in different markets. German Oversea Banks. — English foreign banks used to main- tain agencies in Hamburg while Colonial and other oversea banks were represented in that city through arrangements with local banks. Thus, German exporters used English bank agencies as well as the facilities offered by the banks of their own nationality. A. J. Wolfe in his report to the Department of Commerce on Foreign Credits, prior to the European War, wrote as follows: "The establishment of a network of German banks oversea has saved to Germany a considerable portion of the tribute formerly paid to England in the negotiation of foreign bills. London, however, is still the leading center of financial exchange, and in dealing with countries like South Africa and Australia, Germany still must look to London for mediation. German bankers are compelled to maintain banking connections and branches in that all important financial center. "In certain countries they have no banks of their own and some of their competitors are provided with such banks. Never- theless the Germans are doing a tremendous business there. In Russia, French banks maintain branches and Germans have no banks of their own. Nevertheless, they are far from being ham- pered by such a lack. 46 PRACTICAL EXPORTING "German banks were not created originally so much as a means for better credit facilities oversea as with the object of participating- in the financial activities of the countries within their territory. ' ' Referring to the popular impression that Germany had estab- lished and operated a great many foreign branches of German banks, the late Charles A. Conant, one of the foremost American authorities and authors on financial problems, wrote (1914) : "But even these strenuous and unremitting efforts had only raised the number of German foreign and colonial banks three years ago to thirteen, according to the eminent German scholar, Dr. Riesser, with an aggregate capital of 100,000,000 marks and with 70 branches as compared in England with 32 colonial banks with head offices in London, with 2,104 offices outside of England, and 18 foreign banks with 175 offices." Chances for American Banks Abroad. — There have been many opinions as to the chances of branches of American banks abroad to become profitable or even self-supporting institutions. Under date of May 27, 1914, at the first National Foreign Trade Con- vention held in Washington, John E. Gardin, then Vice Presi- dent of the National City Bank of New York, speaking of the business of American banks in foreign countries, was officially reported as making the following observation: "This is a mat- ter which will have to be given attention sooner or later, but at the present time the new law has not been sufficiently worked out to permit American capitalists to see clearly how to establish American banks abroad. It is feared that they will be a losing factor and I think that this fear seems to have a foundation in fact." Yet within three weeks of this declaration the bank with which the speaker was connected announced its intention to open branches in Brazil and the Argentine Republic. Clearly other considerations than possible profits or losses through operations in exchange influenced this institution. These may have included, perhaps, the development of an investment market in the United States for Latin American securities, possibly local loans of pub- lic or industrial character, all directly or indirectly likely to bene- fit our commerce. Our stupendous war exports inspired or at least hastened the establishment of many other branches of American banks in various countries. The more we have the SOME MISTAKEN IMPRESSIONS 47 better, even though the theory and spirit back of them are as yet totally different from those which actuated the founding of the great British oversea banks. Absence of Foreign Banks no Handicap. — Practically all competent judges, that is, men of considerable experience in the export trade, agree in declaring that the popular or newspaper statement of this obstacle in the path of the extension of Ameri- can foreign trade is unfounded. Thus, President Alba B. John- son, of the Baldwin Locomotive Works, in a carefully written paper presented to the first National Foreign Trade Convention, observed: "We hear much of the need of American banks for extending foreign trade. It is not true that there is any diffi- culty whatever at present in carrying out all the banking opera- tions necessary for making remittances, establishing credits, etc., between New York and Central and South American countries. The existing banks having their head offices in London and their branches in New York, and in all the commercial centers of Cen- tral and South America, furnish every necessary facility for making collections and remittances. . . . The real need of Amer- ican banks abroad is to furnish experienced representatives of American financial interests, capable of seeing profitable oppor- tunities for the investment of American capital and held in such confidence by American investors that when opportunities for profitable investment are presented they will be taken advantage of. . . . No bank can exist on the business of merely making col- lections. Banks must depend for their profits upon using the de- posits of the community in which they are situated. ' ' Howard Ayres, when secretary of the old China & Japan Trad- ing Company, New York, which was one of the prominent and one of the older export and import houses of the United States, writing in the Journal of Commerce declared: "A favorite theme, especially with those directly interested in that instrament of trade and those carried away by the exuberance of patriotism, is the American bank, the need of it in foreign countries, and the difficulty of trading without it. It will be a good thing, of course, for all business men to have more bankers seeking commercial bills, but there will be no peculiar advantage to any one to have the new bankers and their funds of even nominal origin within the United States. There has not been at any time until the 48 PRACTICAL EXPORTING present any lack of banking capital for doing export or import business with any country under the sun, and all the facilities of existing institutions have been, and will be again, extended without discrimination as to nationality to all business men in every country to the extent of their credit. ' ' Foreign Loans. — A general misunderstanding is prevalent re- garding the finance required by some foreign countries, par- ticularly the republics of Latin America. Credits required by such countries are not merchandise credits. They consist of bond issues to which the public of one country or another, where such securities are offered, is invited to subscribe. The late Willard Straight, of the American International Corporation, at one time connected with Messrs, J. P. Morgan & Co., com- pared the purchaser on credits of sixty or ninety days, or per- haps six months, credits carried by the merchant and in turn by the merchant's bankers, with the purchaser who desires credit for a period of from five to sixty years. "It is no longer an ordinary banking transaction; it becomes necessary for him to obtain funds by the sale, on the market, of stocks or bonds rather than by discounting commercial paper. In other words, the pur- chaser, instead of obtaining credit from the merchant, the manufacturer or the banker, through the banker as his agent, borrows from the investing public. Most of the countries which are now rapidly developing their resources and which cannot themselves finance such development, must secure money in this way. If we expect to realize the full possibilities of our export trade, we must, by our readiness to purchase foreign bond issues, be able to extend to foreign purchasers the accommodation whicli they now obtain in the markets of our competitors." Foreign Private Company Shares. — But the foreign and especially the Latin American securities that have been floated by banking interests among European investors are by no means all of them in the nature of Government bonds. Possibly far greater effective commercial influence has been exercised by the investments of European capital in private, industrial or rail- way companies in foreign countries. These, it is clear, are en- tirely different propositions from the Government or Municipal securities which up to the present, at any rate, have been those SOME MISTAKEX IMPRESSIONS 49 almost exclusively referred to when this topic has been on the carpet for discussion. Referring- to the fact that the United States was until recently a borrowing- nation, Mr. Straight, speaking before the outbreak of war, explained how we may even in such condition still have funds to invest in foreign securities. "You know that a mer- chant is continually borrowing- from his bank to carry on his business. Each year he lays aside a certain amount of his own savings which he invests as he sees fit — sometimes in his busi- ness, but many times in something else. The United States and Germany are in very much the same position. The Ger- man manufacturers are continually getting accommodation in London, but their savings they often invest in loans handled by German banks, which are beneficial to German industry. I don't see why we cannot do the same thing. We are still a borrowing nation but our credit is good. We can get money in Europe for our railway development and for the development of this country and our industry. Of course, utilize our money for this purpose ; but there is always a certain surplus which could come back into the development of our own industry by financing these foreign loans." AMERICAN SHIPS For thirty or forty years the American public has been per- sistently and continuously urged "to do something" for the merchant marine of the United States. Frequently it has been asserted that the lack of American ships to carry American goods abroad has been a serious handicap to the expansion of our foreign commerce, and speakers sometimes have even cried that it was impossible for our export trade "to grow" unless we had ships under our own flag. Such speakers may respectfully be referred to the astounding figures of the actual growth of our export trade during- the fifteen years of "normal" trade preceding the war. Their impassioned appeals on this score may, therefore, be dismissed for what they are worth. There have even been some enthusiasts found to repeat what they have never attempted to prove, that foreign shipowners dis- criminate against American shippers in freight rates. Twenty 50 PRACTICAL EXPORTING years ago the extraordinary claim was first made that we pay millions of dollars a year to European shipowners in freights on American goods which we ought to keep in this country, through paying these colossal sums to American ships. Complaints not Justified. — Not one of these statements is jus- tified, their popular currency and constant reiteration from the platform and in the press to the contrary notwithstanding. Large and experienced shippers are practically a unit in con- demning them as largely the vaporings of theorists.^ Criticism on the part of actual shippers almost invariably comes from those of slight experience and proves on investigation to be based on lack of knowledge or misapprehension of facts. Most of it is aimed at our communications with South America, pos- sibly because so many writers apparently forget that we have any export trade with other parts of the world. 1 "We hear much of the need of American steamship lines. Of course there would be an economic advantage to us as a nation in expending at home the sums paid to Europe for sea transportation, but I regard this, from the shipper's standpoint, as comparatively imimportant and senti- mental. It is a fact that the American steamship lines operating Amer- ican and foreign ships to West Coast ports, and the foreign steamship lines operating to East Coast ports (i.e., of South America), furnish by weekly sailings all the facilities at present necessary for the trade, and under the ordinary laws of supply and demand, such facilities will be increased as the business increases. Whilst I have heard of cases of dis- crimination against American shippers by the European steamship lines, so far as my own experience goes, I have been satisfied that the freight rates charged to American shippers are as favorable in general as those charged to European shippers of similar commodities. The need of Amer- ican steamship lines does not, therefore, stand in the way of the exten- sion of American trade. The American flag has been banished from the seas by unwise regulation of American ships." (Alba B. Johnson, Presi- dent, Baldwin Locomotive Works.) "In our shipping regulations we have attempted to coerce economic laws with the result of driving our ships oflF the high seas, and our states- men have no remedy to suggest except new laws of the same general ef- fect. Should we put our shipowners on an equality with those of other nations, and let them alone, the flag will quickly reappear. Meanwhile, shippers of goods have had abundant freight room for any part of the world and have suffered no hardship whatever from having to use foreign vessels. The payment of freiglit money to foreign shipowners is not a tribute, as the more violent assert, but an item of ultimate cost that is recovered in every instance from the buyers in foreign markets, to whom- soever paid. That its payment to shipowners here might be desirable is an incidental feature only." (Howard Ayres, Secretary China- Japan Trad- ing Co., in New York Journal of Commerce.) SOME MISTAKEN IMPRESSIONS 51 However little justification there may have been in the past for complaints of a lack of American ships in which to transport American goods to foreign markets, certainly in the future the solution of the problem will lie entirely in the hands of the American people. It is certain that since the return of peace to the world the United States appear as owners of a great fleet of merchant vessels. Whether they shall be operated by the Government, or be sold or chartered by it to private in- terests, it will almost surely develop that one of two courses will have to be adopted to enable these American merchant vessels to compete with ships of other nations in the carrying trade not only of our own country but of the world : subsidies, or assist- ance in one shape or another, must be granted, or obnoxious shipping laws must be repealed or so modified as to enable our vessels to be operated on an equal basis of costs with vessels fly- ing foreign flags. Enterprise among American shipping agents has never been dead. Their patriotism is equal to any ordinary strain, but it never did and never will extend to the point of operating vessels under the American flag at a loss to themselves when they might operate vessels registered in other countries at a profit. When the people of the United States, particularly manufacturers and merchants engaged in the overseas trade, wake up to the fact that like any other business the shipping business must be profitable if it is to live, and when the Congress similarly recognizes cold business facts, then, and not until then, will our American merchant marine become a notable and perma- nent acquisition to our resources. Freight Tribute to Foreign Ships. — Our friends who work over-time the old cry of an American tribute to foreign ship- owners of scores of millions of dollars every year in the freight paid on American goods shipped to the four quarters of the globe, seem not to understand the entirely obvious fact that it is never the shipper who pays the freight. Our customers pay it, and if we had 10,000 big American steamers ^ these foreign cus- 1 According to P. A. S. Franklin, President of the International Mercan- tile Marine Company, writing before submarine piracy was dreamed of, "The oversea commerce of tlie world is conducted by over 2.5,000 steam- ers having a gross tonnage of 43,0.54,000 tons, which are owned by approxi- mately 4,200 dilTercnt firms and companies. Of this great body of ton- nage only about 1,555 steamers, owned by approximately 108 different 52 PRACTICAL EXPOBTINO tomers of American manufacturers might still prefer to give us positive instructions to ship by foreign, not by American boats. We should be bound by the instructions of our cus- tomers and their patriotic impulses might influence them,- just as some people seem to expect ours would influence us. In any case, they, our customers, pay freights on American goods— we do not pay them. The routes which goods are to take will, how- ever, never be influenced by purely patriotic feelings. It will always be a question of freight rates, or of general ex- pediency, which will govern buyers of American goods, in giving shipping instructions to American exporters. In this regard it may, to say the least, be entirely doubtful if ships under the American flag will be able to offer lower rates of freight than can foreign vessels. No Discrimination Against American Shipments. — So far as discrimination in rates against American shippers is concerned, it may be pointed out that the self-confessed and advertised purpose of steamship conferences was to equalize rates, to make rates on similar goods to the same destinations the same, whether quoted in New York, in Liverpool or in Hamburg.^ Americans are not by any means the only ones who complain of discrimina- tion. For example, the Manchester (England) Association of Importers and Exporters made repeated complaints to the Brit- ish Board of Trade and to British shipowners claiming that lower rates of sea freights have been charged from Continental ports than from British ports, and it has objected to what seems to be a handicap to British trade in the fact that machinery shipped from New York to Rangoon, via Liverpool, is carried on the through journey at precisely the same rate of freight as English shipj)ers have to pay from Liverpool to Rangoon. The companies, are engaged in regular line service in the oversea trades. The remainder consists of tlie great mass of free tramp tonnage, operating en- tirely under the law of supply and demand and regulating the ocean freight rates for everybody by the charges which they fix for the transportation of the great mass of the world's staple products." 1 For a full examination of the problem of shipping rings, or "confer- ences," the reader is referred to tlie Proceedings and "Report of the Com- mittee of the House of Representatives on the Merchant IMarine and Fish- eries engaged in the investigation of shipping combinations, 4 volumes, Washington, 1913-14. SOME MISTAKEN IMPRESSIONS 53 equalization of freight rates by the steamship conferences thus works to American advantage in some cases, although it un- doubtedly works to our disadvantage in others. There is, how- ever, absolutely no basis for any claim of discrimination against us on the part of shipowners of any nationality. ^lerchant ships in times of peace are not and should not be owned by Govern- ments. They are operated by private companies for the ex- press and sole purpose of returning dividends on the capital in- vested. Shipowners of any nationality are not on this account alone likely to take any measures regarded as apt to restrict American patronage , and trade. Few definite assertions that discrimination has existed stand close analysis and investiga- tion. IMost of them are advanced in ignorance or mistake as to facts. Moreover, critics who emphasize "discrimination" sel- dom attempt to adduce specific examples &f proof. COMBINATIONS TO GET EXPORT TRADE Prompted by a desire to secure modifications, as applying to the export trade, of certain provisions of United States laws of doubtful interpretation in that regard, there developed a very earnest agitation to gain legal authority or permission to make combinations for export trade, whatever restrictions the Sher- man Act or other laws may impose on business within our own boundaries. Bound up in the arguments advanced there was too generally and widely advertised a good deal of entirely gratuitous sympathy for the "small" manufacturer who wants to enlarge his business by adding an export trade. That sympa- thy was entirely misplaced ; the small manufacturer does not re- quire or demand it, but so far as can be observed has been get- ting along pretty well and doing nicely all by himself. Presi- dent Wilson in addressing the Chamber of Commerce of the United States in February, 1915, said that it had "many times" been brought to his attention that "our anti-trust laws are thought by some to make it illegal for merchants in the United States to form combinations for the purpose of strength- ening themselves in taking advantage of the opportunities of foreign trade." And he went on to refer to great corporations with abundant resources and the consequent facilities they en- 54 PRACTICAL EXPORTING joyed in foreign markets "which the smaller man cannot af- ford." This was made a feature of discussions at several ex- port conventions. It was contended that the intent of laws designed to prohibit combinations in restraint of trade, or to fix prices, ought not to be construed as forbidding combination efforts to promote and develop trade in other countries. Legal certainty was sought on this point. We were reminded that when business leaps the boundaries of our country it immediately encounters the compe- tition of foreign business unhampered by laws in any degree analogous to ours. But, advantageous as they may seem and be to many manufacturers or shippers of staples or rough goods, it seems doubtful, to say the least, if combinations or the right to enter combinations will be welcomed, if indeed regarded as desirable, by ordinary makers of specialities and patented articles, which are the products of by far the greater number of American concerns interested or likely to become interested in our export trade. Who Would Benefit from Combinations? — Franklin John- ston, publisher of the American Exporter, considered the (jues- tion in an address at the meeting of the American Academy of Political Science in May, 1915, in which he said : "The right to combine to fix prices for export trade is a matter which does not interest the average manufacturer of articles of a highly specialized nature such as engines, machin- ery, typewriters, shoes, sewing machines, haberdashery, auto- mobiles, bicycles and scores of other lines. To such trades 'anti-trust' laws seldom apply, and the advantages to be derived from joint export organizations hardly outweigh the difficulties to be overcome in forming them. In such lines intelligent in- dividual effort will usually accomplish better and quicker re- sults than cooperative ones. "Inadvertently, much of the discussion on this topic has given an entirely erroneous impression as to the difficulties 'small' manufacturers have to contend with in establishing an export business. Small manufacturers, except in certain lines, have never felt the need of combining to fix prices or establish joint selling agencies, and it would not be profitable for them to do so. SOME 3IISTAEEN IMPRESSIONS 55 Nor are they faced with any difficulties which involve large expenditures of money. "That, however, joint selling agencies for export, or, indeed, export 'pools,' would have economic advantages in staple lines, such as steel, nails, copper, cement, cheap paper, cotton piece- goods, cordage, etc., can hardly be denied. "The national advantages of combinations in export trade would be derived through the added strength given large Ameri- can corporations in competing with similar foreign units abroad, and not because industries in which 'trusts' are not typical re- quire, or would take advantage of, permission to combine. The subject has, therefore, an academic interest only, for the aver- age manufacturer of specialties.^ "Moreover, while in certain trades one or two manufacturers have their own foreign branches, their competitors also do a large export business. For instance, one American typewriter company has its own retail branch in Buenos Aires. Other American typewriters are equally as well known in the Argen- tine market, although their distribution is done by local dealers. A famous sewing machine company has its own retail branches not only in Buenos Aires, but, seemingly, in every town of even slight importance throughout Latin America. Yet, other American sewing machine companies do a large business in the same markets." Small Manufacturers as Exporters. — As bearing on the pos- sibilit.y of the "small" manufacturer's ability to get and to build up a profitable export trade, figures compiled by the pub- lishers of the American Exporter in May, 1915, are of interest. Out of approximately 600 advertisers in the paper in question, whose ratings were taken from one of the standard commercial agency books, it was found that 112 are rated at $1,000,000 or over, 226 are rated as having from $100,000 to $500,000, 161 1 This point of view was adopted by a representative of our large busi- ness interests, J. Ogden Armour, of Armour & Company, Chicago, in an address arguing for "Syndicate Export Marketing" delivered before the Federal Trade Commission at its sessions in Chicago, midsummer 1915. "The method might not work to advantage on advertised trade mark goods or where large selling organizations have already developed an efficient distribution for their output. Each industry would have its own prob- lems." 56 PRACTICAL EXPORTING were rated at from $20,000 to $75,000, while 99 were rated at $10,000 and less. The latter category included a number not rated by the agency in question — a blank rating, of course, not always indicating lack of capital, and in this instance the class now in question included a large number who have been adver- tising for foreign trade for many years and who meet their ad- vertising bills, at least, with satisfactory promptness. We thus have a total of 338 advertisers in the American Exporter who may be called large companies, that is, with capital ratings ranging from $100,000 up to $1,000,000 or more. Contrasted with which we find 260 concerns which may perhaps be classed as small, being rated at from $75,000 down to $1,000 or "blank." A little more than one-half of these concerns which manifest their desire to do foreign business by advertising for it are thus found to be "large," and a little less than half of these Ameri- can manufacturers who are thus developing export business are "small." Comparative Export Success of "Small" Manufacturers. — Even a cursory examination of the official statistics of American export trade is sufficient to demonstrate the important position in that trade of that class of manufacturers that may be called "small." Look over the figures for the fiscal year ending June 30, 1914, before war requirements affected the character of our exports. Beginning near the top of the list we may consider our exports of "Agricultural Implements." Shipments of "mowers and reapers" amounting to over $18,000,000 in 1914 are to be credited to one great company and three or four com- petitors who may also be called "large" manufacturers. But there were also exported in 1914 nearly as large a value (about '$16,000,000) of other agricultural implements which were the products of concerns comparatively to be called "small" — makers of plows and cultivators, planters and seeders, incu- bators, windmills, hay rakes and tedders, threshers, wheelbar- rows and cream separators. Steel rails ($10,000,000 worth of them were exported in 1914) are made and shipped by big companies. Products worth twice as much money were exported in 1914 by small manufacturers of locks, hinges, axes, hammers and hatchets, scales and balances, saws, shovels, general tools and stoves and ranges. Large com- SOME MISTAKEN IMPRESSIONS 57 panies, few in number, export $3,690,000 worth of steam locomo- tives; small makers, scores of them, export gasoline engines of all sorts worth almost twice as much ($7,100,000). One big con- cern alone is virtually responsible for exports of $1,500,000 worth of shoe machinery ; a crowd of small makers of marine gasoline engines ship a slightly larger value of their specialty. One big company is chiefly responsible for exports of $780,000 worth of photographic goods; dozens of small manufacturers each get a share in shipments of toys worth much more, or athletic and sporting goods of greater value. Compare ship- ments of soap and perfumery, made by ''small" people, com- paratively, $6,500,000 in 1914, with cigarettes, $4,700,000, made by a big company. Contrast exports of small makers of furni- ture, $6,500,000, with exported products of large manufacturers of talking machines, $2,500,000, or cash registers, $4,800,000. Small makers of carriages and wagons account for $1,600,000 in our export trade totals ; big makers of elevators for only $1,300,000. Large shippers of news print paper get $2,100,000 of trade abroad ; small people making typewriter ribbons, car- bon paper, mucilage, fountain pens, steel pens, writing ink, penholders and lead pencils get $2,000,000. Exports of iron pipe and structural steel ($26,000,000) are controlled chiefly by very large concerns; small concerns ship almost identically the same value of upper leather, glazed kid, etc., for shoe making, and another lot of small manufacturers, the boot and shoe makers, contribute $18,000,000 more to our export totals. We need both sorts, the big manufacturer and the small, — but what justification is there for any claim that the little fellow cannot get any export business? The foregoing is a picture of our export trade in normal times of peace. If so before the war, why not likely to continue so after the war? Combinations of Manufacturers Authorized. — Congress was undoubtedly fully justified in passing the so-called Webb-Pom- erene Act authorizing combinations of manufacturers for the development of export trade. It is by no means inconceivable that such combinations may facilitate the operations of some large corporations, increase their own trade and hence the pros- perity of the whole country, but serious objection is to be made to the assertions that small manufacturers require such com- 58 PRACTICAL EXPORTING binations in order to develop foreign trade or that they could or would take advantage of such a facility were they legally granted the opportunity. It is not expensive for any manufac- turer to build up a profitable demand for his goods in attractive foreign markets; in fact, he usually does it more cheaply than at home and makes a better profit in doing it. Various forms of possible combination efforts will be dis- cussed under another heading. Meanwhile, it may here further be observed that the thought back of the agitation in this regard seems to be only of the establishment of manufacturers' or a combination's warehouses in foreign markets. The trade of no country is dependent now, nor has it ever been dependent on enterprises of this nature. In fact, the history of combinations of one sort or another which have been tried on sundry occasions during the past forty or fifty years is distinctly discouraging. Perhaps not more than two "combination" efforts of American manufacturers in a foreign warehouse scheme can be instanced as a success; one of them in only one of several markets where it attempted to establish itself. We have had various forms of combination salesmen and other enterprises, including at least two "American Expositions." Most such salesmen, both of the others, have been failures. What seem really to be demanded are: more generous, inti- mate and general conferences and consultations among ex- porters, a more thorough study, a broader education and more scientific development of export fields. For example, there is probably a real problem presented to makers of what are some- times called "short lines," that is, manufacturers who make only a few special articles out of many belonging to the same branch. Such manufacturers must usually confine themselves to the very largest buyers only in a few foreign markets. To reach the general trade or even to reach any trade in some coun- tries, they might advantageously work with makers of other allied specialties in order to make it worth the while of such buyers to place any orders at all. This might apply, for ex- ample, to a manufacturer who makes nothing but electric switches, or a packer who produces nothing but canned oysters. Mail Order Ideas. — However, a good deal of the discussion in the present regard seems to be aimed at the idea of distributing SOME MISTAKEN IMPRESSIONS 59 merchandise directly to the ultimate consumer, as has been done by the Standard Oil Company, for instance, in China, in Turkey and in many other countries. It may with propriety be doubted whether similar methods are amy more suitable for most Amer- ican manufacturers in foreign markets than they are in the United States themselves. We have developed the "mail or- der" business and to an unprecedented degree. Houses doing this sort of business here at home already do something of the same sort in some foreign fields, but certainly the time has not yet arrived when the ordinary manufacturer believes it a de- sirable policy on his own part to follow this system, nor has it been done by our competing manufacturers of Europe. While what the English call the "multiple shop" system, which they long ago developed to a considerable extent, has of late years been growing in our own country, yet the number of our manu- facturers who have themselves embarked in the retail trade through the opening of their own shops for the distribution pri- marily of some of their own products is limited indeed. Apart from specialties, it may be said to be chiefly noticeable in the shoe trade, and in that trade the same companies which operate their own shops in the United States have also established shops in other lands. AVhatever this tendency may indicate, there seems no present advantage or necessity in urging the adoption by American manufacturers of different policies in other coun- tries than those adopted at home. The question in export trade is always a puzzling one — how far to cultivate small buyers. Is it worth while drumming the little fellows, the small establishments in villages of 4,000 or 5,000 people, or shall such trade preferably be left to the atten- tion of distributors at important commercial centers ? The prin- ciple usually adopted by American manufacturers and exporters is precisely the same as that followed by British and most other European shippers, namely, in favor of the large general dis- tributor. The quite modern demand for the establishment of direct relations, for the cutting out of middlemen, seems more frequently than not to preach a mistaken policy because it is apt to be carried too far down the line. Especially in the ex- port trade is it of doubtful advantage, not only because of the immensity of the field to be covered, but because certain features 60 PRACTICAL EXPORTING of foreign shipping automatically increase the cost of goods and the cost of doing business, as, for example, the higher pro rata freight charges on small shipments and the unsatisfactory as well as costly means of financing such shipments. When Amer- ican manufacturers have succeeded in adequately introducing their wares with the most desirable connections in all the prin- cipal distributing centers of every possible or desirable foreign market, then their most sanguine aspirations are likely to remain satisfied for many years thereafter. ADAPTING GOODS TO MARKET REQUIREMENTS Critics of American export practices are rare who do not berate us for what they declare is our custom of trying to force on foreign buyers what we think they ought to have instead of meeting their wishes and making the goods they want. Unde- niably this criticism is justified in all too many instances. It may be noted, however, that identically the same criticism is made of manufacturers of Great Britain and of other countries. A writer in a prominent British hardware trade paper in a discussion of the vogue of American saws in Great Britain, de- claring that he had not long before returned from a trip abroad in the course of which he collected a number of samples of de- sirable foreign carpenter's tools for the purpose of submitting them to British manufacturers to stem if possible the invasion of American tools by copying or improving upon the samples collected, wrote that he regretted "to say that a haughty and cynical spirit seems to be shown by many to new and progres- sive ideas." In a speech at the annual meeting of the African Banking Corporation in London it was observed: "The Amer- ican does many things that the British manufacturer leaves un- done. " The South African correspondent of a British trade paper writes that the customary reply of British manufacturers when asked to do special things is, " 'We have been doing this for fifty years and we do not care to alter.' That is why in many cases British manufacturers are fifty years behind the times." Independence of American Manufacturers. — However, jus- tified as it undoubtedly is in many cases, a large part of the criticism aimed at our manufacturers is unintelligent because SOME MISTAKEN I3IPRESSI0NS 61 it does not take into consideration our systems in manufacturing, with the consequent limitation of our abilities to make changes. Perhaps the question of extra price necessitated for special goods is at the bottom of this whole question. It is almost cer- tain that most manufacturers would willingly produce anything that anybody might demand if an appropriate price were paid for it. Quantity production of standard goods is one of the dis- tinguishing characteristics of American factories. Specializa- tion is another. Loss of time is added to other expense in al- most every case where serious changes from a factory's estab- lished products are demanded. Will buyers pay more for spe- cial goods? There's usually the rub. An American consul complains that certain popular cheap automobiles are always painted black and are not so highly varnished as are more ex- pensive cars of European origin. Apparently he forgets that the cars in question are turned out of the factory at the rate of one every minute or two, and in order to be sold at the prices which attract buyers, foreign as well as domestic, have to be produced in uniform fashion. If the foreign buyer requires painting in special colors or extra coats of varnish it may be that he could arrange to have his wishes met if he is willing to pay $50 or $100 more per car. This may be the secret of a manufacturer's refusal to accept an order for porch chairs which were required painted red instead of the customary sea green. Possibly the buyer, not understanding that the chairs in question were offered at prices which were satisfactory because going through the regular routine of the factory, could not understand why he would be expected to pay something extra for special painting. Possibly, in this case, the manufacturer was just "pig-headed." The deviation from the factory routine might, however, have been thought by the manufacturer to cost more than the total profits in the future business that could be ex- pected would amount to. This is one of the features of American manufacturing which all of us ought to understand thoroughly in order to be able in- telligently to present the argument for American goods in gen- eral to foreign buyers, who are sure to recognize the point when it is understood. Take the case of a large importer of Amer- 62 PRACTICAL EXPORTING ican lathes. In a great many other countries what is known as a "gap-bed" lathe is much in demand. The importer in (ques- tion came to an American manufacturer whose regular line of lathes he had been buying in considerable quantities for some time and offered that manufacturer an order for fifty gap-bed lathes, believing that an initial order of this size, coupled with the glowing prospects for large future trade in similar lathes, would be sufficient to induce the manufacturer to make the special pattern desired. But the manufacturer, taking time to figure very carefully all the elements of costs involved, found himself forced to decline the proffered business simply because he could not see any profit in it. Just the other day a large shoe manufacturer, who wanted the business, turned down a contract for $1,000,000 worth of army shoes for a European Government because he was not equipped for studding the soles with hob-nails and could see no profit in equipping himself for that work, American Factory Policies. — In the United States manufac- turers commonly draw the line sharply between cheap goods and high grade goods. The same manufacturer seldom produces both high and low grades of the same article in the same factory. Less often still does he offer two grades under the same brand. It was always characteristic of German manufacturers to "dress up" cheap goods to look precisely like high grade goods. Our practice is usually the reverse of this. We put out cheap lines for what they are, and our manufacturers often decline peremptorily to add to the physical attractiveness of cheap goods, even at a sufficient extra charge to more than cover the additional expense involved. Herein lies one reason of dissatis- faction with cheap American goods in markets not familiar with our wares or our policies. Many foreign buyers, regarding prices only, expect that cheap lines will be as attractive in ap- pearance and as finely finished, at least to the casual examina- tion of a buyer, as the more expensive goods. Changes in our general policy in this regard may not perhaps be advisable, but it is undeniable that greater care in finishing goods of all sorts is an important desideratum . in the case of shipments destined for foreign countries. Perhaps the most serious objection urged against American engines of all sorts, SOME MISTAKEN IMPRESSIONS 63 from big electric units down to small marine motors, is the rough, crude finish, or lack of finish, with which some castings and even complete machines are permitted to leave the American seaboard. Puerile is not the j^roper qualification to attach to this objection. It is rooted deep down in the experience of for- eign buyers, and in that of their fathers and grandfathers, with the products of other manufacturing nations, and prejudice and custom are not to be laid aside at a week's notice. Practices of European Manufacturers. — The organization of European factories is as a rule entirely different from that which has grown up in the United States. In principle, Euro- pean manufacturers produce small lots as distinguished from our quantity production and, because labor is so much cheaper in Europe, that element in the cost of goods does not count for as much as it does in our own country, and it becomes possible for the European manufacturer to shift constantly, a dozen times a day perhaps, from one article or one special feature to another which may be radically different. The bulk of the trade of a European, like any other manufacturer, consists in the domestic demand for his goods, and in Europe the trade is, as a rule, carried on directly from factory to retail customer with the consequence that individual orders are comparatively small. Nor is the specialization in products, as we know it in the United States, common in European factories. In this country a manufacturer of women's shoes seldom if ever at- tempts to manufacture men's shoes. A manufacturer of high grade women's shoes does not attempt in the same factory to produce cheap grades of women's or any other shoes. The manufacture of boys' and girls' shoes is again a specialized in- dustry. In Europe, much more often than not, all kinds are produced in one factory. Here again is a strong arg-ument for the advantages of American goods in general. It seems altogether probable that the fashion which in par- ticular has distinguished German manufacturers of "dressing up" cheap goods to have all the appearance of better goods has contributed more than anything else to the world-wide charac- terization of German goods as "cheap and nasty." The world forgot that some of the highest quality goods manufactured any- where were made in Germany. It oidy remembered, as a for- 64 PRACTICAL EXPORTING eign correspondent of the Atnerican Exporter put it, that "German goods do not pan out the promised 'just as good.' Their manufacturers do not inspire confidence." Or, as an- other put it, " 'German' is synonymous with things of hand- some but deceitful appearance." Both wrote before the war, without prejudice or bitterness. Some foreign buyers are at first quite unable to understand the American policy in this regard. When they look over a line of samples of American silver plated ware and find three or four distinct grades, each grade made in certain patterns, they are certain to demand the most attractive pattern of all to be manufactured in the cheapest grade. They cannot under- stand why the manufacturer refuses to make in his cheapest grade a pattern which he confines exclusively to his highest priced grade. An American manufacturer of lead pencils refuses to put out his cheapest pencil except in plain wood. A German manufacturer would deliver the same quality of pencil but would paint and varnish and polish the wood and even stamp it in gold letters, so that externally it could not be distinguished from a pencil costing twice as much. Certain German manufac- turers, noting a large sale for American meat choppers in Eu- rope, put out a machine in competition with the American. The German machine, instead of being tinned like the American, was enameled, and hence made a much more attractive appearance, while it sold at competitive prices. However, dealers jealous of their reputation with customers quickly found that the German machines were by no means" so satisfactory in operation as the American nor did they give one quarter the service. A certain form of patented corkscrew was invented in the United States and quickly achieved large sales in Europe. It tempted imita- tion and the Germans put out corkscrews of similar design but of such poor wire that it was easy to bend them with one's fingers. The German imitations have even been imported into this coun- try, sold at lower prices than American manufacturers can make, and furnish an example of the fact that good goods and cheap goods can be sold side by side the world over. High grade nip- pers and pliers were exported in considerable quantities from the United States to Germany because the Germans were not able to produce similar tools in as good qualities at equally as SOME MISTAKEN IMPRESSIONS 65 attractive prices. On the other hand, there was formerly a large importation into the United States of cheap German nippers and pliers whose prices we could not equal, whose qualities we per- haps did not care to produce. Catering to Markets. — Of course, there is a great deal in the theory that a trade may be largely increased by catering to the peculiarities or the prejudices of a given market. If manufac- turers find it impossible profitably to make desired changes in their standard products, yet there are doubtless many of them who have capacity in their plants for increased production and might profit by the manufacture of specialties that are de- manded in certain or in many markets in sufficient quantities to make their manufacture worth while. This is a question of add- ing a line rather than adapting existing goods. A few years ago Lord Cromer sent to the London Times an article received by him from a native of British India from which the following may be quoted: "The British exporter does not understand why his marrow spoons are refused and those 'made in Ger- many' find a ready market in India. The answer is simple. The English marrow spoon is too thick for the bones of Indian sheep. The German manufacturer makes the marrow spoons suit the bones of Indian sheep. The egg cup that the British exporter sends to India is too large for the eggs of the Indian hen. The German manufacturer measures the egg and then makes the egg cup for the Indian market. The Birmingham manufacturer thinks he has a grievance because Gennan scissors of the same price find a better market in India than his own make. He does not know that the secret of Germany's success in scissors is due to the fact that the village tailor has a super- stitious regard for his thumb, which he wants to keep in ijiore comfort than his index finger. He therefore prefers a pair of scissors which has a larger hole for the thumb than for the in- dex finger. The orthodox manufacturer of Binningham does not, or will not, study the convenience of the Indian villagers. What he ignores or neglects as mere prejudice is profitably turned to account by his German rival." ^ 1 The trivial importance of all possible Indian trade in e to 51^. In England the practice is the reverse of this and the English seems to be more appropriate, since a youth is certainlj^ older than a boy. There might be a subject here for a large and rather interesting 88 PRACTICAL EXPORTING book, but in any event it should be clear that when we are doing business with British customers there will be nothing lost in conforming our language to theirs no matter how thoroughly Yankee we may feel. If we write ' ' Your favour received, ' ' using the customary English spelling of the word we spell "favor," no harm certainly will be done, while we may thus successfully in- dicate to our correspondents that we are familiar with their own practice.^ Jobbing Houses Abroad. — A good many American manu- facturers in expressing a wish to establish an export trade de- clare that they only intend to do business with "jobbers." As a matter of fact jobbers, as we know them, do not exist in great numbers in any foreign country. The function of the Ameri- can jobber is performed by houses of slightly different character in most other lands. The one notable exception, the trade in which what we call jobbers exist almost everywhere, is in the piece-goods business. When we go abroad we shall find in all countries great establishments piled high with cotton or woolen goods. There are houses in England which we should call hardware jobbers or shoe jobbers. There are some in Australia. Usually, however, in foreign countries big houses which may be wholesalers are retail dealers as well, for although they supply some small local establishments and some country trade, yet as retailers they enter into immediate competition in their own city with other similar establishments. This is especially true throughout Latin America. For example, one of the largest houses in the Argentine Republic imports lumber, machinery, agricultural implements, hardware, office desks, furniture, and other goods. It does a big wholesale business, but it also retails 1 The advice of a prominent representative of the hardware trade, E. C. Simmons, of the Simmons Hardware Company, St. Louis, is worthy of note. "To suecessfully do business with any people, you must not only understand them and sympathize with them, but you must likewise look at all tilings from their point of view. Nothinoj in the world is so edu- cational and so illuminating as to get and consider the other fellow's point of view. We have too much of that Anglo-Saxon pride of race which regards itself as superior to other people, when in truth it would be much better from all points of view, much more kindly, much more charitable, much more profitable, and often more in accordance with facts, to merely rank them as different, rather than attempt to institute any comparison as to superiority, or the reverse." MARKETS FOR AMERICAN GOODS 89 gocds through its branches in Buenos Aires, Rosario, etc. It cannot, therefore, be regarded as a jobber in a position to sell competing retail houses in these cities. On the Continent of Europe there are comparatively few jobbing houses because of the established custom of direct dealings from factory to re- tailer. Indent Merchants. — In general the position of the American jobbing house is usually taken in other countries either by the general importer or by the local commission agent. The gen- eral importer may be either a merchant on his own account or he may be purely an indent merchant. In the first case he buys goods that may appeal to him, puts them in stock and sells them to retailers as occasion may offer. If he imports strictly on indent, he usually solicits orders from the trade on the basis of sample or catalogue and in due course despatches an order to the manufacturer or other supplier abroad for the aggregate quantities of different kinds of goods for which he has re- ceived indent orders from his local customers. When these goods are received the respective quantities are apportioned among his customers who have entrusted him with their indents. In these cases the importer himself may but usually does not carry stocks of his own in addition to the indent business just described. Not only do these general importers carry on busi- ness in a great many different branches but there are, and again especially in Latin America, a great many more general retail shops still existing than is usual in the United States where, as in Europe, trade has become more highly specialized. Women in European Business Life. — It may be worth noting at this place that in other countries retail establishments dif- fer from ours in respects which the American seeking orders from them should bear in mind. Women are by no means un- known here in the United States as heads of departments and even as proprietors of their own shops. But in Europe espe- cially, the wife is more commonly than not her husband's assist- ant in his shop, sometimes as a clerk, very often as cashier. No visitor to a shop on the Continent of Europe will make a mis- take in saluting the cashier qu entering the shop and in always treating with great deference her who appears to be the pro- prietor's helpmate in ways that are comparatively rare in our 90 PRACTICAL EXPORTING own country. If she does not "wear the trousers" she may yet exercise a potent influence in advising her lord and master as to his orders. In Europe, too, perhaps as a consequence of condi- tions just explained, a widow much oftener carries on the busi- ness of her dead husband than follows the American practice of selling it out or closing it up. Hence we find the many firm names beginning with veuve or vmda, the French and Spanish words for the English "widow." ' ' One Price Only. ' ' — One price to all, or as the French put it prix fixe or the Germans feste Preis, is a principle more honored in the breach than in the observance in almost every foreign country, excepting only Great Britain and the British Colonies. Possibly there are some of the great retail establishments in Paris or Berlin where bargaining over the price of goods is not possible, but, in principle, in the retail shops of the Continent of Europe as throughout the Orient and in Latin America, bar- gaining is the rule even where "one price only" is advertised. This inevitably affects the attitude of the proprietors of shops toward traveling salesmen who offer them goods. The buyers expect to bargain over the prices named by the salesmen. They have to do so in the case of European salesmen. The American sometimes has difficulty in persuading his prospect that this is not an American custom and that the prices named are the only ones he has to offer. However, our manufacturers in taking up the export trade will be well advised if they do not carry too far our national principle of one price to all. It will be found far better to graduate prices for export in one way or another. There are a good many contingencies to be provided for. While this sub- ject will be taken up again in the course of later chapters yet for the present it should here be noted that the principle of one price to all is not regarded by most authorities as that which should govern export trade relations. Formality in Business Abroad. — In most foreign countries, but above all throughout Europe, a good deal more formality is usually shown in business relations than we are accustomed to in the United States. Orders are' contracts and are usually signed both by the buyer and seller, or by the latter 's repre- sentative, A sample is a sample, and whenever possible is re- MARKETS FOR AMERICAN GOODS 91 tained by the buyer for comparison -with the goods ultimately delivered. The general principle of formality may be illus- trated in the custom of always initialing any changes or inter- lineations in a letter or a copy of a document. So in England, where carbon copies of correspondence are used for filing, great care is taken that all changes in such carbon copies are identical with the original and each carbon copy is initialed by its writer before it is admitted into the files. The language emplo^'ed in foreign correspondence should al- ways be exact as well as formal and dignified. Above all things American slang must be strenuously excluded. Grammatical English must at least be employed when we write in our own language. Yet it is a mistake to suppose that foreign business men are either better educated or are better business men than are we. The proportion of selfmade men to be found in the business communities of Europe is another surprise for those of us who have been accustomed to fancy that successful business men of this stamp are more common in the United States. FOREIGN CURRENCIES It is essential that the exporter familiarize himself with the various monetary systems of foreign countries, for contraiy to what some of us would like to believe, the American dollar is not universally known or understood. Yet the use of foreign de- nominations of money should be absolutely restricted to a few of the great standard currencies of the world. Certainly no transactions wdiatsoever should be attempted in the currencies of countries where a silver or paper basis prevails and exchange rates are, therefore, constantly, sometimes daily fluctuating. This is the chronic state of affairs in almost every country of Latin America (Venezuela, Uruguay, Peru, Cuba and Costa Rica are notable exceptions), and also in Spain and Portugal. The English Pound Sterling. — The first essential in a knowl- edge of foreign moneys is to learn the British or sterling system. The pound sterling is divided into 20 shillings, each shilling into 12 pence. The actual gold value of the pound is approximately $4.87. Its exchange value in normal times varies, of course, according to the balance of trade between our country and Great Britain, that is, when we are shipping more goods to Great 92 PRACTICAL EXPORTING Britain than we are buying from her or Great Britain for some reason owes us more money than we owe her, the value in this country of the pound is less than when conditions are the re- verse and we have been buying more British goods than the value of American goods shipped to Great Britain. Bankers in New York may accordingly quote exchange on London at all the way from $3.17 up to $6.00, both limits being extraordinary figures brought about by the European War. The gold points, v/hen v/e export or import specie, usually are approximately $4.84 and $4.88. For ready calculation the pound may be called worth $4.80 in normal times. This, of course, will perhaps never be exact and should not be depended upon in any close calcula- tions, but for general estimates it is easy to remember and is a ready basis for converting English money into American or vice versa, when exchange again becomes normal. On the basis of $4.80 to the pound each one of the 20 shillings which make up that pound is worth 24 cents and each one of the 12 pence which make one shilling is worth 2 cents. If, there- fore, we have the sum of say £50. 12. 6. to convert into terms of American money, we shall multiply £50 by 4.80, obtaining $240 ; the shillings at 24 cents each will reduce to $2.88, and the 6 pence at 2 cents each resulting in 12 cents, would give us a total of $243. as the equivalent of £50. 12. 6. The reverse operation is thus performed : Suppose we have the sum of $250 to convert to its approximate equivalent in pounds, shillings and pence. About the easiest way of performing the operation is to call the $250 25,000 cents ($250.00) ; dividing by 2 cents to the English penny we have 12,500 pence; dividing this amount by 12 pence to the shilling we have 1,041 shillings and 8 pence. The shill- ings are in turn divided by 20, being the number of shillings to the pound, and we have a final result of £52. 1. 8. as the equiva- lent of $250 at this nominal exchange rate of $4.80 to the pound. Of course, this operation can be performed in a number of differ- ent ways but the foregoing will be found by many the easiest and simplest, as soon as the pound resumes its old value. It should be remembered that as the British S3^stem is not on the decimal basis, what we should call "even money" parts of the various denominations are a little strange to us. Thus frac- tions of a pound or of a shilling are popularly on the basis of MARKETS FOR AMERICAN GOODS 93 quarters or eighths. Ten shilliugs (half a pound), 5 shillings (quarter of a pound), 2 shillings 6 pence (2i/2 shillings, one- eighth of a pound) are used where we would use even dollar terms: So in regard to the fractions of a shilling, 9 pence (three quarters of a shilling), 6 pence (half a shilling), 3 pence (quarter of a shilling), are used where we should employ nickels, dimes and quarters. As of passing interest it may be noted that the English pound sterling sign (£) is the initial for the Latin libra (pound). The abbreviation of the shilling is the letter s., the Latin solidus which became the German schilling; that of the penny, d., represents the Latin word for penny, denarius. French Money. — The French money system is based on the franc divided into IQO centimes. The gold value of the franc in American money is 19.3 cents. Its exchange value with New York banks varies as does that of English currency, already ex- plained, and in fact every other currency dealt in on the New York exchange market. For purposes of ready conversion in a rough way the franc may be called worth 20 cents of our money and each centime will then, of course, be worth ^lootb of 20 cents, or one-fifth of a cent. Single centimes are, however, rarely employed in business with France. The currency being like ours on a decimal basis, 5 centimes (the equivalent of one American cent) is the customary minimum. We should not quote our prices, therefore, at, for example, Francs 6.27 but we should either make it Fes. 6.30 or Fes. 6.25. It should be noted that in quoting French exchange bankers employ a different system than is customary in the case of British currency. Instead of stating the amount in American money which the French unit is taken as representing on a given day, the equivalent of $1 in French currency is quoted. Thus, we may find bankers' exchange rates fluctuating from say 5.15 to 17.00 (war extremes), meaning that $1 is worth on the day of quotation either Fes. 5.15 or Fcr.. 17.00, as the case may be. In a general way 5.20 to the dollar may be taken as a rough basis, if and when exchange returns to its pre-war status. German Currency. — German currency, like the French, is based on the decimal system, the unit being the Mark divided into 100 Pfennige (abbreviated pf.). The mark having a coin value of 23.8 cents was formerly called worth 24 cents for general 94 PRACTICAL EXPORTING calculation purposes and denominations in pfennige usually • progress by 5s. and 10s. as in the case of francs. Exchange rates in marks used to be quoted by bankers on yet another system than that noticed in the case of British and French currencies. When we read in newspaper reports of the exchange market that marks were quoted at 941/^ it meant that four marks, which had been established as the basis for such quotations, were called worth on the day of quotation 941/4 cents. Rates before the war fluctuated according to the law of supply and demand as applying to money required in the United States or Germany, from 9-41/4 to 95%. It may be noted that in a rough way the value of the mark was called the equivalent of tlie English shill- ing. After the war the mark fell so low (1 cent) that quota- tions are now made in cents joer mark. Other European Moneys. — An easy way of remembering the value of some other common currencies is to note the coun- tries, mostly of Latin Europe, which have adopted the French system and that, although they give their units various nameis, all are equal or approximately equal in value to the French franc. The Swiss and Belgians call their unit the franc, but 4;he Italian call their the lira, the Spanish call theirs peseta, the Greeks drachma, the Roumanians leu, the Servians dinar, the Bulgarians lev. The money used in German Austria is the crown or krone, at par is also the equivalent in value of the franc, while in Holland the gulden or the florin may be called the equivalent of 2 francs. The holivar of Venezuela is also of th-e value of a franc. Currencies Used in Export Practice. — Pounds, francs, marks and U. S. dollars are the chief denominations used in banking transactions and as a rule none others should be employed, al- though many large transactions take place in florins, lire or even yen. In business with any other country than France, when employing terms of francs, it is wise always to specify "gold francs," as in several of the nations named the nominal gold value of the local denominations fluctuates in exchange value. Throughout Latin America either the gold dollar, meaning our own denomination of that value, or the British pound sterling is the usual banking unit and no other ought to be employed. Monetary Symbols. — For purposes of record some variations MARKETS FOR AMERICAN GOODS 95 in the use of monetary sj^mbols may be noted. Thus, £E (or LE.) means the Egyptian pound, worth something more than the British, and £T is the Turkisli pound, worth a little less than the British. £P is the Peruvian libra (pound) of the same value as the British. "Dol. Mex. " is used in the Far East and in the Straits Settlements to represent the old Mexican or Trade dollar with which we used to be familiar forty or fifty years ago and which is usually worth less than half of our present dollar (perhaps averaging about 45 cents in normal times). In Latin American countries of fluctuating currencies the circulating medium is often spoken of as hilletes, i.e., paper bills, as distin- guished from real values which the paper is supposed to but does not represent. In the Argentine Republic they refer to the common currency either as m/n {moneda nacional) or c/1 {curso legal), but the gold value is mentioned as o/s {oro sellado). In Chile the fluctuating currency is referred to as m.c. {moneda corriente). The Portuguese and Brazilian monetary basis is the milreis, consisting of 1,000 reis. The method of writing denominations in these currencies is somewhat peculiar, thus 375$000 indicating 375 milreis. Counting in Other Countries. — Even the method of count- ing in some countries varies a little from ours. We call a bil- lion a thousand million (1,000,000,000), and the French do the same; but in English usage a billion is a million million (1,000,- 000,000,000). In India the name for "the number 100,000, whether used in reference to rupees, people or otherwise, is the "lakh" (also written lac) ; thus 125,000 would be called : 1 lakh, 25,000, and would be expressed in figures thus: 1,25,000. A crorc is 100 lakhs, equal to 10,000,000. Therefore, the number 22,125,000 would be divided thus: 2,21,25,000 reading: "2 crores, 21 lakhs, 25 thousand." Brazilians and Portuguese speak of a conto when they mean 1,000,000 reis, i.e., 1,000 milreis (1,000$000). CHAPTER IV THE EXPORT DEPARTMENT Specialized Attention Necessary — A Separate Department Noi Always Required — Who and What an Export Manager Should Be — When and Where an Export Department May be Estab- lished — Reducing Expenses Through a "Combination" Ex- port Department and Manager — Office Systems for the Export Department— Foreign Languages, Translators and Transla- tions. WHILE at the outset of a manufacturer's effort to ac- quire foreign markets for his products it is not in- dispensable that he establish a special or a separate export department, it is none the less essential that some one in the organization take up the export end of the business as a specialty, devote time and thought to it, direct its efforts as well as manage its details. Preferably this should be some one in authority, a member of the firm, an officer of the company or an exceptionally intelligent employee in a trusted and responsible position. This does not mean that such an individual must by any means devote his whole time and attention to the infant ex- port trade. SPECIALIZED ATTENTION NECESSARY In every concern contemplating an expansion of its business in foreign fields there will certainly be found some such person as has been described who has an especial interest in this branch of the business, some one who can afford some leisure moments during the day and some evening hours, perhaps at home, to that consideration of plans and methods, conditions and policies, and to the direction of subordinate clerks, which are extremely desirable for the successful promotion and trans- action of an export trade. Inasmuch as the beginnings of any foreign trade are usually small and the progress of the trade slow, a member of the firm can usually manage to keep abreast of development, with proper clerical assistance under his direc- tion, meanwhile training up younger men along the lines which 96 THE EXPORT DEPARTMENT 97 he himself has followed, laying the foundations in his own knowl- edge and experience for the capacity to direct and oversee an export manager when it is found necessary to engage a special employee for this department. It was Walter F. Wyman, Man- ager of the Export Department of the Carter's Ink Company, who said : * ' There is absolutely no reason why an export sales de- partment should not fit in to the machinery of any merchant's bus- iness. It does not require special buildings, special manufactur- ing, credit or traffic departments, and is simply one way to reduce the overhead expense by a greater output per working day. ' ' And speaking of ' ' inefficient merchandizing ' ' he wrote : " To the modern business the export department is an essential, not an excrescence. ' ' THE EXPORT MANAGER First among the questions which an intending exporter is quite sure to ask are, "How much will it cost us to hire an ex- port manager and where shall we find one?" To take up the last question first, it may be said that there is at present no lack of applicants for positions of this sort. Unfortunately, all of them have not the qualities or experience likely to commend them unreservedly for the positions they seek. Here is a rich opportunity for young men who may have a fancy for under- taking the varied and attractive duties of such positions, look- ing foi^ward to the certain large future growth of American export trade with its consequent opportunities for themselves. School and College Preparation. — Many of our universities and schools are giving special courses designed the better to fit young men for undertaking the management of export trade de- velopment, but while the courses that are offered are very de- sirable from many points of view, giving their students a more intimate acquaintance with principles of economics and finance, yet they are deficient in the practical details of the actual carrying on of an export business. They may help immensely in the theories, but they do not teach the actual motions. It is well for a young man to acquire every particle of export information and education which may be within his reach. It will then perhaps be best for him to seek a position as assist- tant in some large exporting organization, preferably in a manu- facturer's export department rather than with a professional 98 PRACTICAL EXPORTING export house, usually, called an export commission house. He will learn more quickl}^ and progress faster as an assistant in a manufacturer's export department, and can there pick up quite as much of the technical details of the transaction of export business as he could with the export commission house, although in the latter he would, though probably only with the lapse of a number of years, acquire a smattering of business knowledge of a great many different kinds of goods and branches of trade. Candidates Available. — The manufacturer seeking an export manager may find one among men who have had experience as subordinates in export houses or in the export departments of other manufacturers, or he may find men who have traveled to some extent abroad, or men of foreign birth who have had business experience in one or perhaps in several foreign mar- kets, or he may build up his own manager from among his employees, helping the candidate as much as possible with his own experience and assisting him in his outside studies. The main thing is to find the candidate of thoroughly desirable qualities. Qualities to Be Sought. — Any one in charge of building up and carrying on an export trade should be well read and edu- cated and especially versatile and resourceful. He ought to be what is known as a "gentleman," for qualities involved will show themselves in his correspondence, and he will from time to time be called upon to meet foreign customers, very likely to travel occasionally in foreign countries. It is by no means so necessary that the export manager have an intimate technical knowledge of every detail of the manufacture of the goods which he sells, but certainly a general and comprehen- sive knowledge in these respects is necessary, yet that knowledge any one having the other qualifications desirable in an export manager cannot fail to acquire in a reasonable length of time. A smattering, lat least, of a knowdedge of foreign languages is desirable, in fact almost essential, for the export manager ought to be able to read ordinary correspondence which will reach his desk in the two or three leading commercial lan- guages of the world. Even if he does not speak or write these languages he should be able to read them intelligently, if for no THE EXPORT DEPARTMENT 99 other reason tlian to be able to check off the work of translators employed and assure himself that both the sense and the spirit of letters received by him and written by him are correctly set forth in the translations which he employs others to make for him. Although a speaking knowledge of languages is some- times hard to acquire without considerable actual practice, yet any man fond of foreign tongues can quickly enough acquire the abilit}^ to read them. That ability helps him not only in his own correspondence but assists in broadening his general equipment. Foreign Languages. — It is quite inexcusable for any man engaged in the export trade not to understand at least the principles applying to the pronunciation of the commoner for- eign languages, especially the French, Spanish and German. It is absurd for a man doing business with Latin America to pronounce Santiago San-tee-ay-go — instead of, properly, " San- tee-ah-go." It is essentially ridiculous for one doing business with firms in other countries to address "Mr. Hermanos" or "]\Ir. Freres." Elementary notions of the Spanish or French language, which can easily enough be acquired and which ought to be acquired almost at the outset of an attempt to win trade in other countries, should teach the exporter that hermanos is the Spanish equivalent for "brothers" — ^'Jimenez Herma- nos" means Jimenez Brothers. Or, the French, "Jouhert Freres" would be in English, Joubert Brothers. Such firms must not be addressed as Dear Sir, but Gentlemen. It ought not to be necessary even for the beginner at exporting to hear the common words in the principal foreign languages pro- nounced many times over to remember them ever afterward, if he is the versatile, adaptable man likely to be a successful ex- porter. Of course, not every exporter of this description in other respects has a natural aptitude for acquiring other lan- guages, but he can alwaj\s ask questions and have words re- peated and by dint of repetition impress on his mind the com- mon ones which it is essential he should know. Certainly it is the unpardonable sin for an American to travel in foreign countries and not there learn the elementary principles of their languages, including pronunciation, or on his return from a foreign trip to forget what he ought to, must have learned. Advantages of Foreign Trips. — With the development of 100 PRACTICAL EXPORTING COMMON TERMS AND ABBREVIATIONS IN I FOREIGN LANGUAGES SPANISH Hermano (sing.) (abbreviated Hno) vfro^hpr^ Hermanos (plural) (abbreviated Huos) Brothers Hijo (sing.) •g'^^^ ^IXttbrlLted -WO •;•:;:••;:•••■■• --^v.;;;;;^ Compaiu-a (abbreviated Cia.) Suc™7s Sucesores (abbreviated Sues.) • 4 ■•' V aV" 'T ^^'^'^'^^^^^^ Sooiedad Anonima (abbreviated S. A.) Joint Stock Company Sociedad en Comandita (abbreviated S. en C.) Limited Partnership FRENCH „ . / • „ \ Brother Frere (sing.) Brothers Freres (plural) a„„ „r ^nn^ Fils (both sing, and plural) Son or bons Veuve (abbreviated Vve.) ComnanT .Compagnie (abbreviated C.e. SucSrs Successeurs (abbreviated Sues.) ■ • ; ■ • • • ■ •, • oncce&sorb Socilte Anonyme (abbreviated Soc. Anon.) Joint block Company GERMAN Briider or Gebriider (plural) (abbreviated Gebr.) BrotJ^rs Sohn (sing. ) : ■ '^"'^ Sohne (plural) Wt-a^^ Witwe (abbreviated Wwe.) •„■ " ■,' " ^' "'^^°^ Aktien-Gesellschaft (abbreviated A. G.) Joint Stock Company Gesellschaft mit beschranktcr Haftung (abbreviated G. m. b. H.) ....... - Limited Liability Company Handeisge'sellschaft ' '.'.'.'.'.'.'. . .'.'." Trading Company Vormals (abbreviated vorm.) Formerly i. e., buccessors ITALIAN Fratello (sing.) .Brother Fratelli (plural) (abbreviated Flli.) Brothers Figlio ( sing. ) Son Pigli (plural) Sons Successori (abbreviated Sues.) Successors Societa Anonima (abbreviated S. A.) Joint Stock Company Compagnia (abbreviated C.) Company Ditta Firm of PORTUGUESE Irmao (.sing. ) Brother Irmaos (plural) Brothers Filho (sing.) Son Filhos (plural) Sons Viuva (abbreviated Vva.) Widow Companhia (abbreviated Ca.) Company Sociedade Anonima (abbreviated Soc. Anon.) Joint Stock Company DUTCH Gebroeders (abbreviated Gebr.) Brothers Zoon (sing.) (abbreviated Zn.) Son Zonen (plural) (abbreviated Znen.) Sons Weduwe (abbreviated Wed) Widow Voorheen (abbreviated v. h.) Formerly, i. e., Successors to De Erven Succes.sors Maatschajipij (abbreviated Mij.) Company Handelsvereeniging (or Handelmaatschappij) Trading Company DANISH Brodrene (abbreviated Briidr.) Brothers Son (sing.) Son Siinner (plural) ■ • ■ • • Sons Efterfolger (abbreviated Eftfl. ) ; Successors Akticsel.skabet (abbreviated Aks. or A. S.) Joint Stock Company SWEDISH „ , Broderna Brothers Son (sing.) Son Sfiner (plural) • • • • ■ ^""8 Eftertr-idare (abbreviated Eftr.) Successors Kompaniet .•:•••„••,• -f^^ompany Aktiebolaget (abbreviated Akt. or A. B.) Joint Stock Company THE EXPORT DEPARTMENT 101 the export department it will always be found desirable to allow the manager to make occasional trips to some of the principal export markets which have been developed. Unless he does so at least once in every two or three years he is quite apt to get out of touch with the foreign point of view, lose a certain part of the sympathy which he ought to have with the idiosyncrasies and habits of thought and life of customers in other countries. Such occasional trips, even if only brief ones, help immensely in creating and keeping alive that sympathy, and hence in the more satisfactory conduct and development of export trade from the factory. The Export Manager as Correspondent. — Speaking of some aspects of the general conduct of a manufacturer's export de- partment, George H. Richards, when manager of that depart- ment of the Remington Typewriter Company, said: "Every effort should be made to keep a cordial and personal note running through all communications. The mere routine or careless handling of letters in the office will often offset the value of the personal factor in the field. The correspondence should be directed and supervised by some one personally ac- quainted with requirements and conditions, whose experience enables him to handle orders and all the necessary details, and to adjust all questions and disputes in such a way as to prevent any friction or misunderstanding. This is particularly needful with most of the countries where other than English is spoken. "The manufacturer should not allow any and everybody in the office to write all sorts of letters on all sorts of subjects. The foreign correspondence should be centralized. It should be received and answered in one department. It should be under the direct check of some one qualified to supervise it, even if too voluminous to be handled by him alone. To accom- plish this it is preferable that the department be in charge of some one who has had experience in the field and can thus inspire the proper spirit in those working under and through him. This provision should also extend to orders as far as possible. Foreign orders should be handled by those trained and experi- enced in foreign work. The attention to detail and the judg- ment required are such that nothing but poor results can be expected from an arrangement which permits foreign and do- 102 PRACTICAL EXPORTING mestic orders to be passed along- to the manufacturing depart- ment through the same general channels/' Signatures, — We do not ordinarily in the United States at- tach sutlieient importance to the signatures appended to our correspondence and even to valuable documents and binding contracts. Loose practices in this regard should not be ex- tended to the export department. No one should sign letters intended for foreign destinations except a competent, responsi- ble official. Above all, no one not specifically authorized to do so should ever sign foreign drafts or endorse steamships bills of lading. If the export manager is entrusted, as he should be, with the signature,of his firm, he and no one else should sign and his house must stand back of him through thick and through thin. Under no circumstances must letters to foreign correspond- ents be signed with rubber stamps. The use of such atrocious and indefensible expressions as "Dictated but not read," "Signed in the absence of," etc., must at all costs be avoided. It is a pity that they have been growing so fast in vogue in this country during recent years. Their use in foreign correspond- ence will be regarded with resentment or even as an insult. On the other hand, the expression "per pro," which Amer- icans have sometimes adopted thoughtlessly, from foreign ex- amples M^hich have come under their notice, must not be mis- used. It means "per procuration," and indicates that the per- son so signing has been authorized by his principals so to do. Although legally the principal is bound only so far as the limits- of authority actually given to the agent extend, yet generally this signature is taken as indicating full authority officially given to the .agent. It is not necessary to use any such expres- sion, but no one ought to be allowed to sign even an ordinary letter intended for customers or prospects in foreign lands ex- cept a person of importance and standing in the home office — one in whom full trust and responsibility are reposed, and, above all, no one else must ever be permitted to sign or to en- dorse valuable or official papers. Considerable sacredness at- taches to signatures in other countries and should attach to them in transactions connected with our own export trade. The}^ should be without exception regarded as formal and bind- ing in every respect. TEE EXPORT DEPARTMENT 103 Salary of an Export Manager. — All grades and qualities of export inaiiagers are to be found. A manufacturer may pay from $200 a month, or less, up to $200 a week, or more — and get for his money varying degrees of experience, knowledge, ability and success. No employee capable of tilling a mana- gerial position ought to be sought for less than $200 a month — most competent candidates will require possibly twice as much. Assistants, typists, "Spanish clerks," are to be had at $25 or $35 a week. With training, good ones may be developed up to manager's caliber — but only under supervision and train- ing by one who already "knows." Merely previous employ- ment in some connection with export trade does not necessarily qualify a young man to be "export manager." Making a youth into a manager just because he is a foreigner and speaks Spanish (or any other language) is not usually good business. Experience, training, are required. Almost any properly trained and qualified export manager, worth the minimum salary, ought to be able to establish some profitable foreign business connections and handle details of shipping easily, almost without thinking. But the manager ought to do a good deal more, solve complexities, start the ma- chine running right. The bigger man is preferable. LOCATION OF THE EXPORT DEPARTMENT An export department may be established in the manufacturer's own factory or main office, or it may be thought advantageous to establish it as an entirely separate office at New York or other point through which the bulk of the export trade actually passes. There are strong arguments to be advanced in support of both plans. Advantages at Factory. — Obviously, if the export depart- ment is located at the factory or in the main office of the con- cern, there will result a much closer touch with factory detail and policy. The department will be under the immediate su- pervision of the proprietors or general managers and, in turn, the manager of the export department will be personally pres- ent to supervise every detail of packing, invoicing and other formalities, and even of the actual manufacturing of the ex- port goods. In the very beginning, usually the small begin- ning, of an export trade, it is probable that the location of the 104 PBACTICAL EXPORTING export department at the factory is preferable. Its retention there with the growth of the export business to considerable size and importance must depend upon the individual policy of the manufacturer in each instance. Advantages at Port. — The location of the export depart- ment at the port through which most of the foreign business of a concern passes, which usually means the City of New York, may be either in the way of a separate and distinct office or may be an adjunct to an already established New York office, or it may combine in one man the functions of a domestic New York agent and an export manager. There are undoubtedly several and notable advantages to be gained from the estab- lishment of such an office in New York, at least when an export trade has been inaugurated and developed in promising fashion. The export manager, when located in New York, has an op- portunity for a generally wider acquaintance among other managers and exporters and with conditions surrounding ex- port trade in general ; hence he usually acquires a broader point of view. He probably has the opportunity of meeting in per- son a great many more foreign buyers than would be the cage were he located at some point in the interior of the country, possibly many hundreds of miles distant. He also has the chance of cultivating day by day and week by week the buyers for the hundreds of export commission houses located in New York and, through frequent meetings, establishing intimate and possibly valuable acquaintance with some of them. Then, too, he can look after all of the details of shipping the goods which he sells to customers in other countries, he can make unnecessary the employment of forwarding agents for the despatch of his foreign goods or use them with perhaps better discretion. He can often assist materially in financing readily and economically drafts drawn against foreign cus- tomers through establishing relations with some of the impor- tant New York foreign exchange banking houses. While it is possible to combine in one person the activities of a general New York agent with those of an export manager, yet since it is usually believed better to make the first steps toward export trade development at the factory, the transfer of the export department to New York will probably in most THE EXPORT DEPARTMENT 105 cases indicate a promising growth in export trade, and this should imply importance enough, or sufficient promise, to warrant the de- votion to that trade of an individual 's sole time and attention. This, again, is purely a question of individual policy in each instance. COMBINATION EXPORT MANAGERS A large and notable class of agents has existed for many years in New York, and their numbers have recently grown fast, who are commonly termed manufacturer's export agents or combination export managers. Instead of establishing his own export department it is possible for the manufacturer to utilize the services of one of these agents. They are by no means purely an American institution. Similar combination representatives of manufacturers are to be found in London, and they were an especially noticeable feature in the export trade of Hamburg where they have been numbered by the score, some of them maintaining large and attractive sample rooms — where indeed there was an association of such represen- tatives with formal, printed regulations governing their business. Cost of Combination Managers. — The principle on which such combination representatives work varies with the indi- vidual but essentially involves the division of expenses among the manufacturers whose agencies are secured. Ordinarily such a "combination" export agent will require from each line rep- resented a contribution per month, or per annum, representing some pro rata share of the expenses of maintaining the office and carrying on the necessary propaganda for the development of export trade on a stated basis. Such a contribution is usually coupled with a provision for a percentage commission on all ex- port trade thus developed, or sometimes in any other way trans- acted. Some of the combination representatives represent four or five manufacturers, some of them as many as sixty or seventy- five. Occasionally one will be found who will accept an agency on a strictly commission basis without requiring advances on ac- count. Offices maintained by them range from desk room in some other person's office up to quite elaborate display rooms; their organizations, from no one but the agent himself up to a corps of clerks, stenographers and even foreign traveling sales- 106 PRACTICAL EXPORTING men. Contributions toward expenses from individual manufactur- ers represented may run from $50 a year up to $50 a week, eacli. Work of Combination Managers. — As their organizations differ, so do the operations of these combination export repre- sentatives. Some agents of this sort do little beyond distribut- ing a manufacturer's catalogues and price lists among New York export commission houses, usually endeavoring to secure sample orders from them. Other agents in this category not only work among the New York export houses but carry on direct correspondence with prospects in foreign countries in an effort to secure orders from them. Some of these agents give no attention at all to details of shipping or financing the foreign trade of their principals, others attend to every such detail. It is the latter, that is, those representatives who, more or less, have full charge of all of the export relations of their principals who usually call themselves "export managers." In this connection that term should be understood as a "combination export manager." In- dividuals and firms operating under this style usually act for from five to ten different principals. It is evident enough that a manufacturer contemplating reducing his expenses in the de- velopment of export trade through the employment of a com- bination New York agent has a wide choice offered him. Advantages of a Combination Export Manager. — The prin- cipal argument in favor of the combination plan of export manager is the economy in cost thus secured. Instead of main- taining a separate export office of his own, paying salaries to a special export manager and probably undertaking other inci- dental expenses, a manufacturer through joining a combination of other manufacturers in the employment of one indi- vidual or firm undoubtedly saves a part of the inevitable ex- pense. The advantages of a combination representative are especially noticeable in cases where a manufacturer could not in any event contemplate the establishment of his own New York office. The combination representative is always on the ground, has no interests to serve except those connected with the export trade, enjoys or acquires a wide acquaintance among export buyers in New York, has the opportunity, if he is the right sort, of meeting a good many foreign buyers, who visit TEE EXPORT DEPARTMENT 107 this port. Because he makes exporting his profession, he may not infrequently be better posted in some details of export practice than would be an amateur export manager at an interior factory. In view of the varied practices of these combination export repre- sentatives as they exist to-day, a manufacturer can choose from among them that one who not only appeals most strongly in a personal way, but the scope of whose operations lies within the limits which he would prefer to lay down for such an agent. Some Objections to Combination Managers. — The person- ality of the representative should be equally as serious a factor in his choice in the case of a combination export manager as in the case of an individual employee. The fact that the com- bination man represents, say, ten or twenty different prin- cipals, by no means argues either that the right sort of per- sonality is not necessary or that, because a number of factories are represented, his personality must be commendable. Be- cause of this element of personality, as well as on account of the var^ang activities of these combination representatives, it is most strongly to be recommended that the manufacturer con- templating such an agency arrangement make the personal ac- quaintance of representatives whom he may have under con- sideration. It will be found highly desirable also for the manufacturer to spend a little time and work with such repre- sentatives, and on as many and as frequent occasions as possi- ble. Furthermore, the principal in such arrangement must not fancy that simply through making arrangements with a combination agent to represent him in the export field he can thus shift all the burden to the representative. He will find, if he keeps a keen eye on the progress of his business and is eager for its sure and sound development, that it will still be necessary for him to do a good many things at the factory. He will still have to attend to the duties of manufacturing the right goods in the right way, packing, invoicing, etc., but very especially he will find it essential to keep continual!}^ at the task of inspiring and enthusing as well as educating the combination representative, so far as his own special line is concerned. Since the combination representatives may have in hand the interests of a dozen or two or three dozen manufacturers, not the same attention maj^ be possible to each of these lines. That 108 PRACTICAL EXPOBTINO his own is not neglected or forgotten must be the task of each manufacturer. While a technical knowledge of each line is not to be expected, is probably not required in the case of such a combination export agent, yet the more he knows about the goods which he tries to sell the better for all concerned. The principals involved will, therefore, make no mistake, when they have arranged with such an agent who is apparently a satis- factory and desirable connection, in bringing him on to the factory periodically and there becoming better acquainted with him while he becomes better acquainted with his principal's policy and with the organization of the office and factory, with the details of the manufacture of the goods, and the char- acter and composition of the products in which he is interested. Among the hundreds of such combination export representa- tives in New York there are naturally included men of vary- ing character and ability. Some of them are honest and hard working; others do not merit those adjectives. Theoretically, it should be possible for such a representative to start and to develop, at least up to a certain point, an export trade on a satisfactory basis for each of the principals he represents. Practically, from what has been said it will be observed that discretion and care should be exercised in the selection of such an agent, despite the fact that numbers of them are to be called successful and recommendable. OFFICE SYSTEMS FOR THE EXPORT DEPARTMENT Separate office records and systems for the export depart- ment are highly desirable, indeed, almost vital in connection with office or factory where the export end is only a part of the whole business. Not only should the export manager have ev- ery detail of his own business within arm's reach, but there will arise frequent necessity for records of his own relations in regard to export orders with other departments in the office or factory. All should be thoroughly systematized and have the personal and constant supervision of the man in charge of and responsible for the export end of the business. Receipt of Letters. — Every letter relating to export trade should go direct to the export department immediately upon its receipt. If the rule of the establishment is that all correspond- THE EXPORT DEPARTMENT 109 eiice must first pass through the hands of some superior official, nevertheless some arrangement should be made for prompt de- livery of every appropriate letter to the export manager for his information, even if action on such communications must be dictated by his superiors. Necessity for consultation in regard to any communication may easily be indicated by attaching to that communication a memorandum slip conveying such in- structions to the export manager. The envelope in which a letter arrives from a foreign country should be immediately attached to its enclosure, after opening. This is especially necessary if all mail for the establishment is opened by an office boy or by some one not identified vv'ith the export department. There are many reasons for this rule. One is that, especially in the Latin countries, some names of tovi'ns are often duplicated and the letter-head of a correspond- ent does not any more frequently indicate the country in which his home town is located than do ordinary American let- ter-heads bear the "U. S. A." imprint. There are a number of cities called Santiago, Santa Fe, or Valencia, in sundiy Span- ish-speaking countries. While sometimes letters are dated ' ' San- tiago de Cuba" or "Santiago de Chile," yet this practice is by no means invariable. In any event, when the envelope is attached to the letter-head, the postage stamp and possibly other indications help in identifying the country of origin as well as sometimes con- veying information in other respects not necessary to detail here. If letters received have to be sent out of the office for trans- lation, then a record should be kept of the name and address of the writers, the date of the letter and a memorandum of the contents so far as the export manager can understand them, the date on which sent for translation and other records that may be thought material in order to guard against possible loss. Despatch of Letters. — In no respect are American manufac- turers more severely criticized than in their failure to prepay postage at foreign rates. This is believed to be due almost without exception to pure carelessness rather than to ignorance of the difference between foreign and domestic postage require- ments. There are probably few Americans in any walk of life who do not now fully understand that the general rate of for- eign postage is 5 cents for the first ounce, instead of the 2 110 PRACTICAL EXPORTING cent rate which applies in our own country. If 2 cents only is prepaid when the correct rate is 5 cents, then it is the cus- tom for the delivering post office to collect double the defi- ciency, that is, twice 3 cents, or a total of 6 cents. This is a small matter on each individual letter, but when a foreign house carrying on an extensive American correspondence is thus penalized on many letters, it may sometimes amount to as much as $2 or $3 a week or more, and not a few foreign houses have adopted the practice of refusing to receive such "taxed" letters, as they are called. Although in response to many ap- peals our American post office department is understood to be contemplating an effort to hold up underpaid foreign letters, calling the attention of the senders, when known, to the defi- ciency in postage, yet there is a question how successful such an effort may be or how long it may be continued, especially in view of the claim that in so doing certain rules of the Interna- tional Postal Union may be transgressed. Anyhow, no export manager should attempt to evade his own responsibility. Rates of Foreign Postage. — The rules governing foreign postage rates may be learned from the Official Postal Guide which can be inspected at any post office. They are to be found also in innumerable almanacs and other publications and may well be prominently posted in the export department. The 5 cent rate (for the first ounce, 3 cents for each succeed- ing ounce) may for general purposes be assumed as applying to all foreign countries excepting only our neighbors, Canada and Mexico, with Cuba and Panama, some of the British West Indies, the United Kingdom, New Zealand, British Guiana, British Honduras, the Dutch West Indies, the Dominican Ke- public, etc., with all of whom we have special postal conventions establishing our domestic 2 cent rate. There are other exceptions for which space here ought not to be required. The Philippines, Hawaii, Porto Rico and the Virgin Islands are not foreign countries, although we rightly term them export markets. The Problem of Under-Paid Postage. — How to ensure the prepayment of correct postage on foreign letters is a problem which is solved in various ways by different exporters. In most large offices letters are folded, sealed and despatched by office boys in a special department. To bring home to such THE EXPORT DEPARTMENT 111 mailing clerks the necessity of differentiating between foreign and domestic letters some exporters employ envelopes of a dis- tinctive color, blue or yellow, for instance, when the usual en- velope is white. Other exporters employ square envelopes for their foreign correspondence instead of the usual domestic ob- long envelope. Yet others use for all their foreign correspond- ence envelopes bearing the embossed 5 cent stamp. The last is perhaps the most certain of all, for it places final responsibility on the export manager himself, or on whoever else signs the letter, and does not trust to the possibly hurried attention of the most intelligent mailing clerk. All rules, however, are likely to fail in the case of bulky letters which cannot be en- closed in the usual distinctive envelopes employed for foreign correspondence, and since in the case of a heavy enclosure of many papers the tax for deficient postage, if only prepaid at domestic rates, is correspondingly severe, it is in these cases emphatically the duty of the export manager personally to see that these bulky letters are properly weighed and stamped. Square Envelopes. — The use of the square envelope, taking a quarto sheet folded into four, is almost universal on the Continent of Europe and throughout Latin America. It has been growing in favor for foreign use in England and the British Colonies as it has in this country in recent years. Apart from distinguishing foreign correspondence from do- mestic, the square envelope has other advantages to commend it. Incidentally, it may be remarked that the use of **wmdow" envel- opes is just as legal in foreign as in any other correspondence. Routing Foreign Letters. — It is quite unnecessary, as it is usually inadvisable, to attempt to indicate in addressing en- velopes the route or the steamer. by which the postal officials are expected to forward a letter. Our American post office in- variably despatches mails by the fastest possible routes and, although its clerks are not infallible, it may be trusted in this regard. The British and some other post offices do not always follow the same plan, sometimes holding mails for despatch by national steamers to which postal subventions are paid. In this country, however, no advantage is derived from indicating the route or the steamer to be employed by the post office, ex- cepting when duplicates of correspondence or of documents 112 PRACTICAL EXPORTING are to be forwarded by separate boats or routes in order to minimize risk of loss in transit, a highly desirable practice. Correspondence Files. — Whatever the nature of letters re- ceived regarding export trade, those letters should preferably be filed in the export department, separate and distinct from all other correspondence of the house. Since such letters will often contain matters of interest or importance to numerous other departments, and it may therefore be desired to have them in the files of such other departments or in the general house files, this result can be secured by making copies of the letters, or excerpts from them, for the use of the different departments concerned. The development of an export trade will involve a rather heavy correspondence not only from abroad but from all sorts of people in our country — from export commission houses, rail- way and steamship companies, forwarding agents, banks, etc. Methods of filing these letters will necessarily vary according to the systems adopted or the policies of each ofSce. In prin- ciple, however, it will be found desirable to separate foreign from domestic letters in the files. Many houses have thought it advisable in order to keep together all references to a given business transaction to make an excerpt or a precis from each of many different letters that may be received referring to the execution of an order, its shipping, its financing, etc., filing originals separately but attaching the relative memoranda to the customer's own letter. Sometimes this is done on cards and the whole transaction is recorded in a card index cabinet. How to index foreign letters would by itself form the subject for an extended chapter. Uniformity in filing and indexing should be the aim, for unless a uniform system is devised and adhered to it will be found difficult if not impossible, with the development of an extended business, to refer to all the papers from a given correspondent. For example, names involving "de" or "von" may either be filed under "D" or "V," as the case may be, or they may be filed under the first letter of the name which they qualify. Whichever principle is adopted should be invariably maintained, otherwise letters from the same person may be filed in two or three different places. In spite of the prevalence of such names and the consequent pos- sible encumbering of the divisions of the files referring to them, - THE EXPORT DEPARTMENT 113 it is usually regarded best to file such letters under D or V. Numerous other variations in foreign firm styles call for the intelligent attention of the export manager in devising proper filing systems and supply another reason for the location of such systems in the export department itself. Mailing Lists. — Almost the first essential of any export de- partment is the compilation and maintenance up to date of as complete and comprehensive a mailing list of foreign prospects as can in any way be collected. How to secure such mailing lists may be a puzzle to the beginner. There are many sources of information, but extreme care should be exercised in the pur- chase of lists of names that are sometimes offered to exporters. Some of them are honestly compiled, others do not merit that description. In any case, lists in any given market will vary according to the personality of the compiler; one will always be found to differ in some respects from another, including some names and excluding others. The exporter has at his dis- position several world's trade directories, the best of which is undoubtedly Kelly's. The Bureau of Foreign and Domestic Commerce of the Department of Commerce at Washington has printed several directories of merchants and importers in vari- ous countries, all now out of print, supplemented by trade lists in special foreign countries. The advertiser in the modern export trade paper is entitled, without extra charge, to information regarding trade in his particular line in the principal markets of the world. In addition to the use of such sources of information the export manager must continually keep eyes and ears wide open to every scrap of information he can gather relating to foreign markets in general, especially to the names of posible customers for his goods abroad. The compilation of a complete mailing list will progress slowly and be developed from a basis obtained as has just been suggested. It should receive the thought and study of the export manager day by day and should never be neglected ; the work should never be suffered to fall behind. Card Indexes.— Mailing lists should preferably be in the form of a card index system, arranged by cities under the coun- tries to which they belong. Scores of varying practices pre- vail as to the nature of the cards that are written. If nothing more, each card must state name, street address, city, coun- 114 PRACTICAL EXPORTING try of the prospect and the kind of business in which he is en- gaged. Some houses include on one and the same card informa- tion received as to the financial rating of the house indexed. Some houses even provide on one card for records of corre- spondence exchanged, orders, shipments and general instruc- tions relating to business. On the other hand, it is sometimes believed better to have separate cards for these several details, sometimes for example using a white card for name, address and indication of businss in which engaged, colored cards for other details — a blue card, perhaps, for financial reports that are received regarding the same house, a pink card for a record of correspondence exchanged, and perhaps a yellow card for a record of orders and shipments. Sometimes all of these cards are kept together in one index drawer, sometimes the cards are separated into special drawers, each referring to one phase of business relations. Sometimes an index of prospects is maintained separately, and when a prospect is turned into a customer his card is removed and placed in a distinct customer file. These are details which each export manager must work out as may seem best to him, or as the policy and procedure of his whole office may indicate as preferable. But always every scrap of information that can be obtained regarding a prospect or a customer, personali- ties of the partners, kinds of goods handled, other firms from whom goods are bought, etc., should be sought on every possi- ble occasion and be promptly entered on appropriate cards re- lating to him. Moreover, since such an index in the case of a really progressive export department is bound to grow fast and continuously, adequate provision should be made for its expansion from time to time. A special file for agents is often to be recommended. The establishment of a chain of agencies as nearly complete and perfect as possible is indispensable to fullest export success. Close, constant and continuous relations must be established and maintained. The card index devoted to them may be something more than a mere record of correspondence exchanged or orders received — it may be full of personal hints, individual idiosyncrasies, suggestions received and given — anything that may help in developing enthusiasm. THE EXPORT DEPARTMENT 115 Order Records. — The export manager should be held re- sponsible so far as circumstances allow, or indeed ought to make himself responsible for the right transaction of every relation of factory and foreign correspondent. This applies not merely to the exchange of letters but to the execution of orders. No great amount of detail or red tape is necessarily invoked. Moreover, since the growth of any one's export trade is quite sure to be gradual, usually progressing with some deliberation from small beginnings to more frequent and larger transac- tions, there is almost always time and opportunity for a bright man to evolve systems and procedure that seem adequate and best suited to his particular requirements. It is certainly tiiie that special precautions are necessary in the execution of foreign orders. To ensure attention to them is the part of the export manager. He should be the one to instruct the various factory and department heads as to the peculiar requirements attaching to each of his export orders, and he should keep before him a record of the progress of each order from its start in the factory until its final despatch by steamship. He may keep such a record, preferably perhaps, in the form of a special card which should have spaces reserved for memoranda of the instructions given, the date when the goods enter the works, when they should be finished, what sail- ing date it is planned to make and, finally, particulars of the actual shipping dates, dates for mailing of documents, etc. Instructions given other factory departments must obviously vary according to each organization. They should include in- structions to the bookkeepers' or invoicing department ; instruc- tions to the packing department, including even details re- quired for packing lists, the gross, net and legal weights in pounds or kilos and the measurements of the cases ; instructions to the shipping department as to marks and numbers and how they are to be applied — all in addition to special instructions regarding peculiarities necessary to be included in manufac- turing processes. Sometimes these instructions to other de- partments are conveyed in individual slips or cards, sometimes a blanket sheet is employed including all details under sep- arate headings applying to different departments, which sheet is attached to the usual order form that is made out and is 116 PRACTICAL EXPORTING similar in size to the latter, but preferably printed on a differ- ently colored paper. Record of Foreign Requirements.— Arranged by countries or sometimes by principal ports, there should always be kept a record of the general rules governing transactions therewith. Regulations, national or local, regarding consular invoices, marks on packages, weights and how calculated by custom houses, advices regarding a manuacturer 's peculiar products whenever they have been received; data regarding shipping lines, routes, etc., and in general any helpful details there are to be remembered or that should be available for instant reference. Records of this sort may be made on cards and a separate file maintained for them, or they may be indexed in a general file under country or city sub-divisions. Again, some manufac- turers prefer to keep records of this sort in loose-leaf books appropriately indexed. Correspondence EflEiciency Record.-^It will almost always be found a valuable gtiide in the development of export busi- ness to keep a record of actual results obtained from various ways of soliciting orders. The best plan perhaps is to keep a scrap book into which are pasted samples of circular letters and follow-ups that are devised from time to time, proofs of advertisements aimed at foreign buyers, printed circulars, folders, etc. Catalogues and circulars, even follow-up letters, like advertisements, should always be keyed in order that re- sulting inquiries and ultimately orders may be properly cred- ited. A record of returns received both in the way of inquiries and actual business will be a valuable guide as to the effectiveness of different forms, language, arguments. Such a record ought never be definitely closed, for it is by no means unusual in the ex- port trade to receive replies to advertisements and circular letters two or three or many years after they have been sent abroad. LANGUAGES AND TRANSLATIONS It must be clear enough that there is always an enormous advantage in talking to one's customer in a language which he quickly and clearly understands. To write letters in English soliciting orders from a man who speaks only French involves his getting some one to translate the letter for him, and if he TEE EXPORT DEPARTMENT 117 has to pay money for having such a translation made, his dis- gust on finding it merely a "drumming" letter is correspond- ingly increased. To ask a man in France or a man in Peru to buy one's goods, using the English language when one does not know that the prospect in question is able to read English, will have much the same effect on them as would be the effect on the American were he to receive a letter from a Russian ex- porter suggesting in the Russian language the propriety of placing an order for some Russian products. The question of languages to be employed in letters and also in printed matter is therefore a higlily important one. Lang-uage of the Customer. — To some extent the language to be used in correspondence with prospects abroad is governed by the language spoken in the prospect's country, but to some extent also it is governed by other considerations. Something depends, for example, upon the distribution to be given to the correspondence in question. If it is intended for the ultimate consumer or for small retail traders, then the common lan- guage of the country must be employed. If, however, the cor- respondence is aimed at the big buyers, the wholesalers and im- porters in a given market, then either the local language of that market, or in some cases one of the four great commercial languages of the world, may be used. Throughout Latin Amer- ica it will be found that many of the largest importers are of other than Latin nationality. That is, there are many German and English houses established in these countries whose native languages may sometimes be used instead of the language of their adopted country, if more convenient to do so. In the practice of the average American exporter, doing busi- ness only with large importers in foreign countries, it will be found that four languages are all that is necessary to employ, namely, English, French, Spanish, and German. It is quite needless to use the minor tongues — Italian, Danish, Swedish, even Russian — while correspondents who write or seek letters in Arabic, Malaysian, Chinese or Japanese may properly be "for- gotten." The large merchants in all countries thoroughly un- derstand one of the four commercial languages of the world and are able to carry on correspondence in such a language. Others are sure to be customers of insignificant importance. 118 PRACTICAL EXPOBTING On the other hand, the question of the use of the Portuguese language is a problem of different nature. It is largely one of policy and applies chiefly to trade with Brazil, Brazil, it will be remembered, was originally a Portuguese, not a Spanish colony. It was ruled for many years by emigrant emperors from Portugal. The Braziilians are intensely proud of having their own language and are disposed to be offended if they seem to be confounded with other South Americans when letters are addressed to them in the Spanish language. Moreover, there is a little jealousy in Brazil of the neighboring Republic of Argentina. The Brazilians do not like to feel that they are playing "second fiddle" to the Argentines. On these accounts the exporter will do well to add Portuguese to the other four languages which have been called the great commercial tongues of the world, even though every large importer either in Portu- gal or in Brazil would be quite able to read the Spanish or the French language. But it is to be noted that some of the largest importing houses in Brazil are either of English or German birth ; with them one of these other languages may be employed. There are probably few houses the world over which make importing their business which do not have> some clerks in their employ who read English even if the principals do not. Many a man, too, is able to read a language when he cannot write or speak it. This does not detract from the advantage of ap- proaching such concerns in the language they habitually employ in business and therefore understand best. The study of geog- raphy, which has already been urged, will materially help in de- termining the languages to be employed in the case of the world's markets. It is common enough to say that Spanish is the language of "South America," but we have just noted that this is not the language of Brazil, nor is it the language of the Guianas — British Guiana, Dutch Guiana and French Guiana. Furthermore, Spanish is also the language of Central America and Mexico. But because Spanish is the language of Cuba, Porto Rico and Santo Domingo, it does not follow that it is also the language of all the other West India Islands. No manu- facturer can be excused for addressing people in Jamaica in the Spanish language. Jamaica is a British colony with English as its language, and Spanish is just as strange and foreign there THE EXPORT DEPARTMENT 119 as it would be in Chicago. There are many other English pos- sessions in the West Indies, but in Haiti French is spoken. What Languages and Where. — In the choice of languages to be used in preparing letters and also printed matter, one, or three or four, other than English may be selected. The French language may be used for correspondence not only with France and French colonies all over the world, but for Belgium, the western end of Switzerland centering about Lake Geneva, for Italy, for Turkey, Greece, Egypt and the whole Mediterranean district, etc. The German language answers for the German Empire, Austria and Hungary, for most of Switzerland, for German colonies and for German merchants established in many different countries. Spanish covers all of Spain, Central and South America (with the exceptions of Brazil and the Guianas), Mexico, Cuba, Porto Rico, Santo Domingo, and the Philippine Islands. Portuguese is only useful for Portugal, Brazil and Portuguese colonies in East and West Africa. English is un- doubtedly the most widely spread and most generally used com- mercial tongue of the world. No other language is necessar^^ in cultivating trade in Great Britain and the scores of British col- onies scattered all over the face of the globe, including Austral- asia, South Africa, and British India. English also is the commercial language of the Far East, China and Japan, and is the best language to use in correspondence with Holland, Den- mark, Norway and Sweden. The question of what language to use in addressing firms in Russia is one about which there may be some doubt. Prior to the outbreak of the European War German was the usual com- mercial language of large concerns throughout Russia. The greater part of the large traders of Russia were Jews using Ger- man commercially in preference to other languages. Preju- dice in Russia against everything German, including the lan- guage, seems to have evaporated and German is likely to re- establish itself as the commercial language throughout the empire. French has been the language of high society in Rus- sia, but it is doubtful whether it will ever develop into a widely used commercial tongue there. On the other hand, compara- tively few of the common people of Russia, or of the smaller shopkeepers, speak or read any but their own tongue. 120 PRACTICAL EXPORTING Translations. — The manufacturer nowadays has all sorts of opportunities for securing translations of his letters and cata- logues. There are innumerable translation bureaus to be found in every principal city of the country. It is part of the service which the export trade paper offers to its advertisers, that corre- spondence arising out of such advertisements is translated from and into the necessary foreign Innguagos, if desired. When necessary to buy translations, first attention ought to be given to the ability of the translator and not to the price charged. Many a supremely ridiculous mistake made by ignorant translators, who either have not comprehended the English original or have not been competent in the languages which they attempted to use, has nullified possible good effects from letters entrusted to them. Many a blunder costly to manufacturers has been made by incompetent translators of letters and orders from foreign customers. The principle of employing the best available translation serv- ice applies to all general correspondence, but especial emphasis must be laid on it when it is a question of technical terms and descriptions. All letters and printed matter intended for dis- tribution in foreign countries should be absolutely exact as well as clear and simple in terms. No mistakes or misapprehensions must be possible. Furthermore, it is out of the question to translate literally many of our customary expressions, and the translators employed must aim to paraphrase such expressions in a manner that will be intelligible to our correspondents. A cheap and amateur translator who transforms a hundred dozen into a hundred gross must be avoided at any cost. Translators and Their Charges. — Prices charged by fully competent translators run about as follows: From Spanish, French, German, Portuguese and Italian into English and vice versa 60 cents per 100 words ; from and into Russian, Dutch and the Scandinavian languages $1 per 100 words. Such rates apply usually to correspondence only. Technical catalogue translations sometimes cost a little more. When a thoroughly dependable translator has been chosen, considerable leeway should be given him in rendering the Eng- lish original into the appropriate foreign language. The force of a letter or of a printed page may be considerably increased TEE EXPORT DEPARTMENT 121 if put in idiomatic fashion in the foreign language instead of merely producing a literal, word for word translation of the English. The foreign language involved should be pure in style according to the best usage of that language. Local terms for the same thing vary in all languages according to country, section or district. There is a good deal of difference between Brazilian Portuguese and the Portuguese spoken and written in Portugal itself. Many articles known by a certain name in Spain bear quite different names in ]\Iexico or Argentina. Even the common egg is locally referred to by several different terms in different Latin American countries. When it comes to modern machinery there are more often than not no exact equiva- lents in the Spanish language, and terms adopted in Colombia may be utterly unlike those used in Chile. Probably the translator does not exist who is intimately ac- quainted with all of the local expressions used among different countries for referring to the same subject matter in every pos- sible connection. A translator who is a native of Venezuela knows, of course, the ordinary terms applied to a certain com- modity in his own country. Perhaps he may know varying practice in different countries as applied to one or two com- modities. He will hardly know all terms given to all commodi- ties in every country where Spanish is used. Where exact terms in a given district are positively known, then it is well to employ them, but it will not do to assume that such local usage of words extends in all directions, and it is much better when there is any doubt on this score to demand the use of pure and idiomatic Castilian, rather than local Spanish slang. Criticism of translations is easy and is quite too frequently made. We have to remember that in writing our native English one of us uses certain expressions which our friends may criticize severely. Our style and our friend's style in the use of the Eng- lish language may differ materially. It is precisely so in every other language. The best authors in all countries have bitter crit- ics. Style and phraseology in business correspondence are not vital, so long as the desired accuracy and force are transmitted. DEVELOPING EXPORT BUSINESS It was suggested in Chapter I that in a general way there 122 PRACTICAL EXPORTING are four means of getting and developing an export business. These were enumerated as: (1) by means of correspondence, (2) through traveling salesmen, (3) by advertising, (4) by utilizing New York or other American export commission houses. To these may be added one more, which is often a development from or an adjunct to the others. This is: (5) through local commission agents domiciled in foreign markets. Ways of Getting Export Trade. — Every one of these means ought to be employed by the manufacturer aggressively in earnest about developing his foreign interests to the largest pos- sible extent. Yet in the export trade, as always, conditions must govern. In one market one means may be employed, while in another market quite other means will be utilized. Eternal vigilance is the price of the largest trade development in each direction. The export manager must be eternally and eagerly on the watch for opportunities, yet in the export trade, so far as opportunities are 'concerned, it should be by no means a case of first come, first served. The right man in each place must be sought. This does not mean, in foreign countries any more than in our own, that the biggest man is always the most desirable. He may be too big and too busy ; he may have a neighbor smaller, poorer, but of the right character and of suit- able enterprise and push. A fascinating problem, this of getting one's self established — in the right way — in each one of the great foreign markets for one's goods. It is by no means so intricate a problem, so diffi- cult or so discouraging, as a manufacturer's first efforts in a new domestic territory are likely to be. " The whole world has always looked to the United States for novelties, foreign merchants expect from us something new, at least improvements of some sort on older goods with which they have been familiar. This helps every American manufacturer materially. It virtually ensures attention to his claims, if they are only presented effectively. The result is morally certain to be an order for samples when the foreign buyer is properly im- pressed by the intelligent first efforts of the American seller. Later efforts of the same description, when the intrinsic value of the goods backs up the claims made for them, are bound to build up the manufacturer's future and permanent trade. CHAPTER V FOREIGN TRADE CORRESPONDENCE Correspondence a Vital Element in Getting and Handling Ex- port Business — General Character of Letters to 'and from Foreign Countries — Inquiries for Goods and Replies to Them — Sales Letters, Circular Letters and Follow-Up Systems — The Use of the Cable. WHATEVER other means are adopted for initiating and for buildi .g up an export trade, supreme impor- tance must always attach to one's foreign corre- spondence. It may with entire safety be declared that there does not exist an exporter in the United States or in any other country M^ho has not on his books some foreign customers whom he has never seen, and whom no traveling man of his has ever called upon, whose business has been established and developed solely through the mails. It follows that no matter what other efforts to get and to increase foreign business are put forth, it is essential that first importance be given to the question of the proper conduct of foreign correspondence. GENERAL CHARACTER OF FOREIGN CORRESPOND- ENCE Correspondence, being the very backbone of all export trade, demands the most serious study of every man who is really in earnest in his efforts to increase his business and his profits through orders from foreign countries. We are told often enough that it is quite impossible to get any business b}^ catalogue or by letter, that the visit of a traveling salesman is indispen- sable. No one, however, has ever anticipated a reply, to say nothing of an order, from each and every sales letter mailed abroad or at home. Perhaps if only one or two interested re- plies are received from every hundred circular letters of the best sort that are despatched to possible foreign buyers, perhaps 123 124 PRACTICAL EXPORTING if as a result of efforts to develop actual orders only one real customer is ultimately received from a thousand circular letters, still it can be mathematically demonstrated that in proportion to costs the effort has paid, and paid well. A customer has been established. The question is not one of the volume of the first order, but of trade to follow during many future years. More- over, the establishment of one customer or agent makes enor- mously more easy the later establishment of many another in the same, in tributary, and in neighboring territories. Foreign correspondence, however, includes more than mere circular letters. It includes the development of business abroad established in any one of several different ways. It includes the successful, profitable and mutually satisfactory conduct of all business relations with customers during long periods of time. It includes the adjustment by mail of the little troubles and misunderstandings that are unavoidable in the carrying on of any sort of business at home or abroad. It includes the active and interested support of agents in foreign markets. So important is this form of export activity that unlimited thought and study must be given it by the export manager. It deserves a special course in our commercial schools and col- leges. Some of the elementary principles, only, underlying the conduct of foreign correspondence, can we here consider briefly. Mail Time to Foreign Markets. — Stories have been told of American manufacturers who addressed letters to Manila, Philippine Islands, and ten days later wrote vigorous complaints that no answers had been received. The Philippines are a long ways off, half way 'round the world from us. There are no ex- press trains between Chicago and Manila. There are not even mail steamers every two or three days from San Francisco or Puget Sound. It is not merely a question of reaching a point 13,000 miles distant ; it is one of catching steamers and of weeks of time. The exporter who addresses a letter to Sydney, Aus- tralia, or to Buenos Aires, Argentine Republic, must remember that his letter will be at least thirty days en route. His corre- spondent's reply will occupy thirty days in transit back to the United States; allowing a reasonable leeway for the considera- tion and the writing of the reply, for delay in despatch of later mail steamers, it is clear that the exporter cannot "hope to re- FOREIGN TRADE CORRESPONDENCE 125 ceive an answer from points like those mentioned inside of ten weeks from date of his first letter. Very likely eleven or twelve weeks will be the best that he can expect. Even in normal times, when steamship services have been uninterrupted, three weeks have often been required to receive answers in New York from agents or correspondents in London, even expecting their promptest attention. Some of our foreign markets seem on the maps very close to us. We may understand that it is possible for a letter from New York to be delivered in Havana, Cuba, in three days' time. More likely, five days will be the usual course of mails. We ought not to count on replies being received in ten days, al- though in exceptional cases that might happen. Jamaica does not look very far from Cuba when we inspect the maps, but there is not the same communication between this country and Jamaica. We can expect about only one mail a week and five daA's are consumed in transit from New York. Obviously, there- fore, replies from our friends in Jamaica ought not to be looked for inside of three weeks. For several reasons, as will shortly appear, considerations like these must be taken into account by every exporter. Export Stationery. — If in other countries the same impor- tance is not attached to the employment of artistic or cliar- acteristic letter-heads as in our own, that by no means argues that the best of our stationery does not cany the same desirable impression abroad it is believed to carry in the United States. It is not as a rule necessary to devise special letter-heads for foreign use, providing always that the form employed here at home is dignified and otherwise creditable. It is neither neces- sary nor desirable to have letter-heads translated into foreign languages. An exception may be made for circular letter use, where advertising value in the letter-head is sought. How- ever, for the use of the export department it may sometimes be worth while imprinting regular letter-heads with the phrase "Export Department" coupled sometimes with the export man- ager's individual name. Certainly the firm's letter-head for foreign use should always include the cable address and the names of the cable codes which may be employed in telegraphic correspondence with it. 126 PRACTICAL EXPORTING American business houses are famous for the quality of their business stationery. We should maintain our reputation in this regard. Since the raising of the minimum weight for foreign letters from half an ounce to one ounce, there no longer exists the necessity for preparing foreign stationery of very light weight, nor is it necessary to provide square envelopes for the export department in imitation of certain foreign practices, unless it is desired to have them as a means of differentiating for- eign from domestic letters, and thus ensuring the necessary special postage stamps, as has already been suggested. All in all, therefore, it would seem that one's usual stationery is quite sufficient for his foreign correspondence as well. Of course, the advertising value of stationery is never to be overlooked, but in foreign letters it should be subordinate to the dignity and for- mality which are always highly desirable in dealing with the best class of foreign merchants. Formality in Language. — Personalities and above all offensive impertinences must be studiously avoided in carrying on corre- spondence with foreign customers. The tone of our letters must always be courteous, but rather formal and dignified than the contrary. Anything that approximates or savors of American rilang must be avoided no matter how effective it may seem to us, because the chances are that its very significance will be missed by our foreign correspondents. They will not understand what we mean. It is true that some of our slang expressions have made their way into some foreign countries, but this is by no means true of all such expressions, nor of all countries. In any case, the use of such expressions is not to be commended. We ought not to say, for example, that we have "a cracka'jack line," for people in other countries will not appreciate the phrase or guess its derivation or popular use. The foreign business letter should be essentially business. It is usually addressed to large or important business establish- ments. The same phraseology should not, therefore, be em- ployed that is a favorite in some of our American mail-order business. In corresponding with foreign "agents" the mistake has sometimes been made by ignorant American concerns of send- ing the trashy, ill-bred letters that are used in this country in answering replies from "want ads," for house-to-house peddlers FOREIGN TRADE CORRESPONDENCE 127 of mail-order goods. Such correspondence addressed to foreign countries is an insult to the intelligence and the breeding of the whole American people. Mr. Wyman, Export Manager of Carter's Ink Company, tells a story in System vividly illustrating this point. "No other explanation than a failure to take the other man's viewpoint could be responsible for a letter addressed to a prominent Cal- cutta merchant which was started, 'Bill Jones of Kalamazoo made $1,800 in one month with our patent back-actioned potato peeler. Can 't you do as well as Bill V " A signed letter is regarded in other countries as having all the formality and sanctity of a contract. Every promise made in a letter must be fulfilled, if accepted by our correspondents, no matter on what costly blunders or errors that promise may originally have been founded. We shall be expected by our customers abroad to -abide by our written word. Care must therefore be taken to write nothing which we are not prepared to make good, and, if conditions are attached to clauses in our lettere, then studious emphasis must be placed on those condi- tions, clearly explained, so that they cannot be misunderstood at the other end of the line. Personalities in Foreign Letters. — While it has been re- marked that personalities should not be employed in foreign business letters, yet like most other rules this may have its ex- ceptions. Where an actual personal acquaintance exists be- tween the American house and the foreign house, or between individual members of both, then the personal element may mod- estly be introduced even into a business letter. Yet, it is doubt- ful if a separate and distinct personal enclosure with the fonnal business communication w^ould not be the better. How- ever, with the growth of correspondence with customers through- out Latin America the personal touch is regarded as almost essential. This applies especially to correspondence with cus- tomers of Latin blood, and distinction must be made between such correspondents and other business houses in Latiu America who may be of English, German or other nationality.^ 1 "Between the purely business letters always couched in the langruage which is suited to its recipient (and it is as fatal to write redundant let- ters to Melbourne as it is crisp 'ginger' to Guayaquil) the personal note 128 PRACTICAL EXPORTING Short vs. Long Letters. — When one is doing business or trying to do business with customers from 3,000 to 15,000 miles, or, say, from three weeks' to three months' mail time, distant from us, then it is clear that other rules for correspondence than those we employ at home may well be considered. It is almost cer- tainly a mistake to employ what Mr. Wyman has called our ' ' ' condensed-efficiency-omit-dear-sir-and-yours-truly ' ' letter. It should be our object to tell the whole story in each letter, to leave nothing to imagination or to guesswork on the part of our foreign correspondents. The short, "snappy" letter is re- garded by many here at home as distinguishing the best corre- spondent. It will not do when we are developing business in other countries. Our correspondents do not know our goods when we first call their attention to them. Possible interest evoked by a chance phrase or paragraph very quickly evaporates when inquiries have to be made for particulars and many weeks elapse before the thing is made clear. Moreover, throughout Latin America our usual brief letter is regarded as brusque and discourteous. Each clause and each phrase in every letter must be so clear and simple that a child can understand it and we must not be stingy with the paragraphs. Far better to have two or three pages of them, and put our whole position fully before our corre- spondents, than to delude ourselves with the expectation that they are mind readers. This always providing, of course, that we tell our story in an interesting as well as forceful fashion. The reader's attention, our prospect's attention, must be en- listed and riveted from the start. The adroitness of the letter writer will be shown in maintaining that interest through to the end. Apologies seem necessary when we write two and three page letters here at home. They are not called for in similar can be introduced by a letter on the export manager's personal stationery asking some little favor. As a specific example, a letter asking for local photographs, stamps, and semi-precious' stones, when properly worded and accompanied by an ample remittance, leads graciously to some small souvenir to reciprocate the courtesy and repay in part the inconvenience. When you begin to have a steady outgoing mail which includes everything from hymnals to royal aiiction score pads, when your correspondents feel free to ask you to select seeds for their garden and baby carriages for their children, you may rest assured that your low-priced competition will beckon in vain." (Walter F. Wyman.) FOREIGN TRADE CORRESPONDENCE 1^9 letters addressed to other countries. It is not the bulk or the quantity of the letter, it is essentially its quality that counts. Everything depends on what we say and how we say it; not on the number of lines to which the letter runs. Composition of Foreign Letters.— It is perhaps in connec- tion with our long distance correspondence that the rule espe- cially applies, "put yourself in the other man's place." Try to picture to yourself the mental attitude of an important mer- chant who does not understand your goods or your policy or your general business, who may very likely never have heard of you or of your special products before ; who does business in a little different way in some respects from ways in vogne in the United States, who lives in another countr^^ where possibly a different language is spoken, or where even the English language may be used in a little different fashion than we are accustomed to use it — then make the effort to appeal to such a correspondent in a way to bring the result you seek. There are some rules of a general nature that may be laid down. For example, there are the complimentary phrases pre- ceding the final salutation and signature to a letter. Instead of winding up with the commonplace "Yours truly," a certain ful- someness is never mistaken policy in foreign letters. If nothing more, we may say "Awaiting your further favors" or "We trust that we may have the pleasure of inaugurating (or, further developing) an extensive and profitable trade for our mutual benefit." Again, it is frequent foreign practice to sign letters with such expressions as, "We are, gentlemen, faithfully yours," etc. Our English cousins, in addressing correspondents whom they especially esteem or who are unusually prominent or im- portant people, sometimes sign "Your obedient servants," or "With assurances of our highest respect and esteem." These may be variations of the antique Spanish form which never fails to cause a smile when an American first understands the translation of the mystic abbreviations with which the Spanish and the Spanish-American sign, "S. S. S. q. b. s. m." This ancient form, which, of course, long ago lost its literal signifi- cance, translates into "Your obedient servant who kisses your hand." In writing to big importers and the larger "department 130 PRACTICAL EXPORTING stores " it is always wise to address by name the buyer in the de- partment likely to be interested in one's goods. When that buyer is not known by name, perhaps the opening paragraph of a letter addressed to the house may beg the special attention of the buyer in such and such a department. The great things to be borne in mind in foreign, as perhaps in any letter writing are: accuracy, clearness, businesslike na- ture, conciseness without loss in comprehensiveness, and cour- tesy. Inaccuracy in foreign correspondence is certainly the un- pardonable sin. Carelessness and indifference will react dis- astrously upon the man guilty of them. The expressions of a letter must be clear and all possibility of double or doubtful meaning must be avoided. Undoubtedly the use of short sen- tences contributes to clearness. The dividing of the letter into many paragraphs is desirable practice in foreign as in domestic letter writing. The intro- duction of headings in capital letters, or the use of catch words in the margin at the left, usually assists in directing especial attention to paragraphs which it is desired to emphasize. Care must be taken to develop one's argument consecutively, to group together all paragraphs containing information relat- ing to the same subject. The use of the postscript, which was once thought to be bad form, is sometimes a highly desirable method of lending special emphasis to some desired point. The old newspaper rule that the first sentence should be such as to attract immediate attention is a good one to adopt in any correspondence. Following this the argument of the letter should be carefully and adroitly developed. But, after all, the main essential in a foreign letter must always be the simple, clear and full story of what you have to say. Once more it should be here emphasized that blow, brag and exaggeration must be avoided at any cost. Let us have no more talk of "our factory is the biggest in the world." If we say steel, let us mean steel — not sheet iron. Copies of Letters. — It is the custom in carrying on corre- spondence with established customers abroad that copies of un- usually important letters be forwarded by succeeding mails or by another steamer than that which carries the originals. This is to guard against risk of loss in transit. It is followed gen- FOREIGN TRADE CORRESPONDENCE 131 erally when unusual risks attend shipping, as in times of Avar, but except under such conditions it has not of late years been regarded as necessary to submit copies of ordinary letters. The practice should never be carried too far. For example, no copies ought to be sent of circular or general sales letters. Prepayment of Replies. — It is often enough the desire of the exporter to secure a reply from his foreign correspondents and usually it is rather difficult securing supplies of foreign postage stamps to enclose with letters to which replies would be purely a matter of courtesy and not absolutely required. Several years ago the International Postal Union authorized the use of reply coupons which can be purchased at any post office and are recog- nized by offices in most of the principal countries of the world. These coupons cost 6 cents each and are exchangeable in coun- tries where they are recognized for postage stamps equivalent to 5 cents in value, thus enabling us to prepay replies from our correspondents abroad, no matter what stamps they use. The use of these reply covipons is to be recommended, but that use should be made with discretion. The effect is obviously bad when one's foreign correspondents are urged to make a reply to a communication which is of no special interest to them and when an apparent effort is made to force such a reply through enclosing a stamp or a reply coupon for that purpose. Almost any one's feeling is likely to be that he may be trusted to an- swer anything of interest to him, but that he objects to having any obligation forced upon him and holds himself entirely at liberty to disregard the prepayment of reply which has been sent to him. On the other hand, when a favor is asked of a corre- spondent, then the prepayment of a reply may be put in a deli- cate and courteous fashion that can give no offense. SPECIAL AND INDIVIDUAL LETTERS A manufacturer's foreign correspondence is certain to be heavy — if he pushes as aggressively as he should to establish his goods in export markets. That correspondence will include both special and circular letters, and each kind may be either individualized or "form." Needless to say, the more indi- vidualizing that can be put into all, the better. Two Ways of Introduction by Letter.— In opening corre- 132 PRACTICAL EXPORTING spondence with a given foreign market either of two methods may be chosen: a number of identical (circular) letters may be addressed to several or all the good houses in that market of whom the manufacturer may hear, offering to all the same terms and the same goods ; or one, only, special letter may be written to that one house in the market in question which information ob- tained indicates as that house apparently most desirable as an exclusive (or the chief) connection there for the manufacturer's goods. Both methods have their advocates. Let us now con- sider the latter plan, that of addressing one house only in a market. To study the personnel of a market, determining the relative importance there of the several importers and merchants, asses- sing the probable or apparent advantage of each to the manu- facturer's goods and policies, is obviously good policy in any event. Picking out the one house which seems most to be de- sired, introducing oneself only to that house in the effort to establish one's line in his market, may very likely postpone for a time the introduction of the goods. The house addressed may not be interested ; it then becomes necessary to approach a second choice on the list in the same market, perhaps later a third and a fourth choice. When, however, the line is finally placed, the manufacturer knows that he has placed it in the very best hands available to him. Though perhaps slower in results, this method finds supporters among those who look beyond imme- diate orders to ultimate development of trade. Circular letters to all possible prospects in a market may result in prompter manifestation of interest on the part of some one, if not one of those most desired. Selecting only one target for correspondence in a market will still give the Export Department plenty of work, for there are so many markets. The effort to get established in the best avail- able way should be going on at the same time in Peru and in New Zealand, in Egypt and in Japan. Initial Letters. — How shall we introduce ourselves when we approach a foreign buyer for the first time, if we are writing individual letters, one at a time, to prospects who seem peculiarly desirable? The best of all introductions is certainly that from some of our friends or acquaintances who are already doing FOREIGN TRADE CORRESPONDENCE 133 business, better yet, have for a long time done business, with the prospect. If we can write specifically that Messrs. Smith & Jones, of Chicago, with whom we are on peculiarly intimate terms, have urged us to offer our goods, or their exclusive con- trol, to Robinson & Browne, their own especially valued cus- tomers in Melbourne — that, in consequence, we have made a careful selection from our line and pared down our prices to the last cent, etc., etc. — then we are sure to receive consideration, at least. But never ought we say in an airy, indefinite way, that we owe the address of Robinson & Browne, of Melbourne, "to friends of ours." It is actual acquaintances and business rela- tions of specific friends on which we must, in such cases, depend. If we cannot gain such an introduction (though one should not be difficult through inquiry and cooperation) then we can de- clare in our initial letter that we have for some time been mak- ing a careful study of the market where our prospect is estab- lished, have weighed the relative importance, facilities, advan- tages, etc., of the several leading concerns there on the basis of information we have gathered, and venture to address the par- ticular prospect as the one house whom we would like most of all to count as our customer and ally in introducing our new line which has notable qualities, advantages, price."?, etc. But let us not stultify ourselves by using such phraseology in a number of identical letters to the same market at the same time. Support of Foreign Agents. — Not least important among the letters which must engage the attention of the export manager are those which keep him in constant and intimate relation with agencies he has established abroad. It is altogether too com- mon a practice for a manufacturer to intimate, though he may not say it in so many words, "Now we have given you the agency for the finest line of goods on earth, go ahead and send us orders." The exporter's duty does not stop here. It is distinctly his part to keep his agents primed with interest, en- thusiasm and ambition. The tone and temper of the letters which he receives from the home office are all important. When he sends in orders, congratulate him ; when he sends none, try to find out why — and devise means of helping him remedy the situ- ation. A. E. Ashburner, Foreign Manager, American Multi- 134 PRACTICAL EXPORTING graph Sales Company, advises monthly letters or bulletins of in- formation and suggestion and indicates the following as suit- able subjects for such letters: Letters of general instructions; letters of sales instructions ; letters of mechanical instructions ; letters giving details of new goods placed on the market with new sales arguments regarding them; letters taking old lines off the market ; letters reducing or increasing prices. A general correspondence campaign in a local territory is often carried on by exporters direct from the factory to assist local agents in developing their territories. It often happens abroad as well as at home that a letter bearing a foreign post- age stamp, coming direct from headquarters, makes a deeper impression than a mere local circular. When this is done the prearranged cooperation of the agent is essential. Further- more, his ideas as to the character and nature of the letters from the home office should be sought. The manufacturer himself may not have nearly so thorough an acquaintance with the sym- pathies, prejudices, idiosyncrasies of the foreign people to be addressed, and valuable hints in these regards may be received from the agent. FOREIGN INQUIRIES AND REPLIES TO THEM Every inquiry received from a foreign country regarding one's goods ought to receive some sort of attention. Not one should be consigned read or unread to the waste paper basket. The fact that a good many letters from Latin America are re- ceived on plain paper bearing no printed indication of the writer's occupation must not be assumed to indicate that the correspondents are not potential customers. It is not very long ago that one such inquiry, which it turned out had come from the proprietor of an extensive hacienda (ranch) in a Latin American country, resulted in a total order amounting to over $10,000 for farm supplies of different sorts. The great desideratum in answering foreign letters is the ability to reply without requiring fresh questions, to tell one's story in full and beyond the possibility of misunderstanding, to anticipate objections and criticisms, in a word, to sell one's goods. A certain ability in psychology should be cultivated. Analysis of Foreign Letters. — Too many of us, perhaps, are FOREIGN TRADE CORRESPONDENCE 135 apt to carry our national obsession of "hustle" into the reading of our correspondence. We glance hastily over a few phrases, or a paragraph or two ; we do not digest the letters we receive. A good deal is often to be learned of what is at the back of our correspondents' minds by a study of their letters, of their char- acter and idiosyncrasies, when we have never met them in per- son ; a good deal of the nature and even probable extent of their business from an analysis of some letter-heads. The quite obvious features of a letter-head are the variety and kinds of goods handled and the sources of possible informa- tion about the correspondent's business, his reliability and re- sponsibility, as betrayed by the names which may be printed of suppliers of the goods he handles. The date of the establish- ment of his business may be notable, even the individual names of the partners in a firm or officers of a company. There may be branch establishments named ; cable address and codes used ; indications as to whether manufacturer, importer or retail shop- keeper — all may be interesting if not important. Sometimes there is more or different information imprinted on the en- velope in which a communication is received — one reason for at- taching all foreign envelopes to their enclosures as they are opened. Information and clues from letters, letter-heads and envelopes should always be sought and duly recorded; but they should be recognized as only suggestive, to be proven or disproven by investigation or the course of events. Printing is not expensive and the humblest or most undeserving may compose the most grandiose and eloquent "copy." Kinds of Inquiries. — A certain proportion of foreign inquiries received by any manufacturer is sure to be made up of letters from commission agents who do not want to buy goods them- selves but wish to sell them for the account of the American manufacturer. The function of such agents will be explained in a later chapter. No matter how disposed toward them the manufacturer may feel, no matter whether obviously some in- quiries of this sort come from individuals with whom it may seem for the time being, at any rate, undesirable to establish relations, yet in every instance a reply of some sort should be sent. It is just as well, usually, for the manufacturer to secure 136 PRACTICAL EXPORTING the good will of every correspondent who has shown the slightest interest in his goods. No harm, certainly, can result from an advertisement of one's goods and their peculiar qualities even if it is not desired to meet the special terms proposed by a corre- spondent. Moreover, it is easy to make mistakes in appraising the pos- sible value of such inquiries. A number of years ago when the author was about to start on a foreign trip he was asked to find out who and what might be a certain person in a market that was to be visited, since the person in question had been address- ing hundreds of letters, apparently to every American manu- facturer he could hear of, soliciting catalogues, quotations and agencies. So frequent had been these applications that the in- dividual in question was regarded as very much of a joke. Arriv- ing at the market in question it was quickly discovered that the writer of these innumerable applications for agency was a youth, only a year or two out of school, employed by a local business house at the munificent wage of $13 a month. His applications to American manufacturers seemed at first blush to be the height of the absurd. But it developed on in- vestigation that he had recentlj^ inherited a small sum of money, perhaps $2,500, and was seriously attempting to set himself up in business. He had not paid out money for stationery and printing, and spent about $50 in postage stamps, merely for the fun of the thing. It ultimately turned out that he actually in- vested a large part of his inheritance in small assortments of four or five different American lines, started in business and at last accounts was still continuing to do business. The advice to neglect no inquiry received seems, therefore, to be well founded. None the less, a certain weeding out process may be carried on. Some of the goats can be separated from the sheep. One rule cannot be made to apply to all inquiries received. Form Letters. — The use of the form letter immensely facilities all correspondence, foreign included, in almost every imaginable business. Replies to inquiries and general sales letters nearly all resolve themselves down to a few concrete clauses. A suit- able number of paragraphs may be written dealing with the various conditions which it is necessary usually to treat. These paragraphs may be numbered for reference in dictating replies FOREIGN TRADE CORRESPONDENCE 137 or other letters and, like ever}^ other phase of correspondence, may be translated into foreign languages. Each paragrapli must^ however, treat its special phase fully and in the simplest terms. Care must be taken in the arrangement of these para- graphs so that the argument of the whole letter may be logically and effectively developed. These are commonplaces of every- day business. In foreign correspondence, this is most carefully to be noted : especial attention must be given to avoid, if possible, the very suggestion of a "form letter." Almost ever}- one, and cer- tainly every foreigner, prefers personal attention. As the form letter has not been developed or utilized in other countries as it has in this, the very suspicion that the letter is not especially dictated with personal reference to him is apt to antagonize the foreign prospect. This effect may be usually avoided by care- ful composition of the several different form paragraphs. It is also quite possible in dictation to add to each form paragraph a sentence, or if necessary several of them, in tone with the rest of the paragraphs, aimed personally at the special correspondent in question. If no more, there can at least be the special intro- duction to the whole letter of a strictl3' individual character and a special closing paragraph of similar nature. Very few form letters have ever been devised in the use of which it will ansAver requirements simply to dictate "form 17, paragraphs 1, 6, 8 and 9." Selling- by Letter. — "The first essential of our export sales letter is that it enables the prospective customer to order with- out further correspondence. This means that prices, discounts, f.o.b. points, terms, extras if any, be clearly stated. The second essential is that it create a desire to become a customer of the seller, not merely to attract his attention to the goods offered. This combination of essentials requires a sales letter which by its businesslike presentation of the offered products inspires confidence, not only a belief in their value, but of equal impor- tance, inspires confidence in their maker." (Walter F. Wy- man.) The confidence in the exporter that may be inspired by letters primarily intended to develop orders deserves special emphasis. It ought not to be our effort merely to get one order — our aim 138 PRACTICAL EXPORTING should be to lay the foundation and establish a sound basis for the building up of permanent business relations. To reply to an inquiry about one's goods with the naive and entirely gratuitous remark "We are new in the export trade, have had no expe- rience yet," is to hold out anything but a tempting bait. Get- ting the first order is the indispensable and vital thing. What is there we can say that will help in securing this result? Important to Differentiate the Goods. — In the author's opin- ion the one most important of all features of an export sales let- ter is emphasis upon the individuality of the goods offered. How are they different from or better than other similar goods? Some manufacturers may actually have absolute novelties to offer. ]\Iany other manufacturers make goods more or less sim- ilar to goods of the same class made by other manufacturers. But few cases there are where one maker 's products do not differ more or less distinctly in some respects from another maker's. Such differences may be intrinsic in the goods themselves, or they may consist in variations in processes of manufacture which ensure better appearance, service or effectiveness. Again, sales arguments may depend on deliveries, or one factory may be in a peculiarly favorable position to accept larger contracts than another, or, vice versa, may be willing to accept small orders when competitors demand large quantities as a minimum. Talking on Paper. — The great thing in attempting to sell goods by correspondence, especially in correspondence with large importers abroad, is to be able to transfer to paper effectively at least the strongest and most striking talking points and selling arguments that one uses when he is trying to sell his goods per- sonally face to face with his customers. It seems rather curious that this impresses many manufacturers as a difficult if not an impossible task. Many a man throws up his hands and says he does not know how he sells his goods, his goods are just like every one else's, etc. Yet,- if he is cross-examined and asked what he says to his customers in Ohio, a light- will gradually be- gin to dawn in his mind. His first step ought to be to sit down with a stenographer and talk out his story at length and in fullest detail, conversation- ally, intimately, just as though he were talking to a business prosp^et. Then, when he gets his selling talk in black and FOREIGN TRADE CORRESPONDENCE 139 white before him, he can proceed to weed out and "doctor" it as may seem advisable — but he must be careful not to emascu- late it. He must not be afraid to really say things in print. Sales Arguments. — While it is entirely out of the question to attempt to suggest selling arguments for either regular or special lines of goods, yet it may be hinted that quality goods can be just as effectively presented and as easily sold as cheap goods, if due emphasis is placed on increased durability of a third or a half, on peculiarly excellent finish, on an appeal to discriminating buyers and not the rabble, on advertising possi- bilities to consumers (especially in regard to peculiar features) with consequent ease in selling and profit-making. Goods com- manding the highest possible prices known may boast of that fact. If goods are offered at lower prices than competitor's, suspicion must be disarmed and assurances given that they will answer every practical purpose, while extra profits may be pointed out, or advantages in utilizing such goods in special sales at cut prices. Goods which show no variation in price from competing goods require specialization in some fashion and to the greatest possible degree. Even Staples May be Individualized. — Any kind of goods can be differentiated from competitors with a little ingenuity — even staple goods. There are even certain brands of kerosene oil that have attained a world wide demand and command a little higher price than other brands — perhaps because they are worth it, but chiefly because these special brands, having qualities that have become recognized, have gradually made themselves known everywhere, command higher prices because known to be de- pendable. If nothing else can be done with a strictly staple article, at least an attractive trademark can be adopted, or it can be packed in attractive packages, and the effort made to build up trade and fame on such a basis. Even in staples, merchants and agents will be found in every part of the world who can be induced to take up such a new brand, if promised the enthusiastic cooperation of the makers, for the sake of having something of their own to offer, something different from their competitor's goods. Composition of Sales Letters. — In an article published in the American Exporter some time ago. A, E, Ashburner outlined 140 PRACTICAL EXPORTING his ideas as to a general plan for the construction of foreign sales letters from which the following is condensed : The pur- pose of an inquiry is to learn something about your goods. The first few paragraphs on display in your reply form the show window through which your foreign customer sees your goods. After this display should come a few paragraphs as to the appli- cation of your goods to the foreign buyer's particular needs. This should be followed by the efficiency of your product, the results that are actually being obtained from its use. If Ameri- can users are mentioned they should be concerns of international reputation. If you have ever sold your product abroad in a coiuitry where similar conditions exist as in the one from which your inquiry came, tell your correspondent where those goods were sold and what kind of a concern is using them. Economies to be obtained are always interesting reading matter. Prices must be handled with care. They should always come last. Many a time when the manufacturer has quoted prices first the rest of the letter has not been read, because those prices ap- peared high and the prospect does not wait to read anything more. Tell him your story first. The suggestion to name established customers is an especially good one, when they are foreign customers. Mention of Ameri- can clients, even the biggest concerns, is comparatively value- less. It is always a good plan to let a foreign prospect know that one's goods have already been sold in other countries than here at home in the United States. The prospect in Australia, if he understands that the goods he has under consideration have already been introduced in South Africa, especially if b}^ a prominent house there, is almost sure to argue to himself : if the goods can be sold there, it's worth while looking into them for Australia. Obviouslj^, some care must be used in mentioning the names of foreign customers. As a rule, foreigners object to this prac- tice unless their permission has first been obtained. Then, too, a certain risk is involved in mentioning names unless the manu- facturer has been positively assured of the continued satisfac- tion of the customer with the line. The nearer an actual user of goods may be located to the territory of the prospect the better, as a rule, yet when local jealousy or possible infringe- FOREIGN TRADE CORRESPONDENCE 141 ment of territories regarded as exclusive may be involved such references are obviously not desirable. Guaranty of Goods. — It is almost the universal practice among manufacturers to guarantee their goods, at least so far as "faults in manufacture" are concerned. This seems usually to be done in the case of efforts to sell goods abroad as well as at home. It may be pointed out, however, that such a guaranty on the part of the manufacturer is practically worthless when goods have been shipped oversea. The delays and the expense involved in returning goods make such a procedure impracti- cable, or at least undesirable, while there are probably few manu- facturers who would be willing to make a cash allowance to a foreign customer solely on the basis of his simple, unsubstanti- ated assertion and claim. "While the guaranty really does not mean anything, therefore, but may be included if so desired, it is bound to have this objection: some of our customers abroad will be almost sure to expect that in case of dissatisfaction all they have to do is to express it and receive new goods or an allowance. References on Both Sides. — -In correspondence with new prospects the exporter will, of course, politely inquire for ref- erences, preferably to concerns in the United States with whom business has already been transacted, as well as to bankers. A later chapter will revert to this subject. At the same time the exporter must remember that he is as unknown to the prospect as the latter is to him. The prospect, if a serious and expe- rienced importing house, will hardly have avoided some dis- couraging relations with new suppliers, many of them perhaps American suppliers. In consequence, it Mnll not be surprising if he wishes to know something about the importance and the reliability of the strange manufacturer who now offers him goods in some respects attractive. The manufacturer will do well to take this aspect of the business into consideration. If he has al- ready established business in the prospect's territory, references, with proper restrictions as has already been suggested, may be offered to such connections. In general it is not worth while naming specific references in the United States. This applies specially to references to our American commercial agencies. It is true that the principal 142 PRACTICAL EXPORTING agencies of this sort have established certain foreign connections. None the less, they are not widely known abroad and do not en- joy anything like the universal patronage which they enjoy in the United States. The mention of their names does not, there- fore, carry the same weight with people not thoroughly familiar with their operations. With others, who do know something about them, it is not necessary to mention their names, for the prospects will already understand that such information is avail- able — if tliey wish to pay for it. Those who do not thoroughly understand the operations of such agencies will be unpleasantly surprised and very likely repelled when they make application for information, as invited to do by the manufacturer's corre- spondence, to learn that a fee will be demanded before the in- formation is supplied. On these several accounts references of this character are not to be advised. Reference About Oneself. — The usual English style of dealing with this matter may be recommended in all foreign corre- spondence. An Englishman will be quite sure to write some- thing like this: "As to ourselves we may say that we have been in business since 1812 and believe that we can flatter ourselves on having maintained during all of these years a uniformly satisfactory reputation, both as to our business methods and the quality of our products, with our many customers all over the world. We would suggest that in order to satisfy yourself in these respects you ask your local bankers to make inquiries about us through the usual channels." This means that the pros- pect's local bank will, at his request, address its banking corre- spondents in the United States and the latter will in due course report back briefly as to the reputation and financial abilities of the American concern, without cost to the enquirer. This is a great deal better than to give specific references to American bankers, even the largest and best known of New York international bankers, if the exporter chances to be known to any of them. These bankers usually object to having their names given as references even by old and rich concerns with whom th oy have large transactions. When the names of any such bankers are mentioned at all it should not be by way of reference, but merely "We may say that we are known to Messrs. So and So, prominent bankers of New York, who are FOREIGN TRADE CORRESPONDENCE 143 doubtless also known in your city." (Certainly no references to local interior banks, whether the First National or the Sec- ond National, or any other country bank, carry the slightest weight in foreign correspondence.) CIRCULAR LETTERS AND FOLLOW-UP SYSTEMS There may be little if any ditt'ereuce between the usual form letter employed by a manufacturer in replying to inquiries and a circular letter to be distributed more or less generously among trade possibilities or prospects in foreign markets. All of the remarks just offered apply also to the circular letter. It may, however, be utilized with a number of different purposes in view. For example, for general publicity, or as an introduction to the general trade of a market, that is, the smaller dealers or even in some cases the ultimate consumers, who may be solicited, alw'ays at suitably graded prices, for the sake of getting a cer- tain line of goods on the market, making them recognized, known and popular, and thus supporting or ultimately leading up to the establishment of a general agency or a wholesale dis- tributor. Each manufacturer's policj^ in such regards must, of course, be dictated by his individual judgment. Mailing Lists Again, — The basis for any general circularizing campaign must be the mailing list. Ways of compiling such a list have already been suggested. In addition it may be pointed out that for an extended campaign in a given city or locality the local telephone directory may be employed. Little in- genuity is required in securing such directories even when the manufacturer has no established agency in the town in ques- tion. They are preferable to other directories since they may be regarded as a kind of "preferred lists." Some of them will, however, be found useless because an indication is not always given of the business or occupation of the firms and individuals mentioned. If one has a local agent he can check names before forwarding to the United States, but without that guide such directories are quite useless for the ordinary' manufacturer. Testing Circulars. — The plan may sometimes be a good one to test out a circular letter in a limited experiment. The effect of circular letters, as of any other form of advertising, is not always to be pre-determined. What a writer may regard as a 144 PRACTICAL EXPORTING clever production may fall flat so far as actual results obtained are concerned, while an effort of quite another character may bring surprisingly big results. Each new letter should, there- fore, be watched carefully and a record of results kept. It may first be tried in a near-by market, say Cuba (in Spanish) or the British West Indies (in English), and the future use of that particular letter determined by the results obtained. Who's Who Abroad. — The general circularization abroad of all trade, or of the ultimate consumer, is rare in the practice of American manufacturers. It is probably done exclusively by manufacturers who thus cooperate with local agents already established and under their direction. Most manufacturers re- strict their efforts in circularizing to the larger firms with whom they especially wish to establish direct relations. In such cases it follows that each market to be circularized should have as thorough a study as possible. The selection of names to be ad- dressed should be restricted solely to those believed to be in a position to do direct importing. In no effort of this sort should exclusive agency propositions be made. It cheapens the manu- facturer and his goods to throw his agency at the head of a number of concerns with whom he has not hitherto so much as exchanged letters. Moreover, no good business man can be ex- pected to seek or accept an agency until he has actually seen and experimented with the goods themselves. The effort of cir- cular letters should be to get the actual goods into the hands of people who may ultimately develop into good customers or agents. Careless Circularizing. — Altogether too much carelessness is shown by many manufacturers in inaugurating circular letter campaigns. The general trade in a territory is sometimes cir- cularized when goods have already been introduced there, and cases are not unknown where circulars have been distributed broadcast offering the trade prices less by 20 or 30 per cent. than retailers have been accustomed to pay for the same goods to local wholesalers. This question of prices is one to which we shall also revert shortly. Again, it happens often enough, twice in the author's per- sonal experience, that a manufacturer is apparently ignorant of the fact that he has established a sole agency in a given terri- FOREIGN TRADE CORRESPONDENCE 145 tory and proceeds to circularize that territory without tl]^e slightest consideration for the established agent who is placing regular orders, who may indeed have a formal agency contract with the manufacturer. Practices of this sort do not conduce to the high reputation of American business men. Facsimile and Mimeograph Letters. — In principle all for- eign circular letters ought to be individually typed. It has al- ready been suggested that foreigners, far more than we, are apt to insist on being personally addressed. To obtain the best effects, therefore, at least the appearance of "form" or "fac- simile" should be avoided. The best way of accomplishing this result is undoubtedly through the use of automatic typewriters which reproduce any desired number of letters which are ab- solutely indistinguishable from hand written letters. But these machines are not always or everywhere available. The trouble with most of the "facsimile" typewritten letters is the difficulty of exactly matching names and addresses to the bod}^ of the letter. This difficulty is aggravated when different series of addresses are used at different times. IVIost letters made on the mimeograph or any similar apparatus are open to the objection that they are all too oviously mereh^ circulars. When a circular letter is to be written in foreign languages it is often necessary to prepare two forms, one in the singular and the other in the plural, to be used respectively in address- ing individuals and firms. Another difficulty arises in connec- tion with circular letters in other languages. This is the dif^- culty or the impossibility of insuring the accurate copying of letters in strange tongues by the regular office force. A mis- placed or omitted accent in a foreign word may materially change the significance of a word or even make it highly ridicu- lous. For these reasons the use of the automatic typewriter is specially desirable. Follow-up Systems. — The use of "follow-ups" is so common nowadays that it surely cannot be necessary here to explain what is meant. Innumerable books on business correspondence deal fully with the principles involved, the most desirable sys- tems of ticklers, etc. A warning may, however, be repeated here as io mail time required by letters in transit to and from our various foreign markets. The export manager's ticklers 146 PRACTICAL EXPORTING should be arranged with a full knowledge of conditions regard- ing each market addressed. Of course, the follow-up letters must one and all be devised with special reference to the foreign trade, if possible with special reference to each separate foreign market — better yet, especially written for individual prospects, including some of the suggestions already offered in regard to such correspondence. When the right sort of a mailing list is used, when one is assured that the individual concerns he is ad- dressing are or ought to be desirable customers for his goods, then the effort to enlist them as customers ought not to be given up until a decided Yes or No is returned. Arrangement of Follow-up Letters. — As to the composition of follow-up circular letters the author beliej/es firmly in con- tinuing the principle of emphasizing in each letter the individ- ual features of goods as to value or profit. Perhaps the first letter may be one of general character regarding a manufac- turer's whole line or regarding all the features of a special article. Letter No. 2 may take up and enlarge upon one spe- cial feature of a given article selected as the most effective "opening wedge." Letter No. 3 may repeat the process, re- ferring, however, to quite a different article or quite another feature of the special article on which emphasis is being placed. And so the circulars may go on in such a series as may be thought desirable. Another suggestion is offered by ]\Ir. Wy- man, who is recognized as an expert in this sort of work: "We are indeed fortunate if our product is one which ad- mits only a single letter instead of a series. The majority of lines are best presented by a well built chain of four or five letters, each having its ver}^ definite part to play in the effort to secure initial orders. Such a series might well be divided as follows: (1) Description of product, terms, prices and ref- erences. (2) Profit on resale. (3) Sales assistance offered. (4) Quality and exclusive advantages. (5) Recapitulation. "In planning such a series the enclosures, and literature ac- companying under separate cover, should be designed to carry out the idea of the letter itself, not be a cause of distraction from the letter. Thus, with the initial letter a condensed cata- logue and list of references as enclosures would be Excellent. FOREIGN TRADE CORRESPONDENCE 147 With the second letter emphasize profit on resale, and a circular proving- this would be a tangible addition. Material for your circulars in the dealer's interest, specimens of shelf, counter and window displays or a detailed plan for introductory work would go far to prove the argument of sales assistance on which the third letter is based. Photographs, diagrams and a circular of consumer testimonials will back up our claims for quality and exclusive advantages made in our fourth letter, while for our final letter a complete catalogue, order forms and if possi- ble a special introductory offer at a net price will usually add to the written appeal. "If absolutely no results come from your series of three or four letters the fault lies with you, for the good export letter writer can produce agency rec^uests for fur-lined gloves from the Sahara." The same authority, writing in System, suggests another scheme of follow-up letters, as follows: ' ' Letter 1 : Introduction of maker and product, descrip- tion of prices, terms and, if easy to state, approximate de- livery cost. Letter 2: Service or sales cooperation. Letter 3 : Exclusive advantages in the product, care in manufacture or attractiveness to consumer. Letter 4: Summary with spe- cial offer." But he goes on to advise differentiation in the character of follow-ups: "A fine line, however, should be drawn between the persist- ence which irritates and the persistence which educates. Con- sequently, from the moment it is clear that mail orders are not securable, the type of correspondence which indicates that a reply would be a courtesy should be dropped, and a campaign intended to acquaint the merchant with the manufacturer's products, policies, service and reliability without any greater necessity for an answer than a printed advertisement would im- ply, should replace the aggressive sales ar^iment." Yet another use of a follow-up system is suggested in the fol- lowing: "The closing step in securing foreign trade by sales- men comes in selling by mail prospective customers located but not sold by the traveler. There are many good reasons which prevent even the ablest salesman from opening such accounts, 148 PRACTICAL EXPORTING but it is an old saying in export sales circles that 'the man should show better than an even break and the follow-up pay the dividends.' " ADJUSTING BUSINESS DIFFERENCES With the growth to any considerable size of an export busi- ness, differences, disputes, claims and sometimes belated collec- tions have to be handled by correspondence. These business troubles are inseparable from any large business, whether for- eign or domestic. Since it is not often possible for a manufac- turer or his factory representative personally to visit the cus- tomer in whose case trouble has arisen, we have here one more reason for the studious attention that must be given to the handling of foreign letters. It is all too easy to antagonize the foreigner several thousand miles away by a thoughtless word or phrase which would be accepted here in the United States as a mere formality, and in so doing destroy the foundation on which what might be a profitable and satisfactory later business has been built. It is probable that almost as much American export business has thus been ruined as has ever been started. This is not a trifling matter. It is one of the most serious prob- lems of any foreign trade relations. The man who will assert, "I don't care whether my customer likes it or not," has no place among American exporters. Adjusting Claims. — Claims made by foreign customers may be of various sorts and prompted by differing motives. The commonest are, perhaps : clams for inferiority of goods to sam- ples or to goods previously shipped; claims for short ship- ment; claims that the wrong articles have been sent, with re- sulting demands for credit in full, instructions for disposition of the goods in the hands of the customer, or requests for re- bates or extra discounts. Such claims may be honestly intended or they maj^ be made by those who have been described as cMcaneurs, that is, people habitually inclined to take advantage of every technicality, who regard it as an evidence of business shrewdness to seek every possible advantage. The manufacturer must examine these claims with an abso- lutely impartial mind. He must give his customers the bene- FOREIGN TRADE CORRESPONDENCE 149 fit of the doubt in every case where possible to do so. If his export packing system has been scrupulously painstaking and exact along lines which will later be discussed, he may be able to determine to his own satisfaction that the exact quantities as invoiced were actually shipped and that precisely the identical goods ordered and invoiced were shipped. In sojne instances he may be able to assure himself beyond doubt in his own mind that the goods shipped were identical in quality and descrip- tion with goods formerly supplied, or with samples from which ordered. In most cases, however, there will remain a possible doubt on this score. It is the custom in the United States for a manufacturer to put implicit reliance on affidavits made by his clerks as to quantities, etc., of shipments. No doubt this practice is justi- fied to a certain extent, yet the instances of mistaken affidavits of this sort which have almost certainly come to light in the experience of any large shipper should be sufficient to deter him from placing too implicit confidence in such affidavits when they concern trade with customers so far distant that acknowl- edgments of error cannot be made easily, quickly or gracefully. The author writes with some feeling on this subject, for at one time when in charge of a business establishrhent in a for- eign country- he received a case of goods from an American manufacturer which was invoiced as containing one dozen more of a certain article than were actually received. As the case itself was fully packed and afforded not a single inch of room for the missing dozen articles, it was clear that the manufac- turer had blundered in shipping. In response to a claim there was forwarded the usual shipping clerk's affidavit that the in- voice as submitted was correct and that full invoiced quantity had been shipped. Since it was clearly a physical impossibility that this should have been the case, and as the manufacturer intimated that the receivers of the goods were liars, business with the shippers in question abruptly ended for good. The finish of that manufacturer in that instance was not so much due to the confidence he placed in his shipping clerk's sworn statement as it was to the tone of the manufacturer's corre- spondence. The author, in his first business experience as ship- ping clerk in a factory, was himself guilty of making similarly 150 PRACTICAL EXPORTING mistaken affidavits, and more than once was chagrined to find that goods which he had sworn had been shipped were later actually discovered still in stock. In the instance just above referred to, he, as an American, was therefore prepared to smile tolerantly over the affidavit submitted, but he could not over- look the manufacturer's impertinent and offensive written words. Importers in other countries are usually jealous of their dignity. Very naturally when a fair-minded and conscientious manu- facturer satisfies himself, upon making thorough inquiry, that the goods shipped were in every respect in agreement with the order and with his invoice, he will object to making allowances that are claimed and prefer either to have the goods in question placed at his disposition for return to this country or for turn- ing over to some other nearby customer, or he will be disposed to insist that the buyer retain them in accordance with invoice terms. However, he must remember that he is at a great dis- advantage, the goods are out of his possession, in most cases it would cost more than the difference in question to cause them to be returned to the United States, and in few cases is it con- venient to place the goods with some other customer. The ship- per's only recourse is to the courts of law, and lawsuits any- where abroad are expensive and in every respect highly unde- sirable. While, therefore, a manufacturer may be disposed to sit tight and insist upon his demands being fully met, yet it is a question if in such cases, wlien reasonableness and diplomatic fairness have failed to bring the customer to terms, it would not be better in every respect, as well as cheaper, to meet the demands made or to compromise them. Thereafter the manu- facturer may close his books to the customer in question or he may, with his eyes open to the customer's disposition and prac- tice, continue business on such strict lines as he can lay down, naming future prices which will involve ample profits to cover possible claims and allowances. But first of all the manufacturer must adopt the principle that he must never be too cock-sure and he should thoroughly overhaul his factory organization, especially his shipping de- partment, to make certain that similar complaints on the same grounds cannot possibly be justified in the future. FOREIGN TRADE CORRESPONDENCE 151 THE USE OF THE CABLE Every exporter will sooner or later encounter the necessity of using the cable in negotiations with his foreign customers, probably with increasing frequency as his export trade grows. A prominent New York export merchant has estimated that not less than one-third of all American export business is trans- acted by cable. Early among his preparations for the devel- opment of export business a manufacturer must, therefore, provide for exchanging cablegrams with his foreign customers in the most economical fashion. So doing w'ill require the choosing and registration of a cable address for himself, the selection of codes to be employed and, very frequently, provi- sion in catalogues for code names applying to different articles, parts, combinations, etc., possibly code terms for invoice use. Ultimately, perhaps when the business has developed to one of large volume involving frequent exchange of cablegrams, he will find it desirable to compile a special private cable code as appl^'ing to his own business. Like most other details of ex- port trade, this also grows in course of time from simple, pri- mary arrangements to such complications as large and profit- able transactions may make necessary or worth while. It will be understood that we can here only consider the use of the cable in business as is customary in times of peace. War-time restrictions and regulations often prohibit the use of codes and of cable addresses, besides involving censorship and delay. Normality, few countries forbid code messages. Registration of Cable Addresses — One great distinction be- tween cablegrams and ordinary domestic telegrams consists in the general use of a cable address. Each word in a cablegram must be paid for, including the address and signature. Great economy, therefore, is found in the adoption of a single w^ord to represent the name of the individual or firm and the local street address. Such a cable address is registered wdth the com- petent authorities, and all arriving messages bearing such ad- dresses are properly delivered. Two words must, of course, be used in the address, one representing the name of the corre- spondent (and his street and number), the other the iovm in which he is located. Only in the case of very minor and in- 152 PRACTICAL EXPORTING significant towns is it necessary to telegraph also the country or the province or state in which located. In almost every in- stance a memorandum as to country of destination, not to be cabled, suffices for the instruction of the despatching office. In the United States, where there are a good many towns or cities in different States bearing the same name, that one which is the largest or most prominent is assumed by telegraph companies to be the destination intended if no other is specially designated. Thus, a cablegram addressed to "Rochester" will be delivered, in the absence of instructions, to Rochester, N. Y., not to Rochester, N. H., or Rochester, Minn. But, unless the sender has indicated to the despatching office that the town he wants to reach is in the United States, the message may go to Rochester, England. Code addresses chosen for registration should be filed with the Central Bureau for Registered Addresses, main office New York, branches in all cities. They must not be more than ten letters in length and must be pronounceable. It is desirable in the se- lection of a word for the address that care be taken to choose one whose spelling will minimize possible errors in transmission through the mixing or mistranslation of the Morse signals rep- resenting the different letters, and one not confliicting with pre- vious registrations. Interior shippers should consult the local telegraph office; New York shippers, the Central Bureau. Cable Routes. — While both of the two great American tele- graph companies operate ocean cables, yet messages transmitted by either will in many countries be delivered by one and the same agency. That is, in England and in many other coun- tries the telegraphs are a Government-owned institution, and no matter how despatched from this country messages are de- livered by the Government offices. On the other hand, in de- spatching cablegrams from such countries senders may instruct the Government telegraph office as to the transatlantic or other cable system over which they prefer to have their messages sent. While there are a number of cable companies operating lines from New York and from other points on the American sea- board, it is not necessary for a manufacturer in the interior to pay any attention to the individual cable routes. Registration with the local offices of the one, or two, domestic telegraph com- FOREIGN TRADE CORRESPONDENCE 153 panies is sufficient for the address, while oversea messages filed with local offices will be forwarded by whatever cable company the chosen telegraph company prefers. On the other hand, the exporter who is located in New York City, where messages are delivered directly by receiving cable companies, in some eases has a choice of routes by which to despatch his cablegrams. Plain Language Cablegrams. — Excepting as influenced by the requirements of certain countries, it is probable that com- paratively few cablegrams are sent exclusively in plain lan- guage. On the other hand, a combination of plain language- with code words is quite common. Regulations as to admissi- ble words, their spelling, length, count, etc., may be obtained at any telegraph office. Figures ought never to be cabled in messages, even if writing them out in letters involves payment for two or three extra words. There is absolutely no check possible to the receiver when figures are received. Many a costly mistake has occurred through the transmission of prices in figures instead of words. Selection of Cable Codes. — Everj^ exporter should own or have access to one or more of the code books in most common use throughout the world. His letter-head should show not only his registered cable address, but also the names of the codes which should be employed in cable correspondence with him. It is not necessary that the exporter should personally own copies of several different code books, or indeed even one of them. If he can arrange with neighbors or friends who al- ready own copies of such codes to have access to them when oc- casion necessitates, that will answer his first requirements, or he may establish reciprocal relations with friends who may own one code and himself purchase a copy of another code, thus enabling both houses to advertise the facility of using two or several codes instead of one only. Doubtless the code which is in most general use in Europe is the old A B C (4th Edition), but this code was one of the first which attained wide use and is by no means equal to the re- quirements of modern commerce. The ABC 5th Edition is a later compilation, but is not so widely distributed or in such general use, although a good deal of a favorite in Latin Amer- ica. Lieber's Standard Code and the Western Union Cable 154 PRACTICAL EXPORTING and Bentley's Code have all in recent years obtained a wide sale and are more modern and comprehensive than the others named. These four codes are the ones more usually employed for general cable correspondence. There are many special codes adapted for different kinds of business — engineering, grain, cotton, min- ing, stock exchange, banking, etc. The main thing to be con- sidered in the selection of a code is its wide distribution and common use. A new code or new edition of an old code usually requires a considerable period of time to attain wide and popu- lar vogue. This is one, perhaps the only, objection to the com- paratively new "5 letter" codes, so called, the advantage of which is the economy obtained in combining into one code word of ten letters two distinct code expressions. Use of Code Language. — Extreme care should be taken in writing all messages for transmission by cable. This applies both to messages in plain language but more especially, of course, to messages in code, neither the words nor the context of which afford the slightest clue to operators as to possible mis- takes in spelling or significance. Invariably cable messages should be typewritten, and it is usually considered safer to use only capital letters, spacing between each letter, with wide spaces between the several words, perhaps putting only two words to a line, and spacing adequately between each line of the message — the object being to afford operators not the small- est chance of mistaking each letter of each word. Every code message should be carefully reviewed and checked by some one else than the man who first compiles it. Too many precautions to ensure absolute accuracy cannot b© taken. Similar care should be shown in decoding messages received from abroad. All should be worked out and checked by at least two different people. Confirmation of Cablegrams. — Every cablegram despatched or received should be confirmed by letter. This confirmation should preferably be made on a separate sheet especially de- signed for the purpose. It should repeat word for word the text of the original, including address and signature, and ev- ery precaution must here again be repeated to ensure literal accuracy. In confirming code messages it is customary to write the words of the text in a column down the left side of the FOREIGN TRADE CORRESPONDENCE 155 paper and opposite each word its interpretation from the code book, in order that one's foreign corespondents may know ex- actly what words have been transmitted or received and how each has been interpreted. As cablegrams always mean haste, confirmations should be despatched by earliest possible mail, as of course every resulting act should follow as fast as may be possible. Compilation of Private Codes. — While at the outset of an export business it is not vitally necessary to devise special or extraordinary means of cable correspondence, apart from the standard code books, yet when the point is reached that an ex- port catalogue is prepared, it must, if nothing more in this special regard, contain code names referring to each one of the different articles enumerated and, if possible, each variation or other detail connected with each article. Such code terms must be intelligently selected from vocabularies of words acceptable to the cable companies and must be chosen with careful regard to possible conflict with words used in general correspondence in code books that are employed or that may be employed. Numerous vocabularies of acceptable code words are published. In addition to the code nomenclature used in catalogues, in- voices sent to foreign customers should each be given a code word to facilitate cable reference to that invoice, if necessary, and sometimes it is thought desirable to give each separate item in each invoice its own individual code word so that cable in- quiry, duplicate orders for items, etc., may be assisted. The preparation of complete private codes is not a difficult or a complicated matter. It involves, however, a great deal more space than can here be given the subject. Most private codes, it may be observed, are nowadays based on the numerical system in which combinations of ten or twelve figures are ar- ranged in groups of two or three, each group applying to a special phase of business and each allowing of a hundred or a thousand permutations. The completed groups, ten or twelve figures in all, are then translated into letters making pro- nounceable combinations or "words," of not exceeding ten let- ters in length, which are accepted by the cable companies of the world. Almost always checks for each word are provided for. This brief reference sounds decidedly complicated. The 156 PRACTICAL EXPORTING system, however, is in reality simplicity itself. It can be un- -derstood after only a few hours' study, while it is possible with a few days' work to devise a sufficiently comprehensive code applying to any special business which will immensely facili- tate cable correspondence and economy in cable tolls. If in- disposed to make up his private code in his own office the ex- porter has available the service of many code compilers, who for a respectable fee will undertake the work for him. Responsibility in Cable Messages. — Telegraph and cable companies are generally absolved legally from mistakes made in the transmission of code messages. Cipher messages, it has been held, are in nature and purpose unintelligible to any ex- cepting the sender and the addressee, and this has been held in England, Canada and the United States to relieve transmitting companies from any save nominal damages, excepting only in the event of negligence. Responsibility for mistakes occurring in the transmission of plain language messages is seldom accepted by transmitting com- panies and, usually, resulting losses are not sufficient to justify legal action against them. In consequence the liability for losses that may have been incurred, as for example, through the wrongful transmission of a price, may become a matter of dis- sension between buyer and seller. Legally this responsibility seems to be placed on the one who has originated the transac- tion. Thus, if a foreign buyer cables to an American supplier requiring a cable reply, the latter the American, is regarded as the buyer's agent in transmitting, as the buyer has wished, the information required by cable. On the other hand, if it is the American supplier who of his own initiative makes an offer or otherwise addresses an important communication to a for- eign buyer, then it is the American house which is responsible for errors that may occur in resulting cablegrams. Of course, it is sometimes possible to prove glaring mistakes to transmit- ting companies so forcibly that settlements can be readily ob- tained from them, either by despatcher or receiver of the mes- sages involved, as their responsibility may be determined ac- cording to the foregoing rule. It may here be noted that in this country all cable companies will upon demand repeat without charge words of a message FOREIGN TRADE CORRESPONDENCE 157 which are unintelligible and which have evidently been muti- lated in course of transmission. When, therefore, the exercise of a little ingenuity fails in trying different ways of spelling a word that is blind and is not to be translated from the code known to be employed, then the transmitting company may be asked to have that word repeated, and often enough repetition makes it intelligible. Ingenuity in correcting mutilated spell- ings is assisted by reference to the "mutilation tables" and the explanation of possible "tran'sformations of telegraphic signals" which are included in many of the leading code books, and very especially by the arrangement of code words in terminational order. However, if the message or the word involved is of great importance, no correction or guess as to correction should ever be accepted as final until confirmation from the sender or trans- mitting cable company has been received. CHAPTER VI TRAVELING SALESMEN ABROAD Employment of Traveling Salesmen Depends on Growth of Ex- port Business— Successful Factory Salesman Preferred to an Expert in Foreign Languages — Qualities Desirable in the Man to Represent Americans Abroad — Travelers Who Carry Lines from Several Factories — Conditions Encountered in Selling Goods in Other Lands — Duties on Samples — Salesmen's Licenses in Some Countries. IT is extremely doubtful, to say the least, whether any suc- cessful exporter of to-day, American or European, initiated his efforts to find markets in foreign countries by sending out a corps of salesmen to look for orders. It is usually, and with excellent logic, believed that a manufacturer in seeking to build up a foreign trade must walk before he can run. As a rule, he awaits the results of less expensive initial efforts before he attempts to send traveling men into distant markets. He defers their employment until the growth and prospects of trade otherwise secured by earlier tentative efforts seem to warrant sending salesmen, or perhaps to demand them. Most manufac- turers are convinced that first of all they must learn where they can sell their goods and what goods they can sell. Also, and equally important, that they must study the best ways of getting trade in different markets as well as the most desirable fashion of handling that trade when secured. WHEN TO EMPLOY TRAVELING SALESMEN Traveling salesmen have been called the ideal way of develop- ing any trade, foreign or domestic. Undoubtedly this is true — when one has thoroughly convinced himself that he knows exactly what he wants to do. To send traveling men even to the most attractive foreign markets is the height of absurdity until ar- TB AVE LING SALESMEN ABROAD 159 rangements have been perfected at the factory for giving proper and adequate attention to the execution of foreign orders and the general conduct of a thoroughly organized export department. Furthermore, it is never to be forgotten that no ordinary manu- facturer can possibly support his own traveling men in every foreign market. On the other hand, some tempting markets lie so close to us that it is really astonishing that more American traveling sales- men do not visit them. Mexico, when in normal condition, and Cuba are examples of such markets. A Pullman sleeping car leaving St. Louis used to arrive in Mexico City before another car leaving St. Louis at the same time arrived in San Francisco. Similar conditions will undoubtedly return before long. It only costs a man about $165 for transportation to make the trip from New York to Havana, Cuba, and return. These are examples of temptations to aggressively minded manufacturers to seek trade in attractive markets through traveling salesmen. Seriously determined manufacturers and salesmen will, however, do well to avoid "cruises" promoted by steamship companies and "com- mercial tours" engineered by chambers of commerce. Both may be enjoyable junkets, laudable in some respects, but the}^ are not business-getters. Select the Right Man Only. — It cannot be too emphatically urged that manufacturers and exporters must on no account ever send abroad any but the salesman the}' believe to be the right man in every sense of that term. The American house will be judged in foreign countries by the representative it sends to them. IMore than that, our wnole people, the United States of America, will be judged nationally by the travelers whom our manufacturers send out. The foreign buyer will regard it as inconceivable that a high class American house should tolerate a representative vulgar or incompetent. He will probably form his ideas of American standards, of American moralit.y and courtesy, from the salesman whom we send to seek his orders. The greenhorn, the bore, the under-educated salesman, is the butt for ridicule in foreign lands, and his house will share in it. It is the absurdest as it is likely to be the costliest of mistakes to regard a foreign business trip as a desirable junket for some favored employee who may have no qualifications whatever for the task, and who does not 160 PRACTICAL EXPOBTING intend to stick to that line of work. Export traveling is a far more serious proposition than domestic. Salesmen as Credit Judges. — No salesman should ever be sent into any foreign territories to solicit business for the ac- count of manufacturers unless his judgment as to the making of credits is deemed equally as satisfactory to his principals as is his ability to make sales. In all foreign countries an order is regarded as a contract, equally as binding on the supplier of the goods as on the customer himself. It is assumed by responsi- ble buyers when they attach their signature to a contract-order placed with the authorized representative of a manufacturer that that representative has satisfied himself of their desirability as customers, and that the firm he represents will be bound to ship the goods as per order, just as the customer himself will be bound to accept and pay for the goods in accordance with contract terms. However, manufacturers in all countries, not only in the United States but in England and Continental manufacturing countries as well, even though reposing the utmost confidence in the judgment and discretion of their foreign salesmen, usually take measures to confirm a new representative's opinion of pro- posed customers in one way or another. Ways may in excep- tional cases even be found of declining orders which never should have been booked, while recognizing the sanctity of the contract entered into by the agents. Confidence in the Salesman. — The traveling representative of a factory who visits foreign countries in search of new busi- ness, or for the development of business already established, ought to be a good deal more than a mere salesman. To be desirable, the business secured must be profitable. No imagin- able means of investigating credits can approach in satisfaction the personal inquiries made on the spot by the traveling man. In this c'onnection, George li. Richards, export manager of the Remington Typewriter Company, remarked in the course of an address before a class in exporting of the New York Y. M. C. A.: "The manufacturer must be prepared to place proper confi- dence in the judgment and conclusions of his representative. Unless he is willing to discuss, and possibly accept, the sugges- TRAVELING SALESMEN ABROAD 161 tions offered as the result of work done in his behalf, and the plans developed by study of conditions and recjuirements in the territory where business is sought, much of the work and at- tendant expense will be thrown away. Nothing discourages a good man more than to have the conclusions he has arrived at after much sacrifice and labor treated indifferently or disre- garded. If he is big enough for his work, his judgment is good enough to be made the basis of the working policy of the house." Mistakes of Ignorant Salesmen. — The folly of sending out an ignorant or unprepared man to assume the responsibilities in- separable from being thrown upon his own resources in foreign countries may be illustrated in the story of a salesman for a manufacturer of glassware who some years ago started on a trip around the world. lie progressed through Australia to India, whence he was peremptorily called back home by cablegram, He found from the start of his efforts to secure orders that pros- pective customers were not satisfied with ordinary quotations f.o.b. works, with extra charges for barrels, indefinite costs of freight to New York, etc., and that to get any business it was necessar}^ for him to make prices including all charges through to the foreign seaport. He was not accustomed to figuring such charges, but blundered along taking orders as best he could. Every one of these orders had to be declined by the factory, and his recall followed promptly upon their receipt at the home office and consequent careful figuring. The fact that the factory was afterward able, in the course of correspondence, to induce some buyers in Australia to confirm their orders at higher and suitable prices, and actually laid the foundation for a consider- able later business, is not an argument against the foolishness of sending out similarly incompetent men. Factory Support of Salesmen. — The foreign salesman must have the invariably loyal and enthusiastic support of his fac- tory. He needs a loose rein and confidence that no matter what happens his house will back him up to the limit. Nothing puts a more effective damper on the spirits of a salesman traveling in a strange country than the receipt of cold letters of criticism devoid of any friendly, helpful or encouraging expressions. One of the oldest and most highly respected among New York exporters. Welding Ring, of Mailler & Quereau, expresses him- 162 PRACTICAL EXPORTING self as follows in regard to the support which foreign traveling men should receive : ' ' The home office must be prepared to back up its representatives and traveling agents in every respect, show their confidence in them, carry out any agreements or contracts entered into, and see that the business is operated on just as straightforward and careful a basis as if everything was con- ducted here. Unless these agents and representatives possess this confidence and also the backing of the home office, they will be ver}' greatly handicapped and their success become extremely doubtful." Repeated Foreigri Trips. — The manufacturer who plans to develop his trade in foreign markets through traveling salesmen must by no means anticipate that a single trip of a salesman will be enough. The salesman on his first visit may, certainly should, get some business started, but what about its later development? Periodical if not regular subsequent visits are essential. They are essential both for the sure and large growth of the trade and in order to keep abreast of competition. In the beginning a salesman ought to visit a desirable foreign market at least once a 3^ear to impress his goods on buyers and to convince them that his firm is in the field to stay. When well established his trips need not be so frequent. Moreover, it is highly desirable that the man who has been initiated into the export business through a single trip abroad, be given means of retaining his insight into foreign business life, customs and points of view. It is the experience of every one who has been engaged for any length of time in export trade that the man who does not make frequent foreign trips is bound to lose his sj^mpathetic appre- ciation of customers abroad, just as the traveler who remains too long away from home in foreign markets is quite sure to grow away from the factory point of view, forget home policies and factory limitations. Similarly it is not always wise to keep a traveler continuously at work in one territory. It is often better to give him an opportunity of exploring and developing a new field in addition to all or some of his old ones. One Visit not Enough. — Another story may illustrate the inadequacy of a single visit to a foreign market. An American manufacturer of hay presses once upon a time visited Italy and succeeded in inducing a prominent importer of agricultural ma- TRAVELING SALESMEN ABROAD 163 chinery to introduce his presses. The manufacturer returned home. Orders followed from Italj' for three or four years, at first in fairly satisfactory and increasing volume. Then orders began to fall off. The manufacturer wrote earnest letters of inquiry as to causes, but discovered that his agents did not seem anxious to enlighten him with details. The present writer, mak- ing a trip through Italy, was asked to investigate. The reasons for a decline in orders for these American hay presses were dis- covered. Competing manufacturers of another nation, attracted by the considerable business that had been established, found that Italian farmers liked to attach their hay press to their threshing machine and run both from the same engine. They accordingly put an extra pulley on their separator and operated the hay press by a belt from this new pulley. It was acknowl- edged b}^ the Italian importer that he did not like these other presses so well as the American, but the American manufacturer had not turned up in Italy to see how his machines were getting along and whether there was anything he could do to improve sales, while the importer had no other object in canying on his business than to sell the machines that sold most easily and quickly and at best profits. Accordingly, the American ma- chines were neglected. "Whether or not the}^ regained any of the ground lost is beside the question. No ground at all ought to have been lost. The American manufacturer should not have contented himself with one visit to Italy. He ought not to have waited four, five, six years before personally greeting his customer a second time. If it is worth while sending a traveling salesman to a market at all, it is even better worth while following up the first visit by later ones, even if it is not thought necessary to make regular or annual or seasonal trips for the purpose of seeking in person periodic orders. Trade once established, no matter how, will not continue forever to take care of itself. It must be nursed and cultivated if it is to be developed adequately. FOREIGN BORN VS. SUCCESSFUL FACTORY SALESMEN All of us are favored by an endless stream of advice as to the necessity of sending abroad salesmen able to speak the language 164 PRACTICAL EXPORTING of tlie country which they are to visit. The South American obsession, which seems to claim so many of our advisers and critics for its own, is chiefly responsible for the emphasis laid on this advice, which apparently always refers to travelers who are to be sent to Latin America. But Paul T. Cherington, Pro- fessor in the Harvard Graduate School of Business Administra- tion, remarks: "A man may know forty languages and not be able to sell goods in any one of them. On the other hand, he may be a very clever salesman at home and a very poor one for Latin America." Furthermore, what about the necessity of speaking languages by the salesman sent to Europe ? Must he be able to speak every tongue which he encounters in traveling from Lisbon to Stockholm and Petrograd? Whatever else is to be said in this connection it will still remain true that an enor- mous volume of highly profitable business has undoubtedly been established in foreign markets by American manufacturers and traveling salesmen who have been able to express themselves in the English language only. Foreign Language Experts. — It has been an unfortunate fact in the history of American export trade that our manufac- turers have sometimes seemed to regard as a sufficient recom- mendation of many an applicant his pronounced foreign accent in speaking the English language and his claim that he is a native or has long been a resident of some foreign country. The main thing in the selection of an export salesman is not his familiarity with foreign languages but his ability to sell goods. A friend writing from Rio de Janeiro several years ago observed: "A good many men are sent out from the United States who are excellent translators but poor salesmen. It is easier for a man to pick up a knowledge of the language of Brazil, for example, after he gets there than it is for him to acquire the language of the line that he is selling. Far worse, however, is the type who knows his line but knows neither the language of the country nor good breeding. There is a type of American salesman who blusters and curses his way along, who for the credit of his country and the honor of his house ought never to be permitted to visit these shores. That type of American who walks rough shod and loud mouthed through every custom and form of cities TRAVELING SALE83IEN ABROAD 165 that were old when Chicago was a frontier post — these do their country and their firms infinite harm. ' ' It would seem that in the selection of a foreign salesman the question of his ability to speak the language of the market which he is to visit may to some extent depend upon the charac- ter of the trade which he is expected to cultivate, the class and caliber of the customers whom he is to call upon. Evidently a propaganda to be carried on among small retail dealers or the ultimate consumer must entail a far more intimate acquaintance with the language which these classes speak than would be en- tailed if calls are to be made only on the large merchants, chiefly wholesalers and professional importers. The business relations of the latter and frequent trips abroad on their own account will almost certainly have developed a considerable familiaritj- with other languages than that of their immediately local market. It has been found possible by many an American speaking no language except English to do business in all sorts of strange countries either through finding an important customer who could talk to him in English or through the employment of inter- preters, extremely unsatisfactory as the latter method invariably is. None the less it is hard to understand how a man who has not at least a smattering of the language of the people among whom he finds himself can manage to get through in comfort the ordinary routine of life on the street, in the hotels, restaurants and on the railways. The old joke that when one finds himself in a country where English is not understood then the remedy is to "speak louder," does not materially assist in working a market expeditiously and economically. Certainly, if nothing more, the foreign salesman must possess the knack at languages which is born into some men — the ability quickly to pick up common phrases and the essential words of a language, and this wnll help a lot in every phase of his life abroad. It was a prominent Latin American who declared that if a visitor to South America knows only a few words of Spanish, is only able to stumble through the most elementary phrases, he will actually receive a more careful and polite attention from prospective clients than will the salesman who is a fluent con- versationalist in Spanish. The amateur linguist's very blun- 166 PRACTICAL EXPORTING ders may be made jokes by him and contribute to the establish- ment of an acquaintance and even friendship on the pleasantest basis, with prospects who are certain to show the greatest courtesy in treating his language shortcomings. But the essen- tial in the foreign traveling man is beyond any question not the ability to speak several languages; the essential is an ability to sell goods. Successful Domestic Salesmen Abroad.— Since the essential thing in representatives sent abroad is this ability, the question arises as to the desirability of transferring a successful domestic salesman to one or several foreign fields. The advantages such a man possesses over a stranger are obvious. He knows his goods and his firm. He knows how the goods are manufactured and what goes into them. Moreover, he has had practical and sometimes pretty hard experience in learning how they are ef- fectively demonstrated to buyers. While selling goods to for- eigners differs in some minor particulars from that art as practiced in the United States, yet experiences on the road at home are undoubtedly the best preparation for meeting buyers anywhere. It has been noted that there is a very large number among the big importers of goods in all foreign countries who speak English. Some of them are able to converse in our language even though they do not trust themselves to put their queer English grammar and spelling on paper, have no stenographers able to transcribe English letters, and therefore might not, from their letters, be expected to be able to do business in English. Almost every authority of wide experience recommends the use of the successful domestic salesman for foreign work in prefer- ence to the man who has nothing to recommend him save an ability to speak foreign languages. Insistence that the traveling salesman must speak Spanish comes almost exclusively from peo- ple who seem to have Latin American markets solely in mind, yet we find the High Priest of Latin American interests, John Barrett, late Director-General of the Pan American Union, an- nouncing his opinion in an address before the American Hard- ware Manufacturers' Association in the following language: "You say to me, 'Mr. Barrett, it is so difficult to get men,* and in answer I am going to tell you something that may sur- TRAVELING SALESMEN ABROAD 167 prise you. Here is a man who knows all about your plant, all about its productive capacity, under just what conditions you can compete and sell and how you can change your products if necessary, vary your machinery, etc., to adapt them to the field ; but he has not been to Latin America, he does not know the country or the market or the field. On the other hand, you have a man who knows nothing about j^our plant, nothing about j'our capacity to meet competition, but he knows all about the field and speaks the language. Invariably, if you have to make a choice, take the first one, the man who knows your plant. I speak from having had experience with hundreds and hundreds of men while minister down there, and those whom I have seen go from my office and come back again. The man who thor- oughly knows your plant will pick up very soon a knowledge of the field and of the language, if he is clever enough to know your plant ; while the other man, if he is down there and has not the capacity to understand your plant and productive capacity, may lead you into all kinds of mistakes. Of course, if you can get a man who knows your plant thoroughly, who knows the field thor- oughly, who knows the languages thoroughly, you will have an ideal man." T. W. Van, of the Koken Barber Supply Company, of St. Louis, ]Mo,, spoke at the second National Foreign Trade Convention to a group of so-called "smaller" manufacturers. He said: "Starting in as a small manufacturer with practically no for- eign business, but which to this year shows a volume of a quarter of a million dollars, none of which was got along the lines that have been urged upon us to follow if we want to get foreign business, I want first to take issue with the idea that a man has got to know the language before going into foreign countries. I want to tell you gentlemen and the small manufacturers who are desirous of selling their goods abroad, that if we who went down had not gone because we did not know the language, and waited until we found that particularly gifted man who has been pictured to us to-day as the only man that should go, we would still be waiting and our goods would not be in use in those coun- tries to-day. "The pioneers of America's foreign business did not know the language of the people they went to trade amongst, nor did 168 PRACTICAL EXPORTING that fact keep them from going. The getting of foreign trade is not such a hard matter. You need, first, a representative who knows your goods and your factory thoroughly. This represen- tative must be intelligent, with plenty of initiative. Such a man will lay a foundation for your business, even if he does not know a word of the language. Interpreters can be hired and, person- ally, I would much prefer a thoroughly informed capable house salesman and an interpreter to many native salesmen saturated with the 'mafiana habit.' "I recall the first trip I made into Mexico. I was unable to ask for a glass of water. Other salesmen who accompanied me for other concerns were in a like plight. All, however, were absolutely fortified with a complete knowledge of their goods. All went through the country and came out with a splendid business. I would not discourage the idea of salesmen adapting themselves. This they should do, and the intelligent man will. He will just naturally absorb the language, and this he should improve upon each trip. I would emphasize, however, the neces- sity of sending a man who is, first, your best salesman, and let the language be of secondary importance. ' ' When it is desired to use a successful domestic salesman for foreign work a new question may present itself. It may per- haps be difficult to persuade the best salesman in a manufac- turer's employ to abandon his home territory, to give up a profitable clientele, a line of agreeable acquaintances and many intimate friends. He may perhaps prefer what he regards as a "sure thing" to the chances of an adventure in strange lands. TRAINING MEN FOR FOREIGN WORK The solution of this problem undoubtedly lies^in the selection of special men and their training for a considerable length of time for the express purpose of using them in foreign work ex- clusively. The more widely and the faster this practice is adopted the more quickly will the commercial interests of the United States be adequately and creditably represented abroad. It will involve taking young men and putting them through a rigorous apprenticeship in,every detail of the business. It means personal interest and attention on the part of the partners or TRAVELING SALESMEN ABROAD 169 the ofiScers of the house. Young men cannot simply be thrown overboard and left to swim out for themselves. Attractions of Foreign Traveling. — The raw material for foreign traveling salesmen abounds. There is no lack of young men nowadays who are attracted to the export field either be- cause of its novelty or because they think they see in it tempting futures. The fascination of foreign travel is undoubtedly the most potent attraction in the case of many of these young men who quite forget that it does not mean a series of pleasure cruises on palatial passenger steamers, that real work — often excep- tionally hard, disagreeable and irritating — is required. Any man of experience with the ordinary hotels, railway lines and mule-back travel in Latin America, will enlighten the beginner in this regard. In the majority of cases the novelty of travel in foreign countries quickly wears off. The Wanderlust stays where it is born in a man, even though in the course of years he becomes blase, but the other sort rather quickly tires of travel abroad. Yet the business of foreign traveling should be a permanent profession, or at least one lasting through long years. It seems doubtful, therefore, if mere curiosity to see the world is the right sort of a motive to seek in the most desirable candi- dates for such positions. Rewards of Success in Foreign Travel. — What future has the young man who seeks a position as foreign traveler to look forward to? His case is no different from that of the domestic salesman, j^et it is radically different. His future depends solely on his personal ability and success. He has, however, this ad- vantage over the fraternity whose wanderings are limited to our own borders. He is one of a comparatively limited number of men who know foreign markets and their trade, the characteris- tics of their merchants and ways of handling them successfully. He may command a higher salary than any but a select few command at home, he may either continue abroad or in due time return home to become the head of a big export department, or indeed graduate into almost any position. Several examples can be quoted of men who have made their reputation in export work who are to-day the presidents or heads of great companies. On the other hand, the successful foreign traveler may establish 170 PRACTICAL EXPORTING abroad important and even great branches of his American enter- prise. Tempting rewards of varying character are undoubtedly within his reach. From the very outset of his career he should receive unusually liberal remuneration. In this regard, George H. Richards, manager of the export department of the Reming- ton Typewriter Company, remarked in the course of his address before the New York Y. M. C. A. class in exporting : ' ' The manufacturer must realize that, inasmuch "as the work calls for all of the selling ability he would expect in a domestic salesman, and much more in other directions, the cost is neces- sarily in proportion. It is high class work requiring high class men, and high class compensation must follow. It is useless to expect anything else. The work would better not be undertaken at all, than undertaken with men who are incompetent or un- qualified. A cheap man means cheap work. This must neces- sarily be the result unless the reward attending it is in keeping with the requirements "I would offer the following policy as the one which would be productive of the best results to the American manufacturer for interesting and holding the right kind of men for foreign work. Treat them liberally in the matter of compensation ; place full confidence in their judgment and conclusions ; encour- age and appreciate their work even if relatively of small volume, hold out to them the idea that the best prospect for ultimate preferment is through successful work in the foreign field, with all Df its attendant sacrifices and deprivations ; and assure them that their value to the business will be such as the result of this experience, that nothing the business has to offer will be beyond attainment. Several of our large houses are to-day managed in many important departments, from the chief executive down, by men who have made a name for themselves through foreign work. ' ' How Men Should Be Trained.— It is quite useless to expect to turn out a satisfactory foreign salesman in the course of two or three months. Two or three years' training will certainly be necessary. That training should proceed from the ground up through all the details of factory work necessary to give an adefiuate idea of how the goods are made, of what goes into them, of their costs, of variations in processes of manufacture TRAVELING SALESMEN ABROAD 171 and in the character of the finished products which are possible in the organization as it exists. Training in export practice must be complete ; above all, he must have actual sales experience on the road here in this country — and all of the time the candi- date should be studying one or several languages in schools where languages are taught in a practical fashion, and in dail3^ con- versational practice. While every other detail is important, yet it must never be forgotten that if a man cannot sell goods here at home he cannot be expected to sell them abroad. If a college man can be found who seems to possess the char- acteristics of a successful salesman he will very likely be consid- ered the most promising candidate. He should boast a better general education in the so-called liberal branches and, in conse- quence, perhaps a broader outlook, as well as the probable disposition to master details of each feature of his work and the ability to master them quickly. The experience of many manufacturers is that it takes a year or two for the college man to wear off some of his disposition to look at things in an easy- going, theoretical way and, as it is expressed, "get down to brass tacks." With due allowance, however, and if he receives from his employers the right sort of consideration and attention, there should be the basis in a college man for the best sort of foreign representative. The fact that comparatively few college-bred men develop into salesmen here at home does not by any means imply that among them good salesmen are not to be found by the exercise of judi- cious selection and svibsequent drilling and experience; or, again, that there is not the disposition in this class to undertake for- eign sales work. However, sales ability is the first consideration. Other qualities desirable and sometimes, it seems, essential in a foreign representative can undoubtedly be far more easily im- parted than can the ability to get a customer's signature to an actual order. QUALITIES OF A FOREIGN SALESMAN Lord Chesterfield did not begin to exhaust the list of qualities which one may hope for, if not anticipate, in his foreign repre- sentatives. The Admirable Crichton was an amateur in com- parison with the ideal man to represent American business 172 PRACTICAL EXPORTING interests to foreign buyers. If we cannot secure our ideal repre- sentative, yet some approximation to our ideal must be sought in the man who will be thrown on his own resources thousands of miles away from advisers, even in spite of the general use of the cable nowadays — who must represent himself, his house and his country in strange lands, encountering extraordinary com- plications, unforeseen difficulties, running into unexpected laws, customs and demands. Salesmanship the First Essential. — Ability to make sales is, it has been emphasized, the essential thing in the foreign travel- ing man. It must, however, be coupled with integrity. The man who is not to be trusted under any and all conditions must never be sent abroad, no matter how good a salesman he may be. A writer in a contemporary magazine puts the qualities desirable in foreign salesmen in the following order: (1) integrity, (2) ability, (3) courtesy, (4) knowledge of the language, (5) fixity of purpose, (6) feeling of patriotic responsibility. The present author would amplify qualities falling under the second class, ability. It should apply not only to salesmanship, but it should mean that the foreign traveler be exceptionally versatile, quick and ingenious. The problems which he will meet are certain to be continually changing and quite unlike anything he has ever encountered at home. He must be able to solve those problems on the spot and to the satisfaction and profit of principal and cus- tomer alike. Salesman as Diplomat and Student. — The foreign traveling man must be something more than courteous. He must be a diplomat and a psychologist, much more of both than any do- mestic salesman; able promptly to appraise foreign character and disposition, to "size up" his customers of sundry nationali- ties, to recognize their strange and puzzling idiosyncrasies, meet their "bluffs," duly determine their commercial honor and their creditability. Psychology is thus intimately allied both with courtesy and general ability. In addition to these qualities the foreign traveler should be widely read and a student of current affairs, not in his own home alone but in all countries, and es- pecially of international relations. He must be what foreigners call by the equivalent of our word "sympathetic." He must be able to discuss with his customer something more than mere de- TRAVELING SALESMEN ABROAD 173 tails of his own business. While he must know something about local politics he must be able dexterously to avoid them or treat them broadly and indulgently. The salesman must know the general features at least of the history and geography of the country in which he finds himself, must know something about the cabinet ministers, the heroes of its history and its litera- ture. If no more, must at least recognize their names when he hears them. This means study and broad, intelligent reading. As Man of the World. — He should be a man of the world in its largest sense, entirely at home in his evening clothes, and ac- customed to don them much more frequently than would be the case in a trip in the United States. He wall meet the biggest and best men in the commercial communities of the countries he visits. If he is the right sort he will be ' ' put up " at clubs, very likely invited to dinners and dances, possibly introduced at his customers' homes. In some parts of the United States person- ality and friendship go a long way in making the success of the salesman. In other territories here at home there are almost negligible considerations. There is a great difference, for ex- ample, between getting business in New York and getting busi- ness in St. Louis. It is so in foreign countries too. Circum- stances vary, business is on essentially cold-blooded lines in one, W'hile in another club and cafe life are inevitable precursors to any actual business. Discouraging Features of Work Abroad. — AYe may again quote the views of Mr. Richards, when export manager of the Remington Typewriter Company, this time as to the qualities de- sirable in an American foreign salesman: ''A promising candidate must be ready to make sacrifices, to suffer personal discomforts, to contend against severe opposition, and to accustom himself to the lonesomeness of strange and unusual surroundings. He must be patient and able to hang on — not easily discouraged or disheartened. He must, to a certain extent, live in the future, building not alone for himself and his immediate concern, but also that he by his work may add to the sum total of American commercial progress. He must be broad and liberal in. his views, a good mixer and able to represent with dignity, not alone himself and his house, but his nation. He must know his own business absolutely, and let the other man 174 PRACTICAL EXPORTING also know his. He must be proud that he is an American and jealous to sustain that honor which we all demand shall at all times attach to the name. There hdve already been too many instances of commercial men posing as Americans who have done much to belittle the name abroad. It naturally follows, also, that a man to properly qualify for the work must be practically foot-loose. His domestic arrangements must be such that he is free to go whenever called, to any point desired, and to remain as long as business may demand. Duty must supersede all other considerations. Unfortunately, domesticity cannot flourish with the man prepared to commit himself to the arduous requirements of foreign service. Absence from home, however, should in his case be no greater than, and in the majority of instances not as great as, those which are certain to be entailed upon the average naval officer." Characteristics to Be Avoided. — "Too fresh" is the common complaint of the typical American drummer. Evidently, in view of our list of the desirable qualities in a foreign salesman, freshness must be absolutely eliminated from his make-up ; so must our American disposition to brag. The American who can find nothing better to talk about in London than the superiority of American street cars, American hotels, American railways, and who comments caustically on British conservatism, and in- sists on trying to show his customers how they ought to do busi- ness in the American way, will have a good deal of difficulty in living down the first unpleasant impressions he has thus created. It may be doubtful if he ever succeeds in getting the business he seeks, if any business worth while. Precisely the same is true all around the world. "When in Rome do as the Romans do" holds good to-day, in principle. Here are some maxims to be remembered, rather bald, and a few, only, among many: It is not advised to send abroad a salesman : Who chews to- bacco; who slaps his victims on the back and perches his feet on their desks ; who thinks or says he thinks there 's only one ' ' God 's own country"; whose commonest conversation is of "little old New York" and the glories of "the great White Way" — al- though his native heath is probably Oklahoma. TRAVELING SALESMEN ABROAD 175 COMBINATION FOREIGN TRAVELERS Current discussion of ways to be adopted by American manu- facturers to take advantage of the undeniably wonderful oppor- tunities for the expansion of our foreign trade has resulted in a very general recommendation that manufacturers combine in their efforts to develop this trade in order to reduce what are described as the high expenses necessary. Frequently this scheme is put forth as a brand new discovery, a brilliant idea which has just been originated. It is nothing of the sort. It is as old as is export trade on modern lines. It may or may not be successful. It is one of the problems which is certain sooner or later to be presented to every manufacturer who has the small- est interest in foreign markets. What Is a "Combination" Traveler? — A combination foreign traveling salesman may carry from four or five to forty or fifty different lines. He may make a trip around the world, or he may confine his efforts to a comparatively limited territory. In any case, the theory is that each manufacturer included in the combination will secure the needed representation for his goods at the minimum expense. The combination traveling man usu- ally requires from each manufacturer whose line he carries a certain definite contribution of money, aiming to make the total contribution from all lines represented sufficient to cover antici- pated expenses, and sometimes also his own remuneration for time devoted to the effort. Thus, if a year's trip is to be made and the expenses are approximated at, say $10,000, ten manufac- turers may be asked to contribute $1,000 each in cash. Usually, provision is made also for a commission to be paid on all sales actually made. On this commission the traveling man may de- pend for his own profits or salary. If not content to risk all of his own interests the traveler may make his anticipated expense $15,000 instead of $10,000 and ask each of ten contributing man- ufacturers to advance $1,500 cash instead of the smaller amount. The combination traveling man is expected to carry samples or other trade ammunition of the several manufacturers whom he represents, to drum the trade adequately in each market or each city that he visits, to establish new customers or develop the 176 PRACTICAL EXPORTING business of old customers, just as would an individual represen- tative of each manufacturer in the combination. How Combinations Are Formed. — Men engaged in the ex- port trade in varying capacities, and young men who think they would like to become connected with the export trade, are often attracted by the possibilities of making foreign trips as represen- tatives of combinations of manufacturers. It is proper to warn such men that not only is the idea anything but novel but that no little difficulty will be experienced, and probably many weeks if not months of time will have to be spent in the effort to get together the requisite combination. The man who attempts the task must first of all select those kinds of goods with which he is best acquainted or which he thinks would have the best chances for profitable sale abroad, and must at the same time evolve a sales plan as applying to certain foreign fields about which he knows a good deal. He must for- mulate his plan and his knowledge of the foreign territory to be worked, in order to present his proposition effectively to the manufacturers whom he approaches. When he has determined upon the general classes of goods whose sale he wishes to under- take, he will have to select those special manufacturers of each article whom he would prefer to have enter his combination if they can be persuaded to do so. He usually approaches the most desirable manufacturers first. If, for any reason, they are not disposed to listen to his arguments then he has to seek out others making similar goods. This process he usually finds himself obliged to follow out through a rather long program. It is almost invariably necessary to approach manufacturers in person, correspondence rarely bringing results, because the idea is not a new one and to commend it to any manufacturer's favorable consideration there must be very strong features of the plan, or the personality of the salesman must be the determining factor which ultimately overcomes the opposition of the manu- facturer to the proposal. Each manufacturer approached is usually asked to contribute to the combination his agency rights for the territory to be cov- ered in addition to a certain sum per annum or per month, more often payable in a lump sum in advance. In order to have any chance at all of interesting manufactur- TRAVELING SALESMEN ABROAD 177 ers of the most desirable lines in any combination of this sort, it will be found indispensable for the salesman to put up an excep- tionally strong argument. Above all, to show that he, the sales- man, lias had experience in the field to be covered or at least in doing export business in allied lines to that field, that he knows prospects and opportunities and conditions in the field thor- oughly, that he is able to speak the language of the trade, that in fact he really knows what he is talking about. Most manufac- turers nowadays are not disposed to listen to schemes of this sort advanced by amateurs. Advantages of Combination Salesmen. — Clearly the chief recommendation to a manufacturer of a combination representa- tive in place of an individual factory representative is the re- duced expense thus required. This is, of course, a most impor- tant consideration. The saving is large. There may be other advantages also. For example, the manufacturer of a "short line" may profit by having his goods presented by the same sales- man who handles the products of manufacturers making allied goods, and orders may be thus obtained which would otherwise be missed because buyers would not be disposed to place orders for very small lots. Again, the salesman carrying a variety of goods in which a buyer may be interested may have a stronger argument for securing the attention of buyers than the mere representative of one line only. A dealer in electrical supplies, for example, might not be disposed to show very much interest in the traveling man who has only dry batteries to offer, whereas, he might be prompted by curiosity if nothing else to look over the assorted lines carried by a combination traveler who has samples to show not only of dry batteries but of electric bells, switches, lamps, sundry automobile accessories, etc. Each one of these manufac- turers might receive at least trial or sample orders, particularly if arrangements had been made for combination shipments from the United States of all orders secured, whereas such a trial ship- ment in the case of an individual manufacturer might be so insig- nificant that the dealer would not have the courage to suggest it. Objections to Combination Salesmen. — If the combination representative does not carry closely allied lines, it is evident that his efforts must be scattered, the trade on which he must call of 178 PRACTICAL EXPORTING varied character, and a great waste of time and effort result. The combination traveler who has a line of dry batteries and another line of men 's shoes, a line of glazed kid leather, a line of padlocks, and so on through perhaps ten or twenty different branches of industry, may find some country storekeepers at various points in his itinerary who will be interested in all the goods which he shows, but at the principal commercial centers which he visits he will have to call on hardware dealers, shoe dealers, shoe manufacturers, electrical supply houses, etc., in- stead of being able to devote his time continuously to one species of dealer or importer. Unfortunately, most combination traveling men carry varie- gated assortments of goods. This usually happens because it is the combination man himself who initiates the idea of a foreign trip and propounds it with more or less success to sundry manu- facturers, endeavoring to enlist the interest of each in the trip that he proposes and in making the necessary contribution to- ward expenses. Since it is the combination salesman himself who usually originates the scheme, his ambition is not always inspired by the interests of the manufacturers represented, and it is probable that some lines will be taken on as a last resort, to com- plete the list of contributors to the fund, rather than with real conviction that success will be made of such lines. Again, the motives of the man who proposes a combination trip have sometimes to be examined with care. Such proposi- tions are by no means uncommon. Sometimes they come from capable men, very much in earnest; sometimes they come from men who apparently can find nothing else to do; some- times from men whose object seems to be to get a chance to see the world. Sometimes, too, they are advanced by men of un- savory reputation and previous fraudulent trips of similar char- acter, when contributions have been obtained but the represen- tative has progressed no farther than an American seaport or the nearest foreign port most economically reached. A thor- ough examination of such proposals is invariably in order. Every reference offered by the man who proposes such a com- bination must be investigated, his history carefully looked into and information as to his character and record sought from TRAVELING SALESMEN ABROAD 179 every one who has ever had any connection with him, in addition to those references which have vohintarily been offered. Experiences with Combination Salesmen. — It almost always results in examining propositions of this ^ort that it is found that the traveling man, if he has made similar combination trips in the past, has been successful in making sales for one or two of the firms represented but that others of his principals have not received adequate returns for their investment, or have received no returns at all. There are always a number of manufacturers, therefore, who are ready to rise up and denounce the salesman in question as "a thief and a robber" because he has taken their money and has not returned value received. They are justified in doing so in all too many cases, yet the most honest of men may be mistaken in their opinion of the saleability of a given line of goods. Not a few of these combination efforts in years gone by have failed and have been unjustly denounced by manufacturers whose goods were originally taken in the best of faith, but which it was found impossible to introduce satisfactorily in the markets visited for good and sufificient reasons of one sort or another. Given the traveling man's honesty of purpose, the manufacturer in such a case has no cause for denouncing his failure. The sales- man 's risk was involved no less than the manufacturer 's, and the latter ought to take his medicine also. Probably, however, most failures are to be ascribed to the un- desirable composition of the "combination" which has been en- gineered by the salesman. Either too many lines have been carried, making impossible any adequate attention to each, or the lines have been too diversified, requiring undue haste in a given market in order to visit all buyers interested, with conse- quent almost certain neglect of some lines. Then, too, no sales- man can be expected to present each one of a great variety of lines with the same degree of intelligence. Again, the salesman may have fallen into the natural and human mistake of neglect- ing goods hard to sell in favor of lines which sold easily and in large volume. Certain it is that there are very few indeed per- manently successful efforts in the way of combination traveling salesmen that can be pointed out to-day. These schemes have been tried scores and hundreds of times 180 PRACTICAL EXPORTING in the course of the last forty or fifty years. Seldom has one lasted more than a year or two. Men make such combinations, go abroad, work hard, find success in some lines, disappointment in others. At the end of a year, often earlier, if they can, members of the combination who are dissatisfied with the results drop out and their places must be filled, if the salesman is to continue for another year. This involves loss of time, for it is always difficult to find the manufacturer who just fits in to the vacant place and who is at the same time interested in the proposition. Weeks and months are thus wasted. Ultimate dissatisfaction of everybody concerned has hitherto been the rule and there seem to be no good grounds for anticipating any other results in the future. Most prominent manufacturers are thor- oughly familiar with this sort of proposition, many of them have had actual experiences with similar schemes. As a rule such manufacturers are not disposed to listen attentively to new pro- posals of similar character. How Combinations May Be Successful. — Although the his- tory of combination traveling salesmen has been almost uniformly discouraging, it may be that a successful effort of this sort can be developed. Incidentally, it is to be remarked that other coun- tries than the United States have had precisely similar experi- ences to ours. AVe can by no means claim this sort of effort as one of our own devising. In all cases the prime cause for failure seems, on analysis, to have been the fact that these combinations have been proposed and carried out on the initiative of the sales- men. They have not been originated by manufacturers. Rea- sons for making up combinations of unsatisfactory nature by the salesmen have just been suggested. If manufacturers on their own initiative, instead of acquiescing in chance proposals made to them, were themselves to engineer combinations satis- factory to them in nature and to carry them out along lines dic- tated by them, instead of entrusting their development to the whims or schemes of salesmen who are virtually their own mas- ters, then it might be that a combination effort would be highly successful and satisfactor3\ This sort of effort should, it would seem, proceed in much the following fashion : Three or four, or eight or ten, manufacturers of similar and allied goods, meeting at conventions or simply TRAVELING SALESMEN ABROAD 181 arranging among themselves in conferences, may agree that cer- tain foreign territories are tempting markets which ought to be developed by salesmen, that each of them is willing to spend a certain number of hundred or thousand dollars a year to culti- vate these markets. They may agree, therefore, to seek out and hire on fixed salary the best salesmen they can select. That salesman, possessing as many of the desirable qualities as possi- ble and having had a thorough experience in the branch of in- dustry to which the interested manufacturers belong, should spend a number of weeks at each of the factories which are in- volved in the proposed combination, acquiring a general knowl- edge of each individual line, and receiving lessons from each manufacturer as to his policies and expectations. In that sales- man's hands would be placed representative sample collections of each of the manufacturers engaged in the combination. If some of them make certain articles competing with others, then those of all but one maker should be eliminated, in some cases equiva- lent offsetting advantages being offered by those manufacturers who are favored in such a selection. The aim should be to give the salesman a representative line of the strongest products of each of the factories he represents, making a complete whole that will, as a whole, result most effectively in producing business abroad. "We have here, however, to encounter the element of trade jeal- ousy, and probably to combat the efforts of one factory involved to domineer over the others, to ' ' boss the show. ' ' If there is to be one predominating influence in the combination, it is doubtful if the others will get their share of attention or resulting trade. Yet it is certainly highly desirable that there be a clearing house, a center of some description for the combination. Instructions must be given the traveling salesman by somebody and cannot always be given by majority vote of the several manufacturers concerned. The clearing house is especially necessary when it comes to shipping the goods. All orders taken for the combina- tion from one and the same customer ought to be shipped on one bill of lading, if not invoiced and financed as a whole. To some extent these requirements can be met by utilizing the services of foreign freight forwarders, whose province and operations we shall later inquire into. Or arrangements can be made with ex- 182 PRACTICAL EXPORTING port commission houses to confirm orders, ship and finance them. The one great obstacle to such a combination as here proposed would seem to be the human element. The generous spirit of give and take, cooperation for the benefit of all with possible oc- casional detriment to some even if only minor interests of the individual, is perhaps rarely to be found among manufacturers, each fighting aggressively for the advancement of his own inter- ests. Something of this sort may be developed on satisfactory and permanent lines, perhaps through pooling profits, but the author confesses that he is not optimistic in this regard. PREPARATIONS FOR FOREIGN TRAVELING Before a salesman, whether representing an individual manu- facturer or a combination of several manufacturers, sets out on a foreign trip it is essential that other preparations be made than merely the collecting of a set of samples and their study. Es- pecially in the case of a first trip to a given territory it is neces- sary, curious as it may seem, to caution the traveler that before sailing he must learn just as much as he can about the countries he is to visit and the possible customers there for the goods he has to sell. Moreover, too little attention is often paid to the necessity of starting out fully armed with other papers than the indispensable letter of credit. Travelers' Letters of Credit. — The letter of credit, or other form of carrying money in ample amount to meet every expected expense or possible contingency, is naturally the salesman's first care. Undoubtedly a banker's circular letter of credit is the most generally satisfactory as well as economical way of carrying funds, especially in fields where the salesman is not personally acquainted and cannot depend upon getting money from friends and customers through drawing drafts on his house or otherwise. The letter of credit has some advantages also for the salesman's principals, the manufacturers, in that as a rule it is not necessary for them to advance in cash the full amount represented by the face value of the letter of credit. The manufacturer's bankers usually issue these letters against the manufacturer's rating or credit with them, charging the individual amounts to the manu- facturer one by one as the salesman draws them at various places and dates in the course of his journeys. The so-called ''checks," TRAVELING SALESMEN ABROAD 183 issued by express companies and some other institutions, are con- venient in many respects but usually they must be paid for in full in advance and the rate of exchange is a trifle higher than that charged when drafts are drawn against circular letters of credit. In traveling in South America salesmen have often, before the war, found it advantageous to carry two letters of credit, one in dollars, the other in pounds sterling, drawing on New York or London as temporary rates of exchange made profitable. In very long trips considerable savings are said to have been made. Passports. — The passport should never be neglected, referring to conditions as they exist in ordinary times the world over whether a state of war prevails in a given country or otherwise. A salesman may make half a dozen trips and never have occa- sion to use a passport, but on another trip there may unexpect- edl}^ arise a crisis of some sort which will make the possession of that document vital. It should, therefore, always be carried no matter if the salesman does not anticipate visiting certain countries where it is practically always necessary. Other documents are necessary in the case of some countries, for example, in Venezuela, where (officially) a certificate of re- cent vaccination is required and a certified baggage list. These papers are sometimes demanded and sometimes overlooked. They should always be in the traveler's possession and he should in no case neglect any formality which the laws of the country which he is about to visit require, including the consular visa before approaching the frontier or ports of certain countries. Travelers' Credentials of Authority. — Credentials from the firm or firms represented by the salesman are very generally for- gotten or disregarded, yet they form what may on occasion be an absolutely indispensable part of the salesman's equipment. Usually a Power of Attorney should be supplied. If preferred, a certificate may be given reading perhaps in the following form : "We of the city of hereby certify that Mr. is our representative for {names of countries) wnth instruc- tions from us to take orders, show samples, etc., {inserting, if desired, specific definition and limitation of authority granted) and generally guard our interests. {Signature of the firm.)^' The signature to such a certificate should be attested by a notary public and his signature vised by suitable consuls or possibly 184 PRACTICAL EXPORTING Ministers or Ambassadors representing the countries to be visited who may require County Clerk's and state officials' signatures, even the attestation of the Secretary of State of the United States. This certification of identity and general status, backed by a passport, is frequently of extreme importance. A Power of At- torney when given should also be fully attested in the same way. Other Helpful Documents. — In addition it will do no harm at all and may occasionally be important for the traveler to carry with him a certificate from the Chamber of Commerce of his home town, that is, the town where the factory or headquarters of his firm is located, setting forth under the biggest official seal of the Chamber of Commerce, and in as imposing and formal a fashion as possible, the fact that the firm represented is actually estab- lished in that city and doing business there and that the sales- man is its authorized representative. Such certificates also may be duly attested hy^ consuls of the several countries which it is planned to visit. They help sometimes in very effective ways. Some Governments require evidence that the firm said to be rep- resented is actually and legitimately in business. Helpful, too, on occasion may be official letters to our consular and diplomatic representatives which many travelers are dis- posed to ridicule. For example, if the traveling man encounters opportunities of undertaking important negotiations with rail- ways or with municipal or government departments, he may find that unless he is amply fortified by documents positively con- firming his pretensions to be the representative of the house which he claims to represent, he will not be permitted to tender for supplies required or be otherwise recognized. Letters of Introduction. — Letters of introduction as they are usually solicited and given are of little if any value and may just as well be left at home. Introductions to large commercial houses or local officials abroad, of importance and influence, may be helpful but only when they come from actual and intimate friends in the United States. Such letters given by casual ac- quaintances, or persons who merely think they remember having met the people abroad, are worse than useless. When given by people having real influence with those to whom they are ad- dressed, these letters may be of great assistance, especially as TRAVELING SALESMEN ABROAD 185 further fortifying the traveler's claims to be the representative of an important American firm. Introduction to Foreign Bankers. — Letters from American bankers to their corresponding bankers in foreign countries to be visited should never be neglected. While usually it is possible for the traveling man readily to secure an interview with bankers in almost any city in the world without any introduction what- soever beyond his business card, yet letters from American bankers asking their foreign correspondents to give i\Ir. So-and- So, representing such-and-such a firm, any information that he may require, are always a help and in some cases, especially in British colonies, Australasia, South Africa, etc., may be neces- sary. One of the peculiarities of some British colonial bankers is a refusal to give information unless bankers in his home coun- try have introduced the applicant and specifically requested the privilege of such information. These bankers' letters of intro- duction, it should be understood, are absolutely distinct from circular letters of credit. They are not to be addressed by one 's local bank but should be secured by the local banker from the New York branches of foreign bankers, or from those interna- tional bankers in New York who are the usual correspondents in this country of the foreign bankers to whom letters will be addressed. In some cases circular letters of introduction will be given, good at all of the* numerous branches in a given terri- tory of a certain foreign banker. Papers Identifying Samples. — Other documents which the foreign traveling man will do well to provide, when he is carrying samples on which duties will be imposed by the various coun- tries that are visited, include the requisite number of formal sample invoices, when necessary duly attested, and always the traveler should be armed with an account of the actual numbers of the samples and very especially their exact gross and net weights. With such information he can often avoid a good deal of red tape and annoyance in foreign custom houses. Knowing the Trade. — Tf the traveling man, or the house he represents, has never done any actual business in the market which he is to visit, it is none the less desirable in the highest degree, if not positively essential, that before he leaves the United 186 PRACTICAL EXPORTING States he should have the best possible paper acquaintance with the personnel of the field which he proposes to cultivate. He should have, and he will find it comparatively easy to secure, a pretty good list of all the people of any importance engaged in the line of business which interests him in each city that he intends to visit. He should know something about the compar- ative importance of these various prospects and he should have made up his mind which ones among them seem to be most de- sirable as customers or agents, that is, those with whom he expects to work especially hard. True, on arrival in a strange field and looking over the trade, the traveler may revise his ideas in these regards, but to go to a field without having any idea even as to the names of the business houses established there is certainly supremely ridiculous, involving regrettable loss of time.^ MAPPING ROUTES When a traveling man sets out to visit certain foreign markets for the purpose of developing trade there, he should usually make up his mind to spend as much time in each market as circum- stances seem to require. Having undertaken the initial expenses to reach a market it is usually the best policy to stay there as long as seems necessary in order to get the utmost possible out of it, rather than to cut one's visit short in order to carry out some pre-arranged itinerary, possibly leaving behind one better opportunities than markets farther on can offer. Of course, the traveler must make up some sort of a schedule before he starts on his trip, but the time allowance must be elastic as well as lib- eral. Departure and arrival of steamers are often variable 1 Professor Cherington, of the Harvard Graduate School of Business Ad- ministration, telling of the operations of a suceessful American salesman in Latin America, writes: "Wliat did this observing exception to so many rules do about the moot question of credits? Did he pick up anybody with a sign over his door and tell him to take all the goods he would and pay for tlieni in notes maturing at six-year intervals, just for the sake of get- ting trade started? He did not. In his crude, untutored way he found out wlio was doing the trade in the lines he carried ; from these he chose the ones to whom he wanted to sell and then he looked into their financial standing before they knew he was on earth. Then when he sold them goods he already knew they could pay for them in 00 days as well as in 90 years and he never varied his terms." A good deal of information of this sort and a tentative selection of customers can be made before ever the traveling man sets sail from the United States. TRAVELING SALESMEN ABROAD 187 dates. Excepting in a few of the big express passenger lines, many steamers which the traveler must employ in various parts of the world come and go at their own sweet will, which means as cargo demands at sundry ports make to their advantage. It is quite possible on account of the vagaries of some steamship sailings for one to miss anticipated connections and be held up unexpectedly for a week or two weeks awaiting other opportuni- ties of sailing to new markets. On this account, too, changes in the traveler's itinerary as first planned are often required. The foreign traveling man's principals cannot hold him down to a day by day schedule, as very likely they do their domestic salesmen. Routes as well as dates have to be changed by the salesman on his own responsibility, as circumstances or local con- ditions encountered seem to him to make desirable if not un- avoidable, sometimes by quarantine, for example. Places which on the map look close to other points which the foreign traveler is to visit .may actuall}^ involve five or ten days' travel. Islands in the West Indies, for example, which seem to lie close to- getlier may yet be as widely separated as New York and Liver- pool so far as means of communication are concerned. LIFE ABROAD "ON THE ROAD ' In every aspect of his life abroad the traveling salesman will find striking variations from his home experiences. From rail- way cars to hours for doing business — almost everything will be new and strange to the American who finds himself abroad for the first time. Moreover, the life of the traveling salesman abroad will differ in some notable respects from the routine of the pleasure tourist. Again, practice and routine in one coun- try are no guide to what may be expected in another, even in a closely neighboring country. Here once more we are impressed with the necessity of versatility and adaptability in the foreign traveling man. In some foreign markets he will visit he will find it possible to "hustle," though seldom if ever to the extent which his American training inclines him to attempt. On the other hand, whether he wishes to do so or not, he will find it unavoid- able to take life easy in the tropics. There he cannot hustle no matter how much he wishes to, nor would it be desirable for him to try, for he would quickly wear himself out. The man who 188 PRACTICAL EXPORTING has never traveled abroad will find valuable preliminary infor- mation in Baedeker's and other guide books. The following supplementary hints may be added. Foreign Monetary Systems. — It is important the traveling man should study in each market the ruling rates of foreign ex- change, their fluctuations and the monetary situation in general. He must know something about these things for his own protec- tion in exchanging the money of one country for the money of another, but he should be well posted regarding international exchanges, the gold premium, rates on paper, and in general re- gard to financial matters, to be able to discuss these questions intelligently with his customers to whom they are matters of daily and most intense interest. Baggage. — Of course, the traveler who carries large collec- tions of samples cannot avoid the use of trunks, but he must be prepared to denounce them rather frequently as "an infernal nuisance," and his patience will often be sorely tried by vexa- tious delays and red tape to which he will in consequence be sub- jected. The rule is to carry small hand bags, even if many of them are necessary. In many countries there is absolutely no free allowance for luggage, in other countries the allowance is very limited, and in addition there are in general few facilities for handling big or heavy luggage. Trunks prepared for for- eign traveling should never be the large, heavy cases that Amer- ican traveling men use at home. Lightness and ease in handling are highly desirable. With only rare exceptions, the American traveling man should patronize the first class accommodations on railways as well as steamers. Sample Rooms. — The traveling man who carries samples in Europe will usually have to patronize special hotels, that is com- mercial houses, rather than the hotels frequented by tourists. The latter rarely have any sample rooms or as the English call them "stock rooms." Some of them refuse to receive "com- mercial men." Indeed, in other parts of the world, in many eases throughout Latin America as well as in the Orient, Aus- tralia and South Africa, the traveler must hire special sample rooms outside of hotels or sometimes lease a small shop that may chance to be vacant. Hours of Business. — As a rule office hours in foreign business TRAVELING SALESMEN ABROAD 189 establishments are longer than those customary in the United States, beginning earlier in the morning and ending later in the evening. There are almost invariably, however, interruptions to the business day which we do not tolerate in our more strenu- ous life. In England and the British Colonies everywhere office routine is interrupted by the serving of afternoon tea at four or five o'clock and the American visitor will at first be quite non- plussed by finding his customer putting aside business at such an hour, sipping his tea and eating his toast or cakes while he gossips of anything else than business for half an hour or so. In the Germanic countries the day is broken up by several meals, almost always by coffee at nine, by dinner at eleven or twelve and by ' ' cakes ' ' at four or four-thirty. In southern Europe and in many parts of Latin America the noon recess lasts from eleven or twelve o'clock in the morning until two or three o'clock in the afternoon and in many hot countries advantage is taken of the cool hours of the morning to start business as early as six o'clock, and, to compensate for the time taken from business during the hot midday hours, work is extended until eight or nine o'clock in the evening. On the other hand, peculiar local customs exist at some points, as for example in Jamaica where all business houses are tightly closed at four o'clock in the afternoon. As a rule the Saturday half-holiday, almost universal in the United States and usual also in Great Britain and in some British Colonies, has not been adopted to anything like the same extent in other countries. In New Zealand cities have local option in this respect — Wednesday, or some other day, is a half-holiday instead of Saturday in some of them. It is usually possible for the traveling man to call on his cus- tomers much earlier in the day than he would think advisable in the United States. In England he will probably follow much tlie same rules as here at home, but elsewhere a nine o'clock call will be preferred to one from eleven to twelve. In fact, the morning hours are those most desirable for office or shop visits and advantage can be taken of the afternoon hours for cafe and club conferences with business acquaintances and friends. Custom Houses. — Common politeness coupled with an inex- haustible supply of patience will usually see the traveling man 190 PRACTICAL EXPORTING comfortably through almost any foreign custom house. It is rarely that a man who takes the right attitude toward officials experiences any difficulty whatever. However, this is one of the annoyances inseparable from foreign traveling. At each frontier that is crossed there is the inevitable custom house with its routine and formalities which have to be complied with. The traveling man who carries samples will need all the tact and tolerance he can command. If, however, he has not a large col- lection of samples or only a few articles which may pass as ordinary tourist's luggage, then he may manage almost anywhere with little difficulty or delay. There are few if any custom houses of any country of the world where the inquisition prac- ticed in American custom houses is even remotely approximated, except in times of war. It should be noted, however, that in some countries the typewriter or the photographic camera which the salesman may be carrying will be taxed, and always there is trouble if a large quantity of tobacco or cigars is included in the traveler's baggage. Approximate Average Expenses. — If one were to attempt a guess at what may be the general average expenses of a foreign traveling man in the course of an extended trip, say of not less than four months' duration, it would probably be from $18 to $25 a day from New York back to New York, including steam- ship fares and everything else. Such an allowance is ample for the ordinary traveler who does not carry samples, or have many and costly cablegrams to send, and would cover a trip around the world as well as a trip to the West Indies. Everything, however, depends upon the individual and the errand on which he is bound. If the traveler has to do a great deal of entertain- ing, particularly if that entertaining is of prospects of high position, demanding every available luxury, then his expenses will be correspondingly larger than a more modest man's. The traveler who carries an assortment of ten or twelve trunks full of samples will be subjected to greatly increased expense which will often include the payment of heavy duties on these samples in each country that he visits and even the employment of serv- ants to pack, unpack and handle the samples. In India and throughout the Far East it is a customary thing to carry with one a native personal servant. His cost is insignificant. TRAVELING SALESMEN ABROAD 191 DUTIES ON SAMPLES How to maneuver his samples through foreign custom houses is always a serious and perplexing problem which each traveling man will have to solve for himself. It may be remarked in the first place that if the traveler takes samples away from the United States with the expectation of bringing them back again into this country it will be well for him to secure some proof of their American origin and exportation from one of our ports. If his sample trunks are taken as passenger's baggage by the same steamship by which the traveler himself sails; then certifi- cates to this effect with name of steamer and sailing date may be obtained, while if the trunks are shipped as freight, then it is possible to have a duplicate of the bill of lading and the goods will have been cleared at the custom house in the usual fashion. If some such evidence of actual shipment of the samples out of the United States is not in the traveler 's hands or available when he returns to this country, he may experience some delay if not annoying cross examination by our custom house officials before they will allow samples of American goods free entry to their own home. Foreign Duties Must Be Paid. — It may sometimes be possible for a traveling man to pass one or two samples of apparently insignificant value or importance through the custom houses of the various countries he visits without trouble or expense. If, however, he has with him a sufficient quantity of samples to be noticeable, then he will find in each and every instance that he must make some arrangements with the several custom houses for the duties which will be assessed on these samples. Of course, this applies to samples which have any value whatsoever. Possibly small cuttings of cotton textiles, for example, if not of sufficient size to have any marketable value, even the smallest, might be exempt, but even this would be doubtful in many coun- tries. As has already been suggested, the traveling man should be provided with accurate invoices covering all the samples in his collection with exact weights and any other details that will be of assistance in facilitating custom house operations. Pos- sibly in some instances he might be able to pass samples on such statements without actually undergoing an examination. In- 192 PRACTICAL EXPORTING voices, when carried, should be so arranged that specimen sam- ples picked out at random by custom house officials as a test can be immediately identified from the invoice. Duties, when assessed, as they will almost invariably be, must be paid in cash, or a bond may be arranged to cover the amount of duties pending re-export from the country when the traveling man leaves for fresh fields. Again, duties paid in cash may be refunded in many countries, in whole or less a small discount, when the traveler takes the goods away with him. Such ar- rangements, however, almost always involve the mutilation of the samples, either with the express purpose of preventing their sale, or with the nominal purpose of identifying them for ex- amination when refund of duties is claimed. Holes may be punched in them, seals affixed, rubber stamps impressed, and the traveler who attempts thus to get back the money paid for duties in several countries is apt to wind up with a lot of sam- ples curiously decorated which are no longer most effective as tools for getting orders. How Duties May Be Recouped. — When an effort is decided upon to obtain the refund of duties paid on samples, suitable certificates will, of course, be demanded in the first instance, which must be surrendered when the goods are re-exported. Notice in advance of date of re-exportation must be given and possibly two or three days wasted on this account. Similar de- lay and annoyance may be involved in case it is desired to have a bond covering the duties canceled. On this and on other ac- counts many foreign traveling men prefer simply to pay the duties that are demanded and forget all about them. Others, however, plan to sell their samples in each market they visit, having fresh assortments sent in advance to each new suc- ceeding market which it is planned to visit. Thus, the travel- ing man taking his samples into Brazil will pay duties in the usual course, use the samples for soliciting orders and, when he is finished with the Brazilian market, dispose of them for the best prices he can obtain and go on unincumbered to Argentina, perhaps, where he will find awaiting him a shipment of duplicate samples from his factory. In Argentina a similar course will be pursued as in any other markets afterAvard to be drummed. Obviously, careful calculation must be made by the factory in TRAVELING SALESMEN ABROAD 193 order to ensure getting fresh supplies of samples into the sales- man's hands at about the time that he expects to arrive in each new market. A delay of two or three weeks while the salesman is awaiting samples, or clearing them at custom house, may be rather expensive. On the other hand, if the samples are sent far in advance there may be considerable charges for storage ac- cumulating. In every such case care must, of course, be taken that the traveling man be put in possession of bills of lading, invoices and other documents necessary to enable him promptly to get possession of the goods and have them cleared through the custom house. SALESMEN'S LICENSES In visiting a good many foreign countries the inexperienced traveler will be unpleasantly surprised, if he has not prepared himself in advance, at being confronted with the requirement of securing a license before he is permitted to do business. He will be even more annoyed in some countries by the amount of the fee demanded of him for the privilege of soliciting orders. The principle involved in the requirement for licenses is, nomi- nally, the protection of local salesmen. They are supposed to be primarily intended to apply to the non-resident traveler who expects to solicit business in competition with local agents, that is, from the small retail trade or as house-to-house peddlers. What Are Licenses? — Licenses are not intended in principle to apply to the foreign traveling man who comes to introduce foreign made goods to wholesale houses and thus stimulate the business of such local merchants and their native representa- tives. At least, the foreign traveling man may thus argue to himself in his effort to escape the necessity of paying a lot of money for the licenses that are demanded. Such licenses are the rule rather than the exception in all European countries but almost always apply to the house-to-house peddler only and rarely is any effort made to impose them on the foreign com- mercial traveler of the description we are now contemplating. Where Licenses Are Necessary. — The very real necessity for meeting license requirements cannot be avoided, however, when the salesmen visit South Africa, New Zealand,^ and almost every 1 In New Zealand a traveling salesman must deposit £10 on arrival as 194 PRACTICAL EXPORTING Latin American republic. The only countries in all Latin America where no taxes are imposed on commercial travelers are Cuba, Honduras, Nicaragua and Venezuela. The head of a house or a partner in an establishment going to a foreign market only to visit one or two established customers may in some in- stances be classified as a commercial traveler and may run the risk of a fine if it is discovered that he does not possess the neces- sary license. Costs may range as high as several thousand dollars in covering the different states and municipalities of a single country. Clearly enough, therefore, this expense is to be avoided if in any honorable way possible. To Pay or not to Pay. — Usually the foreign traveling sales- man does not expect to carry on a house-to-house canvass in the market which he is visiting and hence is justified in feeling that he is not properly subject to the license tax. Unless, however, he has made adequate arrangements for evading this liability he may find himself in no end of trouble. Fines which are im- posed upon detection of efforts to dodge these taxes are often very severe in some countries, particularly in Latin America. Half or more of the fine that is imposed is given as a reward to informers. Instances have been known where a customer, after placing a legitimate order with a salesman, has then proceeded to the police and laid information against the salesman. In some South American countries spies are common among por- ters and loafers around hotels. The traveling man who arrives with a large collection of sam- ples in a country where licenses are reciuired, is identified as a salesman by the very existence of those samples. It may happen in some eases that the traveling man will believe it desirable to secure local licenses in every market he visits, either because of the nature of the business which he expects to do, or because it is only by thus establishing his identity that he obtains a legal standing in court and can in consequence enforce the fulfilment of contracts or the payment of indebtedness by process of law. In by far the greater number of cases, however, it is the sales- man's effort to escape the payment of this sort of taxes. guaranty for payment of revenue tax on profits. When lie leaves the Do- minion ho may render an accoimt of sales and i)rofits or commissions and any balance due him will be refunded, or additional tax levied. TRAVELING SALESMEN ABROAD 195 How to Escape Licenses.-»-Usually this is accomplished by working in conjunction with some well established local house which has already secured the licenses under which its repre- sentatives work in the local markets. If the traveler who visits a market for the first time has no established customers there, or no customers occupying the position of agents or wholesalers, then the question arises as to what connections he can make of the proper description which will give him the necessary pro- tection. Here is one advantage in the right sort of letters of introduction which the traveling man may carry with him. In- fluential letters to well known and thoroughly well-established agents or merchants will be exceedingly helpful on his first arrival, even if after discussion of business it is mutually deter- mined that permanent business relations shall not follow. In these cases the visiting salesman is technically regarded as an employee of the local firm with which he is working and is thus exempt from taxation. Some traveling men, preferring not to be betrayed by a sample collection, ship their trunks as freight under regular bill of lad- ing by the same steamers by which they themselves travel as ordinary tourists. On arrival at port of destination the samples are left in the custom house along with the other cargo of the vessel until the market has been looked over and at least tenta- tive arrangements made with a seemingly desirable connection for the development together of local opportunities, always of course under licenses in the possession of such local connections. In some Latin American countries this may involve costly de- lay. Samples thus shipped as freight may be consigned simply "to order" and the bill of lading carried by the salesman, or they may be shipped to some reliable custom house agent who will take ctire of them and look after the necessary formalities while the salesman himself is making arrangements for repre- sentation. ]\Iany salesmen, however, pay no attention to diffi- culties that may follow, take their samples along as personal bag- gage and simply leave them in the custom house while they pro- ceed at their leisure to make their local arrangements. Actual experience can only determine what is each salesman's best policy. CHAPTER VII ADVERTISING TO GET EXPORT TRADE The Modern Export Trade Paper and Its Service Department — Smidry Export Advertising Propositions and Special Export Editions — Local Advertising in Foreign Markets — The Best Copy for Export Announcements — Advertising for General Publicity and Prestige Abroad — Results from Export Adver- tising — Comment and Advice as to Export Catalogues. PRINCIPLES of the desirability and value of advertising are too well established in the United States to require discussion. The man interested in foreign markets will do well, however, to note the fact that it is our American prac- tices which set the pace in every other land. It is American example and American technique in advertising which are looked up to in foreign countries. It is our models which are admired and accepted by all the world. Advertising to get ex- port trade differs from no other in the general acceptance of the principles involved. As a writer dealing with export advertis- ing in ' ' Office Appliances ' ' expressed it not long ago : ' ' This is practically the only method for reaching the foreign buyer direct at relatively small expense and it has been the means by which nearly every American manufacturer now exporting on a large scale made his first beginning. A few houses have occa- sionally advertised in foreign class publications with benefit, but the great majority employ one or all of the export journals pub- lished in the United States." Of all the means available for carrying the manufacturer's message to foreign prospects, it is the export trade paper, therefore, which requires our first con- sideration. ADVERTISING IN THE EXPORT TRADE PAPER The export trade paper is by no means a new thing or an American idea. Similar media exist and are favorite forms of 196 ADVERTISING TO GET EXPORT TRADE 197 advertising in most of the European manufacturing countries. They have existed in the United States for forty years and more and there is no mean number of American manufacturers who have used their columns for publicity purposes continuously for from ten to thirty years past. Although similar papers exist in Europe, yet nowhere else has this kind of publication been developed as in the United States. What Is the Export Trade Paper? — Popularly classed to- gether, there is a variety of publications listed under this head which ought to be distinguished in the minds of intending ad- vertisers. There is the trade paper appealing to importers and merchants dealing in foreign goods in other countries, and there are class and popular journals. Take as examples of the latter : papers devoted to agriculture; to women's interests and to the home ; to general news ; and add the house organs of some Amer- ican export commission houses. The man studying this ques- tion, even if he cannot understand the languages in which some of these papers are printed, can form an adequate idea of their province and of the fields covered by a consideration of the character of articles and illustrations which are published. Such a consideration ought to dictate the class of advertise- ments or the kind of copy which legitimately should be carried by a particular journal. Intended Exclusively for Foreign Readers. — All of the pa- pers in question are, or should be, solely intended for foreign circulation, not for circulation in the United States. None of them have any considerable number of paid subscribers in this countr}' ; none of them have any sale on the news stands ; most of them are known to American manufacturers chiefly through appeals for advertising. It may very likely be largely due to this fact that, in years gone by, a certain suspicion was gen- erally prevalent as to the genuine character even of the best of the trade papers devoted to building up American export busi- ness. Doubtless the last remnants of such suspicion were long ago outlived. In any case, the modern export trade paper is a thing apart from well-known trade papers which rank as authorities in their several branches of industry in the United States. Even when published in the English language it contains, or need contain, 198 PRACTICAL EXPORTING nothing of special interest to Americans. Its purpose is an appeal to buyers of American goods in foreign countries. There may be a section which is not included in copies of the paper sent to foreign countries but is intended for the advice, criti- cism, information, and general help of American manufacturers who are interested in the export trade. This is in the nature of a supplement and does not enter into the foreign advertising problem. The influence and the power of the export trade paper as an advertising medium lies in its circulation among buyers of goods in foreign countries. The export trade paper may be published only in the Spanish language; or in English and Spanish, in separate editions; with editions in Spanish and in Portuguese ; or, in the case of the American Exporter, with separate editions in English, Spanish, French and Portuguese. Character and Appeal. — The function of the American ex- port trade journal is to promote the interests of American exporting manufacturers and merchants of all trades. Editori- ally it is designed to place before importers and business houses in all parts of the world not only American novelties and im- provements in goods, machinery and processes, but also develop- ments and progress in American commercial practice and American life generally, in their true and best aspects. To an appreciable extent the export paper has also a National as well as International duty to perform, correcting false impressions abroad as to American policies and politics, too frequently in- spired by brief and sensational press cablegrams. How impor- tant a service this may be will be realized from a consideration of problems presented by the American attitude toward Mexico, Haiti, Santo Domingo and many growing out of the European War. It follows as a matter of course that such a paper is general in character, having a broader appeal than a trade journal de- voted exclusively to one branch of industry. From the adver- tising standpoint manufacturers use it to reach directly the attention of importers and large buyers of American goods in foreign markets. This class includes not only those houses which are called "general importers" but also large retailers and even some im- ADVERTISING TO GET EXPORT TRADE 199 portant consumers such as railways, mines, plantations, indus- trial and construction companies — who may buy for themselves or in any case exercise a pronounced influence on the buying of goods from this country. General importers in many markets play a relatively more important part in trade distribution than do jobbers in this country. This happens because, among other reasons, many re- tailers are not familiar with and prefer to avoid the technicali- ties of import procedure, the intricate diplomacy sometimes necessary in getting goods through the customs, the problems of ocean freights and foreign currencies, exchange, finance, etc. Again, in some countries the whole trade of the interior is vir- tually in the hands of general importers or wholesale dealers at the principal ports of entry because of inadequate, slow or costly means of communication and because of credit terms locally de- manded by country merchants. But the general importer or wholesale merchant is not the whole story. He may buy certain goods and carry large stocks of them ; at the same time he is constantly executing ' ' indents for his retail and large consumer customers, i.e., he is ready at any time to import any goods whatever which his customers may desire and for which they will give him an import order (then called an "indent") whether or not he, the importer, ever before dealt in those or similar goods. The necessity for the general character as well as distribution of the export paper follows. Even though the advice given by the paper to its advertisers may be to restrict their direct business, as a rule, to the larger houses, the importers and wholesalers, yet the buying of those houses will be perceptibly influenced both by their own reading of export- ers' announcements and by demands made on them, provoked by the same cause, by retailers and large consumers like indus- trial companies and contractors. The importance of those large houses, which are in a general way called "General Importers," is not always appreciated. As an illustration, take the most prominent and the richest im- porting house in the principal market of all Latin America. The house in question imports, annually, millions of dollars' worth of such diverse articles among others as lumber, agricul- tural machinery, gasoline engines, cement and building mate- 200 PRACTICAL EXPORTING rials, cutlery, hardware, carriages, wagons, saddlery, office desks, paper and stationery. Obviously, therefore, the export trade paper devoted to all sorts of American goods which may find profitable markets in foreign countries plays an important part in trade development. Appeal of American Novelties. — There is another reason for the appeal which the American export trade paper undoubtedly makes, and that is the continuing novelty of American goods in all parts of the world. In the experience of any man who has ever traveled widely in foreign countries, he has encountered, times without number, the buyer who asks, "What is there new in America? Can't you tell us about some novelty?" Because all the world has for years looked to the United States as the source of novelties, because all the world thoroughly understands that our present position in commerce is due to the inventiveness of the American mind, to our progressiveness and our adapt- ability and versatility, it is on these accounts that every scrap of information about new American goods is at least eagerly scrutinized by shrewd foreign buyers on the keen lookout for new opportunities and new ways of making money. 'This state- ment indicates some of the advantages of a general trade paper in foreign markets, for many an old merchant is quite willing to add a new line to his established business if he can find one that promises exceptional profit. It explains, also, why the export trade paper brings actual return to advertisers, which are unknown and which cannot be expected from trade papers here at home. And here may be once more repeated — features of novelty and originality can be attached to any line. The Service Offered by the Export Paper. — The service fea- ture to advertisers, included now by many publications of all sorts, has beyond any question been elaborated by the modern export trade paper to a degree unknown in other directions. It is the aim of that paper to offer every form of desirable assist- ance to its advertising clients, in some departments without charge, in others at first cost. The service offered to ad- vertising exporters includes the translation, from and into any of the usual languages of the world of correspondence arising out of their advertising. It includes, also, trade lists of selected names of buyers in any desired branch of industry in ADVERTISING TO GET EXPORT TRADE 201 y't}^ principal commercial centers in any country of the world; /also the giving of status reports, i.e., financial ratings, on for- \' eign concerns with whom prospects of business develop. In ad- (iition general advice and assistance is available regarding satis- factory ways of promoting, developing, and carrying on an ex- port trade, by members of the staff of such a paper who have had considerable personal experience in exporting and in traveling and doing business in foreign markets. The exporter is thus enabled to conduct his correspondence with his foreign prospects and customers in the language pre- ferred by them. He can learn who and what they are, their commercial character, local and general trade reputation and financial ability. He secures mailing lists not only, but is as- sisted in arriving at an intelligent idea of conditions in any given line of trade in the principal foreign markets. It is e^vi- dent, therefore, that patronage of the columns of the export trade press means a good deal more than mere publicity. Short-Time Advertising Useless. — Effects of export advertis- ing are cumulative, just as are the eft'ects of any advertising. In the export field, however, it is especially useless to contem- plate a mere experiment for a short time ; for example, for one month or three months. In view of the long range of a cam- paign for business with foreign countries it is quite impossible to judge of the actual effect of publicity of this sort in the course of three or four months only. As has already been pointed out, no replies, even from the most pointed sort of per- sonal correspondence, can be expected from such important markets as the Argentine Republic and Australia within three months' time. The first reading of an export advertisement is no more certain to bring a reply than in the home trade. The manufacturer, therefore, who contemplates an advertising cam- paign as, an adjunct to his efforts to establish his goods profitably in foreign fields, should plan for an experiment of not less than one year and preferably for two years as a minimum. The export trade paper is clearly and for sundry reasons to be con- sidered as an advertising medium on an entirely different basis from a purely domestic trade paper. Moreover, results in the way of actual orders are not to be gauged from returns of a month or three months. Enquiries must be developed into orders. 202 PRACTICAL EXPORTING EXPORT ADVERTISING SCHEMES Because export trade is still so new to many American manu- facturers who may think of advertising for that trade, alluring prospects held out in glittering and tempting fashion by all sorts of schemers continue now, as for twenty years past, to prosper more or less. In no other field of advertising is a more careful analysis of claims, experience, records, ability and re- sponsibility necessary. No other field, perhaps, has been so often and so successfully cultivated by the faker. W. F. Wyman, Export Manager of Carter's Ink, says: "The same brand of domestic common sense that protects the cash box against 'blue sky' advertising projects at home must be on guard against similar schemes to secure foreign sales by mystic methods. ' ' House Organs. — The house organs, only a few in number, maintained usually by American export commission houses, are not often, if ever, to be classed as export trade papers or, in- deed, as general advertising media. They are issued primarily as advertisements of their publishers — the export commission -houses. In a succeeding chapter we shall examine the province and operations of the export commission house. From that study it will become apparent that publications, issued by such houses, no matter if they appear in the guise of a trade paper, appeal chiefly if not solely to the special foreign clients of the house issuing the organ. It will be quite clear after a little study that the goods advertised in such an organ are likely to be thought, by any merchant into whose hands a copy of it may fall, to be agencies controlled by the American house issuing the organ. It may often happen, on this account, that such adver- tisements may be an actual handicap to the extension of foreign sales, because any but the regular clients of the publishers, who are not primarilj- publishers but are merchants, may prefer to do their American buying through other export commission houses, and not through that house which seems to be advertis- ing certain goods as its agencies. It may even be thought that the goods thus advertised are not available through any other source whatsoever. ADVERTISING TO GET EXPORT TRADE 203 Unfortunately for all concerned, for the publishers of such periodicals as well as for other publishers and not infrequently for the advertisers themselves in these house organs, the history of this sort of export advertising has, in the past, been disfigured by practices that have savored of "graft," not to put too fine a point on it. Very likely such practices may not, of late, be known or at least favored, but in years gone by some of these export hoiLses have actually threatened to boycott manufactur- ers who declined to place advertising in their house organs, while it has rather frequently happened that advertising contracts have been solicited on the basis of actual orders to be placed with manufacturers, which orders have been at the time repos- ing in the solicitor's pocket, received by the export house without special effort from some client abroad who had otherwise learned of the goods in question. On the other hand, the promised orders have sometimes failed to materialize. A good many manufacturers regard advertising in these house organs not as desirable publicity in itself, but as a gift or contri- bution on their part to secure the good will of the buyers of these houses. The policy of a manufacturer in this regard must, of course, be dictated by himself and governed by circumstances in each case. Evidently, however, such advertising differs rad- icall}' from that in the legitimate export trade paper whose publishers have no outside interests. Export Editions. — The "Special Export Edition" is by no means a modern development. We have always had them with us. The advertising managers of all sorts of domestic publica- tions have occasionally, especially in a dull season, been inspired by the brilliant idea of adding to their revenues by making a special appeal to advertisers on the basis of an "Export Edi- tion," which, now and then, has actually been produced, partlj' or in whole, in one or in several foreign languages, or attempts at such languages. This practice has characterized domestic trade papers, even daily newspapers and popular monthly magazines. Such editions are regarded by most shrewd and experienced ad- vertisers as pure speculations. Actual experience in such ad- vertising has almost without exception resulted unfavorably when returns have been carefully traced. Costs for such ad- 204 PRACTICAL EXP'ORTING vertising are usually excessive. Publishers of these special edi- tions, having no personal knowledge of foreign markets or the personnel of such markets, seldom know how to distribute their editions intelligently, or have any means, on which they can depend, of securing the right sort of addresses to which to mail copies. More than a few instances are known when a considerable part of a large circulation which has been prom- ised has remained undistributed in the printer's warehouse, ultimately to be sold as old paper. Most publishers attempting these special editions seem to rely chiefly for their patronage on their regular advertisers and the prestige maintained with them on account of their undoubted value and high position as domestic media. Whatever else may be said of the special edition scheme, it also is not ■^o be confounded with a carefully planned, logical, consistent advertising campaign through the reputable export trade press. ForeigTi Directories. — Now and then, indeed with more or less regularity, American exporters are approached by publish- ers of directories of one sort or another. Sometimes it is a local directory published in some foreign country. Sometimes it is a directory of American manufacturers to be published here and distributed abroad. Opinions differ widely as to the advantage of directory pub- licity here at home, in the United States. Certainly local direc- tories in foreign countries are subject to more than the common criticism, because they are never so well done as ours, announce- ments are never so well displayed, the directories themselves are never so generally used, as in this country. If any argument on the latter point is needed, it may be borne out to some extent by the fact that a good many important foreign cities boast of no directories whatsoever. Certainly it is a fact within the experi- ence of any one who has traveled widely abroad that any of these local directories have nothing like the circulation, i.e., general use, which similar publications in cities of the United States can claim. Directories of American Manufacturers. — Periodically, there appear in this country, propositions for the publication of direc- tories of American manufacturers, usually more or less elabo- ADVERTISING TO GET EXPORT TRADE 205 rately classified by trades, which are to be distributed in foreign countries for the use of importers who are supposed not to know where to buy goods of American origin in special lines in which they may be interested. On its face, such a project has much to commend it. How does it happen that the promoters and publishers of one such directory seldom bring out another? From their standpoint the explanation is undoubtedly the great expense involved in promotion, preparation and circulation. The compilation of any such directory that will even make a pretense of passing casual inspection as half complete or reliable is a Herculean, practically an impossible task. If the ''^classified lists" are not comprehensive, not to say even fairly complete, the}" are almost if not quite useless — and lists never are or can be full, nor can listing be exact of the endless variety of goods made by thou- sands of concerns. Accordingly not only are publishers of these directories discouraged, but foreign buyers who may have wel- comed them at first are disappointed after one or two experi- ments with them and cast them forth to the dust heap. As an advertising medium for an American manufacturer such a directory has only transient value as a rvile and is, more- over, open to this objection — there is no opportunity for change of copy; an announcement becomes little more than a business card. Consular Indices. — Another variation of the "directory" scheme is sometimes presented in the form of a proposition to list the manufacturer's goods with all American Consulates throughout the world, possibly indexing the goods made under appropriate trade headings. It may be observed that there are only, in round numbers, three hundred American consular offices throughout the world. It requires, therefore, no great expense or effort on the part of a manufacturer to bring his goods di- rectly to the attention of each one of these consular offices, and probably more forcibly and emphatically through a personal letter than in any other fashion. Not only is tlie direct effort in this case usually cheaper and more effective, if properly done, but experience in the past with consular files or indexes some- times proposed has proven that, because the idea involved in a truly tremendous undertaking has never been fully carried out 206 PRACTICAL EXPORTING and because no attention whatever has been paid to keeping them up to date, they have promptly fallen into innocuous desue- tude, and the furniture has been relegated to the garret. It will be acknowledged that any form of publicity is good. The question as to the worth of advertising of the several forms just described is one primarily of good faith on the part of the schemers and of their ability to carry out honestly their pro- posals; next it is a question of the real value of such publicity as compared with the charges demanded. LOCAL ADVERTISING IN FOREIGN FIELDS There is no lack of means of advertising goods locally in every country of the world, but the character and value of these means vary as night from day. The crowd of export advisers who have recently sprung up in the United States very commonly urge the necessity of local advertising by American manufacturers who are desirous of selling their wares in foreign markets. Such advice, however, is chiefly marked by glittering generalities, seldom backed by convincing arguments or distinguished by clear reasoning. The utter absurdity of advertising goods locally until the goods themselves are on the market and available to buyers, that is, to local consumers, must be clear after a moment's thought. The would-be exporter's first effort obviously must be to get his goods introduced among the merchants in a foreign market ; to have stocks of his goods on hand for the supply of any demand that may be created by local advertising on his own part or by his local agents. Until this has been accomplished, advertising in any local manner must evidently be a sheer waste of money. On the other hand, advertising locally for the sake of obtain- ing a local agent can only be regarded as the limit of extrava- gance. To promote consumer sales after means of distribution have been secured, all sorts of local pul)licity within the means of those interested are most assuredly to be recommended. Many American manufacturers of goods most susceptible to such means of increasing sales, are already to be numbered among the steadiest patrons of foreign advertising media. For example, ADVERTISING TO GET EXPORT TRADE 207 makers of proprietary medicines, soaps, etc. What are the foreign advertising media which are available? European Export Trade Papers. — As in the United States, there are export trade papers in other manufacturing coun- tries. None of these foreign papers, however, approximate the American in their make-up, their attractiveness, and hence, it may safely be argued, in the effectiveness of their appeal. There are one or two good British export papers of general character. There are several other British publications devoted exclusively to special foreign markets. It will be noted from an examination of any of these publications that their tone is distinctly, sometimes (to an American) unpleasantly, Brit- ish and furthermore that the editorial matter published is aimed largel}^ at the British manufacturer and exporter and not at the buyer in foreign lands, indicating, perhaps, that the circulation, intended or actual, is at home in the United King- dom rather than abroad among foreign buyers of English goods. Few of them appear in any other than the English language. There have been one or two export trade papers in Ger- many and, in at least one case, editions were published in other languages. These German publications were rather cheap affairs, from the American point of view. There have been a large number of French papers devoted to French colonial and general export trade, but they are of entirely different character from the American, British or Ger- man. Most of them appear in newspaper form. Few of these journals claim any foreign circulation. There have existed also Belgian, Dutch, Danish, Austrian and Spanish papers devoted to the expansion of the national trade of these several countries in foreign markets. None of them ever have been or ever need be seriously considered by American advertisers, although one or two are journals of high character editorially. The evident undesirability of advertis- ing American goods in the columns of any foreign export trade medium, of no matter what nationality, side by side with the native goods, on which naturally the chief emphasis of the whole publication is laid, would seem to require no argument. Foreign Trade and Class Publications. — Trade papers ?.v} even class publications in other countries are seldom of '/.; 208 PRACTICAL EXPORTING character and caliber of our own. Moreover, their numbers are limited. In all Latin America, for example, there are only two or three trade papers which we should be willing to recognize as answering that description in any degree. If there are certain high class engineering journals in Europe, it can- not be said that there is a large agricultural implement press worthy the name. There may be a good hardware trade paper in one countrj^ but no trade publication devoted to shoes or furniture. There are many automobile papers in many differ- ent lands, but few are trade papers; many are for "user" circulation and in some countries devoted incidentally, if not primarily, to sport in general. One may be able to pick out a trade paper in some particular country which may be desirable for a special purpose, but this is a question of a single medium, not one of general policy. Foreign Dailies, Weeklies and Monthlies. — While there are some great daily newspapers published in foreign countries which have a wide circulation, even over a whole continent, yet there is the greatest imaginable variation in the circulation and influence of the many papers of this description every- where. Few such journals in Latin America have any char- acter or influence worth speaking of. In any event, use of their columns for advertising purposes is to be regarded as a means for consumer publicity. In almost all countries, there are many society and humorous weeklies, naturally of varying attractiveness, although some of them have an enormous and widespread circulation. In Europe there are, as every one knows, many monthh' magazines of varied characteristics. Some of them certainly compare rather favorably with our similar American publications. Speaking on "Foreign Advertising Media" before the Sixth National Foreign Trade Convention, Chicago, 1919, Howard G. Winne, Manager, Johnston Overseas Service, enumerated by name some of the principal papers, dailies, weeklies and monthlies, in many of the principal countries of the world. Purely by way of hints as to media which are to be recom- mended the following extracts from his address may be quoted: "In Argentina there is a greater variety of worth-while pub- lications than in any other Latin American country. In ADVERTISING TO GET EXPORT TRADE 200 Buenos Aires we have powerful dailies such as La Frensa, La Nacion, and La Razon in Spanish, and other dailies published in English, French and Italian, which serve their purpose as a medium to reach the cosmopolitan population. "In the magazine field of Argentina, observe the popular high-class weekly, Caras y Caretas, with a circulation spread- ing up and down the coast and extending to the remote in- terior. It is essentially a satirical, non-partisan weekly review. "As a vehicle to reach the best classes of society, Plus Ultra admirably meets the demand. This super-artistic monthly pre- sents an excellent proof that South Americans fully under- stand the art of printing. Printed in colors, on coated stock, with embossed covers, tissue protected — this review equals, if not exceeds in beauty of typography and art, anything that is published in the United States. "Australasia has its full share of reliable media. As a chan- nel through which to present a daily message, we have the Melhourne Herald, Melhourne Age, Sydney Morning Herald, Brisbane Courier, Wellington Post, The Press, of Christchurch, N. Z., etc. "Dominating and important weeklies have more of a na- tional circulation, extending through the whole country. In this class can be placed the Sydney Bulletin, The Australasian, and others. "Standing out prominently among the trade papers of that section are such reviews as Australasian Hardware & Machinery, Chemist tt Druggist of Australasia, Chemical Engineering & Mining Review, Australasian Leather Trades Review and sub- stantial motor trade papers." Other Local Advertising Media. — Every known form of ad- vertising is available in other countries as in the United States. We can claim no monopoly of ingenious advertising ideas, al- though our inventions and adaptations have set the pace for the whole world. In every country there are bill-boards that can be used and street cars and omnibuses which carry ad- vertising cards. There are spaces for advertising in the rail- road stations. Electric signs and flashers make "Great White Ways" in other cities besides those of the United States. Even the movies are used for advertising* in many a foreign country. 210 PRACTICAL EXPORTING All of these advertising- adjuncts are good and desirable when they do not cost too much, but they should be employed only by and with the advice of competent advertising agents. Local Advertising Secondary, not Primary. — It has already been said that an effort to get goods widely used in a cerlaai locality through local advertising there, before the goods tl.e..i- selves are on the market, is an obvious absurdity. On the otlicr hand, to increase the demand for goods, to get more retail arid hence wholesale trade through the influence of consumer de- mand, local advertising is b}^ all means to be commended. When stocks of goods are available in a given market, wlicn the man in the street who wants to buy an advertised article can buy it, then, but not until then, it is time to begin to think about plans for further developing that market, for increasing dealers' trade through demand, for riveting fame of maker or brand. Consumer publicity is, as hundreds of American manufac- turers are beginning to realize, a highly desirable, in fact, necessary adjunct to the building up of the greatest possible foreign demand for American goods. In this regard, F. B. Amos, formerly foreign advertising manager of the Studebaker Corporation, remarked at the St. Louis convention of the As- sociated Advertising Clubs of the World: ''American manufac- turers are slowly but surely realizing that when they have sold goods to merchants abroad they have only taken the first step in building up a permanent business. The merchandise must be moved rapidly off the counters and floors of our foreign dis- tributors, just as it must in this country, and as local newspaper and magazine advertising in the United States assists in the rapid movement of merchandise, so the same kind of advertising abroad, properly conducted, produces satisfactory results. The use of local foreign mediums therefore is essential to the proper development and securing of increase in profits from American export business." Advertising Rates and Agencies. — The situation in foreign countries as to advertising rates in local media has, until very re- cently at any rate, been comparable to the condition in this country twenty-five years ago. While formerly rates were as flexible as a rubber band, they are now being rapidly stabilized, ADVERTISING TO GET EXPORT TRADE 211 at least in. the countries of greater development. A reliable for- eign advertising agency in the United States has facilities for learning what are the lowest rates consistent with the best serv- ice and about those publications which are really worth while and which adhere closely to their published rates. Through using such a service a manufacturer is thoroughly protected in this regard. To get real facts a busy export manager needs the same type of advertising assistance and counsel as do his domestic co-workers in their field. A distinction must be drawn between the foreign advertising agency, operating on behalf and in the service of American advertisers, and the publishers' represen- tative, sometimes an American concern representing a number of forign advertising media, sometimes the office in this country of a single important foreign medium. The latter are primarily interested in the publications which they represent. Complex Conditions in Foreign Advertising Campaigns. — To quote again from the address of Frank B. Amos before the Associated Advertising Clubs of the World: "One condition that makes foreign advertising more complex than domestic is the fact that the publications to be used are so far distant from the manufacturer and his advertising organization. When I was foreign advertising manager of the Studebaker Corpora- tion, Automobile Division, I learned that my campaigns had to be planned and prepared long before the advertising could ap- pear; that unless great foresight was used, entirely different conditions might exist when the printed arguments were read than were in the mind of the writer some three or four months before, when he prepared his copy. ' ' Our successful American manufacturers and advertising men have become so accustomed to the high grade service, and quick action given by domestic publishers that they chafe at the delays and handicaps incident to dealing with publishers many thou- sands of miles distant. An exchange of letter correspondence with a majority of these publishers requires from six weeks' to three months' time. Cable correspondence is too expensive ex- cept in great emergencies. "In a foreign newspaper campaign every possible detail must be planned in advance. The production situation at the factory for several months to come should be known. Local trade con- 212 PRACTICAL EXPORTING ditions in each country should be understood. The customs of the country, the types of people and their purchasing power should be considered." Cooperation with Foreign Dealers. — It sometimes seems to American manufacturers that the logical as well as the easy plan for them to follow in attempting to carry out local consumer ad- vertising is some form of cooperation with their local dealer, dis- tributor or agent. This may have been true in the past in the absence of any better means of controlling foreign publicity, that is, before there existed in the United States advertising services especially devoted to the placing and handling of for- eign publicity. It will be found, however, that nowadays manu- facturers who once arranged for local advertising in foreign markets with their local dealers on the ground have now given up that idea and they must have had good reasons for so doing. Very few dealers, indeed, in any countries are advertising men, certainly not advertising experts. As a rule their advertising methods are crude. If allowed by themselves to handle adver- tising for American manufacturers or merchants, with but few exceptions such expenditures will be waste investments. The dealer's cooperation is desirable. His enthusiasm should be de- veloped. Any prejudice he may have against control of adver- tising in his field by the manufacturer should be and can be over- come by careful, diplomatic correspondence and logical reason- ing. The right kind of an advertising organization in this coun- try, which thoroughly understands this dealer problem, can greatly assist any manufacturer in bringing about a satisfactory^ combination of cooperation on the part of the dealer with the manufacturer's plans and policies and the agency's counsel and service. To assure the same high grade of advertising publicity in all foreign fields, its general outline must be determined at the American factory with a full knowledge, of course, of the dealer situation and evers^thing that enters into it, and the cam- paign should be conducted according to the ideas of the factory with as little deviation as possible. All this means that the men at the factory should avail themselves of the necessary in- formation and service in order to be sure that they understand what they are planning and putting into execution. ADVERTISING TO GET EXPORT TRADE 213 EFFECTIVE EXPORT ADVERTISING COPY The purpose of one's first advertising may be general pub- licity or to establish agents or wholesale distributors in desirable foreign fields. In either case, it must be assumed that the American export trade paper will be regarded as the best, or at least the first, means to be employed. Possibly nine out of every ten advertisers want "results." It is not to be forgotten that all any advertising medium can accomplish is to bring the advertiser's copy to the attention of prospects. Results from advertising, foreign as well as domestic, must primarily depend on the copy, so far as inquiries go. Actual business, from for- eign markets, at least, will almost invariably depend on suc- ceeding correspondence with prospects thus discovered. The duty of the advertising medium is finished when the display and circulation promised have been given. The extraordinary variety and extent of the "service" offered by the American ex- port trade paper of to-day is really a free gift on its part. It is a thing aside and apart from the advertising itself. The re- sponsibility for actual results from advertising remains, in any case, with the advertiser and with no one else. To Stimulate Inquiries. — In the words of A. E. Ashburner, Manager of the Foreign Sales Department, American Multi- graph Sales Co. : "I don 't care in what form it is, advertising is primarily for the purpose of ascertaining who is interested in your goods. In other words, inquiries. Ones that come from good live prospects, too. Inquiries will do no one any good unless he has an organization back of him that can develop these inquiries. Too many concerns advertise and trust to the Al- mighty for results. Advertising is merely a means to an end in getting acquainted with a man and teaching him about your product. It is just the same in Kankakee as it is in Vladivo- stok." If, in the great majority of cases, it is the desire of the adver- tiser who seeks first to introduce his goods abroad, to stimulate inquiries from possible buyers in foreign markets, then it is evi- dent that the great thing in his advertising copy must be a catch line of some sort to attract the attention of the kind of buyer 214 PRACTICAL EXPORTING wanted. Here, again, it is not to be forgotten that American slang expressions are not catchy because, in most cases, they will be unintelligible to foreign readers. To gain attention, we have to remember that it is the article advertised which is important, not so much the name and address of the maker. If the pros- pect has an interest in the goods advertised, he will dig out the address to which he must write about them. An illustration of the article advertised will often help materially in attracting to the announcement the attention of buyers interested in a par- ticular branch of trade. The illustration should show the arti- cle itself, not something else. If the article is only a part, then the cut should not show the whole unless the advertiser sells the whole. On the other hand, a cut of a part may be blind and meaningless, at least to a foreigner, unless it is shown mounted, or in connection with a whole. In such a case the cut may be so made as to show clearly just what it is which the advertiser is offering for sale. Having attracted the attention of the buyer, and we should take care that we look for a buyer in the branch of trade which we seek to cultivate, we have to rivet that attention by the story of the goods to which it is directed. Proper display is therefore essential. The prospect's atten- tion should not be distracted by a great quantity of copy, and plenty of white space should be arranged, in order that the striking features of the announcement may make a quick and effective impression. Since we are now considering an export announcement as an effort to create inquiries from possible buy- ers in other countries, it would seem to follow that no object is to be gained by going into great detail regardnig the goods advertised. It is impossible to tell the whole story about any article in the usual space employed by advertisers. Usually it is not desirable to tell more than enough to stimulate the curi- osity of the prospect and impel him to write for fuller details. Hence, the advertiser's shrewdness and ability is called into play to select those few phrases or sentences which will be most effective, and which the space at his disposal enables him to use in striking form. Technical Copy. — Never ought highly technical copy to be ADVERTISING TO GET EXPORT TRADE 215 used in export advertising. The kind of copy which may per- haps be suitable as an appeal to trade here at home in the columns of the Icemakers' Gazette is nine times out of ten utterly unsuitable as an appeal to importers in other countries. Many American manufacturing processes, probably the greater part of our highly specialized machinery, are not known, certainly are not fully understood, in other countries. Technicalities which are the every-day language of a trade here in the United States are an unknown tongue even to English-speaking foreigners. No manufacturer of mechanical appliances should contemplate transferring bodily his announcement in an American trade paper to the columns of the export trade paper. It has just been argued that it is not necessary or desirable to try to tell the whole storj^ in the export announcement. AVhat is essential is the indication of novelty and advantage offered by the device advertised, so worded and designed as to arrest the attention of people in other countries likely to buy or use such a device and prompt them to write for full details. Such details, in the announcement, in expert catalogues or even in correspondence, must not be of the same technical description that might be employed in the United States. They must be simplified in terms and elaborated in fuller descriptions which foreign pros- pects can easily and immediately comprehend, even if they never before heard of anything of the sort. Specialization of Advertised Goods. — Our object, we have agreed, is to make the reader of our announcement think, ' ' Here is something worth looking into, another American innovation. Guess I'll write and find out about it." If this is the effect we aim at, then, like the description of our goods in our corre- spondence or catalogues, as has already been pointed out, our advertising copy ought to individualize our product. We ought to give a brief, but as "snappy" as possible an argument or two why our article is better or different, what its advantages, or what exceptional profit is to be made from it, or any one of the strongest selling points we may have, which, of course, are innu- merable in any of the thousands of articles and hundreds of branches of industry. We must never lose sight of the principle involved, our desire to make the man who sees our advertise- 216 PRACTICAL EXPORTING ment believe it worth while writing to us to find out something more about what we are announcing. Advertising Sample Offers. — Some advertisers believe thor- oughly in the principle of including sample offers in their an- nouncements. In but few lines should free samples ever be offered to foreign buyers, even when coupled with the restric- tion that applicants must write on "their own business letter- heads." It is possible to waste entirely too much money in the distribution of free samples when they are offered indiscrimi- nately to the enormous markets of the whole world, and any at- tempt to restrict such offers induces needless complexities into an advertisement which always ought to be simple, clear and pointed. The offer in the advertisement of sample assortments of goods at a fixed price is usually intended as an effort to minimize cor- respondence arising out of the announcement by inducing a trial order for the actual goods in the first letter from prospects. In many cases the sample assortment is undoubtedly to be rec- ommended as good advertising copy. Frequently, however, the assortments offered are either too extensive or too small, and often they are made up of several different articles some of which may not appeal at all to a given prospect or in a certain market. ^lost such sample assortments apply to small articles, and the only economical way of shipping them to foreign mar- kets is through the parcel post. While our American parcel post has been extended to many of the principal markets of the world, yet it does not reach all markets and some embarrassment ensues when orders for sample assortments of small volume are received from the latter markets. They must be shipped through foreign freight forwarders at considerably increased cost, or they must be handed to export commission houses when buy- ers in such markets have any established connections with such houses in the United States, as is by no means always the case. IMannfacturers who do not favor the announcem.ent of sample assortments believe rather in the principle of urging the indi- vidual selection of samples of the actual goods by the foreign buyer through later correspondence to follow inquiries first de- veloped by the advertisement. This involves the loss of a little time, the necessity for the expenditure of a little thought in ADVERTISING TO GET EXPORT TRADE 217 devising correspondence effectively aimed at turning an inquiry into an order, but it undoubtedly has some advantages, as has just been suggested. Advertising Prices. — The question is always a moot one — to quote or not to quote prices in the announcement in the modern export trade paper. In the present writer's opinion, it is never wise to quote any price in an export advertisement. If a price is quoted, practically every foreign prospect who sees it is certain to assume that there is a large discount available, no matter if we have made an exceptionally close and absolutely net price. Other arguments referring to the advisability of quoting "one price to all," of permitting our best or our general trade prices to go into the hands of consumers and small retailers, will later in this chapter be quite thoroughly discussed. In any event, the quotation of a price with all of its uncertainty cannot be an effective appeal to foreign prospects. The argument about our goods may be. The prospect will naturally be curious as to how much the goods advertised cost. It is eas}^ enough for him to mail a post-card inquiry to the advertiser, if his interest is of the sort we are seeking to develop in our announcement. In the advertiser's correspondence that will follow the argument may be so set forth as to sell the goods no matter what their cost. Change of Advertising Copy. — It is the invariable experience of every advertiser who has watched carefully the progress of his efforts that one idea which he may have thought particularly brilliant and clever has failed absolutely to bring satisfactory returns, while another piece of copy by no means the equal of the first in the advertiser's own estimation, has brought replies in unexpected volume. Change of advertising copy must, there- fore, always be considered, and this applies with equal force to export as to domestic advertising. Certainly changes of export copy should not be made too frequently. An announcement must be given a fair trial and that, as we have seen in the export trade, involves considerable periods of time. It will be remembered, for instance, that one's printed announcement, like his letters, cannot arrive in Buenos Aires, Argentina, or Sydney, Australia, until thirty days after the date it has been mailed. Thirt.y days are also required for inquiries that may be provoked to reach advertisers. Since it is 218 PRACTICAL EXPORTING hardly to be expected that any announcement will provoke in- quiries the moment it arrives in a given market, it follows that no replies whatsoever are to be anticipated from markets like those within three months from the date of mailing of the period- icals containing printed announcements. Very likely much more time will be required. The advertiser, therefore, cannot judge of the effect of export copy for several months after its publication. Writing in System about export advertising, Walter F. Wy- man, of Carter's Ink Company, says: "Sheer laziness is a common cause of the 'business card' which is overprevalent in foreign newspapers as well as magazines. It requires brains to make a four-inch single column advertisement carry a real sales appeal, though it is not an impossibility. To apply a common sense test, what manufacturer would fail to discharge a sales- man who spent twenty dollars' worth of time in visiting a possi- ble foreign buyer — and merely saying at measured intervals : 'I represent Jones Mfg. Company — we make shirtings' — and then walking out!" An Advertising Campaign Necessary. — Another lesson to be drawn from conditions just explained is that export advertising should never be an experiment. It should not be adopted in the first place, until after careful, due consideration. When it is adopted, it should be with firm determination to carry out the campaign proposed as a permanent, or at least as a lengthy, business policy. It is pure waste of money to take up export advertising for a month or two "to see what will happen," and then lay it aside indefinitely. ADVERTISING FOR GENERAL PUBLICITY American advertisers in general too often neglect export ad- vertising from the point of view of desirable, if not essential, general publicity. Some manufacturers seem to feel that since they have already succeeded in establishing agencies in many, or even in practically all foreign markets where they expect a con- siderable volume of business — this often after years of effort — they can now and forever hereafter neglect export advertising in the trade paper. Other manufacturers declare that they do not care for a flood of inquiries, but prefer to develop agencies and ADVERTISING TO GET EXPORT TRADE 219 place their goods with large distributors through traveling sales- men or by means of direct correspondence only. ^lanufactur- ers of both classes overlook some aspects of their own situation. Prestige in Foreign Markets. — It is too often forgotten that the very largest houses in the United States, known by name, at least, in ever}- county and township throughout this nation, may be unknown, possibly even unheard of, in many foreign coun- tries. No matter what the manufacturer's name and fame may be here at home, he has got to begin anew when he enters markets in foreign lands. Furthermore, foreign importers are by no means rare who have had most unfortunate experiences with some previously unheard of American concerns with whom busi- ness has been started. It is undeniable that there really does exist, in many a foreign country, a well defined suspicion of new American concerns. Continuous advertising merely to impress the trade of the world with the existence of a house and the virtues of its wares, for general publicity purposes, cannot there- fore fail to be helpful. It is valuable to a manufacturer in his own trade, and it is worth while in a patriotic way as well. The concern whose announcements have been seen for years all around the world becomes known from that very fact as an "old" — hence probably reliable house. Says ]\Ir. Wyman in his article just quoted : " It is an amus- ing but costly trait of the average successful manufacturer in the United States that he so often considers his goods of world- wide reputation because he has attained a national distribution plus minor sales in a few leading world markets. Too often he forgets the lean years here at home while he was making his brands known and winning the confidence of dealer and user, and falsely assumes that the sale of a dozen stoves or a gross of hat pins in Japan makes his name a household word through- out Asia." Advertising as an Introduction. — Again, many a big Amer- ican manufacturer has been greatly chagrined to find important buyers in foreign countries who, if they have ever heard his name, labor under the impression that he makes something quite different from his actual products. Traveling salesmen who go aboard to drum a foreign market in many cases work under a genuine handicap in presenting the card of a concern never be- 220 PRACTICAL EXPORTING fore heard of. If the card, however, bears the name of a firm which has been advertising for a long time in the modern export trade paper, whose announcements cannot fail occasionally to have made some slight impression on foreign buyers, it is likely that the advertiser 's name at least will be remembered, and prob- able that the impression will have remained that the house now personally introduced by a traveling salesman is a large one. Advertising, therefore, as a means of introduction to prospects in foreign countries, must be said to be worthy of serious con- sideration. Once more let us quote that sane and helpful article in System : "It is commonly asserted that no export traveler can make ex- penses on his first trip. This is an exaggeration based on the fact that no salesman without cooperation from his house can hope for maximum sales when the burden of introducing the firm, the product and the brand, is added to his real work of selling goods. "Advertising will help to remove the necessity for the sales- man bearing such a burden. Whether it is in San Francisco or San Fernandez, the attitude of a merchant or user towards an untried product which he has seen advertised is quite different from his feeling for one of unknown parentage. It is not too much to claim, therefore, that the export advertising which 'makes your goods less apt to be refused when offered,' should be credited with the expense of the 'get acquainted' trip it renders unnecessary. . . . "As a means of preparing. a field for later development by salesmen, export advertising has considerable value. Very often it is important to have partial distribution, in order that the salesman on arrival may have a skeleton organization in a dealer who carries a modest stock and consumers who can be used as references." RESULTS FROM EXPORT ADVERTISING It should be urged that export advertisements be keyed, as should a manufacturer's catalogues and circular letters. Of course, a full and careful record of returns from advertising effort must also be kept if the advertiser is to have a clue to guide him as to the efficiency of various mediums employed, or ADVERTISING TO GET EXPORT TRADE 221 as to the quality of the several kinds of advertising copy which he may have employed. One important consideration affecting results from export ad- vertising must be remembered. It will not be possible to record a part — perhaps a large part — of the results secured, because many orders will be placed through American export commis- sion houses and the original prompting of such orders may never definitely be traced, even if their source be known. It is only fair to credit the total volume of business thus secured, whose origin is unknown, to the general advertising appropriation. Quality and Quantity of Results. — In our consideration of some features of foreign correspondence we have reached the conclusion that it is impossible always to judge of the quality of prospects from the letters that reach us. ]\Iany a case might be instanced where actual business, and business of really large volume, has resulted from people whose letters and even whose personal appearance when we have met them face to face have not indicated any buying ability whatsoever. No replies from advertising can safely be disregarded. If nothing else, there are further advertising effects to be impressed through replies to people who, for one reason or another, have had enough in- terest in our lines to write us about them. On the other hand, mere quantity of replies provoked by a certain advertising copy is not always to be regarded as the ulti- mate criterion of the value of that copy. A large number of inquiries may be secured and yet no definite orders develop. It is to be remembered that just as it is the biggest houses which are the hardest for the salesmen to sell, so it is the same ones from whom replies to advertisements are drawn with the great- est difficulty. An introduction to prospects is what the export announcement should be aimed to secure. Inquiries may be of varying character as well as caliber. Each should be developed according to its importance. Actual business getting is the ad- vertiser's business, not the publisher's. One of the most incomprehensible things in connection with the export business of American manufacturers is their frequent neglect of foreign inquiries. Drawers full of letters are found unanswered — apparently because they are inquiries and not or- ders. That the one is the practically indispensable and invari- 222 PRACTICAL EXPORTING able preliminary to the other seems sometimes to be forgot- ten. Records of Inquiries and Orders. — Advertising records should include not merely the enumeration of inquiries received through a medium or from any special kind of copy, but should further be extended to show the ultimate business obtained in the way of definite orders. It is misleading, however, to charge up against export advertising the first result, in dollars and cents, in the way of orders. While it is true that many adver- tisers for export business have been able to secure a good deal larger volume of actual orders in direct return from their ad- vertising than the costs of such advertising really warrant, yet the principle already laid down should continue to govern here. The exporter's effort in the first instance is not for a big order. His effort invariably should be to get actual specimens, many or few, of his goods into the hands of possible buyers, proving by the goods that they are all that he claims for them, are goods which the buyers can use profitably. It is by later efforts, through intelligent and scientific handling of the trade, coopera- tion, correspondence, service, that the foundations of business thus laid, should be made to serve for building up big, per- manent and profitable relations. The profits in a business through five, ten, or fifteen years, if that business is intelligently cultivated and developed, are certain to offset many times over the comparatively slight cost of initiating it. EXPORT CATALOGUES Another form of advertising to develop export trade must here be considered— the export catalogue, closely affiliated also with export correspondence. In the term catalogue all kinds of printed matter may be included, circulars, leaflets, monographs, envelope enclosures, etc. All may be of much effect or of little effect, depending in large measure on the brains and thouglit bestowed upon their preparation. Catalogues and Printed Circulars. — ^lanufacfurers are sometimes deterred from undertaking an active campaign for export business because of the fancied expense of bringing out elaborate catalogues in all sorts of foreign languages. There is no real basis for hesitation on this score. It is not absolutely ADVERTISING TO GET EXPORT TRADE 223 essential at the outset of an effort to get export trade that any literature whatsoever be prepared in other languages than English. Probably the great majority of successful American exporters of to-day began their export efforts with nothing more than their regular American catalogue. It has already been noted that many people in all countries read other lan- guages than their own with pleasure and with intelligence, even when they cannot speak or write such other languages. It is far more important that a would-be exporter's letters be couched in appropriate foreign languages than that his printed matter be translated. It is, for example, quite possible for him to review in a letter accompanying a catalogue the prime essen- tials of his selling argument, even of the descriptions of his goods — all in the customer's language, although the accompany- ing catalogue is in English. However, the selfsame arguments that apply to the translation of correspondence apply in some measure also to the desirability of having catalogues translated. Each manufacturer's individual policy must, then, determine when the point has been reached that the expense of translating catalogues becomes an unavoidable or a desirable charge, and how much of an appropriation for that purpose is necessary. The reader is referred back to Chapter V, de- voted to foreign correspondence, for a consideration of the use of foreign languages, of translations, etc., which it seems un- necessary to repeat in this place as applying to catalogues. What Sort of Foreign Catalogues? — Certainly it is far more desirable to establish the foundations for taking care of an ex- port trade on a sound basis than to neglect this necessity and plunge into the printing of circulars in other languages. How- ever, when the export department has been thoroughly well organized, systematized and put in smooth running order, then the question of literature for the development of foreign trade requires attention. The regular domestic catalogue in the English language may sometimes be used without modification in the beginnings of an export campaign. Occasionally it may be too big, heavy or expensive to be generally employed in working up trade in other countries. In such cases it may be desirable to bring out an abridged edition for export trade, referring only to those 224 PRACTICAL EXPORTING special articles which are regarded as most suitable, or as most likely to appeal to buyers in other countries, including those special features which properly should distinguish an export catalogue in English or any language. Sometimes the domestic catalogue is made to do duty for foreign distribution by includ- ing a leaflet therein by way of supplement or explanation, either in English or in other languages. It is all too easy to waste money in the distribution of catalogues abroad and hence the first effort in the preparation of foreign literature should be on a conservative basis. Various economies that may be affected are suggested in the foregoing hints. However, no matter what the first effort in this direction may be, it is certain that ultimately, with the development of an export business, with encouragement received from many different directions, spe- cial literature both in English and in appropriate languages will become necessary. Foreign Language Catalogues. — In considering the prepa- ration of export catah)gues in other languages than our own it is probable that the Spanish language will be that regarded as of first importance. This does not necessarily imply that trade in Spanish-speaking countries will be the largest or the most desirable, but their own language is required by more people in such countries than is the case in most other countries speak- ing other languages. By that is meant that importers through- out Europe are much more likely to be familiar with several other languages than their own than are dealers, if not im- porters, in Spanish-speaking countries. Next in importance so far as languages are concerned would doubtless rank tlie French export catalogue. In Chapter V, in our discussion of transhitions, we have already considered the different countries to which the several principal commercial languages of the world most effectively appeal. Putting export catalogues into any foreign language must depend, however, largely upon the nature of the products involved and the foreign countries where such products are expected to find their largest trade, or which it is desired for other reasons especially to cultivate. The foreign language catalogues when prepared should, in fact as well as in name, be "special editions." A catalogue or circular intended for distribution through Spanish America ADVERTISING TO GET EXPORT TRADE 225 should be expressed in Spanish in form and terms best calcu- lated to appeal to buyers in those markets. Similarly with French, Portuguese or any other catalogues. Each should be prepared by a specialist able to transmute the essential quali- ties of the English original into the requisite foreign atmos- phere. This applies even to covers as well as to the contents. The catalogue may be large or small, thick or thin, as circum- stances may indicate in individual cases. The essential thing is to ensure that it makes the right sort of appeal. The edition of an export catalogue should not be limited. Some people seem inclined only to make an experiment and have a hundred copies or so printed just to see how the trial turns out. This seems a pure extravagance. The cost of preparation is immensely greater per copy. An export cata- logue should not be contemplated at all unless with the firm de- termination to carry the campaign through vigorously and largely to a profitable conclusion. If worth doing at all it is worth doing right. No results from any kind of circular effort are likely to result unless the scheme is developed on an extensive scale. Preparation of Export Catalogues. — Printers are often asked to submit estimates for the complete production of a catalogue, including the translation work as well as making cuts, supply- ing paper, etc. It is not too much to assert that there is not a printer in the United States who in his own office has any facili- ties for producing creditable translations. When this matter is entrusted to a printer he secures competing bids from sev- eral translation bureaus or individuals and very likely accepts the lowest price that is made, irrespective of quality likely to result in the product. The translation is such an important matter that it ought to have the manufacturer's study and criticism before ever submitted to the printer. On the other hand, it is sometimes suggested to manufac- turers that a special foreign language edition of their cata- logue be prepared and printed in the country where it is ex- pected to be distributed. In spite of some advantages in fol- lowing this course in certain countries, it is not to be advised. "We are quite justified in priding ourselves in the United States on the production of the handsomest, most attractive and most 226 PRACTICAL EXPORTING effective printed matter to be found in any country. The paper stock and the half-tone cuts that we customarily employ here are many degrees superior to anything of the sort commonly used in other countries. In fact much of the more attractive printed matter issued by Latin-American houses is printed in the United States. While it may often enough be desirable to submit the proposed translation of printed matter to one's agents in countries where it is planned to distribute such literature, receiving back sug- gestions and criticisms before going to press with the catalogue in the United States, yet the work itself should preferably be carried out here and not abroad. The name and address of agents can just as easily be imprinted here, if necessary, as could be done were the whole work performed abroad, or appropriate spaces can be left for imprinting such or other advertisements locally, as various agents may prefer. Except in the case of unusually heavy catalogues the dif- ference in cost of mailing is so trifling that small advantage is to be secured by using inferior grades or light weights of paper. We have an American fame to maintain in the quality and attractiveness of our printed matter and it will be entirely false economy to attempt to cheapen our catalogues at the expense of attractiveness. Contents of the Export Catalogue. — Attractive in appear- ance as we may make our export catalogues yet their real effect- iveness will in the last analysis depend on their contents. The catalogue, it has been suggested, is in a sense a manufacturer's showcase. In the export trade, however, it must be something more. It must be salesman as well as showcase. Business to be obtained from a showcase alone is never sufficient to make a manufacturer or merchant rich. We have, therefore, in our ex- port catalogues to do something more than show pictures and prices of our goods. We have to couple with those elements our sales talk. We can depend to some extent on our campaigning letters for sales arguments, but we can say a good deal more in print than we can in typewritten form. Moreover, a letter and catalogue under another cover are frequently separated in the mails; again, where the letter may not be available six months from now, the catalogue, if of the right sort, is sure to be on file. ADVERTISING TO GET EXPORT TRADE 227 Every suggestion, therefore, included in our discussion of how to sell goods by letter applies to the preparation of the printed catalogue. Catalogue Description of Qualities. — First of all, however, a catalogue must with strictest honesty describe qualities of the goods. Not enough attention by any means is paid to this mat- ter in our domestic catalogues. Here at home the catalogue is often used only as a book of reference after a buyer has seen and inspected actual samples of the goods. This is not possible in all cases in developing foreign business. The catalogue is then used more often than not to secure sample orders. It is the one thing which the prospect has to reh' ujoon, except in those com- paratively few instances where samples of inconsiderable value are submitted along with catalogue. Usually it is not possible for a buyer to inspect an actual sample of an office desk, an en- gine or piece of machinery, or various kinds of boots and shoes. He has only the catalogue to look to, and an engraving or a half- tone cut of a $15 desk looks exactly like a $50 desk, or a $1 shoe exactly like one of a $3 shoe. In the United States buyers make allowance for a certain de- gree of boast and exaggeration in our advertising literature. They do not make the same allowances in foreign countries. Foreign buyers are disposed to expect that every printed word will be the exact, plain, unvarnished truth. They will depend upon it when they place orders, and they will show something more than dissatisfaction if the goods which are shipped do not substantiate every smallest claim that is made for them. The great thing for us to bear in mind in the use of catalogues is that we are not merely seeking to secure a sample, trial or initial order. We are trying to persuade our prospects to get into their possession actual specimens of our goods, usually doubtless in the way of orders for small quantities, in order that after they have seen what the goods themselves really are, numer- ous and regular repeat orders will follow. We have, of course, in our catalogues to tempt these original orders with such appealing language as we can employ, but that appeal must be modified by a strictly honest description of the goods, their composition and their qualities. It will, beyond any doubt at all, be found highly desirable for the manufacturer of 228 PRACTICAL EXPORTING "shoddy" boots and shoes to indicate in his catalogue that his cheapest grades are made with paper or leather-board or com- position soles, heels, counters or what-not, that in consequence that particular grade is not to be recommended for wear in a damp country or during the rainy season in tropical countries. The manufacturer will, as a matter of course, point out the real usefulness of goods of this character and advise when and how they should be bought, sold and worn. He may have a little timidity about exposing the composition or construction of his goods in print, but if he does it intelligently the results in the long run are bound to be to his profit. Catalogues Must Include Selling- Arguments. — The selling argument in the export catalogue will vai*y, of course, according to the individual line involved. The great principle, as in letter writing, is the differentiation of the goods, the emphasis placed on their individual qualities, of how they are different from or better than competing goods or any other goods offered for the same purpose. Braggadocio and boasting are to be avoided, but sometimes a good deal of the desired impression as to size, im- portance and solidity can be accomplished by an actual de- scription of a manufacturer's works and of the processes em- ployed in making the goods. In the letter-press of his catalogue, perhaps in an introduction, the manufacturer of large production can well emphasize its ad- vantages and economies (but, again, never the "biggest in the world"). He can tell of some of the special machinery that he employs, or that he has perhaps invented, to accomplish special results in his goods; he can describe methods of manufacture that are peculiar to his works, that are not employed by his competitors, with resulting quality of the finished product. He can tell of his designs, of their originality and novelty, of how they are superior for certain purposes to any others, or hand- somer, or he can lay emphasis upon the remarkable finish of his goods as commending them to discriminating buyers. He can tell of the work accomplished by the machinery or apparatus he is trying to sell as greater in volume, or better in quality, or more economical in process, than other methods. Doubtless every one of these and other innumerable arguments are actually employed in selling goods by word of mouth; in the export ADVERTISING TO GET EXPORT TRADE 229 catalogue they must be put in black and white, as the salesman to accompany the showcase. Americanisms to Be Avoided. — Not only must swagger and boastfulness be avoided, but also strictly local American usage of words and names and all technical descriptions, above all the use of American slang and of the catch phrases which are so common among us. It is impossible to translate into another language such common advertising phrases as "there's a reason," " it 's a korker. ' ' A writer in the American Exporter a year or two ago explained the difficulties of a translator in trying to put into Spanish the cover legend of a lamp manufacturer's catalogue which in English was called "Cold Blast Book." Some manufacturers have been known to express surprise and dismay when they found that a bit of poetry- used in their Eng- lish catalogue could not be translated into French or German poetry. Allusions to sports, especially baseball, are meaning- less to people in many other countries. The Latin races espe- cially are not by any means the devotees to athletics that are Americans and English. Baseball is so distinctly American that, except at isolated points, it is hardly known in other countries. In this same general connection we may note the remarks of one of the oldest and most experienced American manufacturers of agricultural implements, A. B. Farquhar, in a report of the committee on foreign trade of the National Vehicle and Implement Association. "To avoid losses from wasted effort in advertising, always remember that the Latin-American mind is totally impervious to anything like a joke of the kinds that are specially in vogue in this country. We are told of pictures representing a snow- bird drawing a plow, a rake pulled by a tiger, etc., sent abroad and bringing the advertiser no sales because, it is explained, im- plements so propelled could be of no use in countries where only oxen or horses are used for such purposes. A case is also re- ported of a circular that advertised buggies but failed to sell any, because the foreigner suspected something crooked about several widely different prices being set on vehicles whose pic- tures looked all alike. ' ' Catalog-uing: Each Article. — The introduction to the export catalogue may include many general arguments for the line 230 PRACTICAL EXPORTING illustrated and described in succeeding pages. It should be as strong and forceful as possible to make it, and thoroughly indi- vidualized, putting maker and goods in a class by themselves. But in addition something more is necessary in connection with each separate article referred to. Each one must be illustrated, and if necessary from several points of view, in order to give an adequate idea of its appearance, of its functions or what-not. Beneath each cut should appear the full description of the article, what it is for, how it works, with arguments for its peculiar advantages, all in simple, elementary language, as though the prospective reader had never seen or heard of any- thing like it before. Yet the advantages of the article in com- petition with other goods must have especial emphasis laid on them. Furthermore, in connection with the description of each article there should be code words for use in cable correspondence, to be assigned if necessary to each different size or variation or com- bination. It should be explained how the goods are packed or how many to a case, what are the staple quantities in which orders are usually placed or are expected to be placed. Dimensions of the article should be exact, as made, that is usually in English feet and inches or with approximate metric equivalents following in - brackets. Metric dimensions alone ought never to be given unless the article is originally made to metric scale. A %-inch pipe should not be called "19 mm." — it should be described "%-inch (approximately 19 mm.)." Whenever dimensions or sizes are an important feature of a catalogue it is well to include as a supplement a page or two of metric conversion tables, metric into English and English into metric, giving exact equivalents carried out to fine fractions and decimals. Incidentally, it may here be noted that com- mon indications of feet and inches are to be avoided as is everj^ abbreviation. Do not write or print *'3' 6"" — spell it out, "3 feet, 6 inches." Weights and measurements of the goods as packed and pre- pared for export shipment should be given, in order to assist the foreign buyer in estimating the cost of the goods as he will ultimately receive them after having paid ocean freights and «ustom house duties. The metric equivalents of weights should ADVERTISING TO GET EXPORT TRADE 231 be giveu, that is, net and gross iii kilograms, but this is not necessary in the case of the cubic measurements of export cases, since ocean steamships usually base their rates on measurements in feet and inches. Somewhere in the course of machinery, automobile and similar catalogues, either in a separate division or in connection with each item, there should be given full and elaborate lists of re- pair parts with names, cuts and other forms of identification. In some instances it will often be found highly desirable to quote inclusive, lot prices on special assortments of those spare parts, or extra parts, which it has been found in the course of expe- rience are most frequently needed, and urge their purchase for the user's own advantage. Prices and Discount Sheets.— Perhaps the most serious ques- tion in connection with the preparation of catalogues is that re- garding the prices that are to be quoted. We have to remember that our catalogues may go, by accident if not intention, into the hands of all sorts of people — wholesaler, retailer, ultimate con- sumer. The general principles underlying the quotation of prices in the export trade must be reserved for discussion under another heading. Meanwhile it should be observed that a great injustice may be done to wholesale distributors, jobbers, or others who handle goods for re-sale, if catalogue prices are so made as to betray their profits to their legitimate customers. Instead of promoting the interest of those whose trade is most desired the catalogue, if not wisely prepared, may actually in- jure those interests. It would seem to follow that the catalogue itself should contain no printed prices whatsoever, unless those prices are subject to an extremely liberal discount, say anywhere from 25 per cent, to 80 per cent. In fact, it is by some manu- facturers thought wise in their export relations to make an en- tirely different set of list prices; that is, when for domestic trade they name what is practically a net price, for the export trade another and much higher list price is quoted subject to liberal discount, as has just been suggested. Inasmuch as our object is thus to endeavor to protect whole- sale customers, it is clear that no discounts or at least none but purely nominal discounts must be named in the pages of the catalogue itself. It is customary, in order to advise those whole- 232 PRACTICAL EXPORTING sale or other important merchants from whom one most de- sires orders, either to quote net prices, or discounts applying to current list prices, in a separate price or discount sheet, which may be included in some copies of the catalogue sent abroad but not in others. In fact some manufacturers have two such sepa- rate lists, or inserts, one quoting discounts applying to retail dealers, the other quoting an extra discount over and beyond the retail quotation, which extra discount ajDplies only to certain selected customers who are regarded as wholesalers or in a posi- tion to deserve best prices. A concrete illustration may help in understanding this theory. Manipulation of Discounts. — A prominent manufacturer of jewelry, in a separate price list accompanying his export cata- logue, prints list-prices applying to each item, on which he is privately prepared in case of need to offer a maximum discount of 40 per cent. Under the head of terms, in an appropriate page of this price list, he prints a discount of 10 per cent, apply- ing to prices given. He encloses with the price list and cata- logue, when sent to large dealers or to the general run of the wholesale trade, a separate leaflet advising that the wholesale dis- count from the printed list price is 25 per cent, superseding the 10 per cent., printed in list for popular consumption. In his circular letters accompanying these catalogues, when they are distributed to a general mailing list, this manufacturer writes that he is anxious to secure sample orders at the favorable rate of discount named to the wholesale distributors, is confident that the goods and qualities at the low prices named will result in developing a mutually satisfactory trade and that it is not im- possible that with the development of business relations after the first start, with the growth in volume of the orders, with pos- sible later calculations on the basis of quantities, the raw ma- terial market, etc., he may very likely be able to offer still more favorable discounts. His effort is to induce sample orders and he evidently then depends upon a study of the bu.ying capacity of houses who have thus made a start with him, of their rating and general com- mercial character, to enable him to follow them up and secure the maximum of business from them by the ultimate quoting of the very best prices he can figure. This mainifacturer's line is, ADVERTISING TO GET EXPORT TRADE 233 of course, not a staple line and tlie difference between the 25 per cent, discount which he quotes generally to wholesalers and the maximum 40 per cent, which he can ({uote ultimately, or in case of necessity, is no more than the difference in price between his goods and many goods of competitors. It is b}- no means suf- ficient to deter a really interested buyer from placing a sample order of comparatively insignificant value. To these observations it may be added that in catalogues pre- pared essentially for consumer distribution, for the purpose of general publicity, or of developing interest in a given locality in a certain line of goods already on sale at one or at many lead- ing local establishments, in such catalogues no prices whatever should be printed unless under advice and instructions from local agents. To Facilitate Calculation of Delivered Costs. — In making any catalogue prices with an accompanying discount sheet, the ob- ject sought is to put the customer in a position to place orders intelligently, that is, to know or to estimate closely what the cost of the goods will be when landed at his port. Prices and dis- counts must, therefore, be clear and unmistakable and every necessary detail must accompany them. For example, it must be made plain just where delivery is made, whether f . o. b. fac- tor}^, freight paid to New York, or f. o. b. steamer, and what extras, if any, the customer will have to pay, with a statement of the approximate cost of such extras. If charges for packing are included in prices, as they usually ought to be, that fact should be stated; if packing is not included then the approxi- mate cost must be given, perhaps of various kinds of extra pack- ing which may sometimes be asked or be thought advisable in certain eases, all to be carefully described. If railway freights are not included in prices and if there is to be a charge for cartage from arriving railway station to outgoing ocean steam- ship at port of sailing, then these costs should be approximated for the sake of putting prospects in a position at least to estimate with some intelligence the actual landed cost of the goods to them. Changing Prices. — Another advantage of quoting liberal list prices is that it is then much easier controlling fluctuations in quotations as they become necessary by varying the discount 234 PRACTICAL EXPORTING quoted instead of the list prices, which always ought to be held as stable as possible. In this same connection it should never be overlooked that when a change in quotation becomes neces- sary then prompt notice of the new quotations should be for- warded to everybody who has ever before, or at least within two or three years, received quotations on the old, superseded basis. No one should be forgotten in these new quotations, for one can never tell when orders are likely to materialize from sources half forgotten. The manufacturer should as a rule hold himself re- sponsible for filling all orders received at old quotations until sufficient time has elapsed for new quotations to arrive in the hands of his customers. In the export trade changes in price should be made as seldom as possible. Foreign buj'ers find it a distinct facility to the maintenance of a steady business to know that they can depend upon the prices they have to pa}^ and not be forced to order blindly, never knowing whether their orders at old limits are going to be executed, or whether if they place themselves at the manufacturer's mercy, new orders will not cost them a good deal more than they have former]y paid. Prices in Foreign Money. — Some manufacturers believe it desirable to indicate in their catalogues the equivalent in cur- rencies of other countries of their list prices in American dollars and cents. This may be a help to some prospects who are not familiar with the values of our money, but in principle any such merchants will be of small caliber, usually those not accustomed to doing any import business themselves. Probably all large or frequent importers of goods in any country of the world are quite able to figure for themselves the required equivalents of dollars and cents. However, if it is thought desirable for any reason to include with quotations in our own money those in foreign currencies, such equivalents should be restricted at most to the principal international currencies, namely, pounds sterl- ing, and gold francs, and it would be well to indicate unmis- takably the fact that these equivalents are approximate and that tlie goods will be invoiced in dollars and cents. It should be remembered that we are now discussing catalogue and price- list. Srpecial, written, individual quotations may be made as circumstances indicate as most effective or profitable. ADVERTISING TO GET EXPORT TRADE 235 If it is desired for any reason to quote only in foreign cur- rency (a proceeding of doubtful advantage in a catalogue) then the conversion of current prices in dollars into these other for- eign currencies should be made in general or what we have already called "even money" terms. Thus, the equivalent of say $2.25 should be expressed as approximately 9s. 6d. instead of, say, 9s. 4V2d. In francs the same sum should be approxi- mately as Fes. 11.75 or even Fes. 12 instead of, say Fes. 11.70, becau.se the amounts suggested as preferable are those which in the other currencies may be regarded as the same sort of "even money" quotation as our $2.25 instead of $2.24.^ Printed Terms of Payment. — Full explanation of terms of payment should also be included in the catalogue, or better, in the accompanying price or discount sheet. Whatever may be done in correspondence, that is, in real or imitation personal letters addressed to prospects, the terms that are named in printed fashion should provide strictly for cash or guaranteed payments before shipment of the goods. No other general terms ought ever to be made. In quoting such terms in printed form for general distribu- tion they may be put briefly and formalh', but it is usually worth while explaining at a little length how the terms demanded may be met. The manufacturer may say that orders may be trans- mitted by customers through their usual buying agents in the United States or any reputable export commission house in this country, or in default of so doing orders will, if necessary, be executed direct for the account of the customer providing he will, in the case of small amounts, remit draft on American banking house with his order. Or, again, if preferred (the catalogue may point out), the customer may for his own pro- tection ask his local bankers to open a credit with their New York banking correspondents in favor of the manufacturer for the full amount involved (sometimes a fairly large part of it only is demanded in advance, as a "guaranty"). Customers should be asked to give instructions that such a credit be con- firmed by New York bankers to the manufacturers, for payment against delivery of ocean bills of lading, etc., proving actual 1 Naturally the same liberality in quoting prices in foreign terms can- not apply in the case of small units quoted at home at only a few cents. 236 PRACTICAL EXPORTING shipment. These terms, it may be stated, are obviously neces- sary in the case of transactions with new customers and will be recognized as just and equable, protecting both buyer and seller. Letters addressed to prospects may, of course, amplify such ex- planations of terms, or suggest if not actually oft'er modifica- tions as circumstances in individual cases may seem to indicate desirable. Our customary "cash discounts" should never be offered. If an inducement to pay cash before shipment is thought neces- sary then a "special extra" discount may be named by letter. Such American terms as "5 per cent, ten, 4 per cent, thirty, net sixty days, ' ' have no place in export trading, should be studiously avoided, as we shall understand the better the farther we go into the details of this business. The manufacturer who cata- logues his goods "less 2 per cent, cash in ten days, f.o.b. Pittsburgh" betrays his inexperience, does not encourage confi- dence — if he gets orders, does not get so many as he ought. Distribution of Catalogues. — Catalogues for general distribu- tion will usually follow the course of circular letters addressed to mailing lists, as has already been discussed. Needless to say, in the ease of catalogues in other languages, the same care must be exercised in putting a catalogue in a given language into markets where that language is spoken, as is necessary in the despatch of letters. A catalogue in the Spanish language ought not to be sent to Jamaica or Java. This caution seems entirely superfluous, but it is a curious fact that there actually exist manufacturers who labor under the impression that "Spanish" is suitable for all "foreign" countries. This criticism is nearly as frequent as the other, that English catalogues are made to do duty in Spanish-speaking Latin America. No harm is ever done by placing copies of catalogues both in English and in appropriate local languages in American con- sulates throughout the world. In most of these offices an ef- fort is made to maintain a catalogue file of American manu- factured goods for the convenience of local callers seeking in- formation about our goods, or for the consul's assistance in replying to inquiries for our goods that reach him from mer- chants in his district. Actual orders may sometimes result in consequence; but in principle large buyers do not go to an ADVERTISING TO GET EXPORT TRADE 237 American consulate in search of information. They have plenty of it thrown down upon their desks by every arriving mail/ Follow-up Trade Literature. — Just as a follow-up system of circular letters addressed to foreign prospects is always desir- able, so also there may be prepared a follow-up system of litera- ture to accompany such letters. Such a system may include, for example, a general catalogue and a set of leaflets, folders or envelope enclosures, each one of which may set forth as strik- ingly and as strongly as possible the selling talk regarding a special article or a specific quality of an article. The object of such literature should be to tempt inquiries for further par- ticulars, or if possible orders for actual samples, thus giving the manufacturer an opening for new correspondence, a lead which he should follow to the limit. Reliance should never be placed on a single letter or catalogue, no matter whether big and ex- pensive or small and cheap. It should not be expected that large orders will immediately result. If the subsequent corre- spondence, provoked by curiosity or interest aroused by the ad- vertising literature adroitly devised for this purpose, is prop- erly handled, then the anticipated large business will certainly follow, of sufficient volume and profit to warrant all the original investment and effort. . Separate leaflets or sometimes separate pages from a catalogue, each dealing only with one specialty, may also be found useful by one's foreign agents to whom they may be, on request, sup- plied in quantities for local distribution, possibly bearing the agent's own imprint. However, it is generally preferable for 1 In tliis regard a traveler not long ago wrote to the American Exporter from South America: "However eager the American consul may be to dis- play the catalogues, the local merchant does not get into the habit of going to the consulate when he wants to consult a catalogue. Merchants abroad must he reached at their offices by periodicals and circulars. It is very rarely that they are so eager for information that they will take the trouble to go to the American consulate to see if a catalogue is on hand. "It is a very small expense for a manufacturer to send his catalogue to all the American consulates, certainly no harm is done, and sometimes orders will result from tliis source; but some manufacturers seem to think that if the*' send their catalogues to American consulates they have pretty thoroughly covered the foreign field. They have covered it about as thor- oughly as though they sent their catalogues to chambers of comraerca throughout the United States and not to individual merchants." 238 PRACTICAL EXPORTING the manufacturer to devise his own advertising literature pri- marily for his own purposes in seeking to enlist the interest, in- quiries or orders of the foreign concerns whom he addresses. When so prepared such literature is likely to be of somewhat different character from that suitable for the agent's individual use locally, A good deal of effect is likely to be lost if the manu- facturer, in preparing such literature, forgets its prime purpose and tries to make it suitable for several different kinds of uses. Foreign Restrictions on Catalogues. — No catalogues or adver- tising literature of any sort should ever be enclosed with ship- ments of goods unless customers specifically request so doing. There are many reasons for this. In some countries the import duties on catalogues or printed matter in general are consider- ably higher than rates of duty on the merchandise with which they may be included and if catalogues are placed in the same case with the merchandise, so doing may increase largely the duties that must be paid on the whole case. Again, large im- porters frequently order goods not for their own use or their own stock, but to be transferred intact directly to their local customers. Sometimes these importers are not anxious that their customers should know any more than is necessary about the origin of the goods. They are seldom anxious that their customers should have an opportunity of learning the manu- facturer's prices, and if a liberal supply of advertising matter is placed in cases which upon arrival are immediately turned over to such customers, then the importer who has bought and paid for the goods is not likely to be highly pleased. For these and other reasons if it is desired to send a quantity of advertising matter to a customer when shipment of goods is being made, it is usually preferable to make a special case of such advertising matter instead of including it in cases con- taining the merchandise itself. This, however, will involve the customer in considerable expense — for ocean freight, land- ing and custom house charges, etc., and in general it is not worth while attempting to forward a large supply of advertising mat- ter unless at the suggestion and by the instructions of one's cus- tomers. Both in Australasia and in South Africa a duty is imposed on foreign printed matter. This is intended as a measure of ADVERTISING TO GET EXPORT TRADE 239 protection to the interests of local printers and was primarily due to the practice of large local concerns of getting their own catalogues and their advertising matter printed abroad rather than at home. The fact of the existence of such duties must not be forgotten by American manufacturers, who must eitlier forward catalogues to these markets with discretion and in limited amounts by any one mail, or must make arrangements for the local payment of the required duties at the other end. Otherwise the prospects whom they address will be called upon to pay tliese duties and will not be particularly delighted thereat, especially if the catalogues are sent without their knowledge or consent. The regulations in force in the Union of South Africa have thus been officially stated : "The Government of the Union of South Africa notify in connection with the tariff of custom duty on advertising matter, including catalogues, price lists, almanacs, calendars, labels, posters and show cards, that when any of the above named items are sent to any person or firm in the Union of South Africa through the medium of the post office the duty payable thereon may be prepaid by means of stamps affixed .to each separate let- ter, packet or parcel. Stamps of various denominations may be purchased at the office of the High Commissioner for the Union Government of South Africa, 72 Victoria Street, London, S. W. "The duty on the articles enumerated above is 3d. per pound, or 25 per cent, ad valorem, whichever shall be greater. "The following assessment is now in force for catalogues of non-South African firms: Up to 8 ounces free Over 8 ounces and up to 16 ounces 2d. Over 16 ounces and up to 24 ounces 3d. Over 24 ounces and up to 32 ounces 4d. and thereafter at the rate of Id. for each additional 8 ounces or fraction thereof. ' ' The stamps must be affixed to the reverse side of the packets. They are prohibited on the address side, "Under the imperial post office regulations packages or par- cels of over five pounds in weight must be sent by parcel post, in 240 PRACTICAL EXPORTING regard to which there are special regulations dealing with the question of customs declaration." It would appear from the foregoing that any packet of printed matter under eight ounces is admitted duty free and it may be possible that if heavier catalogues were addressed to South African business houses, merchants or agents, one or two at a time, even such catalogues might escape the payment of duty. In Canada there is a duty of 15 cents per pound on adver- tising matter sent through the mails even though each piece is separately addressed, but this does not apply to bona fide wholesale trade catalogues or price lists. If the latter are sent not more than three to any one address of actual dealers or wholesale buyers then they are free of duty. The Commonwealth of Australia imposes a duty of lOd. per pound on advertising matter including catalogues which are sent through the mails or otherwise. This duty is, however, imposed only when it amounts to 1 shilling on catalogues received in any one mail for one Australian state. The states of the Aus- tralian Commonwealth are New South Wales, Victoria, Queens- land, South Australia, West Australia and Tasmania. Austral- ian customs stamps for the prepayment of duties, to be affixed on the reverse side of each piece mailed, may be purchased from the Official Representative of the Department of Trade and Cus- toms, Commonwealth of Australia, New York City, at the fol- lowing rates: Up to % oz. in weight 1 cent Up to 1% oz. in weight 2 cents Up to 2V^ oz. in weight 3 cents Up to 314 oz. in ■v^eight 4 cents Up to 4 oz. in weight 5 cents Up to 4% oz. in weight 6 cents Up to 5V& oz. in weight 7 cents Up to 6 V2 oz. in weight 8 cents Up to 7% oz. in weight 9 cents Up to 8 oz. in weight 10 cents Up to 8% oz. in weiglit 11 cents Up to 9"^ oz. in weight 12 cents Up to 10% oz. in weight 13 cents Up to 1 1 14 oz. in weight 14 cents Up to 12 oz. in weight 15 cents Up to 12% oz. in weight 16 cents Up to 13^ oz. in weight 17 cents Up to 141,^ oz. in wciglit 18 cents Up to 15%. oz. in weight 19 cents Up to 16 oz. in weight 20 cents Of course, if such duty paid stamps are purchased and affixed then no further action is required on the part of the American house dispatching the catalogues. ADVERTISING TO GET EXPORT TRADE 241 It will be observed that unless catalogues sent by one mail to one state weigh one pound or a little more no duty is imposed. If it is desired to send large quantities of catalogues it is possi- ble instead of purchasing duty paid stamps and affixing them to each piece of mail matter, to stamp each piece "Duty For- warded under Separate Cover," and after weighing the total quantitiy remit the required amounts of duty by international post office money order to the deputy postmaster general at the capital of the state to which the catalogues are addressed. That official when put in possession of the amount of the re- quired duty will permit its free importation and distribu- tion. Again, arrangements may be made with forwarding agents to ship by freight cases of catalogues properly wrapped and addressed and to pay import duties at destination and affix local postage stamps. So far as New Zealand is concerned, the rate of customs duty is 3 pence per pound with a surtax of % pence per pound if not produced in British dominions. However, the under- standing is (see official United States regulations regarding foreign postal rates and conditions) that duty is not payable on trade catalogues "of the goods of firms or persons having no established business in New Zealand." There is no repre- sentative of the New Zealand government in United States. In Russia there is also a duty on catalogues or other trade literature printed in the Russian language but single copies sent by mail are exempt from duty. It should be noted that all printed matter imported into Russia has heretofore been, even in normal times, subject to government censorship. Brazil does not allow more than four ounces of lithographed or similar colored advertising matter to be imported by mail. This does not usually affect catalogues sent out by American manufacturers but applies to the distribution by mail of posters and similar advertising matter. Advertising posters for Brazil should be iiighly artistic, richly lithographed or embossed, and printed in the Portuguese language, since municipal laws (at least in some cities) prohibit the display of posters in other languages. CHAPTER VIII EXPORT COMMISSION HOUSES Importance and Usefulness of Export Houses — Commission Houses, Merchants and Americun Buying Offices of Foreign Concerns — Their Operations as Buyers and Shippers of Goods — Commission Houses Considered as Agents and Introducers of New Lilies — Policy of Giving Such Houses Preferential Treatment and Granting Special Prices. ^ NOT long ago a manufacturer on receiving an inquiry for his goods from a concern in Peru wrote in reply, "We have taken this up with our New York exporter." What did this manufacturer expect woukl result ? What reason had he for thinking that the "New York exporter" in question would be able to get an order from the prospect in Peru? It happened that that New York house is not known as having any business relations in Peru. It is supposed to confine its opera- tions largely if not wholly to Australasia. Perfectly natural is the question in the mind of the manu- facturer first beginning to think about extending his export trade, "Why not turn all my export business over to a profes- sional export house and be done with it?" It would indeed be quite too good to be true were it possible thus to avoid all fur- ther attention and simply draw big dividends from the efforts of the professional exporter. But there is no royal road to suc- cess in the export trade any more than in domestic trade, cer- tainly not the proposed road. The effort in this chapter has been to treat with perfect im- partiality the vexed question of relations between manufacturer and export commission house. Both sides are presented. If condemnation of some practices of some of those houses seems severe, it is to be remembered that the Exporters' and Im- porters' Association of New York was formed by these very houses largely to correct abuses in the trade, and the reader 242 EXPORT COMMISSION HOUSES 243 must not overlook the equally emphatic approval here given other phases of their work. Numbers of them are large, rich, important — some of them indispensable in the nation's foreign trade. Their assistance and patronage are valuable elements in the success of most manufacturers in export tracking. The author himself was for years engaged in the export commission business. He has steadily fought the prejudice against these houses which undoubtedly exists among some manufacturers, has urged a fairer attitude towards them. But to cooperate with them, even to deal with them — intelligently — involves a thorough knowledge of their position and operations. Given that knowledge, the manufacturer should be able to establish his business with them on a profitable and advantageous basis. The value of export houses to a manufacturer must be neither exaggerated nor underrated — it must be fairly appraised from an intelligent appreciation of the circumstances in each indi- vidual case. We must ask ourselves what are these houses, how do they operate, what facilities do they offer us as a whole, what do individual houses offer? NUMBER AND IMPORTANCE OF EXPORT HOUSES According to the latest edition of the "Export Trade Direc- tory" there are in New York City alone 1,729 so-called export commission houses. More than 350 others are listed in New Orleans, San Francisco and many other American ports. Elimi- nating a few specialists, exporters devoted solel}^ to great staples like grain and cotton, there yet remains a large body of busi- ness concerns devoting themselves exclusively to the general export trade in all sorts of goods, depending on it alone for bread and butter. Similar houses exist in large numbers in other countries. In London there are 1,596 houses similarly classified, in Hamburg, before the war, 1,189 were so listed. Important Trade of Export Houses. — These American houses undoubtedly originated a large part of the enormous export trade which the United States enjoys to-day. Undoubtedly, too, they continue to handle the greater part of our existing trade. It was estimated before the development of munition and war supply exports that from six to twelve of these houses handled one quarter of the sum total of American exports. It has been 244 PRACTICAL EXPORTING said that one or tM'O houses control one-half of our whole trade with China. The head of one of the largest New York export houses has asserted that forty years ago these houses did 90 per cent, of the American export trade, that to-day they handle only 70 per cent., perhaps not over 60 per cent. Prominent men in the South American trade estimate that from 70 to 80 per cent, of that trade is still handled by export commission houses. A similar if not larger percentage of our exports to Australasia and South Africa is handled by such houses. It is probably true that up to the i^resent it has chiefly been these houses that have extended credit for American goods to impor- ters in Latin America and the Far East. Prejudice Against Export Houses. — An unwarranted preju- dice against these export houses exists in the minds of many American manufacturers. They seem to be considered by those who have not thoroughly comprehended their operations as parasites on our export trade, or, as expressed by an officer of one of the largest exporting concerns, a political as well as com- mercial power on the West Coast of South America, "The American manufacturer has somehow formed a notion that the exporter is something like a leech upon the factory. In his igno- rance of the facts the manufacturer even persuades himself that the exporter is exacting a tribute akin to blackmail and conse- ' quently is inimical and should be eliminated." On the other hand, there are many manufacturers disposed to exaggerate the importance of these houses or their necessity in the adequate extension of our trade in other lands. Un- doubtedly the truth, as usual, lies somewhere between these two extremes. Exporters as Middlemen. — Certainly the export houses are not the "whole thing." Probably the notable world-wide tendency toward the elimiuation of the middleman is often carried to too great lengths. The president of one of the large New York exporting houses, in a paper read before a conven- tion of the American Hardware Manufacturers' Association, de- clared: "The wholesale merchants have changed with the times and the exporters have done so, or certainly should have done so, as well. I do not see why you manufacturers should not be able to sell your own goods in this country over the head of EXPORT COMMISSION HOUSES 245 the jobber and become jobbers yourselves, and I do not see why you should not be able to do your own exporting over the head of the exporter and become exporters; but I know one thing, that the work of marketing the goods must be learned, must be carefully studied and cannot be accomplished without an in- vestment of brain, capital and expense, just the same as one or the other principle of the manufacturing process is nothing but a link in the chain of work from producer to consumer. The question for your consideration is whether you can run that sell- ing or exporting department at a less expenditure and with greater efficiency than it would cost you under the division of labor by handing over that work to another department, which, if you please, we may call the jobber exporter." It should be noted in passing that the speaker was here arguing for his own side of the question. We shall shortly have occasion to consider the possibilities of export houses as "export department." Export Commission Houses not Brokers. — ^leanwhile, the reader nuist be warned against a very frequent confusion of ideas in the minds of American manufacturers, at least a eon- fusion of terms in their references to houses now under dis- cussion. These export commission houses are not "brokers." They must not be confused with the manufacturers' combination export agents or "export managers," another large body of men who are notable in export circles in New York and some other cities, whose province we have already examined. The manu- facturers' export agent takes the place of a New York salesman for the factories which he represents in so far as the export trade is concerned. He cultivates the trade of the export com- mission houses. The export commission houses cultivate travle only in foreign countries. One of them in New York cannot and does not attempt to sell another New York house in the same category, no matter what agencies for American factories it may control. Wanamaker cannot cherish high hopes of suc- cess in trying to sell Marshall Field. They are not properly "brokers," although William Harris Douglas, of the important exporting house of Arkell & Douglas, has used that term sar- castically in saying, "The American exporter, that is the Amer- ican export commission house is no longer a merchant, no longer a commission house, he is simply a broker, an intermediary be- 246 PBACTICAL EXPORTING tween you (the American manufacturer) and the buyer abroad." The term export merchant or export commission merchant is commonly used in reference to these houses. As a matter of fact there are few of them which are properly to be called "merchants." First of all, we have to decide, therefore, just what are these 1,700 export houses in New York. EXPORT MERCHANTS A "merchant," in the old and preferable definition of the word, is a business house engaged in buying and selling goods for its own account in the oversea trade. Such were our early American export merchants. They used to buy quantities of goods, load them on board a ship and send them to some foreign market to be sold there to the best advantage possible, re-load- ing the vessel with foreign goods and bringing them home for sale here. The advent of the steamer, of quick mails and of instantaneous cable communication, long ago changed all such operations even in the wildest and most undeveloped quarters of the globe. Export merchants still exist but their operations are of quite a different character. Export Merchants in Europe. — In England, for example, there are great houses properly to be called export merchants who simplj^ loan their capital to importers in colonial or foreign markets. Such a British house, for example, decides to place £50,000 in South Africa. Certain importers who are thor- oughly well known to the principals are given varjdng credits — £5,000 to one, £10,000 to another, etc. These importers order from England such goods as they please, their bills are paid by the British export merchant but the latter does not interest him- self in the character or the source of the goods ordered. He simply restricts the amount of money which he is willi^ig to ad- vance to each customer who is obligated for such amount by in- terest bearing notes or other securities. Large Hamburg export merchants have done business in a little different fashion. Al- though they loaned money liberally in certain foreign markets, it was usually done in connection with export and import opera- tions and in exporting to their foreign customers they have virtually shipped their own goods, "neutral" goods bearing no marks of origin, that is, their customers have not been permitted EXPORT COMMISSION HOUSES 247 to know the actual manufacturers or other sources of the goods shipped to them. Export Merchants in the United States. — It is doubtful if there are more than a dozen American export merchants, prop- erh' so-called, in all the United States. There are buying offices here for foreign merchants but these we must, for the moment, disregard. Leaving out of consideration two prominent houses in the trade of the West Coast of South America, one hardware exporter who has been exceedingly important in European fields, one old and rich house which as banker works on lines similar to English and German houses, and a few minor concerns, who may properly be called export merchants, most of our Ameri- can exporters, if they operate to any extent as merchants, do so only in certain lines of goods which it has been found can only be profitably developed in a special and usually a limited market through carrj^ing stocks of those goods. A great dif- ference of opinion is manifested among New York exporters themselves as to whether export houses are properly to be called merch^ts. As to how some of these New York export houses themselves describe their operations we have recently had several declarations in public and in print which are worthy of note. Claim to Stock Goods.— We find, for example, William E. Peck, of the New York export firm headed by him, reported in the printed proceedings of the second National Foreign Trade Convention as having in the course of a speech said: "There seems to be a very great deal of misunderstanding about the functions or operations of a New York export house or shipping concern. There seems to be an idea that these houses only do a commission business. As a matter of fact nearly all of the large houses stock goods in the different cities where they have branches and sell from these stocks. In London, for instance, we have stocked goods since 1888. We do business there in the English way. AVe conform in every way to the English method of doing business." Differing- Points of View.— On the other hand, in an address before the Foreign Commerce class conducted by the West Side Y. M. C. A., of New York, Welding Ring, of the export and im- port house of Mailler & Quereau, interested largely in the Aus- tralian trade, and President of the American Exporters' and 248 PRACTICAL EXPORTING Importers' Association, a body composed exclusively of what are commonly known as export commission houses, declares in the printed report of his lecture, "One of the conditions in- sisted upon by our buyers in Australia and New Zealand is that a commission house shall not be interested in importing and sell- ing goods on its own account. They very rightly claim that both branches of the business cannot be conducted in harmony. It would not be fair for a large buyer or even a small one in Australia to get an order for anj^ line of goods, and particularly for specialties and then have the commission house order out a similar shipment and immediately be in competition with the parties from whom they received the order. The Australians are very sensitive on this point and they will not tolerate action of such nature. ' ' It will hardly be denied by the export houses themselves that only a very limited number of the 1,700 houses listed in New York as exporters carry any stocks of goods in any market where they do business. If one of them carries stocks of Ameri- can toys in London, or stocks of photographic and similar novel- ties at some center on the Continent of Europe, this is a special development of his trade and hardly suffices to justify the good old term "merchant." The exporter who carries toys in Lon- don does not also carry stocks of other goods, certainly not of the great commodities of commerce which should properly justify the assumption of the merchant title. Such a house is more fairly to be called a toy jobber — a sharp distinction in terms. AMERICAN OFFICES OF FOREIGN HOUSES Each passing year sees established at New York, or at some other convenient American port, more and more buying offices of foreign business houses. All of them are buyers of goods for export, but many of them are buying offices for certain in- dustrial enterprises such as railways, mines, sugar mills, etc., lo- cated in foreign countries. Perhaps one-quarter of the whole number represent actual buyers of general lines of merchandise, that is, represent large wholesale or even large retail foreign business houses, or in some cases foreign merchants, properly so described. Buyers Here for Local Enterprises. — The buying offices es- EXPORT COMMISSION HOUSES 249 tablished in the United States by foreign houses have in almost all cases merely followed the development of the business of such houses from beginnings of experience with American goods made in other fashion. It has been found desirable by these large customers for our wares to establish their own buying office here instead of attempting direct relations with manufacturers or suppliers at long range, or instead of employing export com- mission houses as buyers. When the purchases of American goods by a foreign house mount up to $100,000 or $200,000 a year, it is clear that if it costs the buyers say 2Vi> per cent, commission to have their re- quirements attended to in this country by outside parties then it becomes a question whether their business cannot be more satis- factorily and perhaps more economically carried on by sending to this country as buyer one of their own employees, whose sole interest will be the advantage of his principals. JMoreover, a few of the houses thus represented in the American market are both importers and exporters. They not only buy Ameri- can goods here but they ship to the United States foreign com- modities which their American offices dispose of to such profit as may be possible. These are instances of proper merchants. Buying Offices of Import and Export Merchants.— We find in New York such examples of British, French, Australian, Japa- nese and other nationalities. Japanese houses buy in the United States railway and engineering supplies and many other lines as well, but import into the American market Japanese silks, mattings and other native products. Houses of British nation- ality whose main business lies in quite other parts of the world maintain offices in New York for the purchase of American sup- plies, say, for their branches in the Orient, and for the sale here of similar Oriental products to those which the native Japanese houses sell. An example may be found in the New York establishment of a large house of British nationality whose business, however, lies in the Far East where a chain of houses is established in the principal ports of China and Japan. The New York branch of this English house has been a large importer of mattings and other Oriental products, and at the same time has been a large exporter of American cotton piece goods and of machinery of 250 . PRACTICAL EXPORTING various descriptions. It should be noted that houses of this sort also maintain their buying offices in London and in other important European commercial cities. Buying Houses of Local Specialists. — In addition to mer- chants, in the old fashioned acceptation of that term, like those just referred to, we have also in New York the buying offices for large foreign concerns doing a local wholesale, or wholesale and retail business abroad in certain definite lines. Some foreign department stores, for example, maintain buyers here ; some local importers of other specialized lines — agricultural imple- ments, furniture or hardware, for example. As a rule, such houses are strictly local. There are, however, examples of spe- cialized business houses which have establishments in several coun- tries, one for example doing business in machinery and agricul- tural implements in both Brazil and the Argentine Republic. Buyers Here Only Links in a Chain. — The nationality of these buyers of American goods is a matter of no importance at all. The head buyer in New York for a large British con- cern whose business lies in the Argentine Republic was for a long time a German. A big German house, whose business estab- lishments were all in the Far East, employed Englishmen as cotton experts in its New York office for the purchase of Ameri- can cotton goods. These buyers, whether Germans acting for English houses in South America, or whether Englishmen act- ing for German houses, were not sent here to the United States to do as little as possible in American goods. They were sent here to buy all the goods of our manufacture which their houses in any part of the world miglit regard as profitable lines tc handle. The same houses, as has been suggested, have also buj^- ing offices in England, very likely in France and, before the war, Germany also. The buyers in New York have monej'' and fame for themselves to make ; their effort is to increase the busi- ness of their principals in American goods, that is, increase their own business, as fast as possible but always on an advantageous basis. If it is a question of buying pumps for Argentina, the man- ager in New York for a Buenos Aires establishment will secure the best quotations possible in this country. At the same time, offices of the same house in London and in Continental Europe EXPORT COMMISSION HOUSES 251 will be securing quotations for similar kinds and grades of pumps. All offices know what the others are doing and the order ultimately goes to the manufacturer of no matter what nationality who makes the lowest offer or presents convincingly the greatest advantages for the goods to be supplied. THE EXPORT COMMISSION HOUSE The great bulk of the 1,729 export houses listed in the City of New York and of over 350 more listed in the Export Trade Directory as established at other American ports, are properly to be distinguished as export commission houses. It is well nigh impossible to give an accurate and comprehensive definition of this term "export commission house." Export Commission Business Defined. — The fact that such a house buys and pays for the goods which it orders from the manufacturer is misleading in the minds of many manufacturers. In its primitive sense the term export commission house applies to the American firm which simply executes orders received by it from foreign customers, charging the latter a certain rate of commission in return for acting for it as its representative in the United States. Nowadays, however, the operations of the ex- port commission houses are varied and very much mixed. Most of them do the bulk of their business on a commission basis. Some of them do a little as merchants, most of them do as much as they can as agents for specific American lines.^ The enormous foreign business carried on by many of these houses is not always appreciated. The manufacturer who does an export business of $100,000 a year may be very well pleased with himself. The manufacturer who has a total annual turn- 1 The head of a large New York export house has stated: "There is a difTerenee between exporter and exporter. We have those who work on antiquated lines, sit behind their office desks with nothing more than an office expenditure, wait for indents from their clients to buy wliat they ask for, charge a small commission for financing, and then are done with the business. There are exporters who are alive and progressive, who have their traveling men all over creation carrying extensive sets of samples. There are exporters who even carry stocks in different parts of the world and so to speak take the position of the manufacturer's foreign agent " This gentleman's own business, be it noted, is chiefly as a merchant; few of his confreres operate in the same fashion. "Indent" is the term often used in referring to commission house orders. 252 PRACTICAL EXPORTING over, domestic and foreign combined, of a million dollars a year is called a big house. There are scores of export houses which do a business of $100,000 a week, dozens having a monthly busi- ness of several million dollars exclusively in the export trade. However, it is a common mistake among manufacturers to re- gard any "exporter's" letter-head as the indication of a large concern. There are many of these exporters who are small and insignificant factors in the trade, many even of doubtful reputa- tion and credit standing. Advantages to Foreign Buyers. — A great many foreign buyers believe they find certain facilities in passing their orders (or indents, we may use the term without distinction) for Amer- ican goods through export commission houses, facilities which are worth to them the small commission charged by these houses. For example, take an Australian importer of Ameri- man hardware. Every few months he may have orders to place with, say, fifty different American manufacturers of sundry kinds of hardware. Instead of undertaking correspondence with fifty isolated manufacturers, the Australian house sends all fifty orders under one cover to that New York export com- mission house with which mutually satisfactory arrangements have been made. The orders are distributed by the commission house to the manufacturers, the goods collected together and shipped on one bill of lading; the commission house pays the fifty individual suppliers and finances the operation in one draft on the Australian house. The latter is relieved of the work and annoyance which would have been entailed by attempting direct relations with each of these fifty manufacturers and the conse- quent receipt of fifty different bills of lading, drafts, insurance documents, etc. The foreign buyer operating through an American export commission house relies on it frequently for obtaining new goods to the best advantage. It may even place the orders in blank to be executed by the American house according to its best judgment. Certain credit is usually extended by the com- mission house connections of foreign buyers. This, however, usually takes the form of acceptances of sixty- or ninety-day drafts which will be better understood when such financing is examined in a later chapter. However, in attempting to do EXPORT COMMISSION HOUSES 253 "business directly witli manufacturers, foreign buyers frequently encounter objections on tbeir part to similar terms, because many manufacturers are not familiar with international banking oper- ations. Real economies in freight charges are effected when an export house collects and ships on one bill of lading many small lots of goods from isolated manufacturers — often saving on the freight as much as or more than its charge for commission amounts to. Other advantages which foreign importers believe they find through entrusting purchases to export commission houses in- clude the responsibility which is assumed by the latter as a middleman, as to the character of the goods shipped, adequate packing and protection, etc. In most cases this responsibility resolves itself down to acting as intermediary here between buyer and manufacturer when complaint is made that the lat- ter has not properly made shipment. The exporters seldom ex- amine shipments, rarely if ever unpack cases or check contents, usually never see the cases they ship. They rely absolutely on the manufacturers from whom they buy. Again, export com- mission houses offer facilities for quoting on complete plants when individual manufacturers each make only a part, perhaps one out of many required parts. In Varying Favor Abroad. — Commission houses, however, are not universally used or approved of. The ambition to do away with the middleman is much more notable in certain parts of the world than in others. In normal times it is especially characteristic of all of Europe. Buyers there, accustomed for the most part to doing business direct with factories, often ob- ject strenuously to a middleman of any description whatever, and only a limited number of American export commission houses have business of any importance in Europe, the sole ex- ceptions being either in great staple lines, like cotton or grain, or in certain specialities for which the greater part of a business has been worked up as jobbers. It is also characteristic of houses in other parts of the world who are just beginning to import their own goods that an effort is made to disregard the export commission house and establish direct relations with manufacturers. This is true of many con- cerns in Latin America. Sometimes they are of too small 254 PRACTICAL EXFOETING caliber to justify direct individual relations and undoubtedly the greater part of this trade should preferably remain in the hands of competent exporters. Almost all of the Central American trade is a business in the exchange of products. Buyers in those republics consign shipments of coffee, hides, ma- hogany, " cocoa, chicle, etc., to their agents in the United States, and the latter buy and ship to their Central American connec- tions such American supplies as they require. Comparatively little of this trade can be or ought to be done direct from manu- facturer to local buyer. In general, it may be said that the fad for ''direct relations" on the part of many importers in foreign countries has extended too far, is cherished by concerns of entirely too limited impor- tance, located at interior points of difficult access and com- munication. Such buyers are likely ultimately to wake up to the extra costs involved in handling small shipments indi- vidually. The strongest hold of the export commission houses is un- doubtedly on the trade of Australasia, South Africa and the Orient. It is characteristic of most importers in these parts of the world that by preference their orders are placed through commission houses. Proposals by manufacturers for direct re- lations will rather more frequently than not be declined by such importers. It may not be too much to say that 90 per cent, of the general trade of the United States with South Africa and Australia is carried on through the commission middleman. Advantages to American Manufacturers. — From the point of view of the American manufacturer, dealing with a New York export commission house is apparently like relations with any other New York customer. In the case of an export order all risk and responsibility seems to be avoided. One receives an order from a New York exporter, fills it, collects his money just as he would from Wanamaker's or Macy's and it's all over. Self-evidently this is a narrow, short-sighted policy even were it an exact statement of fact, which is not the case. No manu- facturer, disposed to push for all the business he can possibly get, can afford thus to abandon his goods. He must follow them, and the lead they give. However, a great deal of de- EXPORT COMMISSION HOUSES 2E35 tailed attention is undoubtedly avoided when export orders are received through commission houses. Whatever else export houses may offer to manufacturers, al- most all of them have customers engaged in every branch of trade and industry in one or more foreign markets, to whom they can forward a manufacturer's catalogue and price list. They may also write special letters urging orders — when in- fluenced by friendship fur the manufacturer or duly impressed by the novelty of his product. This may be no small advantage, even though the decision as to ordering must come frpm the other end, from the exporter's customer. With their ordinary customers the export houses cannot presume too far or take too many liberties. When visiting the United States customers may be introduced to favored manufacturers, a distinct advantage. As Foreign Trade Advisers. — The advice of export houses is often of assistance, but in this regard note what William C. Downs, when United States Commercial Attache, has to say re- garding this phase of doing business with commission houses. ]\Ir. Downs was for many years connected with prominent New York export houses. "It is hardly to be expected that the export commission merchant will be very cordial and eager to impart information to a manufacturer who evidently intends later on to go over his head and transact a direct business. It is, therefore, a question of ethics whether a manufacturer should use the export commission merchant to help him to a solution of his first problem, if he does not intend to call upon him for assistance in the handling of his second and third prob- lems. This he must decide when he has studied them also and formulated his complete plan of campaign." Frank Relations Urged. — Going on to develop his argument from the export commission house standpoint, Mr. Downs con- tinued (St. Louis Convention) : "There is much need for closer cooperation between the manufacturers and the commis- sion merchants, who always have been and still are the pioneers and who will still handle a very considerable percentage of our export trade. They must be the main reliance especially of the smaller manufacturer in introducing his goods into a for- eign market. They will gladly distribute his catalogues and 256 PRACTICAL EXPORTING samples, not indiscriminately, but among possible buyers, will write special letters in the language of the country for which they are intended, describing and recommending his goods, will give him the services of their local agents and of their travelers, but they expect in return that the manufacturer will play fair and protect them in the business that may result. "Let the manufacturer who does not wish to conduct and finance his own foreign selling campaign inform himself thor- oughly as to which are the best equipped and best represented commission houses operating in the territory which he wishes to enter and lay out with them a selling campaign that shall be mutually satisfactory. He must remember that the fixed ex- penses of such organizations are very heavy indeed, and that they depend on the commissions paid them by their clients on a large volume of business to cover these expenses, compensate the risk they run and earn a reasonable profit on their big capital in- vestment. The manufacturer who wishes to sell his goods through the commission houses makes a serious mistake in forc- ing them to compete too strenuously against each other in the sale of small lines, as finally the selling commission is reduced to a point where it is of interest to no one actively to push the line. Hence the need of intelligent cooperation." Their Case Presented by Exporters. — Other arguments for the advantages of working with or through export commission houses are advanced by C. A. Richards, formerly manager of the Export Department of Bowring & Co., of New York, dur- ing the war Chairman of the Contraband Committee, War Trade Board, and afterward with the American International Corpora- tion. In a lecture before a class in exporting conducted b}^ the Extramural Division of the School of Commerce of New York University he observed: "The commission house has in its em- ploy experts in buying, shipping, insuring and financing, and these men can naturally work more efficiently and more cheaply than the manufacturer could by employing his own export de- partment. In addition the commission houses nearly always give credits and this alone makes it possible for manufacturers, who could not otherwise finance their export shipments, to do an export trade. . . . After a manufacturer has lost a few thousands dollars in a vain attempt to do business without their aid, he is EXPORT COMMISSION HOUSES 257 very likely to swing around the other way and feel that the export commission house alone is necessary for his success. This is also incorrect. "For a manufacturer to build up and maintain a satisfactory export business he should not rel}' entirely on an export com- mission house. He should judiciously advertise in reputable foreign trade magazines and he should send his own salesmen abroad whenever possible. . . . Because I urge a manufacturer to create a demand for his goods himself I am not arguing that he should do more than create a demand. When the importer abroad is ready to buy then is the time the export commission house should be employed. . . . Most of the larger export com- mission houses maintain branches at certain large foreign centers and through these branches or their agents they can generally tell the manufacturer whether his line is one that could be handled profitably in that particular market and give him considerable preliminary information as to the possibility of making a campaign there." The foregoing are among the fairest and most moderate of the claims advanced by export commission houses. The manu- facturer should strive to examine them justly and impartially, to appraise at its true value the advantage to himself of com- mission house cooperation. It is evidently important that we must understand the whole scheme of the operations of houses of the description we now have in mind. ORGANIZATION OF EXPORT COMMISSION HOUSES Possibly the first necessity of a concern establishing itself as an export commission house is to secure foreign connections, to persuade foreign buyers to entrust to it the execution of their orders for American goods. Perhaps next comes the necessity for a wide and general knowledge of American goods which are largely sold for export, sources of supply and ruling prices. Coupled with this must of course be a thorough acquaintance with export practices, routine work, shipping, etc. Perhaps no better description of the routine in the office of an export commission house can be quoted than that of i\Ir. Richards, in- cluded in the lecture just mentioned: Basis of Relations with Foreign Clients. — "The bulk of the 258 PRACTICAL EXPOBTING business done by the export commission house is handled as follows: Say, for example, a hardware importer in Australia makes up a -list of goods which he requires from this market, and these indents, as they are generally called, are sent to the export commission house in New York to whom we will refer hereafter for the sake of brevity as the exporter, wdth the un- derstanding that the exporter will buy and ship the goods as the agent of the importer, charging the importer a commission on the disbursements. The general understanding is further that he will buy at the lowest cash export prices and give the importer the benefit of all the trade and cash discounts he can get. The rate of commission charged varies in different mar- kets and varies on different commodities. On large bulk lines running into considerable money it is generally only 1 per cent. On the ordinary assorted lines of hardware or machinery, 2^2 per cent., and on other lines as high as 5 per cent. Rarely does the commission exceed this. How Orders Are Handled by Export Houses. — "Let us take up step by step the handling of an order received from abroad, until the goods have been shipped and paid for. We will as- sume it comes from a wholesale hardware merchant in Australia and is an indent consisting of several pages of assorted hard- ware lines. In some instances the buyer has specified the name of the maker whose goods he wants bought. On other items he simply specifies the goods without giving the name of any maker, leaving the purchase entirely to the judgment of the buA'er in New York. In some instances prices may -be given either as a limit or as a guide to the buyer. "The first question to be considered on receipt of the order is, How does the importer propose to pay for the goods and the freight which must be generally prepaid?, etc., and it is there- fore necessary before putting the order into work to have an approximate idea of its value and the credit demanded, for the bnlk of the importers in foreign countries expect to obtain credit of from thirty to ninety days. "In a well established export commission house this question of credit, on the bulk of the orders received through tlie mails from its regular customers, is a simple matter to decide because the commission house often deals with the same firm year in and |3 M M M M O) o CO 05 to p. O to s « 3 3 (9 3 > CO =«8 =4N =«3 =^ =#a CQ 05 W JO ct- c«- O a P* y o X 63 c»« td <» A H » - 3 cl- S P p w O B a *< tn 0» B (D H m 3 s m B (D H IS • rof- f CD z Z o p 2 z 5 I/) 3 Hi = Z I «) ~ H 3 wo H Z u Z e i- u S P- y O H- 69 3 &« w H Cu e »i 3. 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A Uelbourne N.mt„f,.m 26 up. TO Petropolie Hardnare Corporation, PetropoliB, Ohio. BO>VKIISG & CO. ^ IT BATTERY PLACE NE^v YORK. September 1 srnp AT ONCE TO New York 15 dozen "I X L" Apple Parer3 LeBB 33 l/Zi 20 " "Honparell" #5 Meat Choppers 3 " "Nonpareil" #7 " " Less 85^ 4 7^^ 3 n 'Perfect" Cherry Stonera Lees 33 1/3^ 1 only "Unexcelled" #208 Coffee Hill 6 " " #155 " MillB Less 33 1/35? 1 dozen "Victory" #907 Coffee MillB Lees 25^ a groBB "Superior" Can Openers Less 10^ 1 groBB "Best" Lemon Squeezers 1 dozen "Newark" Cork Pullers #3 3 gross "Princess" Glass Cutters 100 sets No. GG Nickeled Sad Irons at $1.25 each at 65.00 at 15.00 at 11.10 per doz at 7.50 per gross at 17.60 per gross at 28.10 per doz. at 4.10 per gross at .83 per sat Form 2 — Export Commission House Order. c r INSTRUCTIONS, TERMS AND CONDITIONS PACKING Good, to be cloidy »nd .«urely packed for E.porl. in Le..t Cut EXPRESS PACKAGES York'^cu/"'"'' '*''"''^ "'' "^'*" """' *" '"' '" **"' ^"'''°' NG FREIGHT CHARGES , Bowring & Co.. 30 Wmi Street. Ne«p side pBckige. iDd on RfliIro«d Bill of Muil in ell C8ie« be Prepaid lo New York. Even ihou^h your price* may be i. o. b. New Y( invoice mud (how the pricet at your factory sad cartage and the Ireighl to New York mud ■bo«ra in addition BILLS OF UDING Sit imply Ih. c pcrc. eoiage.l.led. PRINTING MAHER DESCRIPTION OF GOODS b,„1° An primed or Bdverii.ing materifl! encloied wiih goodi mud be apecified on invoice and net weight of aame Supplier, mud be prepared lo pay ihe eudom duly of 6d. per ""lb. in Audr8!i''a and id, per lb. in New land and 2d. per lb in Souih Africa on any eucb advcriidog matter, unleit lame ii acked for on our order. I COUNTRY OF ORIGIN United Siaiet. If il appeera any name, trade-mark, brand, name of plat by the country of origin, i. e., "Made in United Stat :d Stale* of America.'^ are iufficient after the name o mplied with, gooda are liable to confiication by the Ai PRISON MADE GOODS |^P^Mrt^|^^^21rSrl°i^Hi?^ Trade and CuKomt, Melbourne Statutory Rulea, 1910. No. 17. Copies oi - " - -■•'-•-. - - - '" id Labor. Wa.h; 17 A-Audralia Tariff Series 17 B— Audralio, May, 1910. egulationi dated March 14, 1910. iuued by ihe Dt; " ■ ' these tegulaiioDi can be obi nglon. D. C- Tariff Serie* 17 A-Audralia. Oct.. 1902. Manufacturers guarantee in accepting this order» that the prices they will charge are their lowest cash Export Prices and that they have no arrangements covering the market to which these goods are to he shipped which prevent this. Goods shipped contrary to terms of this order at your risk. V, c > 90 2 O 2 E^ 2 « O > •»1 > m p 5 5 so •T? ri p^ ^ s S3 2 « i O N »'. <* 5 SL rt g C«3 > 3 c rr C1.-0 ° »'2.>'S 3=32. D. 5 «5 a rt 21 « *-l •"• CO o a. 5- ° §• CO-o n ^ o B> o era £ S^3 ^ O (» :;. -••o f* — o la O o -. '* 2 3 3-a 2. rt ^ o * 2 2 3 o o 2 V; C 3 O- C O 3 5. g.3 » ar tt c O S-^-o o < ^ tt a. S 2. ^ s-^» g ^ "1 1^ 00 rt n "V -1 — „ rt cr c_ r> c ' "^ 5i 2.3 a> C o i 3 ? -.»■'" GO -o o t» 5 « '* ° ° 3 CD pr CL» 3 '^^ 3 3 o o- c _ 00, S.2: ft n S" o O fi) n n a- a 2 ft o cro. w M ;? ^ = "*> r. 2° = ^-° ^ S = "[2: ? o § -o re 2 s is "^ F^ » >1 are a-T a 00.' 73 3 CO re =; 3 — m O GO ca=r — o o g- -"* ta ^ .3 S » » 2 9 2 A O 9 23 -- ~ ar — 2.0 o < o re ■^ » GO p^ GO re ■» *i re 00 n » iS ga: 2 <* re < O 2. Zn re re • ^S" si c • S. o o** re cr li 5° &«* 3*2 Dm o <» 3 JO. 2 <■ re 3 = n O o ? 3 re S o S Q." 00 O 00 Q o o n o O o o EXPORT COMMISSION HOUSES 261 department, which picks out from its files the corresponding manufacturers' bills. These bills are then turned over to the invoicing department, which starts to make up its. various docu- ments, referring to the card index for the clients' instructions as to the way the draft is to be drawn and the way the insur- ance and other matters are to be attended to. "There are three or four operations going on at the same time the minute a steamer has stopped taking cargo and the exporter is read}' to make up his final papers. "The shipping clerk has to see that the freight rates charged are correct, also that the figuring, etc., is 0. K., and to then see that payment is made to the steamship company promptly, after which his work in connection with that particular ship- ment is finished. Invoicing Purchases on Commission. — "AYhere goods are bought on commission, and this is the form of export in which we are more particularly dealing, it is customary for the ex- porter to send with his own invoice a copy of the manufac- turers ' bills to him, and if this is done the exporter 's invoice con- sists of very little more than a tabulated statement showing the shipping marks, packages, name of manufacturers, etc. "These are totaled, and then the various charges for cartage, freight, insurance, etc., are added on and the exporter's commis- sion charged on the total. In some countries where it is not the practice of the exporter to send out the manufacturers' original bills, the entire bill of the manufacturer is copied of? by the exporter on his own headings and then the charges added at the end. "When the invoice is fully made up he then has to attend to the insurance and the next work in connection with the ship- ment is that of the finance department." Mainstay of Commission House Business. — Most export com- mission houses depend for the bulk of their business on trade in certain staple commodities which although sold on a close mar- gin are yet so much easier to handle that business in them in preferred to orders for a great variety of assorted manufac- tured goods. This was confessed by "William C. Downs, at that time engaged in the export commission business, who wrote in the Quarterly Journal of Economics, of Harvard University, in 262 PRACTICAL EXPORTING regard to commission houses engaged in the Latin American trade: "The field narrows for the commission merchant. It is a serious question whether under the present method of trade he can afford to handle and finance the thousand and one articles not worthy of specification that go to make up 45 per cent, of our entire exports, if his trade is limited to them by the elimination Of the bulk or staple articles which require little labor to sell and mount quickly in value. Up to the pres- ent time the commission merchant has earned on the large turn- over in staple articles, sold in large quantities, sufficient to en- able him to cover his general running expenses and accept and execute orders for general merchandise on the same basis of profit or commission as the bulk goods. It does not require any more labor or time to secure an order for 10,000 cases of kerosene valued at $10,000 or .$11,000 than it does to take an order for 500 dozen of padlocks worth only $500. In the first case the commission merchant might earn $250, in the second case only $12.50. In order to gain a sufficient turn-over in general merchandise sold in small quantities he would be obliged to increase largely his selling force and also his clerical staff, as the detailed work of handling such business is enor- mous. Such expansion would involve a great increase in expen- diture which could not be undertaken under the prevailing per- centage of profit." The preference of the commission houses for bulk business will be appreciated by many a manufacturer by a consideration of what an order for, say, $25,000 worth of his goods may in- volve in the way of clerical labor, number of items, complexity of description, sizes, etc., etc. $25,000 worth of assorted hard- ware, for example, would in most cases involve many order pages filled with details. On the other hand, $25,000 worth of cotton piece-goods, perhaps for China, would, as sold by the ex- porter, involve only an exchange of cablegrams, a single line of an order form and a single entry in the books. The commis- sion house's profit on $25,000 worth of hardware would not, at most, be over $625. If the commission on a similar amount of cotton piece goods were only one-third as much the commis- sion house would probably regard the latter transaction as not EXPORT COMMISSION HOUSES 263 only more desirable but as more profitable, because of the less labor involved and the minimum risk of mistake, as well as minimum credit and other risks. EXPORT HOUSES AS BUYERS AND SHIPPERS It is as buyer and shipper of goods that the export commis- sion house is usually first introduced to manufacturers. A re- quest is received for low^est export prices, then along comes an order "for export" with detailed instructions. Highly agree- able this. Why not get more of such business? Where do these orders come from? Do they originate in New York or where ? Origin of Order. — Some export houses, by no means all, will buy for their own account small sample orders of new goods, after eflfective solicitation. Such samples will be sent out — and invoiced — to branches or intimately allied customers, as samples. No such houses buy large quantities of any kind of goods until their foreign connections — customers or own branch houses — have advised or instructed such purchases. A large proportion of the orders for manufactured goods received by these houses from foreign buyers has, nowadays, actually been originated by the efforts of manufacturers themselves, usually, indeed, through efforts entirely unknown to the exporter. Ev- ery mail from foreign countries brings to export commission houses orders for goods made by manufacturers of whom tlhes© houses have never before heard, whose very addresses have to to be ferreted out with some difficulty. On the other hand, the manufacturer who receives orders from these houses rarely knows the name of the actual foreign buyer, sometimes does not even know the country for which the goods are destined. The Profession of Export Buyer. — In large export commis- sion houses there is sometimes one chief buyer by whom all orders are placed. Sometimes the heads of several different de- partments place their own orders, independently one of an- other. At any rate, in most large houses there are several more or less independent departments doing business with different foreign territories, or sometimes specialized according to the nature of the business transacted, for example, engineering. 264 PRACTICAL EXPORTING chemicals, etc., and the manufacturer's representative who so- licits business from these concerns finds it necessary to see and to know all these heads of departments. That personal acquaintance of the seller with the heads of the departments and buyers is highly desirable on many ac- counts; for example, because open orders are sometimes re- ceived from abroad which do not specify particular manufac- turers from whom the supplies must be obtained but leave the purchase to the judgment of the exporter. This, however, is not the rule, for doubtless eight or nine out of ten orders received name the special goods and their manufacturer which alone will be acceptable to the foreign buyer. None the less, the personal element in the export commission house is an important matter to the salesman soliciting this business. The reputation, salary, perhaps very position of the buyers in these houses depend on the individual's knowledge of sources of supply and competing prices, and his shrewdness in buying ad- vantageously. Strenuous efforts to secure the lowest quotations are therefore the rule. The temptation may be strong some- times to get them through misrepresentation of facts, for exam- ple, as to country of destination. As an illustration, take this actual ease which is by no means exceptional : If an export house has reason to believe that a manufacturer's goods for a certain foreign country from which an order has been received are controlled by an exclusive agency in or for that country, quotations will be solicited by the exporter nominally for ship- ment to some other country where it is not thought that any agency arrangements of the manufacturer will interfere with naming the lowest possible prices. Protecting Agents While Selling Exporters. — The last sen- tence introduces a problem that puzzles many a manufacturer, old as well as new in export experience: How protect exclu- sive agents in foreign markets, yet keep the good will and the trade of the export commission houses — for other if not for the same territories? It goes without saying that no export house will Be unreservedly delighted to learn of any exclusive foreign agency — unless the exporter controls it himself. The establish- ment of such connections in other lands is bound sooner or later to restrict the volume of business of the export commission man, EXPORT COMMISSION HOUSES 265 cut down his prestige as a buyer, if not his profits, probably force him to an annoying, perhaps fruitless search for a substi- tute, and involve efforts of similar description to get that sub- stitute accepted. Manufacturers, therefore, often show some timidity in acknowledging to export houses the existence of foreign agencies. This is a mistake. The manufacturer can- not perch on two stools at the same time. If he has an exclusive agency in any foreign market he must absolutely protect that agent. Since it is usually acknowledged that the route to the largest possible export trade lies in the establishment of the best obtainable agencies in large markets, it is sometimes thought that business with export commission houses must be abandoned. But this result need not invariably follow. An effort is sometimes made to straddle the horns of the dilemma by providing in contracts for exclusive agencies for certain territories that a commission will be paid on all orders received from the territories in question through no matter what .channels — excepting only where orders come through New York exporters when destination of the goods is unknown. This is not likely to be satisfactory to foreign agents of experience. Commission houses have been known to supply goods supposed to be exclusively controlled at much less than agents could offer — even at cost to themselves. Manufacturers have been known suddenly to become deaf and blind when an order has been ten- dered by a good exporter, and forget to enquire where the goods were going. No agent of the desirable description will or should be contented with such a contract. If he's worth having, he's worth protecting — and the protection should b'e real, not a sham. For the manufacturer whose goods are controlled by certain exclusive agents there is but one course to follow with the com- mission houses: He must accept no orders whose destination is not specified. If he finds that a commission house has deceived him in stating destination of an order he should not mince words in expressing his sentiments to the offender and in reporting the facts to the Exporters' and Importers' Association and other- wise assuring them reasonably effective publicity. ^Meanwhile the exclusive agent should receive his usual commission — and an apology. It is not rare that a commission house when tendering an 266 PRACTICAL EXPORTING order is asked as to country and port of destination, even name of buyer. Several important manufacturers will consider no orders without these particulars, reserving their rights to accept or decline, even to vary prices at which orders will be filled ac- cording to circumstances indicated by such information. These manufacturers have succeeded in so firmly entrenching their lines that the exporters are forced to do business as they dictate. It should be the aim of every manufacturer so to establish his goods that only with the greatest difficulty can anything else be made to supplant them. The manufacturers just referred to, while insisting upon the control of their own export business, manage to maintain friendly relations with the export houses. They insist that their policies be recognized. They point out the uselessness of opposition, the possible advantage of cooperation. If they have absolutely to decline an order from one source, it is done tactfully. If another is accepted but only at an unusu- ally high price, it is frankly explained that an agent must re- ceive his commission, that various contracts cover varying condi- tions. If the exporter is recalcitrant and refuses peremptorily to disclose the name of his customers, the manufacturer is usually able from sundry indications his quick mind has noted to hazard a shrewd guess as to where the goods are wanted — and a line to the agent on the ground will probably bring the self-same order through some other channel. Thus it is really the manufacturer who has the whip hand over the commission house — and he should not surrender his advantage. It may happen that a commission house has itself been made exclusive agent for a line in a certain territory, but that orders tendered by the same house for another territory may have to be refused. The heads of all large commission houses will at once recognize a manufacturer's position, even if underlings in the same houses take an obnoxious stand. Frank- ness, tact, firmness, will almost always result in the continuance of friendly relations between manufacturer and exporter. In- deed the manufacturer may often suggest to his foreign agents the propriety of submitting some if not all orders through cer- tain commission houses whom it is wished especially to favor. All of these features of business may be effectively impressed on the export houses. EXPORT COMMISSION HOUSES 267 Execution of Commission House Orders. — In principle the export commission house is the manufacturer's customer. It is only the instructions regarding the making and marking of the goods and their shipment, as given by the exporter, which have to be followed by the manufacturer. However, the latter is by no means relieved of the necessity of giving special and intelli- gent attention to these orders. The goods must be made and packed especially for export and many another detail must re- ceive precisely the same attention as though the manufacturer himself were to do the actual export shipping. Invoices for Australia and some other markets must be prepared and attested by the manufacturer with all the formalities and peculiarities required in the case of any shipment to such markets, even though they are forwarded through and financed by the New York export house. AS AGENTS OR INTRODUCERS OF NEW GOODS To the American manufacturer ambitious for more export business, the functions of the export houses as possible foreign agents for his goods seem most interesting and important ; their facilities and abilities for introducing new articles or lines seem questions of chief moment. The manufacturer is perhaps quite sure to think, "Here is a house which does nothing but export; it ships large quantities of goods. It must know all about for- eign trading, must have a lot of customers in foreign countries. Surely it can do a big business in my line." The growth of the practice of acting as foreign sales agents for manufacturers in one or in many markets is one of the most notable features of export commission house practice to-day. It seems to have been developed, partly in order to forestall the direct efforts of manu- facturers, but chiefly no doubt in the hope of adding to the rather meager profits of these houses from the straight commis- sions paid by their foreign customers. Conflict in Functions of Export Houses. — The very basis of export commission business is, as we have seen, the position of such a house as buyer for foreign merchants. Such a buyer, it would seem, must be supposedly independent and devoted to securing for his foreign clients the goods they order on terms most advantageous to them. 268 PRACTICAL EXPOBTING As the special agent for an American manufacturer endeavor ing to promote the sale of a particular line in which the export - commission house is obviously interested, presumably because more money is made on it than from commissions paid by foreign customers on general orders, the commission house is apparently trying to maintain under the same roof two distinctly opposed interests. It is possible, perhaps, to carry on both operations satisfac- torily at the same time. The export houses invariably claim it is so. However, it is notable that some of these houses apparently recognize the difficulty of harmonizing their functions as inde- pendent buyers and as special agents for particular lines by operating in foreign markets under different firm or company styles — executing orders on commission as one concern and pre- senting special samples and urging particular goods under an- other style. Too much emphasis should not be laid upon this apparent conflict of functions, for it is so common as to be the rule with British and other European exporters as well as American. FOREIGN AGENTS OF COMMISSION HOUSES Most of the leading export commission houses maintain cer- tain branch houses or employ local agents in foreign markets, or send out their own traveling salesmen from this country. For what purpose ? First, to keep in more intimate touch with markets and customers, to watch conditions, credits, etc., and extend their circle of customers when possible. Second, as agents fur the introduction of new lines. As such agents, however, they may operate in two different ways. Their interests may be general or impersonal, that is, an effort to bring to the attention of buyers who entrust them with the execution of their orders for American goods of all sorts, the advantages of other things made in this countr}' which cus- tomers have not previously handled, purchases of which, if buyers can be induced to take them up, will add to the total volume of the business and hence of the profits of the commission house. Or, as agents, the foreign connections of the commission houses on tlie other hand may interest themselves in special lines for EXPORT COMMISSION HOUSES 269 which exceptionally profitable agency arrangements have been concluded with manufacturers. Commission Houses' Branches Abroad. — No American, Brit- ish, or any other professional export house has its own foreign branch establishments everywhere. Such a house may establish branch offices in certain special markets where the growth or conditions of business may have made that proceeding desirable. Again, a few houses may have a number of foreign branches devoted to operations in specialized lines. It is to be noted, however, that some large export houses have no foreign branches. In some foreign markets a branch may be thought necessary in order the better to handle imports for incompetent customers unfamiliar with or not equipped for importing formalities. Sometimes such branches are necessary because of the specula- tive character of a good deal of the business carried on. Some such considerations may, for example, apply to certain kinds of business done by export houses in the markets of the Far East. Commission Business Varies with Territories. — It is always to be remembered that the character of the business done by any general export commission house varies radically according to the territories in which such a house operates. In one foreign market buyers jvho entrust their orders to a certain export com- mis'sion house may almost exclusively be interested in groceries and provisions. In another foreign market it may happen, through chance or the force of circumstances, that buyers who patronize the same export commission house are for the most part engaged in the hardware business. Because an export com- mission house has two or three, or eight or ten, foreign offices it does not by any means follow that the business done bj^ each of those foreign offices is identical, or that the business of one is comparable in character or volume to the business of another. A certain large New York export house has branches in South Africa and Australia. In South Africa it represents a large American automobile manufacturer and its business nowadays is largely confined to that popular car, and to accessories and allied lines. However, the New York house in question does not control the agency for the same motor car for Australia, and as 8 matter of faef its branch in Australia does little or nothing in 270 PRACTICAL EXPOBTING automobiles, but is engaged in an entirely different kind of busi- ness. Another prominent New York exporter has branches in Shanghai, China; Havana, Cuba; Buenos Aires, Argentine Re- public; and Sydney, Australia. In Shanghai its business is largely in the way of cotton piece goods; the Havana business consists of coal and steel; in Buenos Aires it is industrial and. agricultural machinery; in Sydney, boots and shoes, hardware, turpentine and general lines. It would appear, therefore, that in appraising the value of an export commission house's services in any connection or in any direction, something more is neces- sary than a reference to the rating of the house in the commer- cial agency books. Foreign Branch Manager Supreme. — The manufacturer has further to consider that the manager of a foreign branch of an American export commission house is supreme in his field. He has not been entrusted with the great responsibility involved in the management of such a branch unless his principals have been prepared to rely upon his judgment and in general abide by his decisions as a,ffecting business in the field under his jurisdiction. His New York headquarters can do little more than urge and advise him. They cannot impose upon him the sale of goods in which he is not interested, they can hardly even dictate his policy in operating the branch for which he is re- sponsible. As a matter of fact the New York headquarters can do little more than write letters as to the general conduct of business, even though the discharge or recall of the foreign manager, in case of necessity, lies in its power. Travelers for Export Houses. — The traveling salesman for an export commission house is the "combination" salesman in the most extreme sense. He can and usually does carry samples, a lot of them, from brooms to motor cars, padlocks and hams, patent medicines and safety pins, cotton goods and leather belting, jewelry and boots and shoes. These salesmen can and do get business in most lines that are saleable at all in the markets visited, but in principle this sort of representation is a totally insufficient introduction for any special individual line, particularly so if the manufacturer has been induced to contribute to the expenses of such a representative's trip. EXPORT COMMISSION HOUSES 271 Very especially is it to be doubted if any representative of an export commission house is able to do even partial justice to lines requiring considerable technical knowledge. In an address before the American Hardware Manufac- turers' Association already quoted, the head of a large export house who perhaps better than any other man in the trade is in position to speak on this subject, offered this advice to manufac- turers: "I do not deny that there are some manufacturers among you who produce lines of goods that need special treat- ment and are of such a unique character or technically com- plicated that it needs other than every day business education to introduce and sell them, such as machinery or technical lines in general. I do not believe the ordinary export merchant is capable of doing justice to a manufacturer who produces any- thing in this line of goods. It needs some one from the factory with the deep knowledge that the article requires to lay the foundation for that kind of business in foreign countries. But b}^ admitting this I do not admit that the exporter could not offer a helping hand and still play an important part in fur- ther development." In this connection Welding Eing, whose firm exports chiefly to Australasia, has remarked: "There are very many advan- tages in conducting business through the medium of a commis- sion house. Of necessity, such houses are compelled to have their branches in the larger cities of Australasia and in addition their regular agents at other ports and their traveling repre- sentatives who visit the smaller towns at regular periods. By means of these agencies they become thoroughly acquainted with their buyers, know their clients, how to approach them and the class of goods they rec^uire as well as the volume of sales that can be effected. . . . On the other hand, in dealing with large importers it may be a question of whether the commission house can put its knowledge and views before such a buyer with sufficient clearness to warrant his taking up a large quantity of goods and stocking them for general trade." Also note the following from John F. Fowler, second vice- president of W. R. Grace & Co.: "The manufacturer, par- ticularly of specialties or machinery lines, should also send his experienced men to study the foreign markets. They should 272 PRACTICAL EXPORTING be technically familiar with their wares, preferably combining a practical factory knowledge of them. These missionaries can inaugurate business if their lines are feasible ones. The busi- ness initiated by a special traveler can be followed up by the exporter's local representative without further expense to the manufacturer, if reasonable business pursuit will suffice for this ; but if it is a house-to-house specialty, or an article similarly demanding much time and perhaps propaganda expense, the merchant could not be expected to devote so much energy to it. That is a case for the special man." Relative Importance of Exporters in Foreig-n Markets. — The varying character of the trade of the exjjort commission houses in different markets has just been explained. It is nec- essary also for manufacturers to differentiate these houses on the basis of their varying importance in the trade of different markets where they may be doing business. One export house may be "top of the heap" in one foreign country, but the same house may rank only fifth or tenth among American houses do- ing business in another foreign market. This warning should be committed to memory by every manufacturer who does busi- ness with these concerns. No one export house does business all over the world, no one export house has equal facilities in every market where it does operate. sThe absurdity of granting export agencies to a New York house for the whole world or for markets where no business in similar or allied goods is actually carried on, is evident. The manufacturer who may contemplate extending ' agencies to houses of this character must learn what are the actual facilities of the leading houses, relating to his special goods, in each mar- ket where each operates. He will not find it difficult to learn about the character of the business carried on by each concern under consideration. His first recourse will naturally be cross examination of the firm by whom or to whom agency arrange- ments are proposed. However, since the personality of for- eign resident managers of branch houses and of foreign travel- ing men is so important an element in the probable success of agency arrangements, it is highly desirable to make the per- sonal acquaintance of such representatives whenever possible to do so. As bearing out the writer's position as above set EXPORT COMMISSION HOUSES 273 forth, note the following from a highly successful export man- ager, C. A. Richards of New York : "Don't make the mistake of thinking that because an ex- port commission house looks busy and has a large trade that they are the people to handle your goods in every market. There is no commission house in New York to-day who stands at the head of the business in every market. Each commission house has from one to six markets where they do the bulk of their business and where they stand among those at the top of the trade, and certain commission houses have for years spe- cialized in business on the Continent and know nothing about South America, others have specialized in English Colonies, others have specialized in Spanish speaking countries, others in the Far East. No manufacturer can afford to have his inter- ests handled entirely by any one commission house." Cooperation with Manufacturers. — Beyond any question the greatest advantage which established and experienced export commission houses of the best class offer to the expansion of American export trade lies in a more intimate cooperation be- tween manufacturer and exporter. AVe have already noted the exporter's facilities for distributing a manufacturer's litera- ture to foreign customers who buy allied articles. The advantage to be found in many cases by the foreign trav- eling salesman for an American manufacturer in working with the local foreign branches of commission houses is very great. Through such work the managers or local salesmen of such branches are personally enthused over the special line, are edu- cated in its possibilities and its sales arguments, and are put in position to continue the development of business during the temporary or prolonged absence of the manufacturer's own representative. The salesman on arrival in a foreign market is introduced by the agent for the American export house to concerns whose orders that house is willing to finance— usually the best con- cerns in the place. All sorts of assistance may be extended to the visiting salesman, because if the orders taken are passed through the export house its commissions are correspondingly increased. But the salesman may not wish to work through the same export house in every market he visits. He may prefer 274 PRACTICAL EXPORTING to work through one in one market and through a rival of the first in the next market visited. A branch or agency at one point may be important, but insignificant at another. One local manager may not be congenial to the salesman; a directly competing line of goods may be handled at one branch but not at another ; perhaps the salesman will work through connections of exporters in several fields but at length reach one where bet- ter results can be obtained by working independently. In com- paratively few markets can the salesman work at the same time in cooperation with representatives of two competing ex- port houses. He must almost always make a choice.^ Limitations of the Export Houses. — It is always to be borne in mind, however, that the manufacturer who restricts his ef- forts to one export house or gives an agency for a certain for- eign territory to a single exporter, whether or not that exporter has his own branch or other organization in the territory in question, will be to a certain extent handicapped in the devel- opment of trade in such territory. As a rule an export house can sell the manufacturer's goods only to its own customers. It cannot very well sell those or any other goods to merchants who prefer to entrust their orders for supplies in general to another export commission house as buying agent. This will be the better emphasized if we suppose an illustra- tion. Take South Africa as the territory and a certain brand of corn shellers as the line. Suppose the implement manufac- turer grants his exclusive agency for South Africa to a certain export commission house in New York, whom we may call Smith & Co., which has an office in South Africa and possibly several local traveling men visiting the important towns of the South African Union. The traveling man for Smith & Co. who handles the American manufacturer's samples cannot easily induce a local dealer in agricultural implements to buy his 1 "I want to emphasize this point — to the manufacturer who is starting in the field for tlie first time the export house gives an opportunity to do business with the least trouble and expense to himself. It is up to the manufafturer, however, to build up the demand for his particular product. If the manufacturer, by judicious advertising and promotion work, will open up the market for his goods he can very readily rid himself of the other troubles in connection with the export business l)y utilizing the s(>rvires of the export house." (W. S. Kies, Foreign Department, National City Bank of New York.) EXPORT COMMISSION HOUSES 275 goods when that dealer has for a long time maintained friendly and satisfactory relations with Brown & Co., another New York export commission house handling another kind of corn sheller, unless the dealer is prepared to throw over his general relations with Brown & Co., his old connection. As a rule, he will not wish to divide his orders, giving most of them to Brown & Co, but a little order to the newcomers, Smith & Co. His old buyers, Brown & Co., have been executing his orders for lines that suit him, may perhaps have agencies of their own which compete more or less favorably with the new line offered by Smith & Co. The chances are evidently much against the chances of Smith & Co., getting this dealer's "business for the special brand of corn sheller for which the manufacturer in question has given them his agency. Smith & Co., the agents for this new line, can, however, sell their old established customers to whom they have previously been selling other kinds of agricultural implements, supplies in general, or allied lines, which have given them an introduction to these customers. Here and there Smith & Co. may pick up new customers or win away customers from other export com- mission houses. In principle, however, the commission house as exclusive agent for a manufacturer in a given territory is not likely to develop trade to its greatest possibilities. Some manufacturers, however, believe it advantageous to grant agencies to those commission houses which seem most de- sirable, each for a special territory, allowing an agreed upon commission to each house on all orders received from its terri- tory through no matter what channel. Even in those comparatively rare cases where American ex- porters operate to some extent as merchants, carrying local stocks of goods in foreign markets, specialization is coming more and more to govern. Stocks may be carried of factory and mill supplies, for example ; in the same establishment stocks of haberdashery are not likely to be found. All this should not, however, be taken to imply that the services of the American export houses cannot be most ad- vantageously utilized by many manufacturers. It is only in- tended to urge that due and intelligent thought be given to the necessary discrimination between houses and between markets. 276 PRACTICAL EXPORTING TERMS OF BUSINESS WITH EXPORT HOUSES Perhaps most fruitful of all sources of complaint and dissat- isfaction over relations with export commission houses are the demands sometimes made by them which to the inexperienced manufacturer come as a surprise, a shock or a puzzle. How to handle the demands in question must always be a question of individual policy on the part of each manufacturer affected. He will be guided usually, perhaps, by a consideration of the principle involved in relations with these houses which should be quite fully understood from the foregoing. The demands in question as well as general terms of doing business should now be considered. Are Purely Domestic Risks. — The New York export commis- sion house is not a foreign customer. He is a New York cus- tomer just exactly as is any other buyer of goods in that city. Similarly the San Francisco or New Orleans exporter is a purely domestic customer. Ratings of all of them are included in the commercial agency books. No other conditions govern the extension of credit of these houses than applj^ in the case of any other customers in the same cities. While there are a great many of these export houses which are large and rich, there are many others of quite different description. It is probably true that the export commission houses as a class ought to employ more capital in their business, should be stronger financially. The limited capital of some of these houses necessitates selling their drafts on foreign customers the very moment they are able to get possession of their bills of lading. They cannot seek advantages in rates of exchange which might in the aggregate of a year's business contribute materially to their profits. Indeed, it is too often the case that the medium sized and the smaller export concerns simply send their foreign bills of exchange to bankers, accepting any rates they can obtain and making no serious study at all of scientific ways of financing, with little comprehension, apparently, of the principles of foreign exchange and of possible advantages offered by different ways of financing export business. Risks Incurred by Export Houses. — The responsibilities of export commission houses are thus explained by William C. EXPORT COMMISSION HOUSES 277 Downs, in the Harvard University Quarterly Journal of Eco- iwmics: "The commission merchant not only expends and locks up a large sum of money in the machinery for continuing his business, but also, no matter how good his banking facili- ties may be, is obliged to tie up as margin in banks an amount of money proportionate to his transactions and always has a contingent liability for the entire amount of his transactions until they are actually liquidated, a period of time averaging five or six months. Hence, a commission merchant whose sales may average $100,000 per month is constantly carrying a lia- bility of $500,000 or $600,000. The fact that the sales are to various countries, to different towns, to different customers in each country with different dates of maturity and consist of many different classes of merchandise so that a general debacle is practically impossible, is the only reason that he is able to discount his bills with any freedom. An individual manufac- turer, unless exporting on a very large scale, could not expect to obtain the same banking facilities." Exception may be taken to this statement in certain regards. Any individual manufacturer who possesses a satisfactory financial reputation never has any difficulty in discounting his bills and usually at quite as good rates as those enjoyed by the average export commission house, save only that the latter may have more experience in, or better opportunities for "shopping around" among bankers. Again, the responsibility of the ex- port houses is by no means so large as that above indicated. While it is true that the total gross liability of the example quoted in the course of five or six months may be $500,000 or $600,000 yet that is not the net liability. The exporter has hypothecated with the banks to whom he has sold his drafts merchandise representing this face value. In case of forced liquidation the proceeds from such property would account for a very large share of the nominal liability. By no means all of the business of export commission houses involves the exten- sion of credit to their customers. Cash Discounts. — The old notion of doing business with ex- port commission houses, the consideration which seem^ed to commend relations with them to manufacturers not disposed to look beyond the ends of their own noses so far as export trade 278 PRACTICAL EXPORTING is concerned, used to be that the exporters paid cash over the counter; that it was only necessary for the manufacturer to take around his bill of lading and exchange it for a check. Even to-day the advantage of the cash discount is indispensable to any export house. The exporter who does not pay cash within the usual cash period is handicapped in his buying, is not likely to secure the best prices, may even be refused goods by manu- facturers. Obviously, therefore, considerable capital or ample facilities for obtaining funds are essential to success in this field. Many of the export commission houses are, however, ac- customed on one pretense or another to stretch cash terms, de- manding the ten day discount when sixty days have passed. The claim in many instances is that goods have not arrived, or. if they have arrived, that the ocean steamer has not sailed and it has not therefore been possible for the exporter to sell his draft and secure his own cash. Of course, these arguments are rather beside the point, having no bearing on the principle underly- ing the very theory of cash discounts. None the less, there is some justification for the complaint of the export houses that sometimes they do oot receive even as favorable treatment as do some large domestic buyers. The manufacturer who is anxious to get the business of a big New York department store may not only give that establishment equally as good prices as he quotes "for export," but he may extend the facility of "sixty days' dating" with subsequent cash discount, when he positively refuses to consider anything of the sort in dealing with a New York export house. Usually, however, exporters are placed at least on an equality with do- mestic buyers so far as prices are concerned, and sometimes special or unusual quotations are made them. Their ability to command exceptional prices depends, or should depend, prin- cipally on the actual volume of the trade offered or likely to be offered by the house in question. The demand of exporters that cash discounts be restricted to them and not extended to customers abroad, unless the latter actually place cash in this country before the shipment of the goods, is thoroughly well justified and the practice should be adopted by every manufacturer seeking export trade. Later on we shall see how other forms of payment are by no means EXPORT COMMISSION HOUSES 279 to be considered as cash. Manufacturers will conserve their own security no less than interest by refraining from quoting cash discounts abroad, while this advantage to the exporter is little enough for the manufacturers to offer. Extra "Private" Concessions. — No matter what claims may be made in this regard by export houses, it remains a fact that few if any among them do not now and then request or demand extra discounts, private commissions, or concessions of similar nature under some other name, from manufacturers. with whom they do business. In but few cases are these requests justified, for seldom are special services actually rendered. Requests sometimes develop into demands and, in all too many cases, demands grow into threats. This is doubtless the greatest abuse in the export commission business. It is one against which the heads of reputable export houses have themselves protested, but while the head of such a house has been protest- ing, one of his employees, who wants to make a record for shrewdness for himself, has at the same time been adopting the very course denounced by his principal. It happens often enough that demands of this sort are made even when the busi- ness in view by a commission house has been originated by a manufacturer of w^hom the commission house never before heard. Of course, when a manufacturer thoroughl}' understands the business of these houses and h,as established intimate relations with certain of them, the question of policy involved on his part in complying with requests or demands for private con- cessions may be quite another story. Legal Status of Commission Houses. — Here is the position of English authorities as to the seeking and retention of "pri- vate" allowances by export houses: "It should be borne in mind that when a person is acting as agent he is bound to ac- count to his principal for all discounts or other allowances that he may receive. His remuneration should consist solely and entirely of the commission which he receives on the transaction. A merchant on the other hand, if acting as such and not merely as an agent, is entitled to retain any discounts or allowances received respecting the goods ; but when he pa^'S shipping or other charges for account of bis customer and specifies such 280 PRACTICAL EXPORTING charges on the invoice, he is in that respect acting as agent and should allow any rebates or allowances which he may receive of such charges." The English courts have pronounced definitely as to the profits which an export commission merchant may properly make. In a case a few years ago where a plaintiff claimed that the defendant besides charging commission of so much per cent, made profit in other directions, for instance, on the charge for packing and in not allowing discounts granted by manufac- turers, also on the length of time granted for payment by cer- tain manufacturers, the Court found that this way of securing compensation for alleged loss in other directions was entirely irregular and calculated to deceive the clients, who should have been charged with all the losses and credited with all the gains, the only profit accruing to the commission merchants, that is the defendants, being the commission they openly charged in their invoice. The Court went on to declare that the moment a commission is charged the merchant figures no longer as an ordinary buyer or seller but rather as an agent, seeing tliYit he is paid a stipu- lated amount for acting on behalf of another person, whether buying or selling, so that the merchant becomes .for the time being simply the agent of his client. "Contributions" Toward Expenses. — AA^hat is only to be called another abuse in the export commission business is the frequent solicitation from manufacturers of contributions to- ward expenses which it is proposed to undertake nominally in behalf of the development of the manufacturer's foreign trade. Suggestions for such contributions are usually based on a pro- posal to have a traveling man for the export house carry a line of the manufact.irer's samples and actively endeavor to solicit orders for him, which, of course, will be filled through the commission house. Sometimes, however, these suggestions are based on nothing more than indefinite proposals to give special attention to the manufacturer's line, or to handle it exclusively. The ])osition of traveling salesmen for export commission houses has already been examined. Their ability to get busi- ness for any special line which they carry depends largely on the general class of trade which will be chiefly drummed. If EXPORT COMMISSION HOUSES 28 J a large general assortment of samples of all sorts of goods is carried then the traveling man seldom has time enough in any one market to work thoroughly every branch of trade and, since he must strive to his utmost to make the largest total sales in order to justify his salary, expenses and continued employ- ment, it is bound to result that he will follow the lines of least resistance and devote his efforts to selling the goods that sell most easily and quickly. Something may be done by the manufacturer through per- sonal work with the salesman, giving him a more or less ade- quate knowledge of the special line and endeavoring to develop his enthusiasm for it, but any such personal interest that may be worked up in the salesman will rapidly evaporate when he is in the field, if the line is not a popular one or one already known and introduced, that is if a great deal of hard work is required to introduce it. None the less, cases have been known where cooperation of this sort has been found profitable by manufac- turers who have not regretted contributions made to commis- sion houses in support of similar efforts by their traveling men. Not every such suggestion for contribution from manufac- turers is justified or can even be called honest. Each sugges- tion of this sort should be carefully scrutinized and analyzed. New York exporters have been known to appeal for such con- tributions, claiming five or six traveling men continually work- ing in certain markets, when manufacturers of lines apparently well suited for export have solicited orders. Some such ex- porters have never had more than two traveling men and usually have one only. When five sets of samples have been furnished, four of them have remained in the exporter's New York office. This sort of contribution is little less than black- mail. If paid at all by the manufacturer it should be with a full understanding of the real state of affairs. Another New York exporter, Avho is reputed to do quite a large business in Latin America, is reliably reported as carry- ing samples of certain American goods which he takes care shall not bear any distinguishing brands — above all, no registered trade marks. Orders secured by traveling men in the hosiery line, for example — are filled by shipping goods from any manu- facturer whatsoever who can be found to make a near imitation 282 PRACTICAL EXPORTING of the original sample. No little dissatisfaction has resulted from this course on the part of all concerned, save the exporter, and no little real harm followed to American export interests in general. Once more, however, the reader should be cautioned. He must not get the idea that every export commission house is dishonest or misrepresents facts and conditions. Many of them are big, rich, honorable concerns. Ordinary business shrewdness only is required in operating through exporters as a class. Future of the Export Commission House. — In spite of the many criticisms aimed at export commission houses and the world-wide inclination to do away with the middleman so far as possible, there is no real reason to expect their elimination. They are and will always continue to be immenseh^ useful in the exporting of a great many kinds of American products and in our trade with many foreign markets. The character of their business has changed materially within recent years and will undoubtedly change to an even greater extent in the future. Closer acquaintance between manufacturers and commission houses, franker relations, perhaps more honest representations, are to be desired, will probably come. In the discussion of the need of ' ' combinations of small manu- facturers" for the development of export trade, speakers and writers seem entirely to have forgotten the very existence of the export commission houses. They seem to overlook the fact that the combinations proposed will themselves virtually be of the same nature and on the same basis as the existing export houses — with, however, this important distinction : the established houses already enjoy a knowledge and experience in export trading which proposed new "combinations" would have to acquire. It is probable, too, that the day of the real export "mer- chant" will arrive here in the United States, especially in view of the growing difficulties in the export commission business and the narrowing profits of all American business. It is probable that through such merchants the "credit" can best be extended which it is declared foreign markets must have from the United States if we are to supplant competing nationalities in a larger EXPORT COMMISSION HOUSES 283 proportion of their trade. Possibly the greatest opportunity in this direction may be in a big aggregation of capital which shall interest itself in the development of our export trade in cotton piece-goods — even, if necessary, in the physical reorgani- zation of mills to be devoted exclusively to export goods. In a preliminary and more general w&y, however, the cooperation spoken of between manufacturer and exporter is to be com- mended and will almost certainly result in increased profits and satisfaction to both. CHAPTER IX LOCAL FOREIGN SALES AGENTS, DISTRIBUTORS AND BRANCH OFFICES Local Sales Agents Established Everywhere — Used More Gener- ally by European Tha7i by American Manufacturers— Are Not Buyers of Goods and Hence to be Distinguished from Wholesale Distributors — Their Functions as Salesmen and Otherwise — Giving Agencies to Merchants, Advantages and Disadvantages — When and How Manufacturers Should Estab- lish Their Own Branch Offices Abroad. MISUSE of the word ''agent" is much too common among American manufacturers. They often adver- tise "agents wanted" when what they really mean is that they want to find merchants who will give them orders in return for which the exclusive control of their goods for a cer- tain market will be granted. There is entirely too much confu- sion of this term everywhere, even in Europe. A merchant may be an agent in a sense, but even so it is highly desirable to dis- tinguish in the use of the word. "What we want is orders" is beyond any question a praise- worthy slogan. However, manufacturers do not always give sufficient thought and study to different ways of getting orders or deliberately analj-ze ways, seeking that by which the most orders are likely to be obtained. As has already been suggested, one order from a market should only be regarded as a clue to many others. It follows that ways of getting the most possible business in that special market need study. We have now to consider, as regards any given market, the local commission agent domiciled there, the wholesale distributor and the manu- facturer's own branch establishment. LOCAL COMMISSION AGENTS Every foreign mail brings to prominent American mnufac- turers letters from sundry foreign countries applying in more or 284 AGENTS AND BRANCH OFFICES 285 less convincing terms for the agency for the manufacturer's goods in a given district. These letters are often enough dropped un- answered into the waste paper basket, or the manufacturer re- plies quoting prices and soliciting an order. People who ask for such agencies are not merchants. They are not buyers of goods. They are salesmen. It is an evidence of American ignorance of the organization of foreign business to offer to sell them goods. Such a proposition will be as great a surprise to the foreign agent as it would be to an American "drummer" who makes applica- tion iov employment to be met with a proposal that he place an order and pay for goods which he seeks a "job" to sell. It is certainly a mistake also to disregard all such applica- tions or to depreciate the value of the principle involved in this way of developing business. The very fact of the existence everywhere, and in large numbers, of these local commission agents can only indicate that they are believed by some manu- facturers to till a useful purpose. Thus, we find an English au- thority saying: "In foreign trade a network of good agents is practically indispensable to success." We should then ex- amine rather carefully the operations of such agents and possible advantages in utilizing their services. Where Agents Abound. — These local commission agents are to be found in every country under the sun, even in the special- ized markets of Europe, and there are a good many of them still existing here in the United States, for example representing Eastern mannfacturers in the Pacific Coast cities, and in the City of New York as representatives of European goods imported here. In Germany such agents had a large and important asso- ciation of their own with prescribed and printed forms of con- tract including provisions for the settlement by arbitration of disputes between manufacturer and agent. Agents of this sort are used generally by European manufac- turers or at least much more freely than (hitherto) by Americans. Yet practically every export commission house in this country is represented in some, perhaps in many, foreign markets by such agents and the custom of utilizing them has been growing among American manufacturers of late years, as their experience in foreign markets has increased. It may be noted that there are some agents of this class domiciled in foreign markets who are 286 PRACTICAL EXPORTING Americans, notably in Australia. Such agents, although one of them usually represents many different manufacturers in perhaps as many diverse kinds of goods, are not to be confounded with the "combination" traveling men who have already been con- sidered. The local agent permanently domiciled in a definite, circumscribed territory must be regarded as in a different class. Prejudice Against Agents. — American manufacturers, famil- iar only with our highly specialized trade at home, seem always disposed to doubt the ability of any salesman to handle satisfac- torily at the same time ribbons and machinery even in a small market, for example, in the West Indies or in Venezuela. But any live, active man in such a market is bound to know personally every individual engaged in any sort of business. The evolution of the activities of such an agent is sometimes quite clearly to be traced. For instance, take an agent in Cuba who begins by developing quite a large business in strawboard. Among other customers he acquires manj^ of the numerous manu- facturers of matches and soap in Cuba who require material for making their cardboard boxes. At the same time these manu- facturers, whose friendship and confidence he has developed, require chemicals, rosin, greases, paper, printing and paper-box- making machinery, wood-working machinery, belting, lubricants, etc. There is probably not enough demand for machinery, for example, to make the exclusive representation of a given kind of machinery worth the sole attention of a capable agent. If there is not business enough to be done in any single article to make it alone profitable for a local representative, there certainly cannot be enough to warrant the American manufacturer in maintaining his own special agent in such a market. Then, too, American manufacturers seem to be afraid to entrust what they call the making of credits, or "the control of their business," to a foreign agent, quite forgetting that such an agent must in any event be required to operate under their in- structions and subject to their dictation, with such limitations as they may choose to put upon him. Nationality of Agents. — There is a great deal of nonsense in the popular cry that we must have Americans to represent Amer- ican goods in foreign markets. No similar argument based on national patriotism has anything like the popularity among AGENTS AND BRANCH OFFICES 287 European manufacturers tlian this has acquired in our own country. Tlie experienced man in a given market may be, al- most certainly will be, preferable to a newcomer. Costly experi- ments are sure to be avoided. On the other hand, it does not follow that a native of the market is to be preferred. Very likely an agent of foreign birth may be more useful in introduc- ing any kind of goods of foreign origin. Germans in South America used to act as selling agents on commission for British manufacturers. Prior to the European War, English commis- sion agents represented German exporters in South Africa while some Germans represented English houses there. Many years ago an American shoe manufacturer visiting Lon- don and succeeding in securing trial orders for his products, wished to leave a permanent representative behind him when he returned home. On looking the field over he determined on an agent of Austrian birth who had for a long time been domiciled in London representing certain prominent Vienna shoe manufac- turers. The American manufacturer had no hesitation in plac- ing his samples and the development of his business in the hands of this Austrian, for the American goods did not compete with the Austrian represented by the same man, even though at similar prices. The American never had reason to repent of his decision, for the agent had not established himself in London to represent the Austrian nation and he had an equal interest in selling the American goods as in selling the Austrian goods, because it was his ambition to make just as much money as he possibly could. Local Status of Agents. — \\\ every market where agents are to be found, and that means all markets of the world, there are all sorts — good, bad and indifferent. There are agents of stand- ing, successful experience, high character, commanding general respect; there are boys just out of school who do not know what else to do than set themselves up as commission agents ; there are agents who are struggling along making a pitiful livelihood at almost anything to which they can turn their hands; there are agents who represent some of the biggest manufacturers of the world from whom they virtually have carte blanche in their territories. It is not to be forgotten that in foreign markets people look much more to the status of the man on the spot than to the house he represents. In this respect, at least, the local 288 PRACTICAL EXPORTING commission agent is comparable to a manufacturer's own travel- ing salesman. The manufacturer of goods occasionally suitable for supplies to government and public service enterprises will do well to remember that offers in response to official invitations to tender are usually only accepted from people on the ground who give satisfactory references including local banks, demonstrating their ability and the ability of the house they represent to carry out a contract if it is awarded to them. Local agents have other facil- ities in this direction quite impossible to a foreign manufacturer. In many countries Governments maintain a "list" of the local concerns in a position to otter certain supplies and " getting on the list" involves receiving particulars of goods required with invitation to submit bids in numerous instances when tenders are never publicly advertised. A Resident Agent's Responsibility. — In foreign countries an agent is commonly accepted as the authorized representative of his principals in every respect. However, the authority of the agent may be limited by the contract which his principal makes with him. Frequently, if not usually, it is assumed that the agent who sells goods is authorized to collect the invoice value of those goods, unless such responsibility is expressly disclaimed on the face of the invoice. In England, the agent for an American manufacturer has been held personally responsible for claims for damages against that manufacturer on the part of customers to whom goods have been sold and who have found cause for claim. In Italy, the law provides that if an agent has been permitted to collect a single account he is regarded as empowered to collect other accounts. While risk involved in such collections api)lies only in the case of open accounts, which are seldom advisable and on the whole uncommon in American export practice, yet whore it is desired to guard against such a contingency invoices may be stamped, preferably in the language of the country to which the goods have been shipped, with a notice that settlements will not be recognized by the manufacturers unless mad^.^ direct to them, or in some other special manner, "as our representatives are not authorized to make collections." It is, however, quite common practice that when a desirable AGENTS AND BRANCH OFFICES 289 agent has been appointed a duly executed power of attorney is given him enabling him as the manufacturer's representative to do certain specific acts. The agent's principals are thereby legally absolved from responsibility for any acts of his transcend- ing the authority specifically given. A certain implied responsi- bility may remain, however, of which considerations of business policy may impel recognition. It should be understood that an agent is not as a rule, or unless by special agreement, responsible for goods sold by him if his customers fail before the goods have been paid for. The agent does not sell his own goods or act on his own account. He is purely an agent for his principals. The financial resources of agents of this sort are likely to be limited, no matter how good an income one who is successful may be making. His own resources are not usually a matter of im- portance to manufacturers whom he represents, for they seldom have occasion to trust him or extend credit to him, at least for anj'thing more than the usually small value of sample collec- tions. In such a case, or in any likely case, the financial responsi- bility of the agent is quite subordinate to his moral responsibility. Choosing a Local Agent. — It is extremely desirable that when- ever possible agents be personally selected after meeting and watching them at work in the fields where they are located. Whenever a foreign market is visited by a manufacturer, or by his salesman, such a personal selection on the ground can be made. American traveling salesmen should be specifically em- powered by manufacturers to appoint permanent representatives in the principal trade centers who can follow up the introductory work, keep in touch with the local trade and see that repeat orders are forthcoming. When one cannot choose an agent in the course of an actual visit to his market, it still remains possible to obtain otherwise a fairly satisfactory idea of the agent's character and standing and ability. In view of the responsibilities involved on both sides, as well as the damage or benefit to business likely to result, exceptional care must be taken in the examination of an agent's claims before his appointment. The bad must strenuously be avoided. The character of the agent comes first, his ability second. 290 PRACTICAL EXPORTING An Agent's References. — An applicant for appointment as agent will, of course, be expected to set forth his own record frankly and give addresses of many references. References to American manufacturers who have already been represented for a sutificieut length of time to make their experience and opinion worth considering are easily investigated and are probably those most satisfactory to our manufacturers, as a rule. However, be- cause this way of doing business is, as yet, comparatively rare in this country, there are not many even of the best foreign com- mission agents who are able to give references to American con- cerns. References to European manufacturers are much com- moner. Sometimes such manufacturers of international fame are mentioned. Sometimes the manufacturers named are quite unknown in the United States. In the one case, confidence will be felt in information given by the large concerns in reply to letters of inquiry ; in the other, little eonfidenee reposed because the manufacturers are just as unknown as is the agent who men- tions them as his references. None the less, information from all should be sought, but the investigation should not stop there. It is characteristic of all references that names only will be quoted which it is believed will result in satisfactory reports. There may be numerous other concerns with whom relations have been maintained which might not be inclined to recom- mend the agent so highly. An effort should be made to find what other firms than those named as references have also been represented, and information received from such concerns may be compared with that from the applicant's references. Some of these agents, particularly in Latin America, are fond of mentioning local business houses as references. For a nura- l)or of reasons the latter class is worthy of no consideration at all. However, local bankers in the agent's own town may be asked in regard to the applicant's character and local trade in- fluence. As a rule their advices in such regards are trust- worthy. Other information independently undertaken by the manufacturer will follow the procedure usual in the case of any credit reports. Why No References May Be Named. — IMany of the hundreds of applications for agencies which reach American manufacturers do not mention any references w'hatever. This omission is apt AGENTS AND BRANCH OFFICES 291 to make an unpleasant impression on the manufacturer, which may or may not be justified. Even the best of foreign agents are sometimes unwilling to subject their principals unnecessarily to the annoyance and a certain implied responsibility in acting as references and hence defer mentioning any names until they have been encouraged by the manufacturers to whom they applj' to believe that if they can justify their claims they will be con- sidered for the position they seek. On the other hand, a good many of these applications for agencies come from people not in a position to quote imposing references. The manufacturer ought not to assume that one or the other of these conditions is the fact in any given instance. No harm at all is done by replying to every such application, observing in such repl}' that, of course, no real consideration can be given to the application until references have been quoted and duly investigated. Advantage should be taken of the ad- vertising opportunity secured from the applicant's expressed in- terest in the goods. There is nothing to be lost by impressing one's correspondent with the special desirability' of the goods one has to sell, whether or not it is expected in any case to estab- lish business connections along the lines proposed. This matter should, however, be handled intelligently. Nothing is to be gained by offering to sell goods to an agent of this description. He will be apt to curl his lip in scorn at the manufacturer's ignorance, or as he may call it, provincialism. No agent must ever be appointed until the manufacturer is absolutely convinced from all that he can learn from every available source that the agent is deserving of confidence. When appointed, that confidence and every possible support should freely be extended. Contracts with Agents. — In every case, in appointing an agent a hard and fast contract should be made, clearly and mi- nutely explaining and specifying the powers and duties of the agent, his authority and how limited, the terms on which he is empowered to do business as representing his principals and placing equal emphasis on the responsibilities and liabilities of the principals themselves. Among other things, such contracts should particularly specify : the territory in which the agent is to operate ; the dura- 292 PRACTICAL EXPORTING tion of the contract ; the rate of commission ajid whether apply- ing only to new business or to business already established and all business from the territory ; when settlements of commissions due and payable are to be made, and how. The contract may very well also include a provision that all invoices are to be made out in the names of buyers but that copies shall be placed in the agent's hands for his information and to enable him to pro- tect his principal's interests in case of need. Such contracts should be officially executed and attested. The manufacturer will do well to have his signature witnessed by the nearest resident consul in the United States of the coun- try in which the agent is located. The agent on his side should be expected to execute his copy of the contract before the nearest American consul and the whole should, whenever possible, be duly registered in the competent local foreign commercial courts, or with other suitable authorities. Care should be taken to avoid "jokers" in these contracts. Many a contract has been made which turned out to involve the manufacturer in responsibility to pay commissions for a long term of years on business no matter how derived from territory in question, or whether the agent ever lifted a finger to try to de- velop any business. Contracts sometimes include a provision for cancellation prior to their set term, either automatically or on due notice, if a certain minimum volume of business has not been secured by the agent. Liberal arrangements in this regard are called for, since the most honest and most able of agents may not be able to sell new, unknown, untried goods in a foreign mar- ket up to the expectations of their enthusiastic American manu- facturer. Assignment of Territory. — The territory itself should be as- signed with due judgment and discretion. Contracts have been known to include Manila and Panama in an agent's territory, apparently because a manufacturer fancied that both were United States territory. Some manufacturers have been forced to refer inquiries from Iquitos, Peru, to an agent in Lima, be- cause an agency contract has been made to cover Peru as a whole. But Iquitos is on the Amazon River, unapproachable from Lima without a sea voyage of several weeks' duration around the larger part of the South American continent; there AGENTS AND BRANCH OFFICES 293 is no commercial communication between Lima and Iquitos. Rio de Janeiro and the Amazon District of Brazil are as dis- tant one from the other, so far as accessibility is concerned, as are New York and San Francisco. Few of these foreign commission agents do very much travel- ing. Territory, as a rule, should therefore be limited. Here, however, as always, conditions must govern. An agent in San Juan, Porto Rico, may be expected to cover the whole island. In any case, it will almost always be desirable, as will invariably be demanded by the agent, that the agency be exclusive and the manufacturer should not only guarantee the territory in name but should absolutely protect the agent. As one manufacturer who does a large business in this way expresses it: "If you have to hand them a check for $200 on a silver platter, do it with a smile. You will be repaid." Rates of Commission. — The rate of commission demanded by local commission agents naturally varies according to the line of goods involved and local conditions. It may be as low as 1 per cent, on some staples and as high as 20 per cent, on some specialties. This usually lies within the discretion of the manu- facturer himself. An agent's proposal to increase prices in order that the manu- facturer may be able to pay a larger commission is usually open to the criticism that sales may thereby be restricted. However, sometimes an arrangement is made that an agent is to receive the manufacturer's proposed rate of commission on all sales made at manufacturer's established prices, but that when in- creased prices are secured by the agent on terms satisfactory to the manufacturer then a division between manufacturer and agent shall be made of the actual increase in price secured. This may or may not work out satisfactorily, chiefly depending per- haps on the character and judgment of the agent. Ordinarily, settlements for commissions on sales are made every three months or every six months. They usually take the form of a direct remittance from the manufacturer. European manufacturers in making arrangements with local commission agents in foreign markets often add to an agreed upon rate of commission on actual sales a contribution of a small amount of money in the way of salary, or agree to pay all or a 294 PRACTICAL EXPORTING part of incidental expenses undertaken by the agents in their principal's interests. Hence it happens that many applicants to American manufacturers propose payments for cablegrams, postage and other petties. The usual American practice is to decline to recognize these small charges, at least at the outset of business relations. If, however, manufacturers secure commer- cial reports on local customers through their agents, this surely is an expense which the maiuifacturer may be expected to bear. All of these aspects of business ought to be covered in clear and simple language in the contract made with the agent. LOCAL COMMISSION AGENTS AS SALESMEN Most interesting of the activities of the local commission agent are likely to be his operations as a salesman and possible advan- tages he thus offers, although others of his functions may be equally as important, as we shall see. Advantages of a Local Salesman. — The local agent is always on the spot and knows and tries to sell all possible buyers. He is able to take advantage of special opportunities — a proposed new enterprise, a destructive fire, or of the buying that chiefly takes place at certain seasons of the year. He is not likely to be con- tent with a single order from some one buyer of the goods he represents, as the American manufacturer, thousands of miles away, is very apt to be. The local agent, if of the right caliber, may even be able to sell to competing wholesale houses, persuad- ing them that it is to their interest to handle the selfsame goods, or selling one article of a line to one house and another article of the same line to that house's competitor. He can grade his selling prices so as to protect his big or his wholesale customers while at the same time promoting consump- tion, or he can grade prices according to the terms which it is necessary to make to some individual customers, or according to their credit standing and possible risks involved. Furthermore, the local agent is in position to keep abreast of the operations of competitors in his market. Then, too, in line with a hint al- ready offered, the local representative can take care of municipal and other official orders, where delicate personal negotiations are necessary. How Local Agents Sell. — There is no mystery about the op- AGENTS AND BRANCH OFFICES 295 erations of these local agents. They act precisely as would the visiting salesman direct from the factory. They have factory catalogues and whenever possible samples of the goods which they try to sell. Some important agents in London and, for- merly, in Hamburg for American and other manufacturers oper- ate as agents in the name of their principals, for whom they carry consigned stocks, using their manufacturers' letter-heads and invoice forms, collecting invoices in the manufacturers' names and depositing collections to accounts opened in manu- facturer's names in London and Hamburg banks. Sometimes agents of this description are able to supply bonds covering lia- bilities involved through such transactions. But this basis is exceptional. Rarely is a local commission agent anything more than a salesman, with the correlated duties of that position. Terms of sale as well as prices are almost always dictated by the manufacturers who entrust their agency to a locally domi- ciled representative. The principal fixes prices below which the agent cannot sell. Ordinarily, if the agent can secure excep- tional prices or terms for his principal he is expected to do so. The English law is that for an agent to retain any profit on a transaction beyond his commission is a breach of confidence. In certain markets, notably in South Africa and Australasia, the greater number of orders secured by local commission agents is forwarded through each buyer's agents in the United States, that is, export commission houses here. Usually the local agent presents a manufacturer's samples, urges an order, endeavors in every possible way to extend the business of his principals and sends a copy of each order direct to the manufacturer in the United States. Original of the same order is sent by the local buyer to that export commission house in this country which the particular buyer in question prefers to do business with. The manufacturer, having a copy of the order with a statement from the local commission agent as to the export house by whom that order will be confirmed, knows who the original buyer is and is fully prepared to insist upon the execution of the order as given to the local agent. Manufacturers utilizing local commission agents in such terri- tories believe they offer advantages over agencies given direct to export houses, even when the latter have their own branches and 296 PRACTICAL EXPORTING salesmen in the markets in question. It is quite immaterial to the local agent through what export house a local buyer prefers his orders shall pass. The agent's only interest is to promote to the best of his ability the interests of his principals and to pocket as many and as large commissions as possible. He calls on scores or hundreds of buyers who may patronize a dozen different commission houses. Agents as Credit Judges. — It is almost certainly a fact that the best local commission agents in each important market are among the most reliable credit reporters. Such agents have ac- cess to the opinions of all the local bankers, of other commission agents, credit protection societies and collection attorneys. They are themselves largely relied upon for information of th^ sort, of a general character, by local banks and others. A bank will form its opinion of a local case on the basis of its own ex- perience alone, plus possible inquiries which it may be able to make. The local commission agent usually knows a good deal more about the business of his customers than does any one bank, for drafts arrive not through one bank only but through several, perhaps through all local banks. A customer may maintain an excellent standing Avith one bank but may be in the bad books of another, quite unknown to the first.^ If the agent is worth appointing at all, confidence ought to be reposed in his judgment, experience and Icnowledge of the char- acter and idiosyncrasies, as well as the financial status, of his customers. If the manufacturer at first hesitates to trust to the agent's discretion and judgment in such matters, it is altogether 1 The American consul at Valencia, Spain, in a report on credit methods, etc., in that district, wrote as follows reg^ardino: the usefulness to his prin- cipals of a successful local agent representing an important British com- bination of exporters: "This successful agent invariably refuses to sell to any intending purchaser on any credit terms if he does not consider him safe for a three months' acceptance. Every year he forwards his principals a detailed confidential statement of the actual rating and financial stand- ing of every one of the local dealers with inside information regarding their progress or setbacks during the year, regarding their investments, the in- crease or diminution of balances at local banks and whether property ac- quired has been registered in the dealer's own name, and even changes in his marital relations that might directly affect his future commercial sta- bility are also recorded. It will be at once apparent that information of this description, personal, intimate and thorougli. could not be obtained by American exporters through the ordinary channels and bank references." AGENTS AND BRANCH OFFICEIS 297 possible for him to demand of the agent that each order be ac- companied by a report from some reliable local authority on the buyer in question, confirming the agent's own ideas. It some- times happens that suspicious manufacturers, in making ar- rangements with agents, insist that before any orders at all are taken a list be submitted of all local concerns from whom it is expected to solicit orders, so that the manufacturer, having the agent's own observations regarding each prospect before him, may confirm or check the same in advance by making his own direct, independent investigation. OTHER FUNCTIONS OF COMMISSION AGENTS Professional export houses and those manufacturers who have carefully investigated the principle of developing markets through local agents, utilize these agents in many other ways than as salesmen. Their duties should by no means end wuth the soliciting of orders. *'An agent should be the representa- tive of his principal" it may be repeated. As such, all his prin- cipal's interests are his. He should never have been chosen as agent in the first place unless his principals were prepared and willing to use him in cases involving considerable moral re- sponsibility. Agents Facilitate Placing Small Orders. — While the indi- vidual's character as agent should alwaj^s be maintained in re- lations with local representatives of the sort we are now consid- ering, yet this may still be preserved while utilizing the local representative to some extent as a distributor. In many lines of goods shipments are of small volume even though they may be of large value. In introducing new goods to a market first orders are almost sure to be small. Even after goods have been widely and thoroughly introduced it may often be desirable, if not necessary, to bring out small lots for certain customers or to meet certain emergencies. The freight and other charges on small export shipments are always disproportionately heavy. Hundreds of orders have been lost merely because possible buy- ers did not care to bother with the small orders which only they would be willing to place. In such cases as these it is altogether possible, when a good agent has been appointed, to ship a number of small orders on one bill of lading addressed to 298 PRACTICAL EXPORTING him advising liim to distribute the several packages among his re- spective customers as marks on the packages may be made to in- dicate. If it is desired to finance such shipments in the usual way, the manufacturer, by agreement with him, may draw a single draft on the agent, say at sixty days' sight, supplying the agent with individual drafts on the several customers. The latter may be drawn at sight and presented when the goods are delivered. The agent, who accepts the draft drawn on him by the manu- facturer when it is presented, puts himself in funds to meet that draft before due date by collecting the different parts of the total against the drafts on the individual customers. It should be noted that the agent should only be permitted to act in any such cases on behalf of his principals. He should not act for himself, unless in exceptional instances specific authority is given him. The facility of distribution afforded by agents in such a capacity as has just been suggested may often be especially valuable to manufacturers of goods, individual shipments of which ordi- narily aggregate only small volumes. Local Agents as Mediators in Disputes. — One of the strong- est arguments for the employment of local commission agents in large foreign markets is the ability of such an agent of the right sort to arrange to mutual pleasure and satisfaction those little difficulties which are bound to arise in the best regulated family, in compromising claims, or forcing settlements. In efforts to secure harmony and continued profitable business relations, or, on the other hand, to put an effectual quietus on an unjust claim, it will surely be evident how superior must be the position of the man on the ground over that of the manufacturer who is only able to write letters from far across the ocean. In any long range correspondence there are almost certain to creep in some expressions that will give great offense to a man who may be quite innocent of any attempt to impose, who may be thor- oughly justified in the position he has taken. The local commission agent, who has sold him the goods about which trouble has arisen, who probably knows him intimately in a personal as well as a business way, who, if he is of the sort that should liave been appointed as agent, strictly distinguishes personal and business relations, can go to this customer and ex- AGENTS AND BRANCH OFFICES 299 amine all the cireumstanees. If the customer is justified in his position, the local agent can acknowledge his factory's error and either persuade the customer to keep the goods and pay for them, or can take them off his hands and sell them to some one else. On the other hand, if the customer is not justified the agent can personally point out to him the foolishness of his "bluff," insist upon his adhering to his contract and see that the money due is paid. It sometimes happens even with big and rich houses that ac- counts are permitted to run over due date. When a local agent is at hand it is far better for him to go to the cvistomer to inquire reasons for delay, or perhaps with authority from the manufac- turer to collect, than it is for the manufacturer's credit depart- ment to follow the course it usually adopts, with American debtors. Once more, we see how necessary it is that none but the right man must ever be appointed an agent. It also becomes evident how valuable the services of that right man may be. Agents as Consignees of Stock Goods. — In a great many branches of business it is of the utmost importance that supplies of goods, very especially spare parts or repairs for mechanical apparatus of all sorts, be on the ground or available for imme- diate use. When a machine breaks down it is likely to be a seri- ous matter for all concerned if the part required cannot be made locally or cannot be quickly obtained, if it must remain out of commission for from six weeks to six months awaiting receipt from factory in the United States. It is seldom possible in any but the most highly developed countries of Europe to have in- tricate parts made locally in satisfactory fashion. One of the most essential features of the adequate and satisfactory develop- ment of business in engines, machinery of all sorts, typewriters, automobiles, even many kinds of tools, is that buyers be per- suaded to purchase suitable quantities of the spare parts most likely to be required, or that a depot of such parts be estab- lished at some point convenient to many buyers from which re- quirements may be immediately obtained. The local commis- sion agent who is entrusted with the sale of apparatus is the logical resource of buyers when necessity arises. If any great financial responsibility is involved in furnishing such an agent 300 PRACTICAL EXPORTING with suitable stocks of parts or other supplies, he will probably, if of the right caliber, be able to supply a bond to cover his responsibilities. In most cases, however, his moral responsi- bility should be quite sufficient. ' ' Del Credere ' ' Agents. — Although not usually of great finan- cial responsibility on their own account, and as a rule refusing to accept responsibility of any sort, yet it sometimes can be ar- ranged that local commission agents will assume part or all of the risk of loss involved in selling local customers, or certain in- dividuals among them. That is to say, if there chance to be some customers of an agent who are not favorably looked upon by local authorities, but in whom the agent himself has every confidence because of his intimate acquaintance with each cus- tomer's business, he may propose that he will guarantee pay- ment for all goods sold on commission to those customers and agree himself to pay for the goods if any of them fail to do so. It is even sometimes possible to arrange for such a guaranty to apply to all customers from whom the agent may secure orders. In such cases, the agent is called a del credere agent, and in con- sideration of his liability he demands an extra commission called a del credere commission. As this is a contingent liability only and not likely to involve any actual responsibility for large amounts, the tangible finan- cial resources of the agent are not so important as his moral re- sponsibility, which is that which chiefly qualifies the agent in any respect. He is not often willing to assume personal re- sponsibility for the payment of goods sold through his agency. This is an exceptional arrangement, rather than a common one. "In Case of Need." — It is always desirable for a manufac- turer in doing a large business in a given market to have some one on the ground there to whom he can apply for help if any- thing goes wrong with the general conduct of his business. We have already noted how local commission agents protect the in- terests of their principals in various ways. In drawing drafts on foreign customers, as we shall see when we come to consider this phase of business in a later chapter, it is often desirable to notify bankers at the other end of the name and address of some concern to whom they may apply for payment or make other arrangement in regard to protested drafts or acceptances — "in AGENTS AND BRANCH OFFICES 301 case of need." This is the fonnal phrase used in giving such notification to bankers. Although the "in case of need" notice is expected to convey the address of some one who will take up a protested draft, yet a strictly commission agent is often named without expectation that he will personally cover the obligation which devolves upon his principals when customers do not meet their drafts. A certain leeway of time is almost always avail- able, so that the agent has an opportunity of cabling to his prin- cipals, or of making an effort to bring pressure to bear on the defaulting customer to pay, or possibly of inducing other local concerns either to take over the goods themselves and pay for them or to take up the draft for the account of the foreign manu- facturer. Giving an agent's name as recourse "in case of need" again implies a great deal of confidence in his judgment and discretion, even though he is expected to report immediately to his prin- cipals and follow cabled instructions sent to him in each case. Bankers to whom such instructions are given look to the agent for the principal's instructions. MERCHANT-AGENTS OR DISTRIBUTORS Many manufacturers will apparently appoint any one their "agent" who will place an order with them, but, it has been remarked, it is bad and confusing practice to use the word agent indiscriminately. It is better to restrict its use to the salesman or other general representative of his principal, and to call "sole distributor" the merchant to whom goods are actually sold and who receives exclusive rights for a certain district. There are a number of considerations affecting the latter kind of agencies which we must consider. Competing merchant houses do not buy from each other if they can help it, in Brazil any more than they do in New York City. Yet many manufacturers seem to ignore this fact utterly in granting agencies. However, there are certain advantages in giving a merchant sole agency rights, and no doubt satisfac- tory trade results in many cases. Advantages of Merchant-Agents. — As a rule a manufacturer is likely to look with especial favor on exclusive arrangements made with a merchant who has been favorably reported. The 302 PRACTICAL EXPORTING manufacturer lias but one account to carry on his books. Usually-, large shipments are the rule and there is but one risk instead of a considerable number of scattered shipments and risks. The merchant-agent can sometimes be induced to guar- antee a certain volume of annual business. Moreover, if the merchant-agent is a large and w^idely known concern the fact that he has accepted the manufacturer's agency has a distinct advertising value in itself. The connection is apt to be looked upon by the manufacturer with some pride and regarded as a credit to the factory. It is sometimes believed th'at the interest of the merchant who actually buj^s and pays for the goods he handles is far more keen than is that of an agent who merely sells goods on commission without assuming any risk of his own. The merchant's own risk when he has goods in stock may make for his activity in dis- posing of them and developing generally larger trade. If the merchant-agent be a large and old concern, his responsibility and prominence are favorably regarded. On the other hand, if it is a young house, it may be preferred because thought apt to show more push and aggressiveness and hence likely to develop especially good results. Dangers of Merchant-Agents. — Although many advantages are attached to agencies placed in the hands of large and re- sponsible merchants, yet there are disadvantages and sometimes real dangers attending this course which must be taken into con- sideration. In the first place, there are few exclusive wholesale establishments in a great many of our principal foreign markets. Many large concerns which do a wholesale business are at the same time retailers, and, obviously, a retail establishment can- not sell its competing retailers in the same city. The manufac- turer's goods are, therefore, restricted in a large place, perhaps the most important place in a whole country, to one retail shop or at most to that shop and a very limited number of minor re- tail establishments, perhaps in the outskirts of the town or other- wise so situated that they really do not enter into competition with the agent himself. If that agent in his own establishment does a sufficiently large business, or if the city in question is small, this state of affairs may be satisfactory to the manufac- turer. AGENTS AND BRANCH OFFICES 303 In this coimeetion, too, the question of territory to be granted to a "sole distributor" is of importance. Geographical condi- tions usually decide. For example, a well known authority on South America advises as to Brazil that separate distributors should be appointed in Rio, Santos, Bahia, Pernambuco and Para — because the freight on goods from New York direct to any of these ports is less than local freights between some of them. Again, the manufacturer's goods become the merchant's prop- erty; his interests are not always the merchant's interests. The latter may, for example, have little or no ambition to push a manufacturer's special brand. He is always looking for the goods that sell most easily and most profitably. It is rather to his disadvantage to create a demand for a given brand, unless he is positively assured of its exclusive control for a long period of years. Usually, it devolves upon the manufacturer himself to create and build up a demand for his product ; when it is a ((uestion of a brand, to promote aggressively its publicity. A merchant-agent is usually sure under other conditions to prefer "neutral" or unnamed articles of similar class. Merchants May "Kill" an Agency.— ^Many an agency has been secured by a foreign merchant through placing a small "initial" order with the deliberate intention of smothering it, of thus preventing the introduction in his market of a line of goods competing with one M^hieh he already handled and which he preferred to continue. I\Ianufacturers themselves do not alwaj'S look very closely into the motives which ma}^ prompt a merchant in seeking or accepting an agency. Sometimes a manufacturer seems to be so delighted by an opportunity of sell- ing a few goods to a prominent merchant that he grants an ex- clusive agency, even when he knows that the merchant himself is already handling one or several immediately competing lines. Of course, it is to be confessed that a merchant can sometimes do justice to two or three lines competing in a general way, but surely propositions for exclusive agencies in any such cases should be very carefully studied. Competing Agencies. — It has been the accepted practice among American manufacturers of machine tools to seek orders from and give agencies to a very limited number of certain 304 PRACTICAL EXPORTING prominent machine tool dealers in Europe. There is a list of these European dealers that is so well known to every American manufacturer in this line that their names can be repeated from memory because ten or a dozen of them control agencies for practically every American manufacturer in their line. This need not imply that manufacturers who have solicited and been pleased to give such agencies do not actually receive orders for their products. But it does seem altogether likely to the author that a lathe manufacturer, for example, might obtain a very much larger business from a given territory through adopting other means of developing trade than by placing his agency with one of these prominent dealers who at the same time handles six or eight other makes of lathes. The lengths to which the desire to secure an order may lead are illustrated in the ways in which some of our manufacturers have tied up attractive territories. A manufacturer of billiard tables gives his sole and exclusive agency for a rich field to a new hotel de luxe which orders a dozen tables for its grand estab- lishment. A maker of laundry machinery, securing an envied opportunity to install a complete plant for a big steam laundry in the capital of a great country, throws in with his machinery its exclusive control for all that country. Just how it is ex- pected that a hotel billiard room or an operating steam laundry will be ambitious to supply to rival establishments what they themselves evidently believe superior apparatus, thus placing rivals in a better position to compete with themselves, is a ques- tion which possibly such manufacturers have answered to their own satisfaction. Without an inside knowledge of the facts it would seem to most people that other and more satisfactory ways might have been chosen for developing trade in such markets. Betrayal by Foreign Agents. — As has been noted, a great deal of nonsense is current as to the prime necessity of having Amer- icans to represent American goods. Americans themselves are about the only people who do not seem anxious to handle other than their own goods. Some American export houses have even been known to refuse to handle British goods, although they had London offices equipped for buying and shipping goods from England. British and, before the war, German houses in China opened New York offices for buying American goods, not as orna- AGENTS AND BRANCH OFFICES 305 ments. British and German houses in South America are most emphatically not silavishly restricted to goods made in their re- spective countries. They buy indiscriminately, as the values and desirability of goods are made to appeal to them. They have not the remotest intention of buying American or any other goods unless they think they see satisfactory profits in them, nor will they replace goods of one nationality by goods of another, even of their own, unless that other offers greater profits or ad- vantages of some sort. Perhaps the most important English manufacturer of agricultural machinery has a British house as its agent in Buenos Aires, but its goods in Rio de Janeiro have been controlled by a German concern, in spite of the many good merchants of British nationality in Brazil. There are a number of American citizens acting as buyers for British, German, Bel- gian and other European houses in South America. It may be observed, too, that even if we had innumerable American import houses established in promising foreign fields they would not greedily grasp each and every American line that was oft'ered to them. They would not, if for no other reason, because they could not. Nor would it be a case of first come, first served. If they were the right sort of merchants they would do precisely as do their competitors — choose those lines which most commend themselves to them and refuse to handle others. It would then, as it is now, be necessary for any given manufacturer to seek out that merchant, no matter what his na- tionality, who could be persuaded to take up the line on a satis- factory basis. In any of the Latin- American markets there are comparatively few large native importers. Most of the oversea business is handled by British, German, Italian or French houses domiciled in these countries. A notable example of mixed nationality is to be found in the case of perhaps the largest concern doing business in Venezuela. The concern in question is British in nationality, but its principal business interests are in trade with the United States. Among its four branches in Venezuela, two were, until the war broke out, managed by Englishmen and two by Germans.^ 1 Tlio American vice consul general at Singapore reported in 1912: "American manufacturers can do business in foreign countries through 306 PRACTICAL EXPORTING While it is by no means to be denied that merchants of Ger- man or British birth, no matter where they may be doing busi- ness, are sentimentally inclined first for goods of German or British origin, yet none of them are so short-sighted as to imagine that it is possible for them to do the most profitable busi- ness solely and exclusively with such goods. Substituting- European for American Goods. — It is doubtless true that, for example, German merchants in a given territory having found a market for certain American goods have sent samples of those goods back to Germany to be imitated or dupli- cated by German manufacturers for the benefit of these expatri- ated merchants. This, however, is not a matter of patriotism or of prejudice against American goods. It is due to the by no means uncom- mon ambition, especially among Germans, always to find the cheapest source of supply. In the same way German merchants in Germany have been known to send samples of American wooden clothes pins to Sweden for imitation there, in the ex- pectation of obtaining from Sweden cheaper goods than they could get either from the United States or in their own Ger- many. Tendencies such as these are logical and to be expected in the course of any business, might even be followed by Amer- ican merchants themselves. -.To guard against them is, in any case, the duty of the manufacturer, and he cannot rely upon agents of any category whatever to protect interests which he himself neglects. Support of Merchant-Agents. — When an agency has been en- trusted to a merchant in a foreign market he deserves and should receive the same generous and unvarying support as should any other kind of an agent. Unfortunately, one of foreign firms already established and the patriotic idea of an American firm to represent American manufacturers should not interfere with Ameri- can trade extension through channels already existing. A large part of the trade of this district is carried on in native bazars to be in touch with which requires years of steady efi'ort by a new firm. The foreign houses already in the field are intimately connected with these bazar mercliants and can always reach the proper parties to push the sales of any article they represent. Moreover, they are established here to make the largest profit possible and if they are shottii that an American manufactured arti- cle is better or cheaper than similar articles of other countries they will press its sale energetically." AGENTS AND BRANCH OFFICES 307 those characteristics of American business which have contrib- uted to anything but an admiration for our methods in some foreign countries is the non-observance of this principle. A certain American manufacturer appeals to an American consul in Costa Rica to secure an agent for his line in that coun- try. On the very day this manufacturer's letter is received, a dealer in San Jose is making a special display of the goods made by this same manufacturer, and is running large advertisements of these goods in the local newspapers. The consul reports the facts to the manufacturer. The latter insists in reply that he lias no agent in Costa Rica. The consul investigates, receives from the local dealer an original letter from the manufacturer dated within a year, definitely and distinctly appointing him as that manufacturer's sole representative for the whole country. Perhaps the manufacturer had quite forgotten this little detail, perhaps he had made a change in the personnel of his export department, perhaps he was trusting to luck that he might some- how get in touch with a more desirable agent without the facts becoming known. Another American manufacturer of a highy desirable and widely popular line has become rather humorously well known throughout the world as changing his local agencies almost from year to year. This manufacturer's representatives visit large foreign markets periodically and more often than not approach a new local concern with an agency suggestion, if the new con- cern is willing to buy a large stock of goods for the sake of get- ting the agency away from the former agents. Then a change is made, with the result that two houses in the same market are pretty well stocked up with the manufacturer's line. "When this has proceeded through two or three successive performances the result is that the market is pretty well glutted with these goods. A letter from a firm in China complains of the traveling repre- sentative of an American firm: "This very intelligent individ- ual then proceeded to a grocer and a draper and tried to in- duce them to take up his agency although he well knew that we are the only people pushing and advertising his factory's goods in this district, and he also knew that our stock of his goods was a fairly complete one." Such methods in "protecting" a for- 308 PRACTICAL EXPORTING eign agency are not apt to conduce to great enthusiasm regard- ing a manufacturer's goods on the part of any respectable busi- ness house.^ Support to a merchant-agent may be extended in a great num- ber of ways. It may include interested cooperation in the way of local advertising, of consumer samples, of circular letters ad- dressed direct by the manufacturer in the United States to actual or prospective customers of the foreign merchant in his own dis- trict. It may include occasional visits of traveling salesmen from the United States. Protection of Exclusive Agents. — An exclusive agency must be "exclusive" in the full sense of the word. It must be con- fessed that a few, let us be thankful there have been but few, manufacturers of our own as of other countries have deliberately disregarded their obligations under an agency contract, have granted "exclusive" rights to any one who cared to apply for them — provided an order would be placed. Not very long ago six different business houses in Buenos Aires were at one and the same time each claiming to be the "exclusive representative" in that market of a certain American manufacturer. Such prac- tices are not merely to be dismissed as regrettable — they are something worse than dishonorable and dishonest. One such in- stance casts infinite discredit on the whole body of American manufacturers and exporters, works endless and enduring harm to American prestige and commerce. Moreover the practice is suicidal on the part of the offender. There ought to be a league of exporters to save these brilliantly "sharp" specimens from themselves, to preserve the American name from their abuse of it. "Work in cooperation and by agreement with agents, to pro- mote business for the benefit of all concerned, is one thing ; work in opposition to the agents' interests is quite another. 1 The advice piven by the South American traveling representative of an American fountain pen manufacturer is to reserve the right to establish just as many dealers as the manufacturer may desire in a territory where general agencies are given, but in every instance to allow the general agent a certain commission on all goods sold to other parties. This theory is that in such an arrangement the manufacturer is not confined to a single concern and that the total business cannot fail to be increased to the satis- faction of general agent as well as manufacturer, because the more dealers Avho handh' tlie goods, the more the advertisement and the greater the demand to follow. AGENTS AND BRANCH OFFICES 309 FOREIGN BRANCHES OF AMERICAN CONCERNS The keynote of much recent and animated discussion regard- ing American export practice is the insistent advice that Amer- ican manufacturers establish branch houses in foreign markets. This sometimes seems to be a variation of the ancient "Amer- ican exposition" scheme. Now, foreign branches nray be of varied character and beyond any question be of unlimited ad- vantage to trade in a great many instances. We have to ex- amine the question from all points of view as every manufac- turer who is successful in his export relations will sooner or later be confronted with the desire, if not the apparent necessity, of establishing such branches as his business grows and becomes large and important. Nowadays, too, we have the "combina- tion" house in a foreign field proposed and urged. But let this fact be well noted — there are comparatively few branch houses maintained in foreign markets by manufacturers of any nation- ality. Branches as Selling- Agencies. — A foreign branch house may either be restricted to operations as a selling agency, or it may act as a merchant carrying stocks of goods. In contemplating the establishment of his own house in any foreign market the American or any one else must count on the active and very likely bitter competition of old merchants in that market, even if the branch acts only as a selling agency and even if its selling efforts be strictly confined to wholesale importers whom every effort is made to protect. The big local concerns are certain to look with grave suspicion upon the establishment even of a sell- ing agency in their own districts. They are sure to question "why." "Why are you doing this yourself? Why come and locate here to try to sell us ? " They are bound to feel, at least in the beginning, that the American house has some ulterior aim not to their advantage. One of the old established local houses will probably not be greatly pleased if all of its principal competitors are also to be drummed hard and regularly. It may perhaps be even less de- lighted with the idea that the whole market is going to be cov- ered. The big local houses will look on a permanent local estab- lishment of the foreign manufacturer in an entirely different 310 PRACTICAL EXPORTING light from that in which they regard the occasional visits of a traveling man representing the foreign factory. Suspicion and even active opposition are, therefore, to be expected with the establishment of a permanent sales agency in a foreign market. This need not argue that such an establishment is not highly desirable and may not result most successfully. Everything, however, will depend on the tact and diplomacy shown by the manager of the foreign branch in his negotiations and associa- tions with former customers and with important prospects in the market. Suspicion and opposition may be overcome, but a certain margin of months if not of years must be allowed for that process. A warning in this respect is all that is necessary, for there can be no question at all as to possible advantages and probable success of some foreign branches if properly promoted and managed, and if based on an adequate knowledge of local conditions and of prospects for the goods concerned. Branches as Merchants. — When a foreign branch house is es- tablished to carry stocks of goods, it immediately takes its place in the ranks of other local importers or wholesale dealers. What- ever the advantages of such an establishment may be, and in many cases there are great and undeniable advantages, yet this fact must not be overlooked. Suspicion of a permanent local selling agency becomes certainty among the local merchants when goods are put in stock by the new enterprise. It is reasonably to be expected that old customers of la class to compete with the new merchant will be lost, and their active and probably bitter com- petition will have to be encountered. When the branch itself is operating as a wholesaler it will have no little trouble in per- suading its competitors to buy from it. It will probably have a long and hard struggle to get itself established. In more than one actual instance of such foreign establishments by American manufacturers it has happened that, in order to get started, they have had to accept in the be- ginning and for a period of several years credits of second qual- ity or worse — risks that the older local concerns did not want, accepted only on the severest terms, declined altogether, or handled so rudely that customers of this class eagerly sought new connections. Several American factories have sufifered se- AGENTS AND BRANCH OFFICES 311 vere losses for several years in their foreign establishments, even though such branches have ultimately proved profitable. There are undeniable advantages in the establishment of such local wholesale branches in more ways than immediately sug- gest themselves. Having on hand stocks of goods for the im- mediate supply of local requirements is one of the obvious ad- vantages. In addition it often happens in some markets that although the advantages of foreign made goods are recognized, although such foreign goods can be imported cheaply, yet the local trade objects to the time and trouble involved in the neces- sity of importing goods, of placing orders and often paying for large quantities in advance, and accordingly continues the use of locally manufactured goods of inferior quality and possibly higher prices. The author encountered this condition at one time in the case of American wheelbarrows in a new market. A quantity was imported by way of trial. Total landed costs came out cheaper than prices of the crude native barrows, and the American goods were acknowledged to be superior. Importers were pleased with the experiment, but could not be persuaded to repeat it, because it did not seem worth while tying up their funds in this sort of business. Increased Costs of Stock Goods. — Of course, costs of goods will usually be increased when stocks are carried by foreign branches. Interest on investment and new overhead expenses have to be taken care of. It is probable that in both regards the charges of the new American branch will be considerably heavier than similar charges of older established local merchants. Therefore, even from the retail trade, only limited profits can be anticipated, at least until the manufacturer's local organization has been highly developed. One large American company which has an important organi- zation in Great Britain has been accustomed to quote two sets of prices — one for goods from British stock, another applying to shipments from American factory. Quotations from British stocks were 10 per cent, higher than the others. None the less, the British enterprise has been successful because customers throughout tributary territory, on the Continent and even as far as Egypt, have often been glad to pay the extra 10 per cent, and 312 PRACTICAL EXPORTING save the time involved in getting the goods over from the United States. European markets lie close together like our own States. As illustrating the policies evolved in the support of such mer- chant branches, the practice of another large American company may be noted. This concern carries stocks at six or eight dis- tributing centers in Europe, sometimes in its own name, some- times in cooperation with local merchants. Each branch pub- lishes a monthly stock list showing sizes of machines on hand. If any one branch has a call for a certain kind or size of which it is temporarily out of stock, it can tell in a moment by reference to stock lists received from other branches where the required ma- chine can be quickly secured through the despatch of a tele- gram. "Combination" Offices Abroad. — Contrary to what seems to be the popular impression, the effort to develop American trade in a certain market through the establishment there of a local enterprise controlled by a combination of manufacturers is by no means a new one. We have had more than one precedent. Thirty years ago or more an American boot and shoe syndicate was established in London by a combination of six or eight American manufacturers of different kinds of shoes. That en- terprise, so far as an outsider could judge, was fairly successful for a long time and contributed materially to the development of our American exports of boots and shoes to Europe, although the composition of the syndicate changed from time to time. In a paper presented to the American Academy of Political and Social Science, Franklin Johnston of the American Exporter remarked in this connection: "Nor can there be any economic objection, for in theory such organizations are sound, but in practice the difficulties of securing the right personnel, over- coming the opposition of local importers, and satisfyng all the constituent manufacturers, some of whom are bound to feel that their share of the sales is less than their share of the expense, are so great as to make its general success not perhaps impossi- ble, but certainly difficult." Certain failings of human nature have to be considered in the case of combination efforts of this sort, as in the case of com- bination traveling men. Jealousy among the manufacturers en- gaged in a combination, the desire of one to dictate and man- AGENTS AND BRANCH OFFICES 313 age the policies of the whole combination, dissatisfaction on the part of some members as to their pro rata share in the business — these among other elements have hitherto worked against the permanent success of most such proposals. One or several manufacturers will receive comparatively little business and at the earliest opportunity will drop out of the combination. One or two who may have received a large volume of business will either be dissatisfied with the management of the enterprise or believe themselves strong enough to be justified in withdrawing to set up their own individual branches. It seems doubtful if the combination or syndicate plan will ever be a great permanent success unless it may be in the nature of what we call a trust, perhaps with a pooling agreement, distributing orders for strictly competitive or standard articles on the basis of tonnage requirements of the several factories, or dividing annual profits. Similar efforts on the part of European nations have not been unknown. Few of them can be pointed out as successes. Am- bitious. Austrian and Hungarian combination schemes have failed at many points. One of the most notable of European projects is not a proper "combination" at all, but is a separately capitalized individual business which simply controls lines of the well known English manufacturers who are probably the principal shareholders in it. It is, however, operated without interference from these manufacturers as an independent busi- ness. Indeed, it seems not too much to declare that it is only through the constitution of such selling companies which shall be independently managed that prospects for continuous and permanent success lie. However, such companies differ little from the enterprise we already know so well and call export commission houses, excepting possibly that they may be dis- tinguished as specialized export houses. Yet many of our exist- ing export houses are already specialized, the character of their business varying in the several markets in which they operate. "American Expositions." — Any business man traveling abroad is, even now as for generations past, almost sure to en- counter constantly the suggestion that the right thing for Amer- ican manufacturers to do is to establish a "permanent exposi- tion of American goods" in some specified locality. Thejdea is an old one, hoary with age. In addition to the intrinsic weak- 314 PBACTICAL EXPORTING ness of the idea Ave have the discouraging precedents of tw^o such expositions attempted in the past. The expositions of American goods in Caracas and in Shanghai were both dismal failures. Yet in the face of them we have new projects of this sort spring- ing up from time to time. In the very nature of things an ' ' exposition ' ' cannot sell goods by itself. The mere despatch from the United States of a clever manager to such an exposition in a foreign country is by no means enough to ensure the development of trade. A showcase without a salesman accomplishes little. As a popular advertise- ment of national American industries expositions might in some instances be worthy of support, but the large amounts of money they cost are only to be regarded as the most extravagant of all imaginable forms of advertising. Quite different from any "American exposition" are the in- dividual efforts made by some American manufacturers in the establishment in foreign countries of their own retail shops. Thus, the largest American sewing machine company has cov- ered even the remotest quarters of the globe with its own estab- lishments. American kerosene and cigarettes are in some terri- tories distributed by American manufacturers. Prominent boot and shoe manufacturers have planted handsome and attractive shops on the main business streets of the principal capitals of the world ; so have a great American photographic goods com- pany and certain typewriter and cash register manufacturers, and so have certain Americans who sell imitation jewelry. In no case do or can such branches shut out competition from other American manufacturers in the same lines operating in more usual ways. An American department store has apparently been highly successful in London, although it owes its success to American methods modified by local requirements, rather than to American goods. It is like all other London department stores in that it carries some American goods along with many other British and Continental goods. It may verj^ likely be true that there are attractive opportunities for the establishment of other American department stores in many otlier capitals, and possil)ly such estabUshmeiits Avould redound greatly to the prestige of Amer- ican interests in general. AGENTS AND BRANCH OFFICES 315 Foreign Branches Subject to Foreign Laws. — It is hardly to be expected that any wise American manufacturer will plunge unprepared into the foreign branch scheme. Highly desirable as branches may be, they are almost certain to follow earlier de- velopments of business, proceeding step by step from the first ten- tative efforts to more serious attempts to take advantage of oppor- tunities as they have developed, employing first one kind of effort and then one more elaborate, until the point is reached when the establishment of the manufacturer's own branch becomes desir- able. Such a manufacturer will by that time have gained all the information necessary as to the form of organization which he prefers and the conditions under which such an organization can be planted in a given foreign country. It may here be pointed out, however, that establishing one's self in a foreign city in- volves compliance with foreign laws and regulations, the secur- ing of necessary licenses, the payment of prescribed taxes, etc. An American cannot simply sit down in a foreign city and start doing business without reference to the local authori- ties, American Employees in Foreign Branches. — It is often re- marked that Americans do not care to expatriate themselves, that American representatives are averse to establishing them- selves permanently, even in the most attractive foreign coun- tries, and that in the Orient and in Latin America representa- tives are too apt to "go to the bad." Our manufacturers who contemplate establishing branches in foreign countries will have to take such conditions into consideration and plan wisely and well for the organization of their branches as affecting the life and happiness of their employees whom they may send from home. In many countries they will have to remember the high cost of living. As a rule, both Germans and Englishmen go into commerce in a colony or foreign country not with the idea of ending their days there, but to spend a period of years, ulti- mately returning "home" to spend in ease profits they have accumulated or to take a commanding position in the home com- merce with the market they have studied thoroughly. English employees of great companies who are sent to India, East or West Africa and the Orient, are granted periodical leaves of ab- sence — are, for example, permitted to return home once every 316 PRACTICAL EXPORTING three years for six months' vacation on full salary, or once in seven years for a whole year's vacation. Then, too, foreign branches of European banks and large com- mercial houses often supply living quarters as homes for their employees abroad or establish clubs for the young men sent out from home, to protect them both against high local living ex- penses and against the temptations of life in a strange and lonely country. Such efforts as these must also be adopted by Amer- icans if we are to follow to its satisfactory development the scheme of foreign branches, beyond any doubt highly desirable when intelligently contemplated and wisely carried out. CHAPTER X THE. EXPORT ORDER What Samples Mean in the Export Trade and How They Should be Treated — Ways of Quoting Prices and Discounts — Meaning and Attractiveness of C.I.F. Prices — Terms of Sale Customary or Advisable in Export Business — Foreign Credit Ratings and Responsibility of Customers — Acceptance or Re- fusal of Orders — The Manufacture of Goods for Export Ship- ment. ACTUAL experience in handling export business begins with the receipt of an order for foreign shipment. If that order arrives bearing a foreign postage stamp the manufacturer must not immediately be hypnotized and dream that the whole world has been conquered. It has already and more than once been remarked that one order is only a clue to many more and larger ones which ought to be secured. A manu- facturer cannot get them unless each individual order is handled in the right way. Excuses and apologies lose whatever savor they may have here at home when they travel the oceans for three or four weeks; their originality, brilliancy and adroitness evaporate as they wander over 10,000 or 15,000 miles of the surface of the globe. If the order comes from an American export commission house it is not a domestic order. But in this case, if the manufac- turer is disposed so to regard it, the nominal buyer, the export house acting as agent for the acutal buyer, is at hand and close at hand to remind the manufacturer of the real state of affairs. All export orders require a manufacturer's best thought and effort if they are w^orth accepting. One is nothing. It is only the many that count. One is not worth having unless the many are sought. It is trite to remind Americans that export trade cannot be taken up and laid aside as one's summer vacation or the pressure of domestic trade may suggest, that effort and per- 317 318 PRACTICAL EXPORTING formance must be consistent. The mere statement of this axiom ought to be enough for the thinking man, and no other gets or deserves to get export success. The necessity for especially prompt attention to export orders and their execution and despatch will be emphasized when the time necessarily occupied in the completion of a transaction is remembered. Note the date of an order and the date of its re- ceipt. Calculate the shortest possible time in which it can be filled. Inquire when the first available steamer thereafter sails for port of destination and how long the goods will be in transit. Remember that at some custom-houses particularly in South America, thirty days at least will be required to clear goods after arrival. The result in time of this accumulation of delays is likely to be impressive. Furthermore if a steamer is missed, perhaps there may not be another for the same port for two w^eeks or a month. SAMPLES IN THE EXPORT TRADE Most orders, whether foreign or domestic, originate in the sam- ple. It may be a little thing of smallest intrinsic value, pre- sented in the act of soliciting an order; it may be a great power plant installed in some locality accessible to the buyer; it may be one's customer's own last shipment of goods which he likes. Whatever it is, the sample is more than an important, it is a vital element in export success. Sample Offers. — ^Manufacturers of goods which can be repre- sented by samples easily or cheaply submitted often advertise their willingness to submit such sami)les free of charge in their announcements to the foreign trade or in circular letters; but "sample collectors" abound everywhere, even here in the United States. In personal, specially addressed letters to carefully chosen prospects a sample offer may be quite another matter. Probably there is not nearly enough done in this direction. If there were, a certain great South American department store, the largest in that continent, would probably easily be able to supply its equivalent of American 5-and-lO-cent counters with perennial stocks, quite without cost. It is certainly as undesirable hold- ing one's samples too cheaply as clinging too tightly to them. TEE EXPORT ORDER 319 But the same manufacturer who, here at home, bombards desir- able customers with samples very likely decliues to send abroad so much as a tin dipper, unless against "cash with order." What equitable arrangement can be made? Evidently enough, for- eign customers will insist upon knowing what the goods they wish to order are like. In our consideration of export advertising we have referred briefly to the policy of offering sample assortments. However, the assortments selected and proposed by the manufacturer him- self may not be the choice of his prospective customer, may in- clude items unsalable to his particular trade. He may prefer to have quantities or samples only of two or three when a dozen different articles or sizes have been offered. The sample assort- ment does not as a rule appeal very convincingly to the best class of foreign buyers. Sample Discounts. — Manufacturers, in their home trade, in many instances sell the samples which have been used by travel- ing salcvsmen at a considerable discount from the original prices. In the foreign trade samples are usually made for specific pur- poses, or certain customers. When so made they may be re- garded by the manufacturer as different in some respects from the sample ranges supplied to his domestic traveling men, and possibly therefore not subject to discount when sold. Yet it is worth while bearing in mind the cost of getting any new busi- ness, and usuallj^ the much lower cost of getting foreign than do- mestic business. Therefore it seems in some cases logical and just that a spe- cially favorable price on samples should be offered to foreign prospects who seem to be of the right caliber and who* express a genuine interest in the goods. If such special price offers are made they should not be apparently advantageous only. There should be a g-enuine reduction. An offer of "80 per cent, off" may seem a remarkably liberal one, until the prospect, examin- ing the manufacturer's quotations, observes that 80 per cent, is the discount applying to any and all orders. The prospect may then perhaps experience an unfavorable re^iilsion of feeling. It may be added that it is wise to beware of the expression "Sample Order" used by some foreign buyers, especially in cer- tain localities, only for the purpose of securing special discounts 320 PRACTICAL EXPORTING or other advantages. It not always means what the words usually imply. Samples on Consignment. — It has sometimes seemed to manu- facturers a good plan to send samples without solicitation, or even without permission, to every large house abroad whose trade is especially sought. This practice, however, is open to the general criticism applying to any free gift — and to several others. The thing which is not requested and which costs no money seldom carries great influence with it. If the sample has any value to speak of, the prospect will have to pay import duty before it passes his custom house, and may even have to pay fees of a custom house broker to get it through. In such cases the unsolicited sample may never reach the prospect. Accordingly the plan has been adopted by some manufac- turers of making especially desirable foreign houses small con- signments of new goods, after requesting and receiving permis- sion to do so. A manufacturer adopting this plan is likely to propose the consignment to the foreign prospect in advising that it is the manufacturer's firm expectation that the sample con- signment, at least, can be sold with profit. In that case only the quoted prices are to be accepted. If it turns out that the con- signment can only be sold at a loss, the prospect is asked to de- duct costs and his usual percentage of profit, and at his con- venience remit whatever may be left. If the utterly unprece- dented should happen and the goods prove not to be salable at all at any price, then the prospect is advised that it is not worth while returning the goods to the United States, but that he is at liberty to throw them away, charge back to the manufacturer the duties paid and other expenses, for which prompt remittance will be made, and all concerned will give up the effort to develop a mutually profitable business. The privilege of making such sample consignments is some- times eagerly solicited. The propriety of making one before a prospect has signified his willingness to accept it is more than doubtful. A manufacturer must be prepared to find some pros- pects refusing to have anything to do with shipments so made. Large importers are not often so eager to receive consignments as manufacturers are to ship thom. Samples Must Represent Goods. — Among the most important THE EXPORT ORDER 321 of all lessons for the exporting manufacturer is this : his samples must represent his goods. The practice has grown up here in the United States of making samples rather better than the goods. Most American buyers are accustomed so to regard sam- ples, and instinctively discount appearance or quality as experi- ence has taught them is necessary, just as they are accustomed to discount the boastfulness of our salesmen. In many cases our samples for home use are designedly made superior to the goods which will actually be supplied, sometimes, for example, be- cause it is believed that long use "on the road" will result in wear or deterioration. Similar practices will not be satisfactory in foreign business. Foreign buyers are accustomed to consider a sample as a sample. There is prettj^ sure to be no end of trouble if the goods delivered are materially unlike or unequal to the sample on the basis of which the foreign customer has placed his order. When the manufacturer or his salesman sells goods face to face with a customer, if there is likely to be variation in the goods to be delivered, this possibility should be clearly explained to and thoroughly understood by the customer. For instance, in many articles of cheap colored leather, cheap shoes, ladies' hand bags and belts of the cheaper class, it is not possible to en- sure uniform coloring. Great dissatisfaction is certain to follow unless buyers clearly understand this fact and are prepared to take their chances of the ultimate salability of the goods that will be delivered. It is far better to have a thorough understanding on this score before the goods are made and shipped, even at the cost of an occasional loss of an order, than it is to have com- plaints, claims and quarrels follow. Usually in this case it is easy for the salesman to couple with his explanation of what is to be expected and the reasons therefor, effective arguments for a trial order on the basis of the experience in actually handling the goods on the part of large merchants in foreign markets, possibly in a market near that of the prospect. Goods Must Equal Sample. — Conversely, it may be here re- marked, although with equal logic coming later in these pages, that export goods must invariably be manufactured "up to the sample." This follows not alone because one's foreign cus- tomers expect it and because it is good policy to do so, but be- 322 PRACTICAL EXPORTING cause unless it is done the complaining foreign customer will usually have legal support in lodging a claim for damages. Owing to the predominant position of Great Britain in the trade of the world for scores of years, British practices have been widely adopted, not only in the British colonies but in many other important countries. The British "Sale of Goods Act of 1893" still applies in a great many markets besides those of Great Britain. It provides: "In the case of a contract for sale by sample there is an implied understanding: (1) That the bulk shall correspond with the sample in quality; (2) That the buyer shall have a reasonable opportunity of comparing the bulk with the sample; (3) That the goods shall be free from any defect rendering them unmerchantable, which would not be ap- parent on reasonable examination of the sample." Similar conditions are often part of the formal contracts on which large transactions in international trade are founded. In any event, since it is the law of the place of residence of the cus- tomer to which the seller is subject, it is clear that sellers will be wise in avoiding every possible legitimate ground for claim in this regard. Foreign buyers exi^eet sellers to guarantee that goods delivered shall be fully equal to sample. In the piece goods trade buyers retain for comparison small clippings of the original samples or patterns which have been shown tliem, from which they have ordered the goods. In buying oils and chem- icals samples may be retained for analysis and comparison with shipments utimately received. Moreover the policy of so doing must commend itself to manu- facturers if they will rid themselves of our local ideas, and will remember that things are not always done in other countries as they are done in the United States. QUOTING PRICES "Any merchant in Latin America, be he big or small, worthy of extended credit or on the verge of bankruptcy, can write to almost any American manufacturer and be quoted the lowest export prices for his product, down to the la.sf cash discount; catalogues are sent abroad indiscriminately, even to individual consumers showing the exact prices at which the largest jobbers can purchase the articles advertised. ' ' TEE EXPORT ORDER 323 This quotation from a man long engaged in the export com- mission business will remind the reader of some aspects of the price question which have already been remarked. If we have now to consider other features it is worth renewing emphasis on the generally bad principle in export trade of "one price to all." The manufacturer may find that there are export commission houses to be taken care of, sometimes commissions to local agents, sometimes profits of a local wholesale distributor to be looked out for. There is no greater mistake than that of fancying all houses of one and the same caliber, just because they are foreign. Furthermore it is to be remembered that it is utterly impossi- ble usually to dictate prices of re-sale in foreign countries. In addition to ocean freight and custom-house duties there are often charges unsuspected by us, dock dues, fluctuations in for- eign currencies, gratuities and exorbitant fees to custom-house brokers and officials, and a cost of doing business three or four times that to which we are accustomed. How Prices May Be Varied. — To obtain greater facility in quoting varied prices as occasion may seem to demand, many of our manufacturers who make net prices to the home trade estab- lish quite another list for export, quoting from it sundry dis- counts, ranging for example from 10 per cent, to 40 per cent, according to circumstances. Another plan adopted by some American manufacturers is that of varying discounts according to quantities purchased. This is by no means characteristic only of export, it is done often enough in domestic business. A variation of this practice has also been made to do duty effectively in foreign trade — regular discounts are quoted and paid but rebates are granted at the end of a year's trading, based on the total quantity of goods pur- chased during the twelvemonth. It must be acknowledged, how- ever, that in both of these practices a number of obstacles are likely to present themselves in export relations to circumvent which will often require the exercise of a good deal of ingenuity. Complications introduced by agents, jobbers, export commission houses, and otherwise, indicate that the beginner at exporting would do well to defer an attempt to establish quantity dis- counts, especially annual rebates, until his wares have been thor- oughly well established in foreign markets. 324 PRACTICAL EXPORTING Prices are often varied according to territory. This happens sometimes here at home, and the principle may be extended as circumstances or competition may seem to suggest. An Amer- ican salesman traveling from Boston very likely gets 10 per cent, higher prices for the goods he sells to scattered settlers, costly to drum, in Arizona and New Mexico than he has the courage to ask from customers in Ohio, who buy a much larger volume. But possibly a manufacturer of aluminum goods, quot- ing 60 per cent, discount in the Eastern States may quote only 55 per cent, in our Northwestern Pacific States. Perhaps on in- quiring it will be found that in the Eastern States he is selling through his own salesman, at an average expense of 5 per cent., while on the Pacific Slope he is giving 10 per cent, to a commis- sion salesman. His export prices may be similarly arranged. What Discounts to Name. — In principle, our American cash discount ought never to be quoted in foreign business, certainly never unless the foreign customer actually places cash in this country for the payment of his goods before they are shipped. If any cash discount is ever made it should be a large one, or should be varied according to the country for which it is quoted. Two per cent, may appeal to buyers in Europe. It is not so likely to appeal to a buyer in Colombia where the interest rate on money runs as high as 18 per cent, per annum. The practice common in a good many trades at home of mak- ing a series of complicated discounts should certainly be avoided in the export trade. Some hardware buyers in other countries may understand "66% per cent., 16% per cent., 121/2 per cent., 5 per cent, and 5 per cent." but such a quotation would be a Chinese puzzle to most importers contemplating doing business with us. Even in those trades where the quotation of such dis- counts is so firmly established and so old a practice that it can- not be eliminated, care should be taken in deducting these dis- counts when export invoices are prepared. The operations of deducting each percentage should be clearly indicated. There ought never to be any such invoices, for some way should in every case be found cf avoiding similar quotations. Quoting in Foreign Moneys. — It is perhaps characteristic of American patriotism that so much talk is heard regarding the supremacy of the United States dollar. Germany has never at- TEE EXPORT ORDER 325 tempted to impose tlie mark, or France the franc, on unwilling foreign customers or in any cases excepting where available banking facilities have made marks and francs a cheaper or a more desirable medium than the pound sterling. The principle to be adopted by a shrewd, ambitious business man would seem to be that of making prices in such currencies as his customers prefer, providing there is no loss of profit in so doing. Quite often, in normal times, there has been an actual loss in attempting to do business in dollars and cents, where there might be an extra profit in using pounds, shilling and pence. This does not imply any difficult problem for the manufacturer to solve. If there were a problem and it were a difficult problem, it would still be worth his while studying it if thereby larger profits might become possible. In a later chapter we shall come to a detailed examination of problems involved in using foreign cur- rencies. Meanwhile, it should be noted that if prices are made in other than American money, ample allowance should be made in the rate at which conversion is efit'ected for all possible fluctu- ations in exchange, and in no instance, excepting only where the manufacturer has his own branch establishment on the ground, should quotations ever be made in the currencies of countries on a silver or paper basis. The American gold dollar, the pound sterling, or the French gold franc should be specified in all such instances. Undoubtedly most American manufacturers quote their prices in dollars. When exchanges are badly disorganized no other course is possible. It is often, however, in normal times, believed desirable by manufacturers or it is requested by their foreign cus- tomers that total invoice values be collected, however collection is made, in the currency of their country or one of the other great international currencies. In such cases manufacturers should propose that invoice totals shall be converted into the de- sired currency at the day's rate of exchange ruling in New York when the shipment is made. Should this seem to an inexperi- enced importer abroad to involve an unknown quantity, it may be explained to him that all the manufacturer seeks is to obtain the exact equivalent in dollars of the prices which he has quoted and which have been found to be satisfactory, and because of daily fluctuations in the exchange market it is impossible for him 326 PRACTICAL EXPORTING to name a fixed rate, unless he names one so high as to cover all contingencies, very likely working most clisaclvantageously to the customer. Quotation Forms. — It is an excellent plan to have a detailed and comprehensive printed form, on which quotations, either general or special, shall be submitted. Such a form, in addition to the repetition of descriptions and quotation of prices, should specifically and clearly indicate at least the following: where de- livery of goods will be made ; what packing will be supplied as included in the prices named; approximate time after receipt of order when shipment can be expected ; what liabilities only are assumed by the manufacturer ; what, in a general way, at least, must be assumed by the buyer; exemption of manufacturer from liability in case of strikes or causes beyond his control; what form of marine insurance will be supplied in the absence of spe- cific instructions from buyers ; definite terms of payment, clearly explained. In addition each item in a quotation sheet should be given a code word for use in a possible exchange of cablegrams referring to that item. Each special quotation should be signed and in a formal manner by a member of the firm or an official of the com- pany authorized to affix the company's signature. Quotations should be made to hold good for a certain named length of time, or otherwise "until withdrawn," and in the export business withdrawal should only be calculated from the date of receipt by the customers of new quotations. Prices "subject to change without notice" will not be found a satisfactorj^ means of de- veloping any large export relations, excepting only in trades where cable inquiries and orders are the custom. With such quotation forms it is well to enclose an emphatic reminder to customers or prospects that when orders are placed specific instructions must be given whenever special packing, special shipping routes, or any peculiar requirements are to be followed. The manufacturer's correspondents in countries where consular invoices are necessary, should be reminded that unless specific instructions are given by buyers as to the descrip- tions and classifications according to which the goods are to be manifested, the manufacturer or shipper can only follow his own best judgment, and will not hold himself responsible for any fine TEE EXPORT ORDER 327 that may result from errors. The principle involved in prac- tices such as these is, it will be observed, the same as that already laid down ; absolute exactness and general formality in business dealings with foreign countries. Where Goods Are Delivered. — There has sprung up a mis- taken and unfortunate use of the symbol F.O.B., meaning "free on board." In the export trade F.O.B. ought to mean that the price of the goods includes all charges, packing, railroad freight, lighterage, storage and dock dues, if any, etc., up to and including the placing of the goods on board an outgoing ocean vessel. The term ought never to be used with any other signifi- cation. In the United States it is sometimes used rather loosel3^ American manufacturers quote "F.O.B. Factory" when they mean placed free on railroad cars. They often quote "F.O.B. New York" when they intend only to imply that inland freight charges will be prepaid to New York but that cartage or light- erage after arrival in New York wall be for account of the buyer. There is great need of reform here. Properly, in export trade F.O.B. ought to mean "F.O.B. Vessel," as is the European custom.^ It should be noted that there is a distinction between "F.O.B." and "F.A.S." (free alongside). When quotations are nrade F.O.B., that does not of course imply that the shipper himself perform.s the physical labor of actually placing the goods on board vessel. He only delivers them at the dock within the reach of the ship's tackle or to be handled by the ship's steve- dores, the charges for which are absorbed in the freight rate paid. However, ship's tackle is not always strong enough to handle exceptionally large and heavy packages (for example, boilers, locomotives, threshing machines and engines, some auto- mobiles) and they should be quoted F.A.S. "free alongside," un- less the shipper is himself prepared to pay additional charges for special derricks, etc., that are required in putting unusually heaiy packages into the hold or on the deck of the ves.sel. Most freight steamers can hoist weights of up to two tons with their own tackle. The freight rates they quote usually include such charges. Some small steamers cannot hoist more than one ton. Other more modern boats can handle as much as three 1 Official American definitions may be had from National Foreign Trade Council, India House, Hanover Square, New York. 328 PRACTICAL EXPORTING tons or even five tons. Whenever packages in excess of weights which the ship's tackle can safely hoist are to be shipped, spe- cial arrangements have to be made by the shipper, or by some one on his behalf, usually involving the rental of a floating der- rick, which may cost as much as $25 an hour from the tim« it leaves its station until its return. An "F.O.B, Vessel" quota- tion involves payment of these hoisting charges when they are re- quired. "F.A.S. Vessel" excludes them. But F.A.S. is never quoted except as applying to shipments for which extra loading charges may be imposed, heavy weights, bulk grain, coal, etc. Exceptionally reasonable rates applying to heavy packages are made by some steamship lines from New York transshipping cargo through the Panama Canal to the "West Coast of South America. Pieces and packages exceeding 4,000 pounds in weight, were, when freights were stable, subject to the following charges by the lines in question, in addition to the regular freight rates but including hoisting charges : If Freighted at If Freighted Weight ^leasurement at Weight Over 2 to 4 tons $0.09 per cubic foot $.27 per 100 lbs. Over 4 to 5 tons 13 per cubic foot .36 per 100 lbs. Over 5 to 6 tons 18 per cubic foot .45 per 100 lbs. Over 6 to 7 tons 22 per cubic foot .54 per 100 lbs. Over 7 to 8 tons 27 per cubic foot .63 per 100 lbs. Over 8 to 9 tons 31 per cubic foot .72 per 100 lbs. Over 9 to 10 tons 36 per cubic foot .81 per 100 lbs. Over 10 to 11 tons 40 per cubic foot .90 per 100 lbs. Over 11 to 12 tons 45 per cubic foot .99 per 100 lbs. Under no circumstances should quotations be made F.O.B. for- eign point of destination, unless the shipper is prepared to un- dertake the payment of duties, dock charges or quay dues, and other incidentals at such destination. ''F.O.B. Destination" includes all these items. It is a radically different quotation from the familiar "C.I.F.," which we have next to consider. ATTRACTIVENESS OF "C.I.F." PRICES The growth of the practice of quoting C.I.F. terms dates back only thirty or forty years. Half a century ago all export goods from Europe as well as from the ITnited States were sold on "F.O.B. Factory" terms. With the extraordinary growth of THE EXPORT ORDER 329 international trade and constantly increasing foreign competi- tion, C.l.F. terms became common, while in late years quota- tions "Franco Domicile," or in the French plirase "Rendu Franco," are becoming more and more common, especially among British exporters, and very generally are demanded in France by many importers — practically by all in French towns outside of Paris. There is an obviously convincing quality about C.l.F. (often pronounced "sift"") prices, which include those elements in the cost of the goods about which the foreign prospect knows noth- ing, at which he can only guess in an indefinite sort of a way. They also eliminate the question of complicated discounts. The difficulties in the way of naming C.l.F. prices are not great, and it is noteworthy that a very large part of the business of export commission houses consists of orders closed on this basis. Often, or perhaps usually, it results that the manufacturer or shipper makes larger profits in so doing business, but on the other hand he has assumed certain risks. During periods of disorganized ocean shipping and rapid and extraordinary freight rate advances with frequent and ex- treme fluctuations in rates for marine insurance, etc., such as we have known during the War in Europe, few if any shippers dare risk C.l.F. quotations. What "C.l.F." Includes.— The symbols "C.l.F." translate Cost, Insurance, Freight. Quotations of prices thus made in- clude nothing else. A price C.l.F. does not include foreign im- port duty or landing charges, the cost of consular invoices when required by country of destination, or any other item whatsoever save those specifically included in the symbol. The cost means, of course, the price of the goods F.O.B. steamer, including all charges up to that point — the initial cost at factory with railway freight, possibly storage, trucking or lighterage and hoisting charges if any. The insurance covers the charge for premium on a marine in- surance policy effected under the usual terms and conditions of the trade involved. Ordinarily a "Free of Particular Average" polic}^ is deemed sufficient, but in view of possible disagreements on this score it is recommended that in quoting C.l.F. prices there be included a statement of exactly what kind of marine in- 330 PRACTICAL EXPORTING surance policy will be supplied ; also, in times of international conflict, whether with or without war risk. Unless specified to the contrary, war risk, when conflict between belligerents involves risk, will be assumed to be covered as an indispensable protection to the buyer. The freight included in C.I.F. terms covers the steamer's charges to port of destination in accordance with the terms of the ocean bill-of-lading. It should be noted that C.I.F. prices are seldom made other than to port of destination. The charges at such port — discharge, lighterage, quay dues, stamps, petties, porterage and numerous others — are well known to and easily calculated by the buyers. The object of the C.I.F, quotation is to let the buyer know what the goods will cost him on board vessel at his port, or his nearest port. Responsibilities Under C.I.F. Terms. — It is the shipper's and seller's part to assume the risk of fluctuations in the elements which make up the C.I.F. prices. He must speculate on the charges for putting his goods on board vessel ; his is the risk of possible advances in marine insurance rates or ocean freight charges, no matter how extreme, sudden or unexpected. On this account it is not always a safe practice to quote C.I.F. prices to hold good for an indefinite length of time. Most large business on these terms is quoted by cable for immediate cable reply, or such reply within a definite, mutually understood number of days. C.I.F. prices are, however, often (juoted by mail; in such case they may be held open for immediate mail reply, or for prompt cable reply only, after the receipt of quotations. The responsibility of the seller in a C.I.F. sale as legally con- sidered is this: delivery is made to the buyer at the shipping point, the carrier is an agent of the buyer to accept the goods on the latter 's behalf. The seller agrees to deliver the goods on board a suitable vessel and to prepay, for buyer's account, the freight charges and insurance premium or, in rare cases, to credit those charges when not necessarily prepaid. The seller is not concerned with the actual arrival of the goods at destina- tion. The buyer must pay for them whether they arrive or not. If they have been lost or damaged he looks to the carrier or the insurer to make good the loss. THE EXPORT ORDER 331 Variations of the C.I.F. expression are often encountered. C. & F. is identically the same sort of quotation omitting the in- surance element which in such cases is taken care of by the buyer. It is quite wrong to fancy these terms indicated by writing "C.A.F." as some authorities advise. No matter what the American understanding of the latter expression may be, it is not in foreign countries interpreted ''Cost and Freight." "C.A.F." is the abbreviation for three French words meaning precisely the same as our C.I.F., the French word for insurance being assurance. When the cost and the freight only are in- cluded, that term should be abbreviated "C. & F.," never "C.A. F." "C.I.F. & E." adds to the usual significance of C.I.F. the element of exchange. This quotation is familiar in the Australa- sian and South African trades, in which, as we shall see when we come to the subject of banking, exchange on colonial markets is usually, excepting only when these terms have been made, reckoned for the account of the buyer. In quoting C.I.F. & E., it is the seller who takes care of the exchange. C.I.F. I. & E. adds the further element of interest, often much the same thing as exchange, while C.I.F. & C. includes commission. How C.I.F. Terms Should Be Quoted. — It is by all means wise in making C.I.F. quotations to explain precisely, in formal fash- ion, the relative responsibilities of seller and buyer.' This should, preferably, be at length and in detail ; if nothing more there must be a brief explanation and warning. A large New York export house prints the following on its quotation and in- voice forms : "The seller assumes no responsibility aside from the follow- ing: To deliver goods F.O.B. vessel at port of shipment; to ar- range for the freight, paying for it in advance if necessary; to cover the shipment with suitable marine insurance, free of par- ticular average under the terms of the English policy, if no other conditions are particularly agreed upon. These terms shall not be binding on shippers in case of force majeure.'- "The buyer assumes all risks of the voyage, including change 1 See Form .3. 2 For definition of this term see page 344. 332 PRACTICAL EXPORTING of condition or deterioration which may occur on account of the nature of the goods. The ship's bill of lading in the usually accepted form shall define the obligations of the seller." How C.I.F. Prices Are Figured. — The estimate of a C.I.F. price, in normal tnues of peace, is usually an easy matter ; in any case it can be managed by the exercise of a little ingenuity. The manufacturer seldom has any difficulty in learning exactly or closely approximating the cost of a given weight of his goods delivered on board steamer at port of shipment. In normal times rates of marine insurance do not fluctuate greatly and seldom make a very important item in the total charge, ranging perhaps from Vj per cent, to 1 per cent, according to circum- stances. Most manufacturers have more or less standard sizes of packing cases in which certain known quantities of various articles are packed. It is an easy matter to ascertain the cubic measurements and the gross weights of such packages, or to esti- mate them in case of special shipments. Learning by inquiry the approximate ocean freight rate that will have to be paid, the manufacturer is then in a position to judge very closely what the ocean freight charge on a given quantity of goods will be. To make up the C.I.F. cost of a hundred dozen of a given article, the manufacturer has to compute the railway freight, cartage and other charges required to put that quantity of the goods F.O.B. vessel, calculate the ocean freight that must be paid, and add the marine insurance premium. Obtaining the total charge on a shipment of a hundred dozen, it is easy for him to quote a rate per dozen C.I.F. Fluctuations in ocean freight rates are not usually so extreme as greatly to afiPect the quoted C.I.F. price per unit. For ex- ample in one steamship ton of 40 cubic feet about 350 pairs of boots and shoes may be packed. The difference in the freight cost per pair between ocean freight rates of 20 shillings a ton and 40 shilliugs a ton will therefore only amount to about li/i> cents. Such variation in freight rates is the most extreme that is to be anticipated in any normal times when shipping condi- tions are stable, at least within a period of a few weeks. Extra Profits Through C.I.F. Quotations. — C.I.F. prices never fail to appeal to foreign buyers for reasons already indicated. Most manufacturers therefore believe they can rely on getting u U) m u D Ui J 3 u 1- h J (/) < Z > ID -1 h Ul < r z I/) < 6 d o u (/) UI _i a d D h u E 1/1 * m z < :s: z < 2 q: < (t a >- :! -1 < V 2 I o3 ^ < ^ 2 y a. 6 ■■ z S w « ™ "* 3*3T =:&) ft-o o ^ n c rt ? 2.^ n < ET. 3 -» s. 3*S. 2.3 3 3. s w 3'n- ■O ^ (T ft o 3 sr i^' ?• _i. rt O ^ p 3 D. = iS o S curt ft '^ a oi 3 2 ft>"0 c w 3 0=;-' "< 3 3 ^ ^^5 P "O o 3 ^ CL3 t^ P 'S ^§ S-9 7T^ ^ r> 3 S* n' cr 3 o ST 5' 6> --• !-: "2 3 -1 Sfl o •O rt < ^ £• f» s ■? S-o 2. s-3 3 3 5 2. >w -1, 33.^ P 5 r^ "^ S P 3 << (JQ ?[, P !£. 9- »: » i? 3 5' r> •o w 3 r-» w = 3? ^O J5. p p "H. ^i^ -1 <£ J j'' - o rt 3 3 zr Si S.S.5 8 Q-w 5 5? 2-. * =rp 2. O =r ::;; ■^S -1 n - -O P 3 '^ Ui ~c 3 O O o r> ft rt 3 111 Q. 3 t^Cu 3« z:^ "> <=^0 ^ r^ 1^ 3*0 C^ p O O 3 3- 2. < a- e-1 rt 3 "^ 3-_5. Is 5»* '^ =o w "■ «> ?r o •n 3- O a! 3 "^ 1° 3 ^ -■-'.? Ss-cr.H' 3 -^ S Q 3 O pr-2.3 2. " rt HH S o P O- €=» c 3^: So- q'^'-I 3*'< Ei O "^ 1 3 ^^ rt P — * W^ Ma #/j n P fi cm ;? "" O' TO 2. w o StOu 3 50 3 ►<, 3-8 i;; ^a » 5c ?» o - p-7i II:nitkij STcVtes Stejkhtjobucts Uo^ipa'xv CONTRACT COVERING SAI.H! OF- • CNITKD STATES STBBL PRODDOTS CO. k 1 Form 3—0. I. F. Contract Conditions. J GENERAL CONDITIONS OF SALE B Conditions of Sale is undctslood lo be the UNITED STATES i . PRODUCTS C I F C. tc F. Sales. Execution of Orders or Shipment of ditiona' f lading. of the seller. esponsibility for the •x), and accepts and ; of c. i. f. 5 media E lawfully i il of goods at destination or for loss or damage in transit. The ti as are covered by the legal responsibility of the carriers (or, on all usual and customary clauses in the bills of lading as well as _ the-carriers as a condition of their accepting the jrchaser or his authorised agent, of shipping documents, consisting of proper in full fur goods shipped, without prejudice to the subsequent ad)tist- ill receive the goods at destination ex ships tackles as fast entilled , ■ ■ - Unless otherwise : seller select the i s on the part of the pi can discharge, and it is further agreed th; privilege of slopping in transit at port or ing lighterage, wharfage or landing charges, dues, duties, etc, are not mcluded m seller's pr 2. Unless otherwise staled in quotation, the insurance on c. i. f salts is understood ti destination covered by sales price, free of particular average, English conditions, for a su invoice plus ten per cent Other forms of insurance, if obtainable, must be agreed upon i of order, the additional cost to be for the account of (he purchaser, hut no form of insuran other damage unless caused by a peril of the sea 3 All consular fees for legalising invoices, stamping bills of lading or other dociimetii countries of destination, ire payable by the purchaser and are not included in the seller's prii the seller is authoriied to pay same for purchaser's account, and add the cost to the invoic Seller will take oat coiuular documents as agent for the purchaser, who must state ho* but 'will not in any case be responsible for any fines or other charges due to errors or incoi '4-3. The seller shall not be liable for failure to perform this contract in whole or in fires, strikes, disputes with workmen, war. civil commotion, epidemics, floods, accidents, dela of cars or other causes beyond the reasonable control of the seller or of the manufacture be limited or waived hy any other terms of this contract whether printed or written; such the purcliascr from his ohlig;.tion to pay for the good' the event cf such unavoidable delay the purchaser ma of shipment and vessel with the ( ; of 'the seller t the time his 6. if th. Shalt be final apply, previo' 7, ClaiiT s the /ship anv portion of the goods at led'shall become due in acco suspension of any shipment ■da'iice with' the'spec'ificalior t of the same or a previou; mpletef iiufacturer's plant, and payment (or ent herein specified. Insistence upon Icr may be treated by the seller as a shall thereupon be liable for all i within the time specified unexecuted. : pla. esenting the purchaser I ill be considered by the }r investigation by sellei mied Goods must not I 8 The seller agrees that the goods 9. The good! I Landing Certifit other dai ■e to be ant, testi to which (he seller has previously agreed. en made promptly after receipt Of the good« and clue entatives No claims for labor nnr involving consequ< :ept by permission of seller manufacturer's plani in good condition, and the purcha] vill I lisfactory s rity for ly signed by the Ci ry securif. failure of the purch; ■uted, without prejudice to an; 10 Unless otherwise stated .i stinatinn slated by the pure i AiUhorilies at the port of of a ; the i I befoi riance of his obligations, and refusal 1 of bis obligations under this or any oil 9 the seller may be entitled to i^ake. )roved by the seller with whom irrevo e goods have been for relative docu- cepicd and the seller s n n • a • ;'"o c> 5 -^S;o c • c ° 2 c-.K lift S.-'^o .-?§•"> s , E.3 2; ^ ■^^^"^^ •o t "^ o -• n f* 3 -1 ■-►> tT"' =LO o __^^ ols So 3- O o - • rt »J "-^ i-H O O 3 U }: (A &> r* 3 •= « =5* «• "« --ft r* - -1 C 3"-. -1 n >->,&> ft) ^ O 11 <^ c err" '^ 1 )i so SB-S> = c 3 <" •*= S-c« 3 5i o ^ O On O-P "> 3«! o = 3 ^^^ 3 o ;* y. 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C * <" -« X rt 2 ft) W 1 -^ ^ "'^.(^ C rt O "O ■ 3 , en (J -1 S c <^ ^ 2 ^ >- S a.g S=3-§tO -r 3>f» o —v: _ _ £ r* "^ n: o ft» 3" - 2." ^3 rt 0.0 ^o '*& <■" 2.0 ct° =■'5 SS ? ;i -• a.w 3 ^^ 3 ft> 3 -1 «. = OW fi<^ rt-^ 5 ^ o ^ s; - 2 O O ^ ft SI n o 3 a. w >-►< » m > B)_ r TT Vi' c s; 3 0. D rt H v> a. C/l 4-^ 0* 'fl ft U) 3- > ft c s :z ►—1 H W C/3 H > H W (fl V) H m w r ^ » D G H V9 THE EXPORT ORDER 333 rather better returns for their goods in this fashion than if otherwise quoted. A buyer will often pay a higher price when there is no uncertainty or risk involved. This may not, how- ever, apply in highly competitive lines where all sellers are ac- customed to make C.l.F. prices and competition is on this basis. In such cases very close figuring is usually necessary. In ordin- ary lines which we ship from the United States, however, a good deal better margin of profit is possible in C.l.F. prices, as in- deed no seller can afford to assume risks involved and quote any- tliing but liberal prices. Profits are often improved also by following a very common custom of quoting- and invoicing C.l.F. goods in the currency of the foreign country to which they are shipped, or in some cur- rency usually employed by that country in international trade. This applies especially to quotations in English sterling and French francs. If a C.l.F. price figur&s out when converted into English money 4 shillings, ly^ pence, it is quite safe to make the actual quotation 4 shillings, 3 pence and pocket an extra 3 cents profit. Similarly one can usually make the "even money" terms in francs which has been suggested in a former chapter. Francs 5.21 is an unusual and an unnecessarj^ quotation in French money. It should be either francs 5.20 or 5.25 — if not 5.50. TERMS OF SALE American manufacturers seem for the most part either in- variably and indiscriminately to demand cash or to feel very much embarrassed in contemplating .such a demand. That em- barrassment may perhaps largely be because of the current criti- cism of our cash terms and undue emphasis on "European long credit terms," but that manufacturer does not exist, in Europe any more than in the United States, who volunteers liberal terms to unknown customers. Positively the only safe way in making general quotations, that is in price lists and circular letters, or even in making personal replies to inquirers heard of for the first time, is to demand cash payment. However, that demand may just as easily be made diplomatically as offensively. But the basis of international trade is not the cash payment. Diplo- matic ways of proposing cash-in-advance-of-shipment payments, considerations affecting the extension of open credit accounts in 334 PRACTICAL EXFORTING foreign business and the whole very important subject of for- eign drafts Avill be studied in detail in Chapter XIV. "Net" and Credit Terms. — "Net" always means, of course, payment without discouiit. However, "cash" has different meanings in different countries. In England "Terms Cash" means payment within a day or two. "Ready Cash" means pay- ment in five to ten daj's. In France such accounts are often due on the 15th or the 30th of the month. Other terms relating to payment are defined by British authorities, as understood in Great Britain, as follows: "Two and a half per cent, for cash" means that such deduc- tion will be made from invoice amounts if payments be made within from five to ten days. "One month's credit" in Eng- land usually means payment one month after delivery, but in many trades this is accepted as meaning payment on the 4th of the following month for goods bought before the 15th, and on the 4th of the next month but one for goods bought after the 15th. "Payment by fourteen days' draft" means payment by a draft at fourteen days' date. The English understanding of an expression often used in that country and in some trade with Europe, "three months' discount at 5 per cent.," as, for exam- ple, on a bill of exchange, should be understood. Tlie discount rate is the rate per annum. That discount on, say $100, would be $1.25. Common German terms have been "thirty days with 2 per cent, discount or ninety days net." More than 2 per cent, dis- count was uncommon in Germany as well as in France, especially on invoices to retailers, but a note due ninety days after date of invoice is very common. Such a note is enclosed with the in- voice and promptly returned by the buyer duly accepted. This is regarded as a distinct advantage in the collection of accounts, saving time and obviating friction with customers. A similar settlement is also common in Canada. It is a practice which might advantageously be adopted by Americans who find them- selves obliged to do a certain kind of open credit business abroad, which, indeed, will almost certainly be extended in our domestic business with the anticipated development of our discount mar- kets. But open credits are exceptional in the export trade and only to be approved under certain conditions, as we shall see. THE EXPORT ORDER 335 FOREIGN CREDIT RATINGS Contrary to the popular impression which has been rather industriously cultivated by some of our amateur advisers as to export trade, there are undoubtedly more credit reports on mer- chants throughout the world actually available in the United States to our manufacturers than are to be found in any other country, "Some manufacturers who are beginners in the ex- port trade appear to be so elated over the receipt of a foreign order that they fill it unquestionably, look for settlement hope- fully, and frequently have occasion to regard their complaisance mournfully. They overlook the fact that they would have scrutinized an order from a domestic customer very closely be- fore filling it. A few experiences of this description are apt to prejudice the budding exporter. 'No more foreign business on credit for us. Henceforth we get cash in New York before we let the goods out of our hands.' " ^ Distinction Between Foreign and Domestic Risks. — It prob- ably happens in very few instances that American manufac- turers extend credit even to domestic concerns solely on the strength of agency reports. Probably in eight or nine out of every ten cases the manufacturer's traveling representative is personally acquainted with the buyer, familiar with his estab- lishment, his business, his facilities, his personal idiosyncrasies. In the case of foreign customers conditions are often precisely the reverse of this. It is obviously one thing to extend credit to customers in the nited States under the conditions outlined and quite another thing to extend credit under other conditions to foreign buyers about whose personality nothing whatever is known. There are a great many large and responsible concerns in all parts of the world who may safely be indulged with any credit they are likely to seek, but before the extension of credit of any sort a very thorough investigation should be made of the record and status of the proposed customer. Principles Governing Foreign Credits. — The principles that should govern all export business are: Never ship anything to an unknown concern on terms that involve the smallest risk. Never extend any credit favors to foreign concerns until their 1 A. J. Wolfe in American Exporter. 336 PRACTICAL EXPORTING standing has been investigated as thoroughly as possible. C.O.D, transactions with unknown foreign houses are thor- oughly unsafe. While trade in a great many other countries is rightly characterized as much more stable than is trade in our own, yet there are irresponsible and tricky concerns in every market. The mere fact that a proposed buyer has an impressive letterhead and appears to be a large importer of goods is not a recommendation to credit favors. If the character of foreign credit reports differs widely from those we are able to obtain about our domestic customers, yet the foreign reports are quite as reliable and quite as desirable. How Ratings Can Be Obtained. — There are but two or three rating books in foreign countries which are available to Amer- ican manufacturers. An ambitious British publication of this sort which is fairly reliable but far from comprehensive is sold to bankers only. On books available in one or two other coun- tries of the world not too much reliance can be placed, and usually they are chiefly notable by their omissions. The manu- facturer cannot therefore depend upon rating books in any for- eign market. There are, however, in all countries facilities for obtaining commercial reports. There are mercantile agencies and credit protection societies from whom reports can be pur- chased, even by foreign houses, although sometimes it is neces- sary to subscribe and pay in advance for fifty or one hundred inquiiy forms. Sundry trade associations in the United States and even local chambers of commerce in some of our cities maintain export in- formation bureaus, through which credit reports of a sort are often to be had. The modern export trade paper includes in its "Service" department the supplying of credit information about foreign concerns, and this is one of the features on which special stress is laid, which is available in some cases without charge, in others for a nominal fee. Leading American commercial agencies have facilities for sup- plying foreign reports also. The rating books which they pub- lish covering the United States also include Canada and Hawaii, a fact often overlooked. Reports from almost any market in the world may be obtained through them and are as reliable as TUB EXPORT ORDER 337 any, but complaint has sometimes been heard of what have been regarded as rather high fees. American consuls should never be asked for reports on busi- ness houses in their districts, or even for information when local concerns have ignorantly mentioned the American consul as one of their references. The regulations of our State Depart- ment forbid our consuls to give information of this character or to act as references. Credit Advices from Banks. — On the other hand, it is quite generally the practice for bankers in foreign countries engaged in commercial business to respond to proper and evidently legitimate inquiries from manufacturers in other countries with an opinion, when the subject of inquiry is located in their own cities and is known to them. An American manufacturer may address a bank in the city where a prospective customer is lo- cated, asking the bank's opinion regarding that prospect and offering to pay the bank's customary fee. International reply coupon should be enclosed with the application of prepay postage on the bank's reply, and sometimes such banks will send a debit note for a nominal amount as its charge for supplying the in- formation. When such a charge is made it must, of course, be immediately liquidated by the manufacturer, who should return post office money order or bank draft or other funds current in the country in question. A better way of seeking bank informa- tion is, instead of writing directly, to request one's own domestic banker to make the enquiry of the foreign bank. Many British and Colonial banks insist upon this procedure. Such bankers' opinions are highly desirable, even though other reports received may apparently be founded upon these same opinions. As many sources as possible of information about foreign credit risks should always be consulted in order to balance opinions against each other. If two or three bankers' opinions are to be had, as many should be sought, because the prospect may be regarded bj'" different bankers in his market in quite different lights. Foreign exchange bankers in New York City through whom manufacturers may be accustomed to negotiate their foreign drafts may sometimes have on file information about the leading 338 PRACTICAL EXPORTING houses in those foreign markets where they do an especially large business. The New York branches of banks established in for- eign countries almost always have files of duplicates or resumes of reports collected by their foreign houses about business con- cerns in each district where they are located. These bankers are also in a position to cable abroad for information about given foreign houses when that information is urgently required, re- ceiving a reply by cable. This is usually an expensive procedure for the manufacturer, seldom worth while except as to inquiries covering proposed transactions of considerable moment. The information received by cable is sure to be brief although to the point, and is of course confirmed by later letter. Naturally all banks, American or foreign, in giving information to manu- facturers are prompted by the hope or expectation that the manufacturer who contemplates the business about which he in- quires will pass his drafts or other collection papers through them. It should further be noted that by no means all foreign banks are willing to give credit information regarding concerns in their localities. Government banks, the Bank of England, the Reichs- bank of Germany, the State Bank of Russia, the Banco de Espana and similar institutions in other countries are not al- lowed to give "opinions." Savings banks and agricultural loan banks are not suitable sources for reports of this sort. Time Available for Investig'ating Credits. — Almost always the manufacturer has ample time for making the necessary in- vestigation regarding the standing and character of his foreign prospects. Perhaps rarely does an order instantly follow the receipt of catalogue and quotations. Negotiations of one sort or another almost invariably intervene, allowing ample time for credit investigation. If orders do promptly follow the receipt of prices, they are usually for samples only and seldom involve any large sum of money. If terms for first orders or sample orders have been carefully specified by the manufacturer in soliciting business from foreign prospects, such first orders should in- variably be placed in accordance with the manufacturer's terms. Initial orders of large value from new customers almost without exception involve and presuppose the exchange of several letters TEE EXPORT ORDER 339 back and forth in which prices, qualities, references and terms are ar<,'ued, and exphmations given. "Personal Statements" Abroad. — Personal statements are unusual in foreign countries. They ought seldom if ever to be asked for. In Latin America a request for such a statement is quite often regarded as an insult ; so, too, in the Orient. In both instances, when such a statement is made too much credence should not be placed in it. Foreign business men have not been "educated up" to making personal statements as have we in the United States. Character of Foreign Ratings. — The criticism is often made tliat reports on foreign business houses are not comprehensive and detailed, that they lack definite data. On the other hand it seems probable that our American commercial reports are sadly overloaded with detail. The value of a risk's office furniture really has little bearing on our disposition tc extend him credit for large sums of money. In some other countries similarly use- less details are sometimes otfered, including the personal char- acter of a risk's brother-in-law and his family connections. Such details which characterize reports in certain European countries are matched by others of varying description in reports from other parts of the world. If the brevity of foreign reports is sometimes criticized, it must be confessed, that as a rule, they give the essential information which is required, namely, the general trade reputation of the risk, whether he is old or new, small or large. Usually a good deal can be accomplished towards securing specific information if the manufacturer's inquiry itself be' specific. Thus, instead, merely of inquiring for "a report" on So-and-So, if the request be as to the advisability of extending credit up to a certain given limit, $500, or $5,000, as the case may be, on stated terms, sight draft, ninety days' acceptance, or what-not, the reply received is almost certain to say "Yes" or "No" in direct answer to such inquiries. This is a distinguish- ing characteristic of foreign credit reports as compared with American. Essentials in Foreign Ratings. — In principle the main con- sideration that establishes the credit of an importer in any for- 340 PRACTICAL EXPORTING eign country is his general trade reputation and the fashion in which he meets the foreign drafts that are continually being dra\\Ti upon him, not only by manufacturers of the United States but by manufacturers in England and all other countries with which he does business. When a manufacturer learns that the prospect has been in business for twenty years or fifty years, does a large business, and has invariably maintained an un- blemished reputation for taking care of his foreign obligations, that is really all that is essential for him to know. If, on the other hand, the prospect is reported to be just established in business, then much greater detail is to be sought. Yet in many countries it is not so easy for a man to set himself up in or to go out of business as it is in the United States. A good many formalities have to be complied with, and business houses, as has been remarked, are often of much more stable character than is the rule here at home. While this may influence to some extent the general conduct of business, yet it by no means forms a serious part of the credit question as affecting a specific concern. Regfulation of Business Houses Abroad. — In every country of Europe, except Great Britain, the keeping of accounts is com- pulsory. Every trader is compelled by law to keep certain pre- scribed books and the statements frequently encountered in Eng- lish bankruptcy courts, "the debtor kept no books," is unknown on the Continent. In many countries of the Continent the law specifically de- scribes the nature of the account books to be kept, some of which must be bound, the pages have consecutive numbers, no entry to be rendered illegible by striking it through, nor any entry to be erased. In some countries business men must retain their books ten years from the date of the last entry. Some books have to be stamped and initialed at stated intervals by duly appointed authorities. In most of the countries of Europe and Latin America every firm or business house has to be registered, much after the fashion in which corporations or limited companies have to be registered in the United Kingdom or the United States. Not onlj^ the name and nature of the firm must be entered in the official register but also the names of each partner, each partner and employee en- titled to sign the firm 's name, the opening of a branch in another THE EXPORT ORDER 341 locality, etc. A specimen of the signature of the firm and of each person entitled to sign for it under power of attorney has also to be registered, and any change in the firm, such as the death of one of the members or the entry of another partner, the sale or discontinuance of the business, has to be notified im- mediately and be published in the local newspapers. As a result if one wishes to find out who are the real proprietors of a certain business, it is quite an easy matter, as well as the obtaining of an extract from the entry regarding any particular firm. Reliability of Foreign Ratings. — Some variation in the re- liability of reports received from certain foreign countries is to be noted. Generally reports from the United Kingdom, France, Germany, Austria-Hungary, Australia, South Africa, China and Japan, Cuba, IMexico and possiblj'- from South America are to be regarded as reliable. Reports on concerns in the smaller com- munities of Latin American countries, and on native Indian firms in British India, etc., are not always so dependable, and usually lack the definite particulars which we think necessary. Similarly even bank opinions may be modified by the character of the operations of some banks. Thus there are in British India certain institutions established by and for Indian mer- chants, which will always give a far more flattering report on .a native house than will the branches of strictly European banks located in India. This is true also of certain banks in the Balkan states, in Turkey and in Egypt. References of Foreign Merchants. — The receipt of an order from a previously unknown concern unaccompanied by references of any sort usually arouses suspicion from that very fact. How- ever, it sometimes happens that really desirable customers proffer orders in such fashion, though seldom involving large amounts. A good many foreign houses prefer not to give the names of any references until they are requested. Large concerns may hesi- tate to give any one as a reference just as they, themselves, pre- fer not to have the annoyance, and what thej^ sometimes regard as the responsibility, of acting as reference for others. Con- siderations affecting references given by merchants and their in- vestigation are much the same as those we have reviewed in the last chapter, in connection with foreign agents. Common phraseology in applying to European concerns whose 342 PRACTICAL EXPORTING names have been given by a prospective customer as references may read : ' ' We are considering a business proposal from Messrs. of who have referred us to you for informa- tion as to their record in meeting obligations, etc. — We shall esteem it a favor if you will kindly inform us in confidence whether this is a firm with whom you could recommend us to open up business, whether they are sovuid financially and whether they have a reputation for honorably carrying out their ob- ligations." A typical English reply to such an inquiry' might read: "We have known Messrs. Blank for many years. Their financial posi- tion is quite sound and they have always enjoyed a reputation for carrying out their obligations in a straightforward and hon- orable manner." Such a report as this would be regarded by an Englishman as thoroughly satisfactory and upon obtaining such information l)usiness would be undertaken without hesitation. Keep Ratings Up to Date. — It is too frecpiently the custom, once having obtained information about a foreign customer, to regard it as good indefinitely. In spite of the greater stability of business concerns in other countries to which reference has already been made, changes frequently do occur and varying conditions may effect the standing of customers abroad as well as at home. No credit report should therefore be regarded as applying for more than a year, unless meanwhile confirmed by fresh information. Thus, no matter what a manufacturer's busi- ness experience with a particular customer may be, no matter if transactions have been numerous, and contracts have one and all been satisfactorily settled, none the less fresh information ought to be sought at least once a year, especially as in the lapse of that time new sources of information about the risk will almost certainly have come to the manufacturer's knowledge. Credit files should be kept strictly up-to-date, not only by secur- ing annual confirmation of previous opinions, but by utilizing every opportunity for obtaining information from new sources, and as promptly as it suggests itself. In an early chapter co- operation between export managers was urged. In no other particular is it likely to be more profitable than in an exchange of credit opinions. TEE EXPORT ORDER 343 ACCEPTANCE OF ORDERS Greater formality in business, greater importance attached to orders and to samples in other countries, are features of export trading which have already been pointed out. Usually in for- eign countries an order is signed by both parties and becomes a contract. If there are some loose practices in this connection here at home in the United States, they must be remedied in our foreign relations. First, for his own sake, for the sake of his neighbors and for American commerce as a whole, the manu- facturer must invariably and without exception stick to his word. When he accepts an order he signs a contract. Guess Work Barred. — Every order upon its receipt should be minutely examined, and if doubtful points are involved the whole order, or at least those points about which there is doubt, should be held up until a mutual understanding has been arrived at with the customer. It is far better to refuse an order than to execute it to the dissatisfaction of a customer. Importers in other countries would, as a rule, much prefer to wait for their goods rather than have the manufacturer guess at doubtful features, and guess wrong. Cable request for correc- tion or explanation may sometimes be made. Time may be suf- ficient, in referring doubtful points back to customers, for trans- mission by correspondence of the points at issue, fully stated in the simplest and clearest language, requesting a ' ' Yes " or " No " by cablegram upon receipt of the explanation. If one or two items are not clear but goods have been bought before by the same customer, then it may be possible for the manufacturer to assume that the same things are wanted again, but any assump- tion on the manufacturer's part is usually likely to result in com- plaints from his customers. Needless to say exact compliance with each and every word of an order and exact performance of all its terms are indis- pensable to success in export trade. No substitutions must ever be made, no novelties or improvements introduced, without first having received the customer's permission and approval. Even old-style packages must not be changed to what recommend them- selves to the manufacturer as better or handsomer packages. The manufacturer cannot tell what features of his goods or their 344 PRACTICAL EXPORTING packing may have been the very features that particularly recom- mended them to his foreign trade.. What here at home may be regarded as an improvement may not appeal to foreign buyers. Hence, if something new and improved has been brought out since the receipt by one's customers of previous shipments or of samples, then the goods ordered should be supplied exactly identical with -former goods or exactly like samples. Meanwhile the customer may be advised of changes which have been intro- duced and his permission solicited to ship in future the newer goods in place of tlie old styles. "When future orders are antici- pated from established customers it is often a good plan to ship along with the order for old-st^le goods a sample of the improved- product, even if it has to be charged for, politely assuming in the accompanying correspondence that the customer will be glad to have this done, as he will undoubtedly approve of the newer goods. But this again is a liberty whicli should not always be taken. The American manufacturer should avoid the possi- bility of giving an impression that he is trying to force anything on his customers. Engagements Undertaken. — In principle a manufacturer or an exporter is bound by the action of his foreign agent, provid- ing the latter has not transgressed specific instructions and the written authority given him. If the agent has transgressed such authority he alone is responsible and cannot pass such responsi- bility or even loss over to his principal in this country'. It should be borne in mind in accepting orders, that is in making contracts for the supply of goods, that unless such con- tracts specifically exempt the shipper from the effects of con- tingencies beyond his control, then he may be held by the courts of this country and of England for breach of contract. This point came up frequently after the outbreak of the war in Europe. INIany contracts did not provide exception due to force mojoire, a French term meaning a force that is practically irre- sistible by the individual. A great war might be regarded as a eontingenc.y beyond the seller's control, or, as defined by the courts, "a fortuitous event which comes without design, fore- sight or expectation." But in the United States and England practifi^ differs from tlu)t of European countries generall3^ In til is country and in (xreat Britain the seller is not exempt THE EXPORT ORDER 345 from liability to carry out his contract and he is bound to ship the goods, cost what it may — or pay penalty for not shipping — if no provision has been embodied in his contract to cover the event of force majeure. In the continental countries of Europe, however, an opposite view is taken and the existence of a state of war would probably be accepted as a sufficient excuse for fail- ure to carry out contracts made in such countries. Adherence to Shipment Dates. — Strictest attention must be paid to the date when the order is to be shipped. "Shipment in July" means shipment during the course of that month, and if a bill of lading is dated August instead of July serious trouble may follow. If no suitable steamer is sailing for the desired port during the month of July then the order should be held until a statement of the facts is put before the customer and his authority received to make August instead of Jidy shipment. The date of the bill of lading is usually taken as the shipment date. Great care must therefore be taken to have this document dated within the prescribed time; sometimes, but not always, it is possible to have a bill of lading dated in advance of the actual sailing day of the steamer. In probably no countr}^ in the world is greater importance attached to the date of shipment than in India where the native houses especially are very particular on this point. No goods which are in any way late may safely be shipped without special permission to do so having been obtained from the dealer. There are local, formal regulations well recognized in India for dealing with the questions of cancellations and allowances in the event of goods being late shipped. Form of Order Acceptance. — Just as a fonnal printed quo- tation blank has been recommended, so too a form for the accept- ance of orders is to be advised. To avoid any misunderstanding such an acceptance of order, or contract note, should repeat the same details as those included in the order itself with exact specification of the goods, their prices, discounts, terms of pay- ment, delivery, etc. The printed post-card acknowledgment of order, so frequent in this country, is another of our rather loose business practices wdiich should not be carried into our foreign trade. ^ 1 During the late war, before an order was even aeeepted, or preparations 346 PRACTICAL EXPORTING As we have noted, quotation forms should give warning that unless specific instructions are received as to shipping routes, manner of packing, amount and kind of marine insurance, fashion in which consular declarations must be made and other similar details, the manufacturer will follow his established prac- tices, use his best judgment, and no responsibility is in such cases to attach to him. The same warning may be repeated in the ac- ceptance of orders when no advices or instructions have been re- ceived from customers in such regard. Of course when special instructions have been given, they must be followed to the letter. This is, perhaps, the one invariable rule in all export business. MAKING THE GOODS From start to finish, in every factory operation, export goods should receive special attention. This need not imply increased cost of production, for systems may easily be introduced which will automatically ensure due attention to the details required in preparing goods for foreign markets. If increased cost is neces- sitated, then suitably increased prices should be made, for ex- port trade is not desirable to any one unless it is profitable. The rule should be to supply goods better, if anything, for export trade than those usually shipped on domestic orders. At any rate, more attention should usually be given to the finish of were made to manufacture or prepare goods for shipment, it had first to be ascertained if the proposed customer were satisfactory to the competent Gov- ernment authorities. The Euroj)ean war developed tiie necessity of securing Letters of Assurance from the British government for shipments destined for the neutral countries of northern Europe. Many countries of the world put into effect export and import embargoes, or prohibitions, which made it necessary for American shippers to secure from their customers in such foreign markets licenses from their own government officials to import the required goods before those goods could be shipped from here. The American government itself instituted a system of licenses for exports ap- plying to almost every kind of merchandise, and the granting of such li- censes, in many instances, depended upon the nationality or the character of the consignee as determined under our "Trading With the Enemy Act." Details of export licenses, import and export permits, priority certificates and numerous otlier complexities and complications were in a constant state of flux varying from month to month, almost from week to week. Large and elaborate bureaus created at Washington with branches in New York and other cities handled the tremendous volume of business required by the necessary war time formalities. Such officials formed the court of last re- sort and all shippers were obliged to keep in constant touch with them TEE EXPORT ORDER U1 export goods aud to their fittings. These are features which make the first impression on foreign buyers when they open the cases and inspect their purchases, the first things that commend goods not only to our buyers but, in turn, to their customers. By this is not meant that any ett'ort should be made to imitate certain notorious practices in disguising cheap goods to look like goods of better qualities. Plowever, here in the United States, we are accustomed to put up with a great many crude and roughly finished goods which are not desirable at all, at any price, in other countries — no matter what their intrinsic qualities. Export Goods in the Factory. — Details of the manufacturing processes involved in innumerable trades certainly cannot be here considered. Very often goods as regularly made for the home trade will be suitable in all respects for foreign trade; in more instances little touches of one sort or another are required as export goods go through the factory which must have the manu- facturer's interested attention. It may, for example, be neces- sary that goods be dried in exceptionally thorough fashion in order that they do not sweat, or disintegrate, or separate, when shipped to hot and damp climates or even when merely passing through hundreds or thousands of miles of moist sea air. Var- nish or enamel must be especially hardened. Now and then some small processes must be performed in a special way. These are all details as to which no one not intimately concerned in the trade affected can possibly instruct. Usually an order that is to be manufactured for export, before it goes to the factory, should be designated in some conspicuous fashion "Export Order," and tickets attached to raw mate- rials or the goods in process of manufacture should similarly be conspicuously labeled "Export" in one fashion or another, some- times by special tickets of red or some other color. Goods to be taken from stock should be picked out by employees who handle no other than export business, or by those who have given special attention to such work in connection with their regular duties. When it comes to the packing department unusual attention is vitally necessary. Packing instructions as received from abroad must be followed to the letter. If no instructions have been received, then the greatest care and discretion must be exer- 348 PRACTICAL EXPORTING cised, the practice of other and more experienced manufacturers learned and followed, or new methods based on a thorough study of actual conditions be inaugurated. Grading Goods. — Foreign customers seldom understand, until they have had experience with them, the manner in which some American goods are graded as to quality, price, etc. The various "selections" of upper leathers for size coupled with qualit}', texture, blemishes, etc., each supplied in several thick- nesses or weights, are a great puzzle to many new possible buyers of such leather even though tliey may have been obtaining the very same goods from French, German or English wholesale dealers in American leathers. These wholesalers buy assort- ments as we market them but make a very much closer selection for re-sale and charge their customers aecordingl3^ A good many American tanners have learned to follow the European example in selecting their export goods for new and inexpe- rienced buj'ers. Foreigners offer a great deal of criticism at the fashion in which we pack our barrels of apples for export. Thej^ expect apples to run uniform tlirough the barrel from head to bottom. In all such instances it is wise to meet foreign expectations, even if it is necessary to charge increased prices. Although the price may look large at first, explanation and later demonstration are certain to win the best sort of trade, the trade that stays. Marks of Origin and Labels. — Although not always neces- sary, it will never be a mistake to stamp all export goods, ' ' ]\Iade in U. S. A." Regulations affecting goods of different sorts in many countries of the world are so many and complicated that a whole book and a large one would be required to explain them in detail. All labels and descriptions of goods must be full and accurate. The United States is only one among many countries where "Pure Goods Laws" are in effect. Australia is par- ticularly strenuous in its requirements as to stamping, descrip- tions, etc. A piece of jewelry is not to be called merely "gold," but it must be labeled "14-oarat gold," 12-carat, or 18-carat, or whatever it may be, "rolled gold," "gilt," etc. Goods for France must not be stamped "J. Smith & Son, New York and Paris." That would be held as an infringement of the French law, designed possibly to mislead Frenchmen into the THE EXPORT ORDER 349 belief tliat the articles were made in France. Similarly as to the fashion of marking goods with French words — " L'Ideal," ^' La Rapide/' etc., are regarded in France, when used without any additional designation in a foreign language, as giving an impres- sion that the protluct is French and hence likely to deceive the customer. No established American practices in common vogue are likely to cause trouble in any foreign country. The situation simply is that so far as nuirks on the goods themselves or their immediate packing are concerned, inquiry should be made when customary legends employed on domestic goods are not quite exact or are elaborate or unusual. So far as descriptions of goods are con- cerned, if they are simple and honest, as well as complete, no trouble is likely to ensue anywhere. Special instructions for in- voicing and other similar purjjoses ought alwaA's to be given by buyers when placing orders, otherwise penalties that may be incurred are for the buyer's and not the seller's account, al- though the seller, in the interest of harmony and mutual profit should always specifically enquire for instructions. In seeking information for his own benefit the seller may consult the tariff laws, etc. of the country of destination, applying to the nearest consul in the United States of that country, or the Bureau of Foreign and Domestic Commerce, Department of Commerce, or (as concerns Latin American markets) the Pan-American Union, Washington. Certain special requirements for British India may be learned from the I\Ierchandise IMarks Act of that Empire to be found in a monograph in India known as Special Consular Reports No. 72, to be obtained from the Bureau of P'oreign and Domestic Commerce. CHAPTER XI PREPARING SHIPMENTS How Steamer Differ from Rail Shipments — How Cargo Is Loaded on Board Steamships, Unloaded and Transshipped — Packing Required for Adequate Protection of Goods — The Packing Which Is Sometimes Desirable on Account of Local Foreign Conditio7is — How Export Weights and Measurements Are Calculated — Marks and Addresses on Packages for For- eign Shipment — Making Export Invoices. FEW of our export advisers have failed to include in their speeches and writings a tirade against American manu- facturers for amateurish and grossly inadequate packing of export goods. The present writer takes some pride in never having joined in this hue and cry for he has long been con- vinced that the great bulk of American exports are well and properly packed, in spite of many glaring examples of how not to do it. A good deal of criticism that has been offered has cer- tainly been based on insufficient premises. A single wretchedly, ignorantly packed case of envelopes for Ecuador is to be con- trasted with hundreds of cases of magnificently packed sewing machines, typewriters, cash registers for the same destination. Moreover, our manufacturers are not the only offenders. By one mail the Aynerican Exporter receives photographs of a case of lawn mowers from the United States received in "kindling wood" at Manila, the proprietor of the shop standing by with hands stretched out in protest to heaven ; by another, photographs of a shipment of printing machinery received from Germany by a newspaper publisher in South America, the cases smashed, the contents lost or broken. Much American Packing Excellent. — Criticism of some of our export jiacking is emphatically necessary. There are many, a great many, outrageous, inexcusable examples of the grossest ignorance and carelessness, yet there is certainly too little ap- 250 PREPARING SHIPMENTS 351 preciation of the unusually fine packing which characterizes our largest and most experienced shippers. Certainly in many lines American packing sets an example to all the world, has in fact been used as an example to German manufacturers by ad- visers in that country. Thus we find in "Export Teclmik," a standard text-book in Germ:an commercial schools, by Robert; Stern, professor in the Commercial High School of Leipsig: "Very especially are the manufacturers of the United States notable for their appropriate and adequate packing of small articles, particularly hardware. Even in their larger cases, the neat and attractive packages of American manufacturers are immediately to be distinguished from others." So, too, British experts have advised British manufacturers that Americans in shipping to Australasia overcome tariff prefer- ences in favor of some British goods by a saving of 25 per cent, or 30 per cent, in freight charges through lower freight rates and the more scientific packing of American goods. It is notable that the greater part of the criticism of American packing comes from Latin America. Europe seems to be satisfied with our methods, perhaps because the trade of Europe is largely carried on by older, more experienced shippers on a bigger scale, more likely because conditions in handling shipments are simpler and more modern.^ If experienced exporters long ago learned how to ship their goods in the most satisfactory way, the beginner must under- stand the principles involved, so radically different in ocean than in rail transportation — must, as soon as he can, learn a never-to- be-forgotten lesson of what ocean shipping, loading, carriage, landing, mean. STEAMER SHIPMENTS DIFFER FROM RAIL Any one who has ever traveled by an ocean steamer and 1 In this connection, note the remarivs of Professor Cherington of the Harvard Graduate School of Business Administration: "There is plenty of evidence that in some resjiects American manufacturers are the cleverest packers in the world. The chief complaints from Latin American markets on this score seem to grow out of the fact that the handling conditions in many of those countries are such that tlie packages sent there must be individual products of the packer's craft and not the output of any packing and shipping system, no matter how efficient." 352 PRACTICAL EXPOBTING watched the processes of loading and unloading cargo — indeed, any one who has so much as visited an ocean steamer's pier and observed these processes, needs no explanation of the necessity for packing export goods with quite different attention than for home shipment. A thorough understanding of these processes is the first essential to correct packing for export. If the manu- facturer or his shipping clerks cannot in person visit ocean steamer docks, an effort should be made to visualize the scene and then to follow the goods that are shipped from rail-end across the seas. Capacity of Steamers. — Incidentally, it is of interest to note the capacity of ocean steamers. A fairly large ocean cargo vessel will carry the contents of at least 300 American railway freight cars, that is, it will take several long railway trains to fill her holds. It takes about 500 standard tank railway cars to fill one of the great tank steamers carrying petroleum in bulk to Europe. Perhaps the capacity of ocean steamships may best be impressed by specific illustrations. Let us disregard the varying types of vessels and their capacities as affected by the construction of holds, hatchways, etc., and suppose that the ship we select will carry equally as well cargo of any sort and that it is possible to load a vessel to its full capacity with one kind of cargo — which, by the way, cannot always be done although common practice in some staples like wheat, coal, lumber, etc. Let us take as our vessel one of the newer and larger boats of the Atlantic Transport Line, which have a deadweight cargo- carrying capacity of say, 15,000 tons. Suppose that a fairly important manufacturer in his line wished to load this vessel with plows. On the basis of the average size as exported, it would require 247,500 plows to fill this ship. If the manufac- turer in question followed his usual factory routine and, along with his normal production of other implements, harrows, culti- vators, rakes, repairs, etc., turned out 20,000 plows a year, it would take him twelve and one-half years to fill this ship with plows alone. If he were to turn over the whole plant to plows, producing no other implements, lease another factory and jump to the top of the list of plow manufacturers, he might reach an output of 100,000 plows a year and complete this cargo in two and one-half years. PREPARING SHIPMENTS 353 A boot and shoe manufactory finishing daily 1,000 pairs would require twelve years to collect a cargo for this ship and such an unprecedented cargo would be worth from $4,000,000 to $12,000,000, according to grade of the goods shipped. If this ship were to be loaded with "case oil," i.e., kerosene oil in five- gallon tins, two tins to a case, 300,000 cases at least would be re- quired and, with the best of facilities, not less than thirty days — probably forty-five — would be required merely to load and stow them away. As another illustration take the machines known as harvesters and binders. Six thousand of them would be required to com- plete this cargo, or say nearly 400 carloads. Of ordinary mow- ing machines 15,000 would be needed, employing enormous fac- tory facilities and, to hazard a guess, the work of 3,000 skilled men for a month or two. A flour mill producing 7,000 barrels a day is regarded as big. It would take such a mill one month's steady grinding to pro- duce a load for our steamer and it would use the entire crop of from 250 to 300 average farms of 160 acres each. Multiply such a ship load by one hundred and sixty and the result represents the weekly, not monthly or annual — the weekly foreign shipments of these United States before the war. Loading on Steamships. — At the home town the manufac- turer's dray backs up to a railway station platform and cases are wheeled across in hand trucks to the level floor of a box car waiting on the other side of the station. Conditions are alto- gether dift'erent when cases are delivered to a steamer. Tlien, operations begin with dumping the cases from the dray to the deck of the pier. They are then at the mercy of the longshore- men, a motley crew by no means famous for gentleness, beating the roughest of the most famous baggage smashers caricatured in our humorous papers. Steamers' cargoes are not often han- dled by the crew of the ship unless by way of assistance to the gang of longshoremen who are especially emploj^ed for loading and unloading the cargo. It is to be remarked, too, that at the other end of the voyage longshoremen are likely to be far more ignorant, insubordinate, impervious to common sense and wil- fully reckless, than at this end. The manufacturer's eases have been dumped on the pier. 354 PRACTICAL EXPORTING Alongside lies the steamer her decks rising twenty or thirty feet high. How is the freight to be gotten on board 'I Doors in the ship's side are rare — as rare as possible, except in the case of American coasting vessels. The cargo has to go up to the deck, then down again into the vessel's holds — three or four stories down, the lower holds twenty or thirty feet below the surface of the water. Mechanical apparatus, conveyors, telphers and the like, ought to be used but are not, save in exceptional cases, as (at some ports) in the banana trade. One reason is that there is no uni- formity whatever in the sizes and weights of the cases and other packages which go to make up a steamer's enormous load. An- other is that there are few piers, even the newest, constructed with room or facilities for such apparatus. To the layman this seems a remarkable state of affairs. However, the reluctance, not to say aversion, of steamship companies to the introduction of mechanical loading and unloading devices probably has good grounds for existence. In any case, a certain rough manual skill is required in storing away cargo in the ship's holds. How Cargo Is Hoisted. — Ships are still loaded in very much the same way as they have been from the days of windjammers when there was no steam or other power — by means of the pulley, the rope and the sling. The sling, a square net of knotted ropes measuring perhaps twenty feet on a side, is spread) flat on the floor of the steamship pier. Such a quantity as it will hold of cases, barrels, crates or bundles, is heaped into a pile in the center of the sling. The corners are gathered to- gether and looped into a great steel hook dangling at the end of a rope. It is usually the steamer that supplies the power. Winches on its deck are operated by steam from the ship's en- gines. Ships' masts exist nowadays solely for the purpose of serving as braces for the several booms or jibs hinged and piv- oted to each of them, which in port serve as derrick cranes for hoisting cargo. Steel or rope cables run through pulleys at the outer ends of the swinging booms from the drum of the winch on deck to the hook which grabs the load in the rope sling. That load of a ton or two tons' weight may perhaps be composed of a dozen or two dozen packages of varying size, weight, strength and contents. PREPARING SHIPMENTS 355 As the load is hoisted the sling compresses all these packages and the weight of the whole rests on those in the lowest layer. Hundreds of pounds above are quite likely to crush the weak ones. The strain on the corners at top as well as at bottom is likely to break any cases not strongly made, fully packed or ade- quately reenforced. Up into the air goes the sling, high enough to clear the ship's decks, swinging to and fro like a pendulum, possibly crashing against the steel sides of the vessel on the way. Now the boom is swung over so that its dangling load is more or less directly over the open hatchway of the ship which gives access to the holds far down, perhaps next to the very keel. At a signal the winchman lowers away the sling. Swaying from side to side, banging against the steel deck beams and hatch-combings, down it goes swiftly until at another signal the winchman checks its descent. Sometimes the rough apparatus does not work quickly enough. Never does the sling land below decks where it is to be stowed, gently as a feather wafted by summer breezes. There's a bump or a crash of the weight of a ton or two. The steel hook is unfastened, the rope sling opened, its contents — a pile of as- sorted packages eight feet high perhaps — fall apart, tumbling about in various directions, to be grabbed by the half naked la- borers below and carried by hand, rolled or tumbled, to the dim recesses of the hold and there stowed away for the voyage through seas always strong enough to toss the whole great ship a little, sometimes fierce enough to throw her about like a bubble. A place for a given package may not be chosen with great care and deliberation in stowing away cargo. Cannot the reader now picture to himself a case of his own goods going through this process? It must stand up under heavy weights superimposed on it. ]\Iore often than not it is stood on its head or laid on its side. It must endure falls, bangs, bumps, crashes, in the loading of the ship. It may have unpleasant, even dangerous neighbors who will make their pres- ence felt when the ship begins to roll and pitch. What is morally sure to happen if the boards of the cases are old and frail and what will be the result to the goods inside ? Unloading at Destination. — Arrived at port of destination, the processes of loading the ship have to be reversed, slings lift 356 PRACTICAL EXPORTING the cargo out of the holds, swing outboard and deposit their con- tents either on quays or more often in lighters floating alongside the vessel. There are few except the greatest ports of the world where ships can or are accustomed to tie up to quays or "docks," as we mistaketily call piers. The general custom is for ships to anchor in the stream and discharge into lighters which then proceed to the shore where again very much the same performance in unloading them goes on. Furthermore, ships are by no means always able to anchor in safe and secure harbors. At hundreds of so-called ports there are nothing more than open roadsteads where steamships have to lie anywhere from one to live miles off shore in the open sea. This is n.otably the case all along the west coasts of Mexico, Cen- tral and South America, at many points also on the east coasts. This, too, is frequently enough the case at ports all over the world outside of the most highly developed countries. Many and many a time ships have to pass such ports as Mollendo, Peru, or Jaffa, the port for Jerusalem, because seas are too rough to permit the discharge of cargo or landing of passengers. At all such ports there is likely to be a heavy swell running. The lighters put off from shore, range alongside the steamer, bobbing up and down in very different time to the rolling and pitching of the ship. With ail the care in the world it is im- possible to deposit slings of cargo from the ship in the dancing lighters without bumps and crashes or without an occasional bath of spray. Transshipping Cargo. — Consider now that a very appreciable portion of tlie shipments of every country does not proceed direct to port of destination in the vessels into which they are first loaded, but has to be transshipped into other vessels at connect- ing points. There are certain main trade routes of the world over which ships proceed with great regularity, but these routes have many feeders. European shippers no more than Amer- ican can always find a ship proceeding direct to every port they wish to reach. It is often necessary to forward by a vessel which in the course of her voyage will transship the goods to some port where it is wished to land goods. Transshipment, though un- desirable, is often unavoidable. When goods have to be trans- shipped, all unloading and loading processes from and into ships, PREPARING SHIPMENTS 357 from and into lighters, have to be repeated, sometimes repeated several times over. Does it now become more evident what sort of cases must be supplied to witlistand the treatment described, of how different ocean shipping is from rail ? PACKING FOR PROTECTION OF GOODS Importers in foreign countries would invariably far prefer to pay extra for appropriate and necessary packing rather than suffer loss from inadequate protection to the goods they have bought. British manufacturers still very commonly charge ex- tra for packing. In fact, in England a good many export goods, notably piece-goods and machinery, are prepared for ocean ship- ment by professional packers who do nothing else than pack for export for any one who chooses to employ their services, and there are established and printed tariff rates applying to many kinds of goods and many sizes and varieties of cases and bales. American manufacturers long ago gave up the practice of charg- ing extra for packing, eitlier in the home trade or for export. Adequate Charge for Packing. — It is probable that there is too great hesitation to-day about suggesting extra charges for special packing, too much fear of advancing quotations for some export goods to cover entirely adequate packing which will nec- essarily be more costly. Very likely a good deal of the com- plaint against American packing, both domestic and foreign, may be due to manufacturers' fear of competition. Their habit of supplying packages free for which forty years ago they used to charge, has probably resulted in the cheapening of cases and, generally, of the protection given goods in transit, while our improved transportation agencies have made less necessary old and more substantial methods of packing. Similar considerations do not affect the export trade. By all means export prices ought to include free packing, but that packing must always be adequate to insure arrival of goods safe, sound and complete in the hands of the foreign customer. If ordinary quotations do not include such packing that is ab- solutely adequate, then an extra charge should be made, or bet- ter, quotations advanced to cover the increased packing costs. Risks of Damage Versus Cost of Packing. — Sometimes there may be a choice between the costs of extra packing and the 358 PRACTICAL EXPORTING amount of possible damage to goods as usually packed. This, however, is not a matter for the manufacturer to decide. It is the buyer who mast make his choice between paying extra for special packing or running his risks. A decision is usually made after consultation between buyer and shipper. German manu- facturers of beer bottles have shipped those bottles unprotected in common jute bags to some Latin-American markets. Amer- ican manufacturers of cast iron pumps have, to some points, shipped them naked without packing of any sort. In both cases the theory may be that, with the nature of the goods plainly ap- pearing, more attention will be paid, more careful handling given and the resulting loss from breakage may therefore amount to less than would be the necessary charge for cases or barrels. These remarks are to be taken purely as suggestions and the examples quoted must not be accepted as precedents. The only safe principle is to pack in the securest possible fashion, no mat- ter what it costs.^ Check Goods Before Packing. — Before export goods are packed at all they should be carefully laid out where no possible danger of confusion exists and checked with invoice or packing list in the most scrupulous and careful fashion. The manufac- turer, through his shipping clerks, must be absolutely certain that exactly the goods ordered and invoiced are actually packed and despatched. We have already remarked how much more serious are complaints on this score from foreign than from do- mestic customers. It is best, whenever possible, to have two per- sons do the checking; one confirming the other. Weighing Goods Before Packing, — Always, too, the contents of each case should be carefully and exactly weighed before pack- ing. This for two reasons. The net weight of the goods, to- gether with the gross weight when packed, is a check against possible thievery en route and a proof to the manufacturer that the exact quantity of goods as checked was actually despatched. Then the net weight of the goods is always necessary in foreign trade and sometimes it is also necessary to know the so-called 1 Valuable and detailed technical advice is to be found in a recently published work, "Export Packing," by C. C. Martin. PREPARING SHIPMENTS 359 ' ' legal ' ' weight, which is the weight of the goods themselves with their immediate containers, such as cartons, bottles, tins, etc. Fit and Count Small Parts. — Checking of goods before pack- ing is peculiarly necessary when the shipment consists of a num- ber of parts of one whole. Every screw, rivet, bolt and part, small or large — of a machine, for example — must be counted, after having been fitted into its appropriate place and found ex- act, and must be checked beyond possibility of miscalculation. Aside from dissatisfaction of a customer and the uselessness of a unit minus essential parts, there is to be remembered the in- evitable extra expense and delay in foreign custom houses when missing parts, etc., are delivered by later shipments and do not arrive with the original cases to which they belong. In line with the absolute and invariable exactness required in every detail of exporting, the necessity of the careful checking of goods be- fore packing must have special emphasis. Cases, Crates, Bales, etc. — In principle, cases are invariably to be preferred to crates, and either case or crate to burlapped bundle. A crate can seldom, probably never, be so strong as a ease and strength is evidently required in the processes of load- ing and unloading which have been described. Paper or paste- board packages must never be shipped — unless for enclosure with others in suitable cases. ''Use no hooks" is a phrase without meaning to longshoremen in any part of the world. Anything likely to be damaged by their hooks must never be packed in a bundle or bale. Whenever a bundle is made there must be many strong wrappings. If crates are ever used, exposed surfaces be- tween their slats must not be of a kind permitting damage or must in some fashion be adequately protected inside of the crate. The shipper cannot provide against the intrusion of the comers of other cases between the slats of his crates. Lumber to Be Used. — The lumber employed in the manufac- ture of cases or crates may be one-half inch or may be one inch stufiP, one and a half inch, or thicker, depending entirely upon the weight and the nature of the contents of the case. It should not be too heavy, for the weight of the packed case may afCect charges of various sorts which buyers have to pay, but security is never to be sacrificed to lightness. There should be no knot 360 PRACTICAL EXPORTING holes in the wood employed; if any, they should be covered by squares of tin securely tacked on from the inside. As a rule, cases should be new and not second hand. If the latter, they must be as good as new in every respect. Lumber may be light as well as strong and should always be matched, that is, tongued and grooved, because ordinary nailed boards will shrink on account of varying temperatures, sweating, etc. Packing cases of lumber good enough to arrive in excellent condition are of real value to many importers in foreign coun- tries. Good American lumber is rare and expensive in some countries and importers easily dispose of packing cases for good prices. The wood in them has even been known to be used in making coffins. Other materials employed in export packing are also valuable in foreign countries. Burlap, waterproof paper, etc., are used in the Orient and in some parts of Latin-America by upholsterers. Iron bands surrounding bales are a regular article of commerce in the Far East. Sizes of Cases. — Cases should not be too large. There should be no waste room inside. As we shall see, ocean freight rates are often charged on the basis of cubic measurements. Waste of a cubic foot in a case when multiplied many times over means the payment of considerable extra, useless and unnecessary freight charges by consignees. Furthermore, empty space in a case is a source of weakness. Again, if goods are not tightly packed, damage may result to the contents from shifting about. When machinery is packed and there are necessarily empty spaces in the boxing there must be cross battens and stays that will ensure every corner and edge of the case being as strong and secure as though it were fully packed. Every case, no matter what its contents, must be so prepared that it will ride safely whether stood on its head or laid on its side. Weight of Cases. — It is better, if possible, never to ship eases Aveighiug over 200 or 250 pounds each and never to make eases unusually large in size. In a great many foreign ports, eases must be moved about by hand or by the most primitive of appli- ances; facility in handling will often reduce the risk of rough treatment. The size and M^eight of cases is often dictated by the means of interior tnmsport available in countries of destination. The bulk of our export trade goes to markets where transpor- PREPARING SHIPMENTS 361 tatioii facilities are as good as they are in the Uaiited States, but a considerable share is destined for markets of another descrip- tion where even if there are good facilities at ports where ship- ments are landed, yet the goods are destined for interior points which are difficult of access and only reached by cart, or on the backs of horses, mules, donkeys, llamas, camels or coolies. In such cases, instructions should always be given by buyers. Such instructions, it has already been remarked, should be invited and urged and must be followed by the shippers to the letter. The load of a mule is supposed to be from 200 to 250 pounds, but that load should be divided into two parts and the packages made of suitable size for loading one on each side of the animal, prefer- ably' oblong in shape, at most 36 x 24 x 24 inches — not so large unless they contain light goods. A mule cannot carry more than 150 pounds if in a single package to be laid on his backbone. Bales for Export. — Goods packed in bales should be com- pressed as tightly as possible. Professional packers in England use hydraulic presses, sometimes working on all four sides at once with a pressure of as much as two tons per square inch. The goods should first be wrapped in good strong ordinary pa- per, then a layer of leather paper or sheet of canvas, followed by a layer of tarpaulin or oilcloth, or possibly some good water- proof packing paper, and outside of all double canvas or burlap. The outer covering should be carefullj^ and tightly sewn with heavy twine, with knots in the seam every two inches, so that breaking of the twine at any point will not permit the whole covering to rip open. Sometimes lags or boards are used to as- sist in keeping bales in their original shape, and ropes or iron hoops, as many in number as necessary, are used to bind the whole together. Necessity for Waterproof Linings. — One radical difference be- tween export and domestic packing is , the invariable necessity of protecting goods for foreign shipment with wrappings of some waterproof material. There are all sorts of contingencies to be provided against. In the first place, there is always the damp- ness of sea air. Next, there is the unavoidable risk of sea spray, to say nothing of a veritable drenching. Again, at many ports goods are landed on open wharves or quays and may lie exposed to rain as well as the hot tropical sun for days or even for weeks. 362 PRACTICAL EXPORTING Yet again, there is the risk from storms in general transporta- tion inland, even by rail. Box cars are not so generally used in other countries as in the United States. Open railway trucks are much more common and then, as in transportation by cart or on the backs of animals, although tarpaulins are spread against rains, yet a soaking is none the less possible. Kinds of Waterproof Protection. — Waterproof linings are usually provided in the way of tarred or oiled papers especially prepared for this purpose. The English have been rather fond of using oilcloth or tarpaulin and much more commonly than Americans have utilized hermetically sealed zinc- or tin-lined cases. The latter are extremely desirable in shipments of goods peculiarly liable to damage from rain or dampness. Few export quotations ever cover the cost of tin-lined cases. When they are regarded as desirable, although not absolutely essential, a special price is usually quoted separately for such packing, should buyers prefer to order it instead of other ordinarily ade- quate waterproof protection. Usually a case is lined with strong waterproof paper, inside of which is placed one or more layers of ordinary packing pa- per before the goods themselves are packed. Some attention has often to be given to the selection of suitable papers, since certain heavily oiled or tarred lining papers are likely to soil or spot goods placed in contact with them or may at least ruin the ap- pearance of cartons in whiel^ goods may be packed and thus pos- sibly affect the saleability of their contents. Packing in oilcloth or tarpaulin is often considered "old-fashioned" but may be a good plan. However, aside from the cost, such packing is open to the objection that in some countries a duty is charged on oil- cloth. Stuffing Materials. — Risk of possible damage from dampness sometimes affects the choice of material used for stuffing neces- sarily empty corners or for protecting against chafing. Straw, or particularly hay, is especially liable to absorb moisture and hence should be avoided whenever dampness is likely to damage goods. Whether excelsior, wood-wool, straw, hay, waste paper, or other material is selected will naturally depend upon the na- ture of the goods and the discretion of the shippers, guided by considerations like those now suggested. PREPARING SHIPMENTS 363 Protection of Brig^ht Steel. — Possible damage from moisture, raiu or sea water has especially to be guarded against in the shipment of machinery. All bright steel parts should invariably be covered with a thin layer of "slush," vaseline or grease of some sort; steel moldboards of plows protected by a thin paint easily scoured off and in general any articles of bright steel must be protected against danger of rust by the exercise of every imaginable precaution. In many steaming hot, tropical markets it is impossible to display a penknife in a shop window unless it is so thickly coated with grease as to be unsightly. The effects of climate in other parts of the world are not to be judged from conditions we know in the United States. Strapping Cases. — ]\Iost manufacturers long ago learned the necessit}^ of strapping cases which are to be shipped even by coastwise steamers, here at home. Straps are necessarj^ for at least two reasons. (1) as protection against theft while the goods are lying on docks, etc., and (2) as giving additional strength to the packing. The straps used should be continuous, extending all around the packages and not merely corner straps. They should be intended to serve the purposes just named, not merely look like straps. It is usually better to strap a case in all directions, not merely at the ends. Straps about the middle of cases both vertically and horizontally are often desirable. A practice in vogue among shippers of fruit from Porto Rico and other West India Islands is worthy of note. Boxes of oranges, grape fruit and pineapples are strapped with vulcan- ized fiber to avoid the possibility of rust from iron straps spoil- ing the appearances of the package or its contents. Cement coated nails are often used in export cases both on account of minimizing rust stains and because not so easily withdrawn. Similarly, screws are frequently used instead of nails, particu- larly in the covers of cases, which can then be opened easily and without damage in foreign custom houses to permit examination of the goods, and facilitate secure reclosing. Protection Against Pilfering. — Complaints of stealing of goods while in transit are common among foreign importers. Goods exported are peculiarly subject to this risk. Cases must lie in exposed places, in mountainous piles on docks where watch- men cannot observe each single package ; must often remain for 364 PRACTICAL EXPORTING considerable periods where not subject to supervision at all ; are open, in lighters and in the holds of ships, to the approach of all sorts of people. It is extraordinary with what judgment thieves pick out cases containing articles easily abstracted and suitable for their own uses or readily disposable. As a protection against suspicion it is advisable that no clues to the contents of a case be printed on its exterior. Such goods as boots and shoes, jewelry, wines and cigars, are especial favor- ites among thieves, to such an extent, indeed, that some steam- ship companies refuse to accept shipments of shoes unless espe- cially protected against this risk by wires about the middle part of a case, passed through holes bored through the wood at the corners to prevent breaking of the wire at that point and fas- tened by lead seals countersunk in the wood of the case. Cloth- ing and small articles in general are often extracted while cases are in transit. A good deal of ingenuity is shown in supplying the place of the missing goods by stones or bits of old metal to make up approximately the original weight of the whole ease and thus avoid suspicion until the goods have been passed through the custom house, duties paid and are fully unpacked in con- signee 's warehouse. One of the favorite and most successful methods of thieves is to draw the nails out of a case and slide the inside board, gen- erally at the bottom, cutting the interior lining, extracting the contents, finally replacing the board in position and re-nailing so that, to all appearances, the case remains intact. In a cir- cular issued by the American Trading Company some time ago the suggestion is made that in order to guard against the possi- bility of withdrawing boards in this way, "in addition to the usual strapping, strong iron clips be driven into the edge of each board and into the ease at top, sides and bottom, and a nail driven through the same." Another American export house in a circular relating to nec- essary protection against pilfering writes: "A certain firm, after lining a case with waterproof paper, weighs the goods care- fully as they are packed. They then place inside a slip stating that goods have been checked twice and requesting that in event of shortage the contents be weighed. The case is then iron strapped and sealed with a lead seal. In addition a rubber PREPARIXG SniP3IEXTS 365 stamp impression is placed on the case close to the seal and the same impression is made on invoices reading: 'This case has been properly packed, marked and sealed, and we will therefore not be responsible for anj^ loss cansed by theft or breakage.' " Essential Particulars of Export Packing. — The details of suitable packing fur export as applying to the thousands of ar- ticles shipped from the United States to all parts of the world will vary according to circumstances in each case. The essential points which every exporter should indelibly impress upon his memory are: Strong, whole cases. Thoroughly waterproof linings. Secure iron or wire straps. Protection against pilfering. PACKING FOR LOCAL REQUIREMENTS Another consideration affecting the kind of export packing that should be supplied is suggested by the enquiry : What ' will most please our foreign customers? What do they require in order to do business with us profitably, saving trouble, ex- pense, duties ? In such regards a manufacturer must largely be governed by the specific instructions given him by his foreign customers. He should always make a point of emphasizing his request for such instructions, but he nuist often be guided, in part at least, by his own study of conditions affecting or likely to affect shipments to a given market. He can learn a good deal about such conditions from information he can obtain from the Department of Commerce or the Pan-American Union in Wash- ington, from other inquiries and investigations he may set on foot, and from consultation with other shippers to the markets in which he is interested, or traveling men who have visited and had experience in such markets. Packing as Affected by Freight and Local Charges. — The in- terest of a shipper by no means ceases when he has delivered his goods to a forwarding agent or a steamship company for trans- portation to his foreign customers. He should make his cus- tomers' interests his own. This involves not alone securing the best available freight rates, but providing in every possible fash- 366 PRACTICAL EXPORTING ion that c^^arges on his goods shall be the minimum. He must reduce the weights and cubic dimensions of his packages so far as possible without endangering the safe and sound delivery of their contents. We have already noted how the shipment of cases unnecessarily large for their contents may involve cus- tomers in paying ocean freight charges on empty space, which on a single shipment or in the course of a year's shipments will amount to a considerable sum of money. ' It has been suggested, too, that to facilitate handling and sometimes interior transpor- tation, cases be neither too large nor too heavy. There are quay dues which have to be paid in almost all ports of the world and often lighterage charges. Those charges are sometimes per pack- age, not always on the basis of weight. Hence, a multitude of small light cases may involve a good deal greater expense than would be necessary were ten or twelve such cases to be strapped together or made up into a crate. What to Pack Separately. — So far as practicable a package should contain only one class of goods, otherwise there may be trouble, or at any rate delay, in many foreign custom houses.^ No catalogues, pamphlets or advertising matter of any sort should ever be enclosed in cases with goods unless specific in- structions have been received to do so. There are several rea- sons for this. Buyers do not always want their customers to know all about the manufacturer from whom the goods are re- ceived ; in many countries duties are imposed on catalogues and, unless buyers have especially requested them, they will object to being forced to pay the required taxes. It happens in some countries that the duty on printed matter is much higher than on some other kinds of merchandise and the inclusion of catalogues with such other merchandise subjects the whole to the highest rate of duty. Therefore, shipping clerks should be peremptorily forbidden ever to include in export cases any advertising matter unless instructions to the contrary are before them. Packing as Affected by Import Duties.— There is really little occasion for manufacturers usually to pay any attention to duties which various foreign countries impose. The chief reason for 1 The rule should be to avoid packing into one case two or more kinds of goods, or goods whicli may be subject to dififerent rates of duty, in sliip- ruents to any Latin American country. PREPARING SHIPMENTS 367 any consideration of this question at all is the indication of the most desirable packing sometimes to be discovered from the man- ner in which duties are imposed. In some countries all duties are on gross weight. This indicates that cases or other con- tainers should be as light as may be consistent with strength. In some countries some goods are dutiable on gross weight and some on net weight. In such instances it is desirable to use care in separately packing classes of goods subject to the same kind of duty, and not mix them together in one container.^ Net, Legal and Gross Weights. — Another consideration affect- ing packing is a term that is quite strange to many Americans, "legal weight." This is used in Mexico, Argentina and other Latin- American Republics and some other countries; duties in such countries are sometimes imposed on the gross weight of the goods, sometimes on the net weight and sometimes on the legal weight. These terms are thus defined in Mexico: Net weight is the intrinsic weight of the merchandise alone without any packing ; legal weight includes the interior wrappings containing the articles which are packed with the articles in the outside container, for example, small parcels of paper, tin, glass, light wood, bottles, jugs and everything of that sort ; gross weight is, of course, the weight of the entire package as shipped. Legal 1 The interest of manufacturers in studying gross weights of packing is illustrated in an extract from a letter from Costa Rica: "Manufacturers must understand that in Costa Rica, as well as in some of the neighboring countries, duty is charged on the gross weight of the goods. Every pound of weight that the manufacturer can save in packing his goods is so much money saved his Central American customer in the delivered cost of these goods. It is therefore obvious that manufacturers have a personal and selfish reason for taking particular pains that their goods are packed right, a reason resolving itself into satisfied customers and duplicate orders in the future. When goods are packed in unnecessarily heavy cases, duties will so increase the cost of the goods that they cannot be sold with a profit; repeat orders, therefore, will hot follow. One importer here told me of his experience with certain cushions imported for the trolley cars from the United States. These cushions weighed 21 pounds, the case weighed 60 pounds. Duty was, therefore, paid on 81 pounds, whereas the total gross weight could easily have been made 30 poimds." Tlie extra cost to the shipper of needlessly heavy packing may also be remarked. At this writing all duties are levied on gross weights in Colombia, Costa Rica, Honduras, Salvador and Venezuela. In many other countries duties on some goods are by gross weight, on others by net weight, ad valorem or otherwise. 368 PRACTICAL EXPORTING weight in all countries making this distinction is much the same thing, namely, the net weight of the naked goods plus the weight of cartons, cards and other immediate packing. Some exporters have learned by experience that on account of tariff provisions such as these a saving in duties is effected by shipping in one case goods practically naked, with as little im- mediate individual packing as possible, and shipping in another ease and invoicing separately the cartons or other packing in which the goods themselves are usually put up for sale, or which are desirable or essential to improve sales when placed in dealers ' stocks. This, however, is only a suggestion and should never be attempted except as the outgrowth of experience, after a careful study of conditions and by agreement with customers.^ Crating Together Small Packages. — Referring to the often desirable practice of crating together a number of small cases, a Special Agent of the Department of Commerce wrote in a re- cent report. from Guatemala of a shipment of safety matches from a German manufacturer that "not only were the goods put up in light tin boxes but the boxes were crated with plank. The German firm knew that the duty on matches was rather heavy and made an arrangement with the steamship people by which the planking was all to be removed from the matches and only the tins entered at the custom house, so the buyer did not have to pay a high duty on the planking." The foregoing report is characteristic of other "snap judg- ments" that have been published from consuls and many critics of American practice. As a matter of fact American and Eng- lish shippers also take advantage of the opportunity offered of reducing import duties in such fashion. In all countries of Latin-America where duties are assessed on gross weights it is very common practice for American sellers of matches, crackers and other commodities shipped in tins and sometimes in other small packages, to crate a number of such packages together and arrange with the steamship company's agent to have the ship's carpenter knock off the outside cover when the vessel has arrived at port of discharge, landing only the individual packages orig- 1 In a few Latin American countries poods shipped witliout customary wrappiufj or ((mtainers are subject to an arbitrary increase of weight on which duties are levied. PREPARING SHIPMEXTS 369 inally shipped in these crates, thus saving importers the duties which would otherwise be charged on the crates as well as the packages themselves. In such instances, the bill of lading is usually made to read, so and so many packages contained in such and such a number of crates. In every instance specific and very emphatic instruc- tions must be given to the ship 's officers and carpenter by the agents of the ship at point of departure, and the exporter must take care to make suitable arrangements with the agents before the goods are put on board. CALCULATING WEIGHTS AND MEASUREMENTS Exact statements of weights of all export shipments are nec- essary for steamship purposes and because of local conditions in foreign countries; of measurements, on account of ocean freight charges. Except for Great Britain, her Colonies and the Orient, weights are invariably required to be expressed in the metric system. Measurements of cases are seldom required in anything but feet and inches. Invariable exactness in these as in all other statements Is essential. IMistakes or miscalculations are punish- able by heavy fines on importers in many markets where authori- ties assume that if goods weigh more than the declared Aveights there is an attempt to defraud the government, even when the variation is plainly a mistake. Sometimes goods under these conditions are actually confiscated by the authorities. In the Argentine Republic a leeway of only 2 per cent, in the legal weight is permitted, although not much harm is done if the de- clared weight is more than 2 per cent, over the actual weight. A good deal depends on the terms of the tariff regulations of the country of destination as to how weights shall be calculated and declared. Instructions are or should be given by foreign customers in this regard. If no such instructions are received then the exporter may consult regarding the tariff regulations of the country in question the Bureau of Foreign and Domestic Commerce, or for Latin American countries the Pan-American Union at Washington, or he may buy Kelly's Customs Tariffs of the World, in which translations are printed in condensed but elaborate form of the regulations, rates of duty, etc., of all coun- 870 PRACTICAL EXPORTING tries. It may be observed, however, that it is possible to waste hours and days of perfectly good time in a study which will often be fruitless. To save time and wear and tear on gray matter in figuring weights and measurements shippers always have at their elbow suitable calculation books, immediate reference to which gives accurate results without necessitating extended arithmetical processes. British Weights and Measures. — The ton as used in Great Britain and British Colonies generally is not that ton to which we are accustomed in the United States. It is the old "long" ton of 2,240 pounds, which, except in a few commodities, long ago went out of use in this country and was supplanted by our short ton of 2,000 pounds. If we quote to British or British Colonial customers "per ton," we must quote in their tons and not in ours, unless we specifically state that our quotation is per 2,000 pounds. The British still commonly employ old divisions of their long ton, namely, the hundredweight of 112 pounds, the quarter of 28 pounds, etc. The abbreviation for hundredweight, "cwt.," is sometimes wrongly used in the United States to represent 100 pounds. A hundredweight is not 100 pounds, it is 112 pounds, and "cwt." should never be used to represent anything else. Incidentally, it is to be remarked that British, European and in general all foreign railway cars are small, light afi'airs, as com- pared with ours. A "carload," which in the United States may be from 18 to 50 tons, will in most foreign countries be figured as from 10 to 15 tons only. Another British measure which differs from our American standard is the gallon. The British use the Imperial gallon, which is one-fifth larger than our American measure, as are nat- urally the divisions of their gallon, quarts and pints. In for- eign trading, it is necessary that the exact kind of measure and weight that is used be clearly expressed. The Metric System. — The metric system of weights and meas- ures is generally employed throughout the world excepting in Great Britain and the British Colonies and in the Far East and Middle East. It is only necessary for the exporter t-o under- stand the principles of the system, familiarize himself with the PREPARING SIIIPME^\TS 371 names of the various terms and commit to memory the equiva- lents of the standard denominations for length, weight, capacity, etc. He should have available for quick reference a set of metric conversion tables to which he can turn in a moment and find the exact equivalent in our common denominations of a metric quo- tation, or find the equal in the metric system of an American de- nomination. A busy man has no time to waste in attempting to figure these equivalents for himself. The chief things which he must know, which he ought to commit to memory, are : The meter is equal to 39% inches. The foot is equal to 30 V^ centimeters. The kilogram is equal to 2^ pounds. One pound is equal to little less than half a kilogram. One liter is equal to little less than one quart. One pint is equal to little less than half a liter. Metric Standards. — The exporter must remember that all the old tables he learned at school, avoirdupois and Troy weight, the foot and the yard, the quart and the pint, and everything else connected with our common system, have nothing in com- mon with the metric system, are not even distantly related to it. First to be learned are the names of the metric standards : — the meter, the standard of length ; the liter, the standard of ca- pacity; the gram, the standard of weight. When the system of multiples and divisions of the metric standard denominations are understood, the system presents no difficulties. The prefixes employed are the more easily under- stood if one has studied 6;*eek and Latin. Greek prefixes are used when the standard is to be multiplied. Thus, dcka means ten times, hecto a hundred times, kilo a thou- sand times. A kilometer, is, therefore, a thousand meters; a kilogram, a thousand grams. Latin equivalents for 10, 100 a^id 1,000 are employed to indi- cate division. Deci means a tenth, centi a hundredth, milli a thousandth. A centimeter, therefore, is one one-hundredth of a meter ; a millimeter, one-thousandth of a meter. The principal denominations of the metric system in every day use are the following: In measures of length, the meter with its multiple the kilometer, and its subdivision the centimeter- In 372 PRACTICAL EXPORTING measures of weight : The gratn, but more especially its multiple the kilog7-am and its subdivisiou the centigram, lu measures of capacity : The liter and the hectoliter. How Metric Denominations Are Used. — A kilometer is used to express long distances, when we speak of miles. A meter is used to measure the length of pieces of cloth, of a wall, etc. Cen- timeters are used to express the width of a piece of cloth, the size of a pane of glass, etc., while the millimeter is most com- monly employed to measure the thickness of articles such as wire, sheet iron, a pane of glass, etc. Square meters are used to express the area of a room, square kilometers express the area of a country where we usually em- ploy the term square miles, but in the measurement of land an- other measure is used called the are which is equal to 100 square meters. The most common use of this term, however, is in its multiple, the hectare, 100 ares (10,000 square meters) which is used "chiefly in the measurement of farm properties as we em- ploy the term "acre." A hectare is equivalent to nearly 2i/2 acres. The metric measurements of capacity are almost exclusively used in the measurement of liquids. The liter is the standard, measuring a little less than our quart. The most important of the other measures of capacity is the cubic centimeter, "c.c. " as we call it sometimes, expressed in the proper nomenclature of the system as the centiliter. In measures of weight the gram and the centigram are used for very small commodities, but the kilogram, equal to 2^^ pounds, is the demonination most commonly encountered. It is to be noted that in countries using the metric system many dry commodities which we sell and buy by measure, e.g., by quart or bushel,— vegetables, grain, etc., — are usually sold by weight, not by measure. The problem of multiplying and dividing denominations in the metric system presents no difficulties to an American if he will keep in mind the decimal system on which our own currency is founded and forget the 12 ounces to the Troy pound and 16 ounces to the pound avoirdupois. Metric weights and measures are multiplied and divided just as are our dollars and cents. PREPARING SHIPMENTS 373 Moving the decimal. point a notch in one direction or the other multiplies or divides by ten. Rough Equivalents of Metric Denomination. — The equivalent of the kilometer in miles is easily arrived at by memorizing the rough equivalent, 8 kilometers to 5 miles. The equivalent of the meter may be memorized by thinking of three threes, namely 3 feet o|8» SK9 4) CO ^ S ^ MmoraitJufn of Weights, Measurements and Rales of Merchandise Shipped l>y Masn. BROWNE . GREENE A WHYTB . Crnci/wati in/JVeu York "ADHUIIO" '» HAEMSOII, POST, HATKAWAY i CO. #3 One 2i H.P. Englre fi One 2} H.P. Engine f5 One 24 H.P. Enelne =3 One 8 H.P. Engine h One 8 H.P. Engine #S one 8 H.P. Engine iO One 8 H.P. Engine #10 One 12 H.P. Engine #11 Repair Parts #12 Advertising Hatter 14000 4700 Form 6 — Weight, Measurement and Rate Memo. O cs Od m • 09 CO • I [ « CO 4H • < o ir: 1-1 • i lO cc lO; CT ^ tr s? 4> O I tm ^ '0:5 ^ o ^ o t— I ^ 3 eg -5 - is o ^ ^ S Q S w o o o 'C s -^ a ■= 2 rS3 S P CO O ^ _ s © c ■^ I ° H .S"S O CO m m 6R0WNE, GREENE 6 WHYTE. shipping 6 financul advice CINCINNATI AND NEW VORIl Cables: "Breene, New York- b^oadwav chambers Codes Dstd: A. B. C. 4th Md Sth ^^^ ^^^^ _,^^^^^ 3^ „ Liebers, Western OiUon. „Hairiaon,.Poat,- Hathaway- 4 Co,, 507_ Lime Street, .. - Liverpool . 1 Vrar SiilB ■ , , j j We beg to advise having drawn on you for £ 396-^-15. 1 ® Blgl't d,t being Ihe value of a shifmeiil made by m per .jaiS-.-'ADHIATIC" - " - Liieipool /«>■ «"'•"' "/ yOUTBelVeS _ - We liave negotiated our Draft ^jl/j QUI Bankers, instructing them to pass documents through .,., _...,... ..--..>..^-> - with current Colonial exchange '^" "" ~ " ""tIu Insurance for £. -41835.0.0 --^-we have covered in The- lOSUraaoe Ooopftny. .Of ...Hortlli. AneziCA. Company of Philadelphia .„ »,//, a«y losses made payable in LiXeipOO] Vessel Sailed^ Septenber -1 Commending our Draft to your protection. We are. Dear Sir. Yours faithfully BBOWNE, GREENE &_JWHy2E. lark.^^Sj-kzs. 12 £ 341.- .14^. ...n~ - Invoice No 6224^ „ CMrgefl ae per ... 8 tatement -5.5 .....Of, 6 , _ Form 7 — Shipping and Financial Advice. c 1 1 PREPARING SHIPMENTS 383 invoice will or should show in just which case of a shipment each particular item is packed. A packing list should also be supplied giving the reverse information, that is, just what is contained in each case, but more especially the net and gross weights and cubic measurements of each case. Such a list is especially useful to importers when a shipment consists of a large number of packages. Other Papers.— Other papers which may have to be prepared to accompany export shipments vary with the circumstances oi such shipments, but almost always include notice of draft sent by shippers directly to customers telling the latter how collection is being made, amount and terms of draft, etc.^ This will be the better understood when we reach the chapter considering methods of financing foreign business. In some lines it is necessary to supply certificates of inspection, analysis, weight, count, etc., especially in connection with ship ments of meats, oils, grain, lumber, and similar commodities. Copies of these certificates are also usually demanded by bankers who negotiate drafts covering such shipments. 1 See Form 7. CHAPTER XII MAKING THE SHIPMENT Parcel Post Facilities in Foreign Trading — Starting an Export Shipment by Rail from an Inland Factory — Steamship Serv- ices Available to All Parts of the World — Ship Chartering — Ocean Freight Rates, How Governed and on What Based — Advantages Offered by Foreign Freight Forwarders and How They Operate — The Various Formalities Necessary in Making an Export Shipment — Shipments in Bond — Drawback — The Steamship Bill of Lading — Considar Invoices, What They Are and When Required. WHEN goods filling- an export order have been properly prepared and packed, the manufacturer finds him- self confronted with the task of putting them into the hands of his foreign customers in the most satisfactory fashion. Export shipping practice difiPers from domestic in some impor- tant ways, but the routine motions are easily and quickly learned. They contrast strongly in this regard with the necessary formali- ties in importing goods which, in this as in every country having a complicated tariff, is a strenuous performance, intricate and complicated, only learned after years of apprenticeship. Export procedure, on the contrary, is simple, only requires ordinary in- telligence, and most of the detail work in connection with it can be entrusted to minor clerks after they have received a little in- struction and experience. POSTAL FACILITIES Not enough attention is given by American manufacturers to facilities offered by the post office for the development of export business. In fact, these facilities seem not to be generally under- stood, for people in Boston think it necessary to ask questions of a New York "export authority" instead of seeking information at their own post office or asking there for a copy of the Official 384 MAKING THE SHIPMENT 385 Postal Guide and themselves studying the regulations. The facilities now in question range from low rates of postage on commercial papers (that is, copies of invoices, bills of lading and other documents) to sample post and parcel post. Foreign Parcel Post. — Small orders can frequently be des- patched to foreign customers more cheaply and more expedi- tiously by Parcel Post than by any other means. Even when a shipment exceeds the limit of eleven pounds in weight for a single parcel post package, it can often be divided into several parcels, each falling within that limit. The parcel post is some- times preferred by customers, even when its cost is a little higher than some other means of forwarding, because custom house regu- lations applying to packages thus received are in many coun- tries by no means so severe as they are when goods are received as steamship cargo, in fact, such packages sometimes pass with scant attention to the levying of duty. It is seldom in any coun- try necessary to employ a custom house broker in order to get possession of goods shipped by parcel post, whereas the broker is unavoidable when cargo has to be passed in the usual way, no matter whether there is a single paper parcel or a hundred big cases in a shipment. Not the same sort of protection is required in making up pack- ages for the parcel post, although strong waterproof wrappings are advisable. The post office itself packs parcels into bags or cases for foreign shipment, which receive the greatest care in despatch and invariably the first attention of the steamship people. Flimsy pasteboard boxes are not accepted. Post office rules, to be found in the Official Guide, give advice as to suitable packing for the foreign mails. ^ Willie the L'nlted States has not yet concluded parcel post conventions with all eountries, still most of the principal markets of the world can now be thus reached from this country and this postal faeility is being rapidly extended. Yet it still seems to be a surprise to some shippers to discover that it costs less to send a parcel by post from New York to Australia than it costs to send the same package to San Francisco. No zone system ap- plies in the foreign parcel post. 1 See also special chapter on packing for parcel post shipment in C. C. Martin's book, Export Packing. PARCEL POST TO FOREIGN COUNTRIES POSTAGE, SIZE, WEIGHT, AND VALUE Postage 12 cents a pound or fraction thereof Greatest length (for exceptions see Postal Guide) 3 feet 6 inches Greatest length and girth combined (for exceptions see Postal Guide)... 6 feet Limit of weight in general, but see Postal Guide 11 pounds Value Not limited LIST OF PARCEL POST COUNTRIES Subject to change and extension. Always consult local postmasters and latest supplements to Postal Guide. Abyssinia** Aden** Afghanistan** Algeria** Argentina Ascension** Australia Austria** Azores Bahamas Balearic Islands** Barbadoes Bechuanaland Prot.** France Belgian Congo** Belgium Bermuda Bismarck Arch.** Bolivia Borneo** Brazil* Br. East Africa** British Guiana British Honduras British India** Br. New Guinea Br. Noith Borneo** Br. Somaliland** Brunei** Bulgaria Cameroons** Canary Islands** Cape Verde Is.** Ceylon** Chile China* Colombia Corsica Costa Rica Cyprus** Czecho-Slovakia Dahomey** Denmark Dominican Rep. Dutch Guiana Dutch E. Indies Ecuador Egypt** Falkland Islands* Finland French Congo*' French Guiana French Guinea* French India** French Oceania Fr. Somaliland* Gabon** Gambia** Germany Gibraltar Gilbert and Ellice Is New Zealand Gold Coast Col.** Nicaragua Japan Jugo-Slavia Labuan** Latvia Liberia Lithuania Luxembourg Macao (China)* Madagascar** Madeira** Malay States** Malta** Manchuria** Mauritania** Mauritius** Mauru Island** Mesopotamia** Mexico* Monaco** Netherlands New Caledonia** Newfoundland New Hebrides** Port. Africa** Port. India** Port. Timor** Reunion** Rhodesia** Roumania St. Helena** Salvador Samoa* Santa Cruz Is.* Sarawak** Senegal** Siam Sierra Leone** Society Islands Solomon Islands* South Africa S.W. Africa Prot. Spain Straits Scttle'ts*^ Sudan Sweden Switzerland** Syria** Tibet* Togo** Trinidad Tunis** Turkey** Turks Island ITganda** I'ruguay Venezuela West Indies Br., Du., Fr. Zanzibar** Great Britain Nigeria' Greece Norway Guatemala Nyasaland Prot.^ Haiti Palestine** Honduras Panama Hong Kong Paraguay** Hungary** Persia* Iceland Persian Gulf* Indo China** Peru Italy and Colonies Pitcairn Island** Ivory Coast** Poland Jamaica Portugal *Principal places only. **Packages for these countries are transmitted through the intermediary of another country, involving additional charges for transportation over its terri- tory, which charges as well as regular postage must be prepaid. REGULATIONS In general, any article admissible to the domestic mails of the LTnited States may be sent in unsealed packages by Parcel Post. A letter or communication of the nature of personal correspondence must not be enclosed with any parcel. No parcel may contain packages addressed to persons other than the person named in the outside address of the parcel itself. Parcels must not be posted in a letter box or package box, but must be taken into the Post Office and presented to the ofificer or clerk in charge. Every package must be securely and substantially wrapped in such a way that its contents may be easily examined. Parcels wrapped in thin, flimsy paper or packed in thin pasteboard boxes will not be accepted. Wooden boxes having lids screwed or nailed on and bags closed by sewing may be used, provided they are presented at the post office open for inspection and afterwards closed by the sender. CUSTOMS DECLARATIONS A Customs Declaration obtainable at the post office must be properly and fully filled out, stating the actual contents, value, etc., of the parcel. It must be firmly attached to the cover of the parcel. Special instructions and the number of copies required by different countries may be learned from the Postal Guide. CERTIFICATES OF MAILING The office of mailing will, if requested, fill out and date-stamp a "certificate of mailing" and hand the same to the sender. REGISTRATION The sender of a parcel addressed to any country except those specifically ex- cepted (see Postal Guide), may have the same registered by paying a registration ice of 10 cents, and if requested will receive the "Return Receipt" without 3()ccial charge therefor; but the Post Office Department is in no case responsible lor loss or damage to any parcel. CUSTOM DUTIES Customs duties on parcels for foreign countries cannot be prepared by the senders 386 MAKING THE SniPMENT 387 An extra, or transit, charge is made on parcels shipped to cer- tain countries with which the United States have no direct parcel post arrangements. But even witli this surcharge the cost of thus forwarding small shipments is usually much less than by any other available means and the service (juicker and more satis- factory. ' ' Combination parcels ' ' are accepted to certain countries. The list of countries to which parcels may be sent by post from the United States together with all regulations governing the despatch of such parcels can be learned at any post office or, in detail, by reference to the Official Postal Guide. Emphasis may, however, be laid on the possibility of paying a registration fee of lU cents per package and receiving through the post office a "return receipt." This is often overlooked but affords the shipper proof tliat his goods have actually been delivered to his foreign customer. Further, a "certificate of mailing" may be obtained on request from that United States post office from which a foreign parcel is dispatched, and in duplicate or tripli- cate, if desired. A "certificate of mailing" dispatched with in- voice to a customer is prima facie evidence both of actual ship- ment and date of shipment. Parcels shipped by post to foreign countries are not insured by our Government. But insurance may be secured from sundry companies, some of which make a special feature of that business. ^lany claims by foreign customers because of lost packages may be adjusted without loss if the simple precaution of insuring parcels be not forgotten. As so often emphasized in these pages every effort must be made by shippers to deliver goods to cus- tomers promptly and .safely. Sample Post. — It is possible to send to all countries of the world embraced in the International Postal Union (except in times of war) small packages of samples weighing not to exceed 12 ounces gross at the rate of 2 cents for the first four ounces and 1 cent for each additional 2 ounces or fraction thereof. This class is supposed to be restricted to actual samples "of no commercial value." Sometimes packages tendered are refused because contents are considered intrinsically valuable. United States authorities construe the term "no commercial value" much more strictly than do similar authorities in many other countries. A pair of gloves might be regarded in the United 388 PRACTICAL EXPORTING States as not admissible to Sample Post, although honestly in- tended as samples, and readily accepted as such in England, for example. It is possible, of course, to forward one article of a pair in one package and its mate in a separate package by subse- quent mail, but this may involve payment of double duties by the addressee because custom houses everywhere are quite well ac- quainted with efforts of this sort to get goods through without payment of duties and are likely to assess full duty on each half of a pair, anticipating that mates are to arrive on some other occasion and might escape detection. While the limit of twelve ounces appl3'ing to sample post does not permit despatch of samples of a good many articles, yet it is a facility by no means to be despised and even affords a quick way of putting samples of greases, liquids, etc., when packed in approved containers, into the hands of one's foreign customers or prospects without great expense. Commercial Papers. — Some saving in postage can often be made when a heavy lot of documents of no special value have to be forwarded abroad, by posting them as "Commercial Papers" in unsealed packets, but firmly secured to avoid loss in the mails. This classification is intended to apply to documents that have not the character of an actual or personal correspondence and applies to bills of lading, invoices, copies generally, andjn sev- eral respects is much more liberal as applying to the foreign post than it is within our own borders. Ten ounces may be sent for 5 cents and each 2 ounces in excess of 10 ounces cost 1 cent additional. STARTING FROM INLAND FACTORY BY RAIL Extraordinary as it may seem, it is a fact that a good many manufacturers not located on the seaboard apparently expect that their foreign shipments will take care of themselves, once loaded into a railway freight car. "There is one point which causes considerable trouble not only to the railroad but to both the shipper and the consignee, namely, the fact that some ship- pers not thoroughly acquainted with the handling of export freight will send forward a shipment, say to Glasgow, Scotland, take out the local order railroad bill of lading, send the goods forward, put their bill of lading through the home bank and rest MAKING THE SHIPMENT 389 peacefully, presuming the goods will go to Glasgow, while as a matter of fact the goods will stay in New York City. They are not even billed iu care of any steamship agent, forwarder or for- eign freight agent. "In due time the railroads are informed that these goods are on one of their piers, which necessitates their tracing back to the shipping point, leading to the discovery that there are no papers, no instructions and no arrangements made for forward- ing from seaboard. It should be fully understood by all ship- pers that a local railway bill of lading is of no value on ship- ments beyond the seaboard. Shippers must not send forward ex- port freight without first making arrangements either with the railroad company or a forwarding agent at the port of ex- portation." ^ How Rail Shipments Are Handled. — All of the great railway traffic lines maintain foreign freight offices which are always available for information, rates, expediting shipments, making contracts, etc. Shipments from the interior are handled in one of two ways. Either on a through export bill of lading or on a local railroad bill of lading, billed to the manufacturer's New York agent, in care of some forwarding agent, or in some cases in care of a steamship company. When goods are shipped on through bill of lading issued by the railway, the local railway representative advises his foreign freight agent at New York to engage space for ocean freight and the local agent in due course hands the local manufacturer copies of the through bills of lading, the foreign agent for the railway attending to all details connected with the ocean trans- portation. The local railroad bill of lading is different, in that some other person at New York is the consignee and no arrangements for steamship space, etc., are made by the railroad. When the goods reach New York an Arrival Notice is sent to the person to whom the goods are consigned and it is his duty to attend to subse- quent transactions necessary for shipping the goods abroad. To practically all European ports and to most other principal ports of the world, with the exception of those in Latin American countries, through railway bills of lading can be obtained. We ^Export Bulletin, Detroit Board of Trade. 390 PRACTICAL EXPORTING shall shortly comment on the advisability of these bills of lading. Early Despatch Necessary. — Most steamers sail on routes which involve calls at more than one foreign port. This is the case with almost all lines except those to Europe, notably with lines for Australia and New Zealand, for the West Coast of South America, for the Far East and for South Africa. In such cases goods from the interior must be shipped to arrive at sea- board in ample time for proper stowage in the ship. It must not be assumed that cargo for all ports will be ac- cepted up to the scheduled day for sailing. Freight for the last port of call has to be loaded into the ship first. Most of these steamship lines therefore require that goods for which space has been engaged shall be delivered on certain days ranging over a week or ten days prior to the date of sailing. Delivery dates are arranged according to ports of destination, as per the steamer's schedule. Freight for the first port of call may be accepted sometimes up to the very day of sailing. If other goods arrive, say, only three days ahead of scheduled sailing the vessel may refuse further freight for the special port of destination, because then loading for earlier ports of call. The Railway Bill of Lading. — Railway bills of lading cover- ing goods for foreign shipment should always be marked "for export," or in the case of carload shipments "for export, light- erage free." When names and address of ultimate consignee are shown with measurements and weights, goods arriving at New York are granted free storage for five days instead of for forty-eight hours only. This is intended to provide for delays in making connections with outgoing ocean steamers. It does not apply to goods arriving in New York from New England points and active efforts have been made by the railways to be permitted to abolish all free storage. Full details can always be obtained from the shipping instructions, eastbound guide books and other publications of the trunk lines. Contents of a carload need not be all for one consignee or even for the same steamer. But a carload for one vessel is lightered free alongside the ship. Shippers forwarding their goods for export via New York should be reminded that there is no direct or intimate connection between arriving railway stations and the piers of ocean steam- ers. It is necessary for freight to be carted from rail terminal MAKING THE SHIPMENT 391 to ship's pier, unless goods are shipped in carload lots; in the latter case the cars are lightered by the railways alongside the vessel free of charge, within reasonable limits in New York Harbor. The railway companies themselves will agree to undertake the cartage of export goods for certain specified rates and in the absence of any other facilities in New York such arrangements may be utilized, although usually money can be saved by em- ploying foreign freight forwarders or some of the established carting companies for special jobs. The rates for cartage quoted by some of the leading rail lines range from 50 cents for ship- ments of less than 200 pounds up to 75 cents or more for the same weights, according to location of the steamship pier to which delivery must be made, with ferry charges added when steamers are berthed at Brooklyn, Iloboken or Jersey City piers. Rates are proportionately less, of course, for larger quantities of freight. An important matter quite often overlooked by inland manu- facturers is the necessity of supplying agents of any description in New York with an officially signed copy of the railway bill of lading. At many small railway stations arriving freight is given up by station agents without requiring the production of a bill of lading. This practice, however, does not prevail in New York or other big cities where consignees are not personally known. It is necessary to produce the railway bill of lading in order to get possession of the freight. If the manufacturer has not forwarded such document to his New York shipping people it becomes necessary for the latter to write or telegraph for it, delay ensues and a steamer may be lost. All rail shipments to seaboard ought to be prepaid even when prices do not cover such delivery and the freight has to be in- voiced. Prepayment of inland freight saves a great deal of red tape and annoyance, possibly delay, after arrival at port. STEAMSHIP SERVICES In determining routes by which an export order should be shipped a manufacturer has to consider both the fastest and the cheapest routes available and must exercise due diligence to despatch his goods in ample time to catch a desired steamer. 392 PRACTICAL EXPORTING No great advantages in ocean freight rates are often obtainable in days of steamship conferences and Shipping Boards, although independent lines do exist. There is, however, no excuse at all for the popular cry of lack of opportunities for shipping American goods to any part of the world, in normal times. It has not for many years been necessary to ship goods first to Europe in order to deliver them to customers in South America, as politicians in and out of Congress have charged. We have regular direct sailings from New York to Java and Sumatra and to the west coast of Africa, to points which it is doubtful if the average Congressman ha.s ever heard of since he discarded his elementarv' school geography. It is true that sometimes the post office has despatched mails for South America via Europe, because it is American practice to seize the first opportunity of getting letters through to destination in the shortest possible time. But it is also to be remarked that letters for Germany used often to be despatched by fast Cunarders via England in- stead of by slower direct German boats. Services from New York. — It is impossible, as it would be in- advisable, to attempt to give schedules or even an outline of steamship services in these pages. General services can be learned at any time by specific inquiry of authorities in New York or by consulting files of the New York Journal of Com merce, which will probably be found in most public libraries or cliambers of commerce. Names and addresses of steamship com- panies maintaining services to all parts of the world are given in the Export Trade Directory. Several New York forwarding agents publish monthly sailing lists which are fairly complete and are distributed free of charge as advertisements. Services from Other American Ports. — Although only about 37 per cent, of the total exports of the country in normal times pass through the port of New York, yet it remains and must al- ways remain as the greatest shipping port for the greatest num- ber of commodities and to the greater number of the world's markets. If 63 per cent, of our total exports are cleared through other American ports they are chiefly of special character or destined for certain special markets for which such ports afford peculiar facilities. Comparatively little grain or cotton, for 393 niilar de- ports, he world )rt News, ite ports, lines of e Orient, America othing of feles, and ig to the !xico and ices from ed. h Mexico ihipments btainable led to by r. snts from )ast ports lasia and *^'cialize in trilnitary than car- er thence, le Middle , than via ter condi- elays and ignees re- are some- 3Ustomers. 1 pounds, icago for- it railway Sjcport Bill ofLadinl Ai>. -46353— Cimfrarf Xo.-234S Lot Jfo Zteiedgf-BuffalO^.JL.1^ «i«..31»-t (fnyo/'..-J.Uljr. Oin. -; K.T.C. 03164 {.. THE NEW YORK CENTRAL RAILROAD COMPANY. SHIPPED BT John Smith 4 Son from Buffalo, N.Y. Uiefollowiog property ia apparent good order, except as noted (contents and condition of coc tents of packages unknown) marked, nnmbered. consigned and destined as indicated below: CoHBioirer ) _ . «^ , ._ L iHD v Order Edinburgh DoTiHATrmi ) ° HoTiTT Duncan Soott, Ltd. I c 1/14 ^~\ Edinburgh! ARTICLES Fourtaen (14) Caees Carriage Goods Shippers' weicit 3450 lbs. ^o^*^ ormadeupinalnelepaetagea addreaaed to one conaiKnee. pay full frdghtooeochpan^L aitlclea*aVa^JoMtth«li*^ "'"''' ot any part of thrar^clra specified herein bepr^cnted by any (suae from Koiog in the firat ateamer leaTlnjr after the arriral f aueh il ruiaa and ra^Htatiotta at port s/d. ""^■Ja eapenae.'Sd ull all libll&SFih, .'iSSiffl SSjfny'S™?^SSlSt^^S'd;S^t?5,"„rafnJ'c?m'er'''" be " the rtak of the owner of the good., bnt at i, ^i!^SiS£i.?^^^SiS,si'£x^L^S£t^l^^z^'^,^i'J:'^j:::^ »/ .o.-.r, jr«,.o,.„ (^je,,,.,; i„o^ /»a,^,. „ ,> o,,..juor, tlona. e.,52^aIl'i:Sa7,;£^"e?i;iSS°J;p'Xtef5P'Sif"i":£e"aSSU'SS g^ch-SiiUr'-o'iSy^'cSiiSl'eS'ol-h^.a^-^ tobe honnd by all of Ita atlpola. Form 8— Through RaUroad Bill of Lading. MAKING THE SHIPMENT 393 example, is despatched from New York. Exports of similar de- scription are peculiarly characteristic of certain special ports. There are many steamship lines to various parts of the world taking cargo at Boston, Philadelphia, Baltimore, Newport News, Savannah, Mobile, Galveston and at some intermediate ports. New Orleans boasts a large shipping business with lines of steamers to Europe, to South America and even to the Orient, but it is especially in facilities for shipping to Central America that this port is prominent. San Francisco and the Puget Sound ports, to say nothing of minor ports on the Pacific Coast — San Diego, Los Angeles, and Portland, Oregon — enjoy especial facilities for shipping to the Far East, to Australia and to the West Coasts of IMexico and Central America. Specific information regarding services from all American ports is obtainable in ways just mentioned. Overland Routes. — The major part of our trade with Mexico and Canada is carried on by rail and, although such shipments involve certain special treatment, details are readily obtainable from the carrying companies — are in fact often attended to by them, requiring only incidental attention by the shipper. Certain advantages in some respects attach to shipments from the Middle West by overland rail routes to Pacific Coast ports where transshipment is made to steamers for Australasia and the Far East. A number of concerns in Chicago specialize in combining carload shipments from manufacturers in tributary territory and making through rates on carload and less than car- load shipments via rail to the Pacific Coast and steamer thence. It is claimed that it is cheaper for manufacturers of the Middle West to ship to such destinations via the Pacific Coast than via New York, (unless the Panama Canal route may alter condi- tions), although complaint is made of exasperating delays and careless treatment of goods and it is doubtful if consignees re- ceive earlier delivery of their goods, and shipments are some- times "split" — to the annoyance and dissatisfaction of customers. Through rates are named, usually per one hundred pounds. Specific quotations can always be obtained from Chicago for- warding agents. Through R. R. Bills of Lading.^ — Any of the great railway I See Form 8. 394 PRACTICAL EXPORTING companies will arrange to issue through bills of lading from points on their lines to foreign port, or even through to inland point of destination in a foreign country. While such a bill of lading may sometimes seem desirable to an inexperienced ship- per, it is doubtful if, as a rule it will prove advantageous to the development of an export trade. Grain shipments can thus be handled because of the immense volume of the business and much more severe competition for it than in general lines or small sundry shipments. More economical arrangements are in most cases possible by giving special attention to competing rates and services. It may be observed that some bankers, at home and abroad, especially in Australia, refuse to recognize through rail- way bills of lading. No definite sailing date or name of vessel is stated ; the responsibility of carriers is with difficulty fixed in frequent cases of short shipment. Bills of Lading- to Inland Foreign Points. — It is notable that few large importers in foreign countries when they happen to be located at inland points some distance from their seaports ever desire that goods be shipped to their own cities on through bill of lading. Carrying companies in the United States, either railway or steamship, are rarely able to name as good rates or procure as good services for inland transportation abroad as im- porters are able to obtain for themselves through agents which all such importers of considerable caliber maintain at their ports. The custom of large importers, therefore, is to have shipments consigned in the care of such agents at seaports and all details connected with landing of goods, clearing through custom houses and despatch by rail or otherwise to interior destination are at- tended to by such agents. It is the rare exception and usually only in the case of small or occasional importers that a through bill of ladilig to an interior point is requested. Except upon such specific request from foreign customers, manufacturers are not advised to seek such bills of lading. Steamer Transshipments. — On the other hand, transshipments are often necessary to land goods at some foreign ports. This, as has already been pointed out, is the case in shipments from European ports to many of their foreign markets as frequently, or almost as frequently, as it is in American shipments. Let us take an example to illustrate transshipping facilities: MAKING THE SHIPMENT »35 Assuming that shipping facilities will regain after the war much the same basis as before, we may take Constantinople as an ex- ample of a port wnich (although nowadays there are direct steamers) it was formerly necessary to reach by transshipping en route from vessel which takes the goods from New York to some other vessel connecting for destination. It has been possible to forward shipments for Constantinople by lines reaching Naples or Genoa, Trieste, Piraeus or IMarseilles ; they could be forwarded by lines reaching Liverpool or Hull, England, or by German lines plying to Hamburg or Bremen. At all of these ports transship- ments were made to vessels sailing thence to Constantinople. Competing freight rates were made by all these lines. Ship- ments proceeded in approximately direct line from New York to Naples, transshipping there to steamer bound direct for Con- stantinople. The freight rate was about the same as by the much longer route via New York to Hamburg and transshipment there to vessel sailing all around Europe, past Gibraltar and through the IMediterranean to Constantinople. In fact, the through rate from New York in the latter case was but little higher than the rate from New York to Hamburg only, or from Hamburg to Constantinople only. Rates by direct steamer from New York to Sydney, Australia, have usually ruled only a little lower than rates offered by certain companies for shipment to Liverpool and thence transshipment to Australia. Wherever there are direct steamers with satisfactory rates of freight, transshipping is to be avoided because of the necessary rehandling of the goods, with increased risk of damage and pos- sible delays in reforwarding. SHIP CHARTERING Ordinary ciuantities of most commodities are shipped by ves- sels owned or operated by so-called "lines" plying to various parts of the world, with more or less regularity. However, when a shipper has a very large quantity of goods to be delivered at one or at several foreign ports, he may hire, that is, charter a whole ship for the purpose. Such charters are for the most part confined to commodities shipped in bulk, like grain, cotton, sugar, coal, ore, lumber, etc. Sometimes manufactured goods may be required in sufficient quantities to make it necessary to 396 PRACTICAL EXPORTING engage the whole carrying capacity of a ship. This happens, for example, quite frequently with manufacturers of harvesting machinery, steel products, etc. How Ships Are Chartered. — A ship may be chartered for a given length of time (sometimes for several years), or for a stated voyage or a voyage out and back. The charter party is the lease or contract which the shipper makes with the owner of a vessel. It may be in any one of a score of forms devised for special trades or by steamer owners according to their own pref- erences. Charter rates may be a certain sum per month or an agreed price pei* ton, pound, bushel, etc., of cargo carried. These contracts usually provide for the number of days that are to be allowed to shippers for loading and discharging the cargo, which are technically known as lay days. The charter party usually provides that if the vessel is delayed beyond the agreed upon number of lay days then the charterers shall pay the owners a penalty, known as demurrage, at some stated rate per day of delay. Obviously space is not available in a book of this character for a detailed or comprehensive review of the whole subject of ship chartering, as indeed such a consideration does not seem here to be called for. Usually sales by the ship load are regarded as on the same basis as C.I.F. sales of less than cargo quantities. OCEAN FREIGHT RATES Nowadays we have all sorts of technical and highly compli- cated zone, commodity and other rates in our railway regula- tions. There is nothing comparable to them in ocean rates.- No systematic or scientific classification of commodities is in force, although a good deal more is attempted in this direction than in formg' times. Up to quite recent years all. ocean freight rates were named on the basis either of weight or measurement. Now, certain rough, general classes have been established but there is absolutely no uniformity in making such classifications or in ap- plying them. Rates in one direction may be in one form, in an- other direction in quite a different form. Rates on the same goods may by some lines be quoted by weight, by other lines by measurement, or sometimes per unit of packing, per bale or per barrel. A steamsliip line will quote rates on some goods in shil- MAKING THE SHIPMENT 397 lings, per long ton or per ton of forty cubic feet, and rates on otlier goods in cents per foot or per hundred pounds. In times past no schedules of freight rates were published by steamship companies, barring only a few lines in special services and in most cases applied only to a limited number of commodi- ties. Freight rates established by the United States Shipping Board are at present being published with constant changes and revisions, but they apply specifically to a comparatively short list. Basis of Ocean Freight Rates. — Ocean freights are payable in a variety of ways. For example: per pound as in the case of wool from Australasia ; per bushel as in the case of wheat from the United States; per package as sometimes in the case of cot- ton seed oil, cement, etc. ; a lump sum for a steam boiler, for in- stance; per ton weight, usually for heavy goods such as steel rails, iron bars, etc. ; per ton measurement, usually for light goods such as glassware, shoes, furniture, piece-goods, hardware, etc. Beginners are often puzzled by the common steamship quota- tion of rates "per ton, weight or measurement, ship's option." This means that the rate named will be applied either per ton of 2,240 pounds or per ton of forty cubic feet, whichever will result in the larger charge for the benefit of the steamship com- pany. In principle, goods which do not weigh fifty-six pounds to the cubic foot (%(> of 2,240 pounds) will be charged freight on a measurement basis, that is per ton of forty cubic feet, and since it takes a pretty solid package of heavy metal to weigh as much as fifty-six pounds to the cubic foot, it follows that the majority of ocean freight rates are on a measurement basis.^ Quotations of Rates. — As a rule it is useless asking a steam- ship company to quote rates in any general way — for example, "What is the rate on hardware to Cape Town?" Such in- 1 By way of information it may be remarked that the assumption that 40 cubic feet are equal to one ton weight seems to have originated in the ■Russian grain trade, when it was foimd by experience that one ton of Russian wheat by weight required 40 cubic feet for stowing. Our Ameri- can wheat, however, is much lighter in weight, averaging only about 1,900 pounds to 40 cubic feet. Although comparatively few shipments are made by sailing vessel it should be noted that in such shipments 50 cubic feet instead of 40 are counted as the measurement ton. 398 PRACTICAL EXPORTING quiries will seldom bring a definite or specific reply. It is usually necessary to state particulars of a shipment, specifying the kind of goods, their value, the number of packages, weights, measurements, date of shipment desired, all at least in an ap- proximate way, and very often it is only when this is done that a definite or firm quotation of rates is made. Eates quoted on a measurement basis, that is, per ton of forty cubic feet, are by some lines named in pounds, shillings and pence. Rates per ton weight may either be in dollars and cents or in foreign currencies ; they may either be per the English or long ton of 2,240 pounds or according to our more common American practice, per one hundred pounds or per unit. Ow- ing to the growing practice of quoting difi'erent rates on differ- ent classes of commodities it often happens now that a shipper of several kinds of goods (freight forwarders and export com- mission houses) will find several classifications and different kinds of rates, even in different currencies, enumerated on one and the same bill of lading. Practices in the shipping trade re- garding rates and classifications are in a chaotic condition and sadly need standardization. Influences of Freight Rates on Business. — Ocean freight rates are usually called the cheapest known form of transportation. An automobile manufacturer in Michigan said (prior to the European War) that it cost him $125 to put a car into San, Francisco but only $85 to deliver one to Buenos Aires. Simi- larly, small variations in freight rates or advances in rates do not often affect chances for export business in ordinary lines of goods. On a very large package, like a threshing machine, which may measure about 1,000 cubic feet, a variation in freight rates of 2 shillings 6 pence or 5 shillings per ton represents only about 2 per cent, on the value of the goods, and in such a case cannot materially affect chances of making a sale. Freight rates, usual in normal times, on most articles are not to be regarded as often handicapping the beginnings of business. But they must invariably receive the special attention of shippers because of the interests of foreign customers which have always and in every respect to be considered when the full development of foreign trade is sought. The direct and distinct interest of customers in saving freight charges, not on a single shipment only, but on MAKING THE SHIPMENT 399 the volume of the year's importations, perhaps from hundreds of ditt'erent supplies in sundry countries, is obvious. Primage on Ocean Freight Rates. — Some ocean freight rates are net, others are subject to a charge of 5 per cent, or 10 per cent, which is known as "Primage." This practice seems to have originated in the early days of shipping as sort of a pres- ent made to the captain or crew of a sailing vessel to ensure especially careful loading and general attention to a shipper's goods. Afterwards it came to be the remuneration of some agents for shipping lines, but of late has probably gone into the coffers of the shipping companies themselves. A quotation of rate with "10 per cent, primage" simply means that the rate named will be increased by such a percentage. Forty shillings plus 10 per cent, primage is precisely the same thing as a quota- tion of 44 shillings net.^ Primage is gradually being abolished. The chief reason for its retention, apparently, is to enable shipping companies to grant certain rebates to shippers, but rebates themselves are in most countries either frowned upon or positively forbidden. In which connection it may also be remarked that in these times the largest shippers have little if any advantage over the small or occasional shipper. Shipping companies pretend, and are prob- ably honest in claiming, thai rates they name are the same to all comers, big or little, regular or occasional shippers. Fluctuations in Rates. — -"Wherever freight offers, there the ships may go and do go; so that, although industry and railway transportation are local matters within a particular country, ocean carriage is absolutely international, and reflects world con- ditions which are often directly opposite to those prevailing in any particular country. For example, during the bounding prosperity which prevailed in this country between 1901 and 1905 there was the worst shipping depression ever known. "Ocean freights may go to great depths; and, conversely, they may rise to great heights, for when the freight is plentiful and the ships are scarce the only limit to which the freight may rise is set by the limit that the shippers can afford to pay to get a particular deal consummated. No auction room or horse fair could be more competitive than the ship market. If there are lA rate of 150 shillings was not unusual during the European war. 400 PRACTICAL EXPORTING two bidders the price rises ; if there is one, he has his own way. In response to these primary forces, the bargainers representing the ship and the freight take advantage of every factor in sight, and freights range through hundreds of per cents. ' ' ^ It has usually been found, heretofore, that there was slight if any advantage to be obtained by seeking competitive rates from various shipping companies. Rates were almost always made by agreement between companies, which in fact were nearly all united in combinations of some description. Present Shipping Board control of services and freight rates, in some respects nominal, may or may not continue for some time to come. Even now official rates are sometimes shaded when owners or operators are short of cargo. No one now can guess as to what future con- ditions will be. Shippers should exercise all care in selecting either the fastest or the cheapest transportation on behalf of and as ordered by their customers. Shipping companies for their own s.ikes, almost invariably treat their clients with proper consideration. But this by no means implies that terms of per- sonal ac(|uaintance and friendship between shipping clerk, or traffic manager, and steamship agent ma^^ not ensure promptest shipments and lowest rates. Payment of Freight Charges. — The custom has becoroe almost universal on the part of shipping lines from this country of re- quiring prepayment of all freight charges. In only rare cases is it possible to forward goods by steamer subject to collection of charges at destination. It is well to have it understood with for- eign customers that if freight charges must be prepaid they will be charged in the manufacturer's invoices or statements and drafts. Such an understanding is desirable because the prac- tices of European shipping companies, in the past, at least, has been somewhat more liberal than in this country, that is, more freight has been accepted subject to charges collect than has been the rule here. Accordingly, some foreign buyers more familiar with European shipping than with that from this country may not understand that freights from the United States must be prepaid, unless a preliminary understanding has been arrived at. Minimum Bills of Lading. — Steamship companies usually im- 1 J. Russt'Il Sniitli, "Industrial and Coinmercial Oeoorraphy." Wo liave had the moat striking of illustrations of this truth during the European War. MAKING THE SHIPMENT 401 pose a minimum charge for small shipments, that is, will not issue an ocean bill of lading for less than a certain payment. This limit may be the regular freight charge for one ton, one ton and a half, or two tons (from forty to eighty cubic feet) practice varying wuth different lines. When inferior quantities are shipped the pro rata cost of the freight is correspondingly in- creased. For example, two cases weighing 260 pounds and measuring twenty-two cubic feet will be charged as much freight as would four, six or eight similar cases, as the regulations of the shipping company concerned may require. "i\Iinimum Bills of Lading" are therefore to be avoided if possible. This may be accomplished through a combination of small shipments from several sources to the same destination, sufficient to aggregate at least a total volume justifying the minimum charge. This is usually arranged through certain concerns who specialize in shipping export goods, commonly known as foreign freight for- warders. FOREIGN FREIGHT FORWARDERS Many and valuable facilities are offered by the large body of shipping agents who for want of a better name we call Foreign Freight Forwarders. Manufacturers at inland points who have no agents at our seaports or who ha-ve shipments to make of too small bulk to warrant minimum bills of lading which are yet too large for the parcel post, or are destined for countries to which the parcel post does not reach, will often find foreign freight for- warders almost indispensable. It may seem an easy way for a manufacturer to give his shipment to the foreign department of a railway or despatch it through a foreign freight forwarding agent, but if he is seeking to develop the largest possible busi- ness, then it may in many cases be wise for him early to begin the study of economies. In any ease certain abuses have crept into the business now under consideration, and it is extremelj" desirable that manufacturers follow their shipments through to destination, learning from their foreign customers whether ship- ping' methods emploj'ed have given them satisfaction. The manufacturer's duty is not filled when the goods have been handed over to somebody to be forwarded. Foreign freight forwarders exist because they fill a distinct 402 PRACTICAL EXPORTING need. The Interstate Commerce Commission has held that such an agent, engaged in assembling packages belonging to others and sending same in bulk, is not a common carrier. The ship- per who has a single small package to forward, or possibly two or three cases, must either despatch his goods on a minimum steamship bill of lading with extravagant freight charge, or he must find some one who will combine his shipment with ship- ments from others and forward all together on one bill of lading at reduced pro rata charges. Foreig'n Expresses.— There is no such thing as a foreign "ex- press," in our ordinary acceptation of that word. Certain American express companies, operating services over our own railways, have also foreign departments, but in the latter their work differs radically from an express service as we know it in this country. In their foreign relations they lose much of their character as "express" companies and compete directly with other foreign freight forwarders, even with the humblest of them. With the exceptions of Canada, Mexico, Cuba and Porto Rico (where American concerns have introduced American methods), no express services, in our definition of them, are operated on foreign railways. The sole justification for extending the word "express" outside of our own country consists in the fast pass- ages across the Atlantic offered, by one or two lines, by three or four large, swift steamers which make a specialty of carrying passengers, have very little room for and usually accept only limited quantities of freight at high rates. These may possibly be called express boats, but express services of any firms or com- panies virtually cease when ships dock at foreign port of des- tination. As a matter of fact neither express compaiues, nor more modestly named foreign freight forwarders, by any means in- variably patronize the fastest ships. While it is true that in England, France and Germany some of these shipping agencies have established a house-to-house delivery in the capitals of these countries and in one or two other large cities, yet even this service is strictly limited to a few concerns in the few towns in (|UostioM and the same concerns have no facilities of the sort in immediately neighboring countries in Europe, certainly not in MAKING THE SHIPMENT 403 other parts of the world. A likeness may be said to exist be- tween express companies as we know them and the service of any of these agencies in foreign lands because of the fact that small parcels make the larger share of the business handled by them. The use of the word "express" in connection with export ship- ments is, however, misleading and not to be encouraged. Steamship Companies as Forwarders. — Formerly steamship companies did not themselves undertake any work of this sort. In recent years at least two-thirds of the companies plying from American ports have established their own forwarding depart- ments which enter into immediate competition with the profes- sional foreign freight forwarders, those who do nothing else. In either case practically the same facilities are offered. The organization of such departments by the steamship com- panies themselves has not promoted an increase of atfection be- tween them and the forwarding agents. The latter, arguing for their own position, claim that shippers are bound to pay considerable higher rates than by using regular forwarding agents and that steamship companies are certain to hold up con- signments for later shij)S of their own line instead of turning them over to a competing line for earlier shipment. It may be added that some of the petty charges which the forwarding agents are accustomed to make also characterize the forward- ing departments of steamship companies. However, the faet re- mains that shippers now have the choice between consigning small shipments directly to the forwarding departments of the steamship companies which they wish to patronize, in case such companies maintain forwarding departments, and utilizing inde- pendent freight forwarders. Operations of Foreign Freight Forwarders. — The organiza- tion and operations of a forwarding agent may be roughly epito- mized as follows: An active campaign is made for the patron- age of manufacturers who have regular or occasional foreign shipments to make. Such clients are supplied with Advice of Shipment forms on which instructions are given to the for- warders and mailed to them with the railway bill of lading. These forms instruct the forwarding agents precisely what to do. with the shipments to which they refer.^ 1 See Form 9. 404 PRACTICAL EXPORTING Upon arrival of the goods in New York the forwarding agent follows one of two courses, as may be necessary : He either takes the goods to his own warehouse, there to combine them with other goods for the same foreign destination, or he treats them pre- cisely as would a manufacturer, or any other shipper located in New York, in delivering direct to steamer and going through the usual formalities and operations. It may be necessary for the forwarder to pack together a number of small packages, which may even be paper covered parcels, into one large shipping ease. When the forwarder has not collected a sufficient quantity for any single destination, it may be necessary for him to make up one combination shipment of packages intended for several dif- ferent ports. This he will send to some correspondent abroad at a centrally located point, by whom the shipment will be broken up and distributed item by item to the neighboring ports.^ For- warding agents exist all over the world and any concern in this business is in more or less intimate touch with correspondents equipped for the same sort of operations in the principal foreign markets to which shipments are likely to be made from the United States. The agents at foreign ports are continually mak- ing up their own combinations just as do the Americans. If a shipment handled by a forwarding agent for an American manufacturer is sufficient in volume to warrant an individual steamship bill of lading, such a document is procured. If, how- ever, a small shipment has to be combined with several other small shipments, then the forwarding agent takes out a bill of lading in his own name covering the whole and issues his pri- vate receipts or bills of lading to the individual shippers. The bills of lading which he so issues show the name of the foreign correspondent to whom the combined shipment has been des- patched and who will make the distribution of the several items included in the whole shipment.^ Needless to remark, all these operations applied in taking care and keeping track of hundreds or thousands of packages every MTck, involve an immense amount of detail and clerical work. It must be remembered that all the formalities necessary in any foreign shipment have to be attended to, including usually also 1 Sec Form 11. 2 See Form 10. SHIPPING INSTRUCTIONS for C. B. RICHARD & CO. FOREIGN FORWARDERS and FREIGHT CONTRACTORS 29 BROADWAY, NEW YORK o Shippers will please fill out this form and mail to C. B. RICHARD & CO., or hand to truckman with ahipment DEAR SIRS: Dale Au£ii6t Z4 -.-I9I.„ Please note the following shipping instrucbons for goods sent to youf care at New York (Refer to yours of Auguat 15 or Contract No. -^---f Make Bills of Lading in name of ourselves - „.,.. as shippers Consign to Frey^erc.^; Co.-,. Santos. _.._ — ™ Party to be notified. Taortiino ImSoSj - - -■ - — - - — _ "\if > Lladelra. Sao Paulo — „ S-. CO. Sao Paulo 1 crate Velocipedee P Through Freight and all charges to be charged Freight to New York. Boston or Philadelphia to be charged to ua Cartage to Ship's side to be charged to us..., , Ocean freight to be charged to ... Coneigaee Your services to be charged to Consignee Value for Customs Clearance $ 91 . You will insure against Marine Risk for $ lie. ^ and charge cost to. . consignee VWe affirm that, the above is a correct declaration and agree to pay any and all charges incurred. I/We waive clai Yours truly IMPORTANT.— Shipper should attach hereto Local same the marks, numbers or address on goods, (b) When ii to such receipts "Vq C. B. RICHARD & CO., 29 Bi Collect for our account $ ---rr.^—r. — . Collection charges payable by .-^■:— ,,,.*« __ Send 3 _Bi!ls of Lading to \XB -.— and . -. Bills of Lading to Goods shipped by .H.Y.C. R. R. in Car No.. .15 Special Instructions Charge consular t&est to- consignee should the shipment for any cause be refused or returned, fi for loss or damage to packages or contents unless insured. ^S^»- S^ Express or Railroad Receipt, (a) Always show clearly on 1 carload lots add "Lighterage free", (c) and also add :oad>vay. N. Y.," "For Export". Form 9— Instructions to Forwarding Agents. # ..-.on • ship or Vessel) now lying in the Port of qqj^ to be transported ,'ke good order and well conditioned, at and to be by them forwarded thence at ling of connecting line or lines), to the r " j'" ►„ VnrV-Antwerp Rules, 1890. 'Sranlbe-Tn^he marUs and nu.be.. rBl^??fV Master or crew. J-^^^^^^^^^^ fecay. Insufficiency of Wrappers a ^1^^^ . tage, SmeH or Evaporation from ^f ^j ^terage. of any Goods eh'PP^ Deliver; " '^ Ug- >• Qgilt alien Kosten in belasten. ^ee--properly Endorsed by Shipper. ^^NSIGNMENT UNDELlVEREa WAYBILL^--, f™. D. C. ANDREWS & CO. Inc.. ™ f™,;;^^^^'^^ awarders 27-29 WATER STREET Cable Address "BOCKAND" N. T. '^^'^^ £-t^-i^ « ^ -« > CUSTOM HOUSE BROKERS NEW YORK N.Y. ' — ■ — ~ '-"-M j-p j^f franciaco-Carvallio &. Ca>,-Eua_d.o-Oura-127,— LiaboiL_ , . 5/iipp'» WON. Line Enginee > ^ s ^ iat aB nCCClVCd the foUowiTig goods in apparent good ordtr BRQimE^ QRECTR A WTTTTf • » *l|t4f yt ^'°'' *'"?">«"' ^l^ "^ Steanur "ftTOTATTft" ^o LIVERPOOL, •* Si|8-2|3 ord««.«^kerj|rj™»nd(i«tfeiiiubwwail(«b»Unoll»|iiroT»itt«iSS^^ iillilli J ttslttV. I Si- S Ulfli! '& CO. IIVEEPOOL DBsaupncH. Twelve (13) Caeee Oaeoliae £Dglnes e. ■ I iiil oM lua tfaaa aat d«r faEfm ius d bI Form 13 — Steamer's Dock Receipt. • N r > IN I > % 1^ \ ^ to k 1^ X 410 PRACTICAL EXPORTING tination "When a satisfactory rate has been obtained it is nec- essary to engage the freight ^ —'" -.otation of ^ V ^ \ \ o-^ ^ ^ I X iSee Form 12. 8 See Form 13. MAKING THE SHIPMENT 4ll weights and measurements of the goods so received. When many deliveries are made against a single shipping permit the shipper's own receipt forms are usually signed by the receiving clerk and given to the draymen as their vouchers while a dock receipt covering the whole shipment, as specified in the original permit, is the one finally returned»with all the foregoing details when all goods included under it have been delivered to the pier. The drayman's or other carrier's receipt, signed by the receiv- ing clerk at the dock, may sometimes be of a good deal of value as evidence of the exact date of shipping, that is, of delivery to shipping agents. This may happen when shipments have been contracted before a certain stipulated date. ]\Iissing shipment by a special boat may be a ver}^ serious mat- ter involving rejection of the goods by the customer on account of their late delivery. This is especially the case when consid- erable time elapses between sailings of vessels for a given port. If it happens that the market in country of destination is a fall- ing one, the consignees, or if they refuse the goods, the shippers, may be involved in considerable financial loss. The dock receipt, it should be noted, is not a bill of lading. It is only the acknowledgment of the receiving clerk that the goods have been delivered. The receipt which he gives, known as the dock receipt, has to be exchanged for -the formal bill of lading at the steamship company's ofifiee. Clearing at Custom House. — Export goods have to be cleared through the custom house at port of shipment before steamship companies are permitted to issue bills of lading. What is termed a Manifest, or, as it is now called, Shipper's Export Declaration, must be prepared by the shipper, enumerating the ship by which the goods are to be despatched, the destination, the marks and numbers of the packages, the kind of goods con- tained, their values, etc., all of which must be sworn to by some representative of the shipper before a notary or the appropriate officials in the custom house.^ 1 See Form 14. On tlip reverse of the two sheets composing this form will be found full nnd explicit instructions regardinfj the preparation of th(> Shippers' Export Declaration and as to sliipping instructions and the disposal of these forms when fully prepared. It should be noted that if the exporter has any doubt as to the correct description of the articles to be sliipped, in order that suitable classification may be made by the Govern- 412 PRACTICAL EXPORTING These particulars are required by the United States Govern- ment, as they are by all Governments of the world, in order to keep accurate statistics of export and import trade. Manufac- turers and shippers should cooperate with the Government in making these statistics complete and exact. The Government demands an accurate and fairly close description of the goods shipped but as a good deal of such shipping is handled bj^ agents who know little about the goods which are actually being des- patched it happens that there is not a little room for improve- ment in the way in which declarations are made. Although it is provided that manifests must be attested, yet it does not follow that the head of a house must in person visit the custom house to swear to each manifest that he files covering his foreign shipments. It is customary to place on file in the custom house formal authority empowering some named clerk of the exporter to perform this duty. Foreign freight for- warders, supplied with invoices by manufacturers in the interior, always attend to these formalities which then require no atten- tion from such manufacturers. When the manifest has been duly certified at the custom house it is presented to the steamship company with the dock receipt, attested Shippers Declaration, or evidence of other special for- malities fulfilled, as they may be required, together with copies of the bill of lading which have been prepared in the shipper's office and the latter may then be signed by the steamship agents. SHIPMENTS IN BOND— DRAWBACK A large saving is possible to some manufacturers — or what is the same thing, a largely increased trade — through certain fa- cilities offered by the Government of the United States to ex- porters. Although restricted by entirely too much red tape, yet these are very real facilities, advantage of which is not nearly often enough taken by manufacturers. Products subject to our internal revenue tax, or goods originally imported from foreign countries, may be shipped "in bond" without payment of tax or duty, while goods manufactured in the United States wholly mont for its statistical purposes, then the exporter may obtain for five fonts from tlie Biireaii of Foreign and Domestic Commerce the official scliediile of classification of goods. ^ 6p ■?? 4) O &-£ \s I u !CQ i P< •2 1^ 1^ ■ V CO o S -2 ■tf ea a 5 ■p -S "^ u o ?•« P4 ^ ^ X •s =1 H OJ Ol ■3 _a "u 2 '^H a> a p. a a. •S^ ■5 >< M OS ^£3 fl «. 02 ■S .2 ^ -M J •« 3 ^1 h tH B u =H "a o °fc Ph _M ■3 a ^" ■« fiiH ^£ t- s ps §50 a.|,g^c» H CI* 3 g; cr (a as- « o p. >-n • © P 'E p O ffl o 5. P. SO 60 O P ni iT»- • 1-1 ► 1^ c+ P p ►r* ■r«- 1-5 _ (D ^ P C! S^ •^ © © P ^ S o SiS-p s ^3 O F? P p" i-J o P o p 3 PP (B to 2 -I. 05 2 p cc o = C P P en 2. !ir © p O S o»I< -4. ►—TO P o" o-P. p S. o .•"J

rf i.a© 5' ^ O O I 9 SHIPPER'S EXPORT DECLARATION or SHIPKENTS TO FORSGN COUNItlES OR NONCOKTIGUOUS nRRITORIES OFIHE U. ! Goods shipped by BRngJTJF, fTRFTrrm A V/HYTF _ Address 3575. Smith CijieJJBmti Qhls From S. (NomMr.) (Stmt.] (City.) (Slat«.) (Pl»c Vis — Jtniia,-i.-i» For Shipment on the Br.it;isb..S.,5,..;'.Ateiat ipV. From Ketf--Inrk To ultimate foreign destination Iii-Vftniool- tMgl anrt c I, tbo vmdeTeiened, eolemnl)' sod tnily declare that thi mo—FQimA~ implete, just, and trueaccouotofuUii ^. . . . ed above, and that thodescriptioD and quantity of each article u truly slated les at the time and place of ebipment lor expfrLation. , , ,rT- r- (Signature) (Capacity),. (Address). _ "president Form 14 — Shipper's Export Declaration- r INSTRUCTIONS Bead tarefnlly to aTold delay nt shipping potnt 1. ProrlsfOBS of law.— Before a clearance shall be granted for any voeel bound to a foreign port, the owners, shippers, or congignore of the careo of such veaeel ehall deliver to the Collector manifeata (or declaratioDB) of the catH?) or the parta thereof shipped by tkem respectively, and shall verify the eame by oath. Buch manifests (or declarations) shall specify the kinds, guantitiee, and -valuefl of the articles and the forcim port or country of destination. (Sec. 4200, Rev, Stats., tJ. S.) If any vessel bound to a foreim port departs op her voyage without delivenne manifest and obtaining clearance, the master or other person in charge shall be liable to a penalty of $500 for every such offenae. (Sec. 4197, Kev. Stats., V. S.) Similar provisions apply to eiportations by rail, vehicle, or terry. (Sec. 1, act March 3, 1893.) i-j- / t- j , . / \ 2, The shipper must prepare oa this form m dupUcale an eicport declaration for all merchandise Ehipped to for. OT bom nonconHgumis ttrrltorUa of '^"•''''•■•'"■"^•-' . t- i':_.i-j _<.- -■ ...,. . , .. .(rr-._,^... to ancilher. The origina! declara adminisfer oaths, except in the c t filed with the Collector. The original is for use of c 3. Shipments originating at the seaboard. — In the case of shipments oririnating at the seaboard or arriving there from the interior expert, the export declaration (original and dupUcate) touflt be presented to the Collector of Customs, who will reuin the original, _i;„. J .,. — •'•-'"••---T the shipper for presentation to the steamship or railroad company, without which no freight any will attach the duplicate to the outward manliest filed at the cuetomhouse when me \s cleared, noting thereon any snore shipment or other duaepancy. Clearance will not be granted tmtil export declarations have been filed with the Collector. 4. Shipments from the interior. — In the case of shipments from the interior on throu^ bills of lading, the shipper must prepaie the export declaration in duplicate and deliver both copies to the carrier to accompany waybills to the port o? exportation. The origma 1 may be placed in a sealed envelope. In the case of shipments on local billaof lading the declarations may be banded to the earner tj BCC'umpany the goods or mailed to the consignee at the seaboard. Upon arrival of the goods at the port of exportation the carrier muat deliver the declajration to the Collector of Customs. To prevent delay at the border an export declaration should be prepared for each carload aa otherwise cars breaking down or detached in transit may arrive at port of exit without declarations, 5. Domeatic articles exported. — The value of all articles grown, produced, or manufactured in the United States must be stated in the column of "U. S. Prwiucts." 6. Foreign articles exported.— The value of articles of foreign origin shipped out of the United States in the same condition as importedn- -■'--— '--' •-■'•-—' (..o— :_ t,__j..-.. ,. ^,t ^^i„.u _j . tiuninthe . from imported raw sugar ehould be reported a 7 The value of articles is the selling price or the actual market value at the time and place of shipment for eicportation. 8. Description of articles exported must be accurate and complete. General terms, such as dry Roods, grooeriea, meats, machinery, millinery, etc., will not be accepted. The total quantity and \'alue of each class of articles should be stated in one item, omittine details such aa specific quantities of different sizea or kinds of the same article. In the c filled or unfilled, oleomargarine whether colored or uncolored, butter whether p 10. The country of final desdnatloa of goods — that is, the country to which goods are sold— muat be shown. Special cate should be exercised to state the final destination of goods ehipped through Canada to Europe, and of goods to be transshipped in the United Kingdom, the Netherlands, Germany, and France en route to other countries. 11, Inspection certificates. — Process butter or butter adulterated or renovated muat bo accompanied by < by the United States inspector of dairy products. Ortificate of inspection must be p '" -'-'■-"- — products exported when reqiured by the regulations of the Department of Agriculture 12. Export Schedule B may be obtained for 5 cents from the Superintendent of Documents, Government Printing Office, Washington, t be presented to the Collector Govemmeni e principal c 9 m preparing tbe declaraQons. „. is and Drintine of blanks. — ShiDi>er's export declarations may be obtained from Col per block o exporters h . Sale and printing of blanks. — Shipper's export declarations may be obtained from Cotlcctord of Custom To the Collector: I hereby authorize _ — - addrefi3 » to act as my agent for customs purposes in the exportation of the within-described goods. Please dehver the certified duplicate accordingly. 92—*i*i Shipper c " -■; era p ■ - 3.0P- cra CS^, rt ^ O ?« V m a- P HCD p>i3 g'^ ft. w-( ® 5 z! Q «> CI- 0^«+^ ® & ft g-rt CO 2. ^•p i4p o 5 ►r-^i Co CD P M. "S CD 5 ft P-3 5-^ B Cf erg J2.ft CD ir>- 02'^ 2*^ H CI- O ►—(D ^'^ ^ CD ^ ^3 P 8 ^ ^•^^■ ^s ^i? 1 §. PS; P M {^P O^Wfrt p P ft g:o § ^-S. 3.^ CO. P P*t3 O CD g r<- (D P _ B o "-^ cs S "^ P-CD gg-g. 2 r> CD ^p^ ^ 9-P S^'S O^P crh CD M S ^ P-£.It ft P-^ (D c o rrft o CD ^^ ^ o " g p^i^ g CD ir+<<< 2^2. ^^^ o » P CD -s,>4 o br^S ft C-< p'P-g- G ft nt stdject „ .„„^ , . rby whom the fcoods aro forwftrilea, Di>ond8UT»ry of thecoodifrom the ship's tackle ftt Liverpool the StPiimiihlp C-ompnny ceasM toad os carrier, - ■ - 1 forwardtoK agent wlthoat responsibility. The ihrongh frelfht la chargeJ lODdltlODi of carrlaee of the Carrier b owBer'n rislc rates when ssme are qaotod by carrier by whom the gooUs a BTentoftbansaal means of conveyancs from Liverpool to the place of destlc Ivery of the sooda thereat being delayed, Impeded, Interniptea or easpende Steamship Gompaay may la Its sole deseretioo and option, I, and the Rteamahlp ( H of i>arrlft£6 and ti Noe. 1-13 & CO. LIVERPOOL Notify Harrison, Poet, Hathaway & Co., 507 Lime Street Liverpool. f/0 Ft f. ...... ..in. @J^y-. .....p^, iOc. ft. £ /4l>JO,0 ...Bu... ®... per Barrel, £^.. per 60 lbs., £ per £ Toat. ewT. Said to weigh .i\^^^ sC0 f^ ]^1Z 33357 _per 2240 lbs., ^.. 6 per cent. Primage, .. Charges, „ ...■ Total Gold £ j/:aAVti lbs. gross. RciwEiVEDj in apparent good order and condition, from BROWHE,-..OREEKE &..WHt.TE to be transported by the Britleb . Steamship ."ADRIATIC" now lying in the port of NEW YORK a^^^ for Liverpool with liberty to call at intermediate ports or any port or ports in or out of the customary route in any order, to receive and discharge coal, cargo, passengers, and for any other purposes, or failing shipment by said steamship in and upon following steamships:' Ten (10) Cases Gasoline Engines „ One (1) Case Repair Parte - : „ - One... (I) Case Advextielng Jiattcr , „ _.„ _ ...._ 1„ _ being marked and numbered as above, shipper's weight (quality, quantity, gauge, weight, contents and value unknown), and to be delivered in like good order and condition at the Port of Iiiverpool tlllto ORDER , or to his or their assigns, he or they paying freight, primage, and charges, as per margin, immediately on discharge of the goods, without any allowance of credit or discount. IT IS MUTUALLY AGREED th»t the eteamcr ahaJl have libertr to tul with or witboat pOoU; ■ assist vessels In distress; to deviate for the purpose ol saving life - • r shall hive liberty to convey goods in craft and/or lighten to and from the i _iers o( the goods; and, in case the steamer shall put into a port of refuge, or c from procccfftng in the ordinary course of her voyage, to transship the goods to their destination by the steamer and carrier shall not be liable for loss or damage occasioned t - ■ ' , by fire from any cause or wheresoever occurring; by barratry of the , ,___'e8, or robbers; by arrest or restraint of princes, rulers, or people,' riots. labor; by explosion, bursting o( boilers, breakage of shatia, or any latent defect i : the' beginning of the voyage, provided the owners have exercised due diligence to make the i ortb>; by heating, frost, decay, putrefaction, rust, sweat, chai breakage, vermin, or by explosion of any of the goods, whether i rew: by enemies, pirates, or robbers; by of la- . •_ " - appurtenai seaworthy; 6y^ heating, frost, loss or damagi Sdress, or description; nor for risk of craft, bulk, or transshi tioD of the voyage, 1 of quality, i; ' — ^worthy and properl; E of danner. dcmai In the I incurred, but, with the shi aster bad not rcsul easure during tne voyage by a vea_._ _. it such salving vessel or vessels belonged to slrangf al Average " ■ - - ~ - r conlribui: ) shall be paid for as fully a a General Average, less I ■ of, and all the i York-Antwerp' Rules. " II the owi itT.,.r in all respecU seaw of danger, dcmage, >p art en an CCS, II the voyage, _ _ xempted from liability pecial charges incurrcc, . --- amage, or disaster bad not resulted fro{ -tenances, or unseaworthiness. I- _ . . during the voyage by a vessel of the same Ime. such salvage ser^ic salving vessel or vessels belonged to strangers. Passengera' effect General Average, but claims for passengers' e&ccU Hcritaced to be allowed proper contribution in such case. . . , ,. . . , t ALSO, that this shipment is subject to all the tema wd provisio from liability contained in the Act of Congress of the United States apprc Fe^Tuary. 1833, and entitled "An Act relating to the navigation ol vessels. et< 5. ALSO, that the value of each package receipted tor aa_ above d linndred dollars, unless otherwise sUted herein, on which basis the rai 4. ALSO, that the steamer, lighter, and carrier shall not be liable loi of the Revised Statutes ol the United Slates, unless written notice ol the is Riven st the time ol lading and entered m the bill of lading. 6. ALSO, that shippers shall be liable lor any loSs or damage to a caused by inflammable, explosive, or dangerous goods shipped without whether such shipper be principal or agent; and such goods may be t _„. any time without compensation. Extra charges, if any. lor di^cbarguig. lighterogc, or other exp haxarduus goods, declared or considered as such by civil or military authorities, must be borne by "t^ALSO. that the steamer and carrier shall have a lien on the goods^lor all freights, charges and also for all " tiie Illegal, Port Cuatoms', or Consular authorities. Consular. Board of Health, or other certificates requi __ .. .__ J 1... ,1.: — J any detention, charges, or penalties occur- es, ate to he borne by the shippers and/or rry of goodj nol plainly marked with tht port the thirteenth i exceed the i s adiusti _. ified in Section 4.2S1 of freight is^ adjusted. earner, cargo, lighter, or wh full disclosure ol their natu iverboardor destroyed incorrect, __ U, Bills of Ladit Suamrr w 7, ALSO, liable r rtipomibU for delay in I* ' of the port oi discharge lie to quarantine at any si ,er from epidemic or otheri subsequeni tion therewith, rendering or being or in case o( the master consider- ■ lajunouB to the further prosecn- mar be 1 , depot, hulk, lighter; put Into tauretto, hulk, or Ughtei r consider sale, at shipper's risk and expense^ . ,■---- —ere land tbem. Advices'rai shall be deemed, under this agreemant, • du« deh I lor all quarantine kesVToSoi inees, il named, or otherwise to' goods, and lucn goods shall be uppers, shall be deemed, under this i oi discharge or delivery, the same shall he "• •- -'— -ation, or retained on board (oi [ the owner of said /[oods. If landed , or olb*»wise to shippers, shall be di ind such goods shall be liable and a lien held ihei .-_-50, that Uic steamer may commence discJtargtna immedUUtli \iSfnmofthaport ' "^ " ' srcU order: " strikes, lockout, earthquake, epidemic, Interdict, prohibition ol beyond the control of the said steamer or steamers, last^, to unload said goods, as a whole or part^ ■Tfor diechai'ge imnwdtaUl] lor all extra expenses incurred': . iqimrMdUUelu on arrival, and dtscharoe coiiKnuoiuIu, vmtrcav notiotttutandtng, Ois totlcctor of the port betiig ftercAu autftortrcri to nrottl ' '■-' ' -■■ ofT-dfoi; and if the ooo(tg fien-' •"'•— ' — "-- -' • •• - - until th€ paymtiil of aU &jjte n"d " '.LSO, that il on a sale o. . aid freight and charges, the "10, that full freigbl is I bulk or weight caused U. ALSO, that the steamer has the privilei doubt exists as to the correctness of weights < height ^ The expenses of rcwci^hing or remeast as shall be 'aliottell 14. 'also, that for metal in slabs, bars, bundles rt&pomlhnity em!«I. but tht steamer and carrier lo have a Hen on sucJi nooda "d chfrffcs 80 incurred. sale of the goods^ U destioslion (or freight and charges, the proceeds fall ttt 13. ALSO, if of the swe of any clai 14. AL5-. packed property, but shipped eighing t the Toysge. aid by I ring any goods where rcacciubte Goodi wroittly baled goods are landed slack e shall be deemed a full scKlFment ALSO. ithe Kliail be the market pritc . the prle« shaU 16. ALSO, that raerchai or light. be deemed to be waived " 'LSO, thai mei damage not happeoi le steamer or lighter, any loc 17. ALSO, that (his Bill of Lading, duly codorsed. bi ir a delivery order. 18. ALSO, that freight is pa'iable at ciiiretU rate of fxcliaiigc for bank dcmni 19. ALSO, that the freight prepaid will act be returned, goods lost or not loi liabU for n iBota, rods, hoops, pistes, marks and/or weight and/or : dddvrj' vUn the afeame I on Uu day of the steamer's entii/ at the Custom HoiLie, )^ afl damage, or of whatever nature, must be matte in tcrltUig to the }ods icUhinJwe days after the steamer or Uahter fliilahcd au- c taken deUveni of by the consignee : arid in care such claiwu tlaee hereiniefore designated, auoh loss or diimage ahaii ighter awaiting shipment or delivery be at shipper's risk of lit or negligence of the owner, master, agent, or manager of rilegcs to the contrary notwithstanding, agent in exchanga London on day of r reaches her denlii t the Gusto.. tt be matte i. nerurl " B consignee ; and i 2a ALSO. one consignee pay full freight 21. ALSO, that packages ex charges, if any, for loading, bai :ei collected or made In weight liogle packages addressed to •ball be liable to pay extra In accepting this Bill of Lading, the shipper, owner, and consignee of the goods and the holder of the Bill of Lading agree lo be bound by all of its stipulations, exceptions, and conditions, whether written or printed, as fully as if they were all signed by such shipper, owner, consignee, or holder, any local customs or privileges to the contrary notwithstanding. In Witness Whereof, the agents of the said steamer have affirmed to 3 Bills of Lading, all of this tenor and date, one of which being accomplished, the others to stand void, Dated in New York, this thirty-first day of August 191 For the WHITE STAR LINE. ->l> Form 15 — Ocean Bill of Lading. One of many forms iu which ocean bills of loding are issued if two negotiable copies, has been drawn "to order" with 11 lanse, and endorsed in blank by the shippers. See also Invoice ^f}J C) f 4 If ^ ^ 7 ' ^ f . 3SoD 5Soc JSc>d 3 Sod 2^0 ^7 33 2355y7^. k ^ ^ ^ V « » ^ 4^ I- Vv ^ ^ cs) ^ ^ I .....^ ^ MAKING THE SHIPMENT 417 g-oods are to be delivered to them. No one else can obtain posses- sion of those goods, when bill of lading is thus drawn, untilJohn Smith & Sou place their official signature on the back of the bill of lading. The "Notify" Clause in Order Bills of Lading. — However, to permit delivering steamship agents to advise the actual con- signee of the goods of their arrival, it is permissible to write in the margin of such a bill of lading ''Notify Hem-y Jones & Co." the latter concern being the actual consignee. This notifica- tion clause does not, however, give Henry Jones & Co. any rights over the goods in question until they are able to present a prop- erly endorsed bill of lading. The delivering steamship agent will advise them on receipt of goods and the shipment is not likely to lie around a wharf or a custom house for days or weeks while Henry Jones & Co. are wondering what has become of it. - Another clause of similar nature may sometimes be written on bills of lading in cases where transshipment has to be made in the course of voyage to destination. The clause in question may, for example, read "Transshipping agents at please notify Henry Jones & Co. at name and date of sailing of transshipping vessel." In cases of transshipment it is quite impossible, as a rule, for consignees to have any knowledge of the connecting steamer or perhaps even of its approximate ar- rival date. The clause in question is a polite request to the agents at the transshipping point to send advices to the con- signees at port where they are established of the steamer by which their goods will go forward from such point. Some- times such agents comply with requests of this nature, some- times they do not. It should be noted that certain countries forbid the shipment of goods "to order" while in other countries so doing is unde- sirable because the shipper cannot thereby control the goods, because of local conditions or regulations.^ This especially ap- 1 For example, in Venezuela anybody can obtain delivery of goods, wbich are turned over by the steamship company to the custom house, merely upon presentation of a copy of the invoice for the goods and sometimes even by making suitable representations if not in possession of a copy of the invoice. An American consul in Venezuela advised in 1017 that "the only way to give a bank control over merchandise shipped here, to be paid for 418 PRACTICAL EXPORTING plies in normal times to Venezuela, Colombia, Santo Domingo and Guatemala. In the case of some other countries, if bills of lading are drawn to order the ''notify clause" must appear.^ Endorsements. — All negotiable copies of a set of bills of lading should be endorsed by the individual or firm to whose order they are made deliverable. If John Smith & Son are the shippers of the goods and bill of lading is drawn to their order, then John Smith & Son must endorse the negotiable copies before passing them along to any other persons whatsoever. The papers are otherwise useless in the hands of anj^ one else. If Henry Jones & Co. are the consignees and the bills of lading are drawn directly to their order, then John Smith & Son's en- dorsement is not necessary, but the documents when presented by Henry Jones & Co. at point of destination will be endorsed by them when taking delivery of the goods. It is not enough to endorse only one of the negotiable copies. All should bear the required endorsement, but in no event must endorsement to the original be omitted. Bills of lading, like bills of exchange, may be endorsed either "specially" (that is, to a particular person, firm or bank, etc.) or "generally" (that is, in blank). In the latter case, the goods are deliverable to the person who presents the document, the holder of a bill of lading being deemed to be the true owner of the goods. Being negotiable, any one copy of a bill of lading, provided it has been honestly come by, is sufficient to give title to the goods. The only way that any one can get possession of goods for which he is not able to present title in the form of a properly drawn and endorsed bill of lading, is to furnish a bond to de- livering steamship agents in sufficient amount to indemnify those agents against all possible claims on the part of others. upon arrival, is to consign the same to a bank, giving the bank instructions to turn the merchandise over to the purchaser upon payment of the draft covering cost of tlie goods." Even tliis is not always entirely safe if the customers are not known to be people of high reputation and character. In all other cases in doing business with the markets above enumerated the only safe plan is to require payment for the goods before they leave an American port. 1 During the European War the Entente Allies prohibited the use of "order bills of lading" to some ports, even with the "notify" clause, be- cause they insisted upon knowing the actual consignees. ^sl3 American-Asiatic Steamship Co. 12 BROADWAY, NEW YORK GENERAL AGENTS New York, China, Japan and London SHEWAN TOMES &. CO. Agents in Singapore ADAMSDN, GILFILLAN & CO., Ltd. Agents in Manila WARNER, BARNES & CO., Ltd. \ ,^d^.^A^^*^ •■ % :.... ■■ •^..././: PREPAID • • ° I H _5 a i; S •- -^ .S 'a S ' I 1 1 i ; I c 3 3 • = Oij StJ5 q "I 5 S £ II a jRl^rPtH^d in apparent good order and condition from •' L E:ASTc:aN ^T'lLA -^^*,*.-*«-^'k-tf-^ f / being marked and numbered as hereinafter mentioned ia like appareat good ordei therefrom, at the port of r their assigns. Freight for the said good! liberty to sail with or without pilots, and the owners of the good ined by perils of the sea ilry of the Masiei . . inces. rulers or people; by riois, strikes, or stoppage of laboi of the eight and valui That General Average shall be therein to be signed, also sufficie manned, equipped and supplied, in the steamer, her machinery or able by the exercise of due dilig owner in General Average to the all with the r defet the risk of th, or damage occasioned :raft or on shore; by bai by tlefect in any :h'ange of character, drainage, leakage, breakage, vermin, :au5ed by the proloni 'S, 1890, and as to m _ , . =r or Agents. If thi of danger, damage or disaster, s of the cargo shall, n< nses of a General Aver; iger. damage or disaster s subj ansbip the goods be paid by the sbippe pose of saving life or pr. {'e the stear r by explosi of ; of the I thereto as she may safely get) unioi n New York, on dehvcry of Bills ^ lart of it being forwarded by vei id the holder of the Dill of Lad e' Bills of Lading, all of this ten f (be delivery, by the Custoi sdelivery of. or any default of sucb not > lost ( if there be ; or employees, when the goods :argo. sh.ill be presented by the 1 shall be deemed to have been I forced inierruptJon or abandon- els of the same Line, or otherwise, the cost of forwarding shall be payable by the ,g agree to be bound by all its stipulations, exceptions and conditions, whether written r and date, one of which being accomplished, the others lo stand void, AMERICAN-ASIATIC STEAMSHIP CO. Form 16— Ocean Bill of Lading. Pf?0. FORMA . For Master \^ O MAKING THE SHIPMENT 419 Such claims might later arise through the actual presentation by others of the missing bills of lading. Bonds are not always easily to be arranged and invariably involve expense, nuisance and delay. When a shipper has forgotten to send forward the bills of lading, or has neglected necessary endorsements, the disposition of the consignee towards him may be guessed.^ Marks, etc., on Bills of Lading. — Space at the left of bills of lading is utilized for an exact reproduction of the marks and numbers appearing on the cases represented by the bill of lading. The identical repetition of marks, etc., on cases, invoices and bills of lading should once more be emphasized. The shipper makes out the whole document before presentation to steamship agents, excepting only calculations for weights or measurements and extension of freight charges which must be filled in by the steamship people themselves. For the rest, the blanks pro- vided in a bill of lading are self-explanatory. When weights of each package have to be written "as per endorsement," or when a large number of packages including a great variety of merchandise is shipped on one bill of lading, the particulars may be written on the back- of the form. Styles in Bills of Lading-. — Bills of Lading vary in form ac- cording to the steamship lines which issue them, sometimes are modified by conditions or customs at port of destination. There is no uniform style. They are, however, usually similar so far as their main clauses go. They seem very formidable docu- ments containing a great number of clauses printed in such small characters that it is almost necessary to use a microscope to read them. As each shipowner drafts his own form of bill of lading shippers have no option but to accept it, however ob- jectionable its clauses may seem. It should be observed, how- ever, that shipowners do not always interpret these clauses ac- cording to the strict letter of their reading. They generally construe them liberally when reasonable claims are made in a reasonable way. Bill of Lading Conditions Explained. — Certain phrases in the usual forms of bills of lading may need a word of comment. 1 In Argentina, when bills of ladino; have been issued in their own names, i.e., to their own order, consignees can obtain shipments without present- ing documents or suffering any serious formalities. This is exceptional practice. 420 PRACTICAL EXPORTING "Shipped in good order and condition" applies only to the external appearance of the packages. Courts of law of all countries have held that the steamer's owners cannot be ex- pected to know the condition of goods contained therein. "Quality, quantity, gauge, contents, weight and value un- known" is a provision intended to signify that no matter what the shipper himself says when he makes out the bill of lading the steamship owner reserves his rights in these respects and will assume no responsibility for claims in such particulars. "Clean" Bills of Lading. — Shipowners are responsible for damage to the goods, other than that covered by the clauses in the bill of lading. Therefore, when a package is found to be chafed, broken, in any way damaged or even weak, when the goods are received on board, such facts are noted on the dock receipt and subsequently on the bill of lading also which is then called a "foul" bill of lading. A bank always looks with suspicion upon a "foul" bill of lading because a claim, whether justifiable or not, is morally certain to be made on arrival of the goods. Large New York exporters, constantly making shipments by certain lines of steamers, always lodge permanent instructions with the receiving clerks at docks of the steamship companies chiefly patronized forbidding them to put on board vessel any packages for which a "clean" bill of lading cannot be issued. Receiving clerks are instructed to 'phone the shippers or advise them by letter of the facts and new cases will be supplied, or old and weak ones coopered in order to put them in such con- dition that a clean bill of lading can be issued. It should also be the duty of shipping agents employed by inland manufac- turers thus to safeguard their principals' interests in making sure that only goods properly packed, for which a clean bill of lading can be issued, will be forwarded. In making occasional shipments the drayman's receipt or a separate notification to be delivered by him with the goods, may contain printed instructions like the following: "This cargo is only shipped on the distinct understanding that a receipt will be given for all counter or qualifying marks and numbers. The packages are not to be taken on board except on these terms." Or, in language similar to the following: "The Receiving THE NEW YORK & PACIFIC STEAMSHIP COMPANY Limited. HANOVER SQ, NEW YORK. MAKING THE SHIPMENT 421 Clerk is requested not to take in any package unless he is pre- pared to sign for all the qualifying marks and numbers. All packages in bad order must be returned." Sometimes a Dock Receipt will be returned quite unexpectedly endorsed "one case weak," "one crate broken," "one bale chafed," or something of that sort. The exporter, hastening to make inquiry, will find that the shipment has already been loaded on board vessel and cannot be reached. The bill of lading when issued will bear the same undesirable notation unless steps are taken to prevent it. The steamship agents may sometimes be induced to issue a clean bill of lading in such cases, if they are given a "letter of indemnity." Such a letter may read : "In consideration of your signing clean bill of lading for shipped by us per S. S. , the Dock Receipt for which reads 'one crate broken,' we hereby undertake to in- demnify you against any claims that may be made on account thereof on arrival of the vessel at . " If such a letter is accepted, it is attached to the ship's copy of the bill of lading in question, and if a claim is made on ar- rival at destination in respect of such damage, it is paid by the shipowners and recovered by them from the shippers. The latter do not escape liability ; but the clean bill of lading which is issued does not arouse suspicion or prompt claims. INIeans, however, ought always to be adopted to prevent loading of dam- aged or weak packages. Liabilities of Shipov^rners. — Quite unlike railways the liability of shipowners is strictly limited. To get due protection for the value of their shipments manufacturers or exporters must in- sure their goods. The Harter Act, as passed some years, ago by Congress, allows cargo carriers to exempt themselves from liability, as they stipulate in the usual ocean bill of lading. The statute was adopted in order that American steamship compa- nies might be better able to compete with those of other nations. Several important maritime countries, notably Great Britain, already had such statutes in force and vessels were thus enabled to take their freights at lower rates than they could afford on ours, on account of greater liability for American cargoes. The shipowner, however, is bound to see that his vessel is seaworthy at the beginning of the voyage and is free from all defects, 422 PRACTICAL EXPORTING latent or otherwise. If there is an explosion, the bursting of a boiler, breakage of a shaft, etc., arising entirely out of some- thing that happened after the voyage began, the carrier is re- lieved of liability by this provision of his contract. If investi- gation shows, however, that the damage arose wholly or partly from some defect, even a latent defect, which was in existence at the beginning of the voyage, then the carrier is liable. A bill of lading is both a receipt for goods and a contract to carry them as explained by the Journal of Commerce. As a con- tract it is binding upon the carrier according to the strictest construction of its terms. As a receipt it is like any other receipt and may be explained away. When duly signed it is strong prima facie evidence against the steamship company, but if the latter can show, for example, that the number of packages described was wrong by mistake and that a smaller number only were in fact received, such a condition is regarded as one which the shipper, himself or through his agents, was legally open to have known and is conclusively presumed to have known. Attention should be drawn to a clause in some steamship bills of lading reading to this effect: *'The amount of any loss or damage for which any carrier is liable shall be computed on the basis of the value of the property (being the bona fide in- voice price, if any, to the consignee, including the freight charges if prepaid) at the place and time of shipment under this bill of lading." This it will be noted precludes any claim for settle- ment so far as the shipowner is concerned, on the basis of what may be claimed to be the market price of the goods at point of delivery. More often, nowadays, steamship companies' docu- ments make them responsible for "market price at port of des- tination on the day of steamer's entry at the Custom House." Parcel Receipts. — A good many but not all steamship com- panies offer facilities for shipping small packages of insignifi- cant value under what is known as a Parcel Keceipt.^ This form was originated for the purpose of giving shippers an oppor- tunity of putting in possession of their foreign consignees samples of goods shipped by the same vessel under regular bills of lading, before delivery of the actual goods could be made. Parcels thus shipped are carried separately from general cargo 1 See Form 18. PARCEL RECEIPT FOR PACKAGES NOT EXCEEDING £5 VALUATION. BARBER & CO., Inc. Steamship Agents Whitehall Buildintr. 17 Battery PUce New York, AUgUfl.t...l.7 19 Received in apparent good order and condition from ^--r..r..r:--..-....ThOInp.a.Qll...(S^...Caxieton ..-.~-.----^^ macked or addressed as der, for shipment per S. S ".B.Ol.t.0.n...Caa.tle.". to Sliangliai , bject to the following conditions: Freight.— ——.r.r'.—$l.r.r:.r..r. — ~.r.— paid at New York. IT IS MUTUALLY AOREED that this shipment It subject to all lerms and conditions contained In Steamers Bill of Ladine. In no case is value to exceed Five Pounds. It is distinctly understood that if the above package contains packages Sressed to other parties, each package so addressed will be charged freight as above, payment for which will be reqnired iore deliverj'. Duties and Customs charges to be paid by Consignee asL usual. If goods are carried "freight free," the owner of within described property in accepting same, agree to relieve said amship and owners of all responsibility for loss of or detriment, damage or delay to said property. DESCRIPTION One (1) Case Typewriter Ribbons Shanghai M. O'Briain. ^^0 fO^^ L\«> ..for Master. Form 18 — Steamship Parcel Receipt. Some, but not all, steamship companies issue Parcel Receipts, similar in a general way to that illustrated, covering packages of limited size and insig- nificant value, for which a reduced freight charge is made. are reqiiireci oy practical ly an ijanu American republics and ^ oee r ui ui lo. MAKING THE SHIPMEXT 423 and are more promptly delivered. The real origin of the prac- tice was to favor English shippers of piece-goods. A small col- lection of swatches, or sample clippings, of the goods shipped as cargo is despatched under parcel receipt and promptly upon arrival of the vessel is delivered to consignees, who thus have an opportunity of taking actual samples of the goods to their customers and selling the stocks of those goods while the cargo itself is in process of discharge and clearance through Custom House, which may sometimes occupy a month or more. Parcel receipts, however, may sometimes be used in other ways, even for small packages of general goods, providing the value is not considerable. The steamship companies offering this facility restrict the size and value of such parcels, and as the parcel receipt is regarded as a favor or courtesy and not as an established custom, the companies reserve the right to re- fuse to accept packages tendered for transportation under them. They often exercise this right when they feel that they have been imposed upon through misrepresentation of values, or something of that sort. Because Parcel Receipts cannot be regularly or even frequently used, and because of limits as to size and value, they are not dependable as an escape from mini- mum bills of lading or forwarding agents' services. Regulations of the companies affecting parcel receipts differ widely both as to size of packages that will be accepted and their value. Rarely is a package measuring more than 3 or 5 cubic feet accepted, and between $10 and $50 is perhaps the usual limit of value for such packages. Charges are generally much less than for a minimum bill of lading, but the parcel receipt does not answer the same purpose. IMuch less responsibility is assumed by steamship companies under parcel receipt than under bill of lading. The parcel re- ceipt may, however, be used for banking purposes, although seldom so utilized because of the limited value of the property thus covered. CONSULAR INVOICES AND SIMILAR DOCUMENTS Nuisances as they are, we Americans cannot complain of the somewhat formidable documents called consular invoices which are required by practically all Latin American republics and 424 PRACTICAL EXPORTING by Portugal and a few other countries, when goods are shipped to them. The United States Government requires that quite as intricate and puzzling papers accompany all imports of foreign goods into this country. The income from fees to American consuls, paid according to our law by foreign shippers for cer- tifying such invoices, pretty nearly covers the whole cost of the American consular service. In the case of some of the Latin American countries it is suspected that their consuls receive no other remuneration than the fees for certifying such documents, which they are permitted to retain. Documents falling under this general head are of several sorts — the consular invoice proper, consular attestation of usual invoice or certification of ocean bill of lading, certificates of origin, non-dumping certif- icates, etc. Minute Exactness Required. — Emphasis has already repeat- edly been placed on the imperative necessity of exactness in every detail of export trade relations. In no other phase of such relations is exactness so essential as in the preparation of consular invoices. No indefinite or inexact statements are to be tolerated. No corrections or interlineations are to be made. The smallest mistake on the part of the shipper in making out these documents may be punishable by exceedingly lieavy fines on the foreign importer, the American manufacturer's customer, which are certain to react on the shippers. In doing business with countries where documents of this sort are required, customers or prospects should be asked and expected to give definite instructions as to how goods are to be invoiced. It is wiser to follow instructions received from cus- tomers rather than to take any one's advice at this end of the line, even the advice of a consul of the country in question. The manufacturer should specifically exempt himself from all re- sponsibility if he exactly follows his customer's instructions, or in the absence of any instructions, is forced to follow his own best judgment, relying on the advice of consuls or others. Consular Invoices.^ — A consular invoice is a document cover- ing all the customary details of any invoice and sometimes others, which is usually printed in the language of the country of destination of the goods, must be fully and accurately pre- 1 See specimens, Forms 19 and 20. New Yorh, 7,.de AgQato.. jy^tUiV^ de mercancias embareadas por _ Sani-taiy...- Deaic.C.Q*- d hordo de ".P.ftH.lt.OX.eft'' con destino BJ .'.^ret°°.tlabaiia. INii»cor»™ol (Pon) por euenta y riesgo de.- — _Jta.t.aillQra8 ...y ...Ciaj. (For wbo-a Kcoatil and riik ihipmeni ii nide) y d la emiignaciim de XOB mlsinO& - - - L^ Habana #387 Esoritorloe a oortina,de roble #043 " " • #6241 Esoritorioa de roble para maqulnae de eecrlblr 540 733 750 491 597 603 39.7 14.5CI 19.75 $89 87 35 00 Declare que soy ci XabrlQante ciertos los precios y demas particulares que en ella se i del suelo u de la industria de los Estados Unidos de An de las mercancias relacionadas en la prcsente factura y que son ;ienan, * y que las mercancias contenidas en dicha factura son producto Declaro que soy el Agente aulorizado por Don — - - que ha suscritn la anterior dedaracion, para presentar esta faciura en la Ofrcina Consular de Cuba en esta plaza, a fin de que sea certiBcada. ^fcX-*w^ Form 19— Consular Invoice, Cuban Form. required hy moat Latin . MAKING TEE SHIPMENT 425 pared in the same language and presented and sworn to by the shipper in person, or by some authorized representative of his, at the consulate of the country of destination in the American port of shipment. The number of copies of such a document which are required in different countries varies from two to eight. Sometimes the forms are to be purchased from the con- suls in question, sometimes they must be obtained from certain stationers authorized to sell them. Fees of consuls for certifying such invoices are most often graded according to the value of each shipment. Usually the consul retains copies for himself and for despatch to the cus- tom house of his country to which the goods are bound, or the bill of lading will not be signed by steamship companies without the production of a duly attested consular invoice. It should be noted that consular invoices are not required to accompany packages sent by parcel post, excepting only in the cases of Cuba, Bolivia, when value exceeds $100, of Nicaragua if value amounts to $50, Chile, charge made only if the value is $24.33, and Haiti. A Certificate of Origin is required for Uruguay, Description of Goods in Consular Invoices. — It is in the classification of goods in these consular invoices that there exists the greatest opportunity for costly mistakes. The author when visiting Venezuela a year or two ago wrote in this regard : Goods must be described in strictest accordance with the official classification and nomenclature. If nails, for example, are called spikes and manifested as coming under Class II instead of Class III of the Venezuelan tariff, the result will be that the unfor- tunate importer of the goods must not only pay the duty on the class in which the goods are manifested, but a fine equal to the duty on the class in which they ought to have been manifested. Moreover, in addition, the importer loses the goods which are confiscated by the Government, afterward to be sold at auction for its own benefit. Since the amount of the fine imposed goes to the man who discovers and reports the mistake, there are very few mistakes indeed that pass unnoticed. Certificates of Origin. — A good many countries make in their tariff' laws what they call two columns of duties, one being a general duty, and the other, called the "most favored nation column, ' ' applying to the products of nations with whom special 426 PRACTICAL EXPORTING in H o o o p w <;« ^^ w a. I— ( I— 'r/i o 1^ w Q W 1—1 Pi H !z; w u o Q <: ;d en '^ O o OQ Oh oQ S3 pia HW ^'^ o u 'o «) S. ' 0! o « •• 1 rt en oj ^^ o H Sro 1- V. u « O ■g hoP-i > ■2^ E ■r o"^ u 1) m u O •c M •= ■^ oi*^ ^ S ^ £■•« o ^-^ c^t: • - M u M c t> "> .S o V- O C U « rt^ ro >> i; o 1) u= u I- 3 ^S-J2 S ivoic by cons :e i rge aid of t al c M u u n o = -= a3 Ri ot J-f £-7- ■"■"S^x-^s^ -^ o ■'■ X P^ W um O W ^fcf^'bi) -J o 3 4J *^ «J "^ O u u u III •"•>-. o, — o rt G -3 C " o S "^ C > _ 1-1 ■=• '^ . ft hJ iJ 3 ^ P3 <"" ^tJ u rt E m O .H s o g t-^ = On «^(^1 «/> <«-, PM Pm O ^ rt U j; ^ ^jz a> bD "n "u: '(^ *«] MW"^ 3 'H M C c s 3 a rt :A s°a 3. a a a C OT C/3C/2 d. M -^ -S -S M^ M .-• ■-■ E u 9 o 5 r > £^ S A*A 'A Ph '- 2 rt S .S ^ M d V. ^ c tiS k- 3 aj O rt rt p. 3 >* Ph Ph W W c/} H 1-' 428 PRACTICAL EXPORTING treaties have been negotiated. In. order to take advantage of the lower rates of the most favored nation column, it is neces- sary that goods from countries subject to these rates be accom- panied by what is known as a certificate of origin, that is — as refers to us — a document certifying that the goods in ques- tion are the product or manufacture of the United States and of no other country. In the case of certain markets no special documents of this sort are required because the point is covered by the usual consular invoice, as for example in Cuba and Brazil. Ship- ments to other countries which do not require consular invoices may have to be accompanied by certificates of origin when certain goods are in question which are entitled to specially favorable tariff treatment. This particularly applies to goods shipped to France and Japan, with which countries treaties have been negotiated admitting at low tariff rates certain kinds of American goods. ^ "Non-Dumping" Certificates. — Certain British colonies at tempt to guard against the "dumping" of foreign goods into their markets at exceptionally low prices, or at rates less than cost of production, by requiring from shipj)ers certificates to the effect that the invoice prices are the customary prices in country of origin. The colonies in question are Australia, New Zealand, South Africa and Canada. The customary phraseology of such certificates is self-explana- tory. For shipments to the Union of South Africa invoices must bear the following notation: **I declare that the subjoined statement of Values and Costs is accurately given in conformity with the requirements of the Customs Tariff of the Union of South Africa Act No. 26 of 1914: (1) Home consumption value Less home trade discounts Net Value Packing Cost of carriage to port of shipment as represented by railage Shipping charges, excluding wharfage and lighterage Total (2) Actual cost of goods at port of shipment to importer in South Africa (i.e., actual cost delivered into dock sheds)." The value declared must be the "true current value" of the iSee Form 21. MAVTTda TTTJP fiTTTPHrF.?jr 429 '^' Mar. O'?'''^* Unidades * da Tarifa Kumi Mark' 9t^f'■ , .unities of Numlthe Tariff Valor parcial declarado por artigo inclusive ou exclusive frete e despezas, Specified value of each "article inclusive or ex- clusive of freight and charges Paiz de origem de cada artigo Country of origin of each article ards Lqb... lao-O— .7.05 .6Q_ U«S,Qf A> u tt F ACTU R A ""aiin p,°'™" specification of the merchandise, in conformity with letter K. art. 13, of Inw n, 1103. dated "::°i!°:::.r" ia? n'o".-SS.^:i i-° P.iadeori,eo 1 '° a 1 ^^L M^chand^^ do';'Anfe°o. ■"^iS^Hr oSsH^h y\ — X36 / N^ [qs. 1 -jS 6 8_ Bales.. 1147 Tfinn Yards 4flnn |AS3 705 U.S. of A 'OS. 7 -14 1390 Tsnn SiJQD ir.R.of A .,' — Form 20 — Consular Invoice, Brazilian Form. o Via FACTURA CONSULAR BRAZILEIRA (BRAZILIAN CONSULAR INVOICE) n (Tonsulabo Geral em IHova l^orh. DECLARACAO (DECLARATION) Declaramos solemnemenle que somas exporladores ou carregadores Wl solimnly declare that W! arc the exporters or shippers das mercadorias ntencionadas nesta factura conlidas nos 14 volumes .X *!.. M^.^^ti^iJifj eJirrHl*it in tJtit invoiee fntti/iinfd in the liacka^CS of the merchandise specified indicados, a gual i exacla e verdadcira indicated, which iS' in all respects todos OS ue and packages effeilos sendo essas mercadorias destinadas ao porta de this merchandise being destined to the port o/ do Brazil e consignadas aos Sres. Brazil and consigned to Messrs. de Sa.nJLQS j< 0/ Neva Vork 6 dc July Da Silya_4_flaj de igi yr5^7..,,...i?iS.<-^<)!?'^Sft^*^ A^ente do Expovtador Agent of Exporter JV7*,«.* * ^^^l^^^UJ^J^ J^ «^«./*. J I'^U Name and nationality of sailing vessel Nome e nacionalidade do navio d vapor ^iiinaa. Name and nationality of steamer Porto do embarque da mevcadoria IISW Yoxk Port of shipment of the merchandise Porto do destino da mercadoria ScWltita Port of destination of the merchandise Porto do destino da mercadoria Port of destination of the merchandise Brazilian... com opfdo pa with option for ..em transito para.. in transit for Porto do destino da mercadoria Port of destination of the merchandise Valor total da factura inclusive frete e despezas approximadas $ ..1X67.86_.. Total value of the invoice inclusive of approximate freight and charges Frete e despezas approximadas $ 38*90 Approximate freight and shipping charges Agio da moeda do paiz de procedendo _ Exchange of the country whence exported OBSERVACOES DO CONSUL I Pagou $1.65 VISTO. Consulado Qeral do» E. U. do BraslI de 191 428 PRACTIC AT, FTPnvTTNrL < 'Sl.^ let- !0 ID I? 9»« C ^ ^1- Si ^ ^. 1 1 »^ ft I- ft 2 ^ I r «» « §- a to ft ft ■^^ ft^ '^•^ to D ^ ft ~. a > •o > o o m o r > or o © SO o 73 s» > ^ H o O F Z r<4 MAKING THE SHIPMENT 429 CERTIFICAT D'ORIQINE , Certificate of Origin Nous soussignis, ",! D....P....Edgar^ . A gent... d 6. The undersigned (Owner or Agent, or &c.) .Px.of.il.e...T.y.pesirriter Co.,. Detroit^ -Mich* (Name and address of Owner or Shippier) qiie les Marchandises ci-aprds designees, tliat the following mentioned goods (for) ^D4clar Dectar NOMBRE DR PAQUETS CO COUS on CAISSES Number of Packages Boxes or Cases MARQUES Marks NOMBRES Numbers POIDS Weight BRUT Gross NET DESCRIPTION 30 X/30 PARIS Kilos 918 Kilos 526i Machines at ecrire et embarquees sur le S. S. .".Efl.paigll.6.**. And shipped on the S. S. (Name of Ship) d la date diilO.JulllQtadressieadM. M...J.0.Ul3.e.rt Fr.C.r eS^.Paril on the date of (date) consigned to (Name and Address of Consignee) Prete serinenl devant moi. Sworn to before me celQ ioMr...Juill.et »his day >^0 ^0^' .^'^ sont le produit des Etats Unis d'Amenq are the product of the United States of Amtric Fait a New York ?e....XO....J.UilI.e.t...... Dated at New York on the (date) (Signature) ^ CERTIFICAT D'ORIQINE Kom soimignit '.. D.- -P.. Edgar, Agent...de.. Profile Typewriter Co., Detroit, Mich, 30 / C^. 1/30 PARIS Kilos 918 526i Machines d ecrire "Espagne." et emharqiih-s sur le • And shipped on the d (a date di. 10 Juille.t "rf"''^" a Jtf. itf.J.Qu'b.er.t, ,Fre.re8,PariB, Pr&U nernient devaiit ao.^^^.y^r.juillet ,^0 ^0^^ a^' Fait a New York ie . .10. Juil let- Doled ot New York on the (datel HOTARY PUBLIC y^ /^/CyO>^^ T MEW YOBK COUNTY No- ., " " REGISTER Wo.Al^i.L • ffOOllB TT Form 21- -Certificate of Origin. efnre n Notary Public tod States.' is roi|uir 'tb; lowest rates of ppod to some countr doty. r MAKING THE SHIPMENT 429 goods in the United States, the discounts shown must be the same as those granted on similar quantities sold for consumption in the United States. Actual cost of packing, also of forwarding must be declared. The declaration must be signed by the prin- cipal, or the director, manager or secretary of the exporting concern. A declaration of similar character is required in the case of shipments to Australia or New Zealand. A more elabo- rate certificate is required in the case of shipments to Canada but the intent is the same.^ Regular shippers often print the form at foot of, or on reverse side of invoices. Rates of Duty Under Foreign Tariffs. — At this point it is advisable to remark that ordinary inquiries as to the rate of duty which will be assessed on any given article when imported into most of the Latin American republics are entirely useless because, among other reasons, the tariffs of these republics are constantly changing. They are almost invariably subject to temporary surcharges imposed from time to time and nomi- nally only for certain periods, or to meet sundry expenses, such as the building of a national theater, the construction of port works or the equipment of a military force to put down an in- cipient revolution. Sometimes there may be half a dozen such surcharges. In principle, in regard to the tariff of any foreign country, it is seldom possible for any one who has not had actual per- sonal experience in the country about which inquiry is made, and in the importation into that country of the identical article in question, to make any definite statement in regard to the exact rate of duty which will be imposed. Printed tariff laws are, in every country of the world, subject to myriads of ex- ceptions and special rulings just exactly as are our own laws in the United States, as witnessed by the endless procession of our Customs Court and Treasury Department decisions. The only way of definitely learning just what duty will be applied in any country is by submitting actual samples of the goods to the competent custom house officials in the country about which inquiry is made, obtaining an official ruling. Even this iThe official form of invoice for Canada, known as Form 1-M, may be obtained from any British consulate as well as up-to-date instructions as to phraseology of declarations for South Africa, Australia and New Zealand. 430 PRACTICAL EXPORTING does not always suffice. In so highly civilized a country as France instances have been known where official rulings have thus been obtained, but when the goods were actually imported heavy fines have been imposed for wrong declaration, ap- parently through the complicity of custom house officials. In a great many countries half if not all of fines imposed go to the officials who discover the mistakes. Tariff Treatment of American Goods. — As a matter of fact it is only rarely the case that an American manufacturer has any real interest in the rate of duty which will be charged on his goods in any foreign market. It is the business of his cus- tomers, importers in such markets, to know all about the duties which they will have to pay. As a rule, the manufacturer's only interest in such regards is to loiow that American goods of the sort in which he is interested are subject to the same duties as are any other foreign goods, that there is no dis- crimination against his products. This may be said in a gen- eral way to be the case in every country with which we do busi- ness. In some countries, indeed, American goods receive especially favorable treatment. For example, they enjoy a 20 per cent, reduction in duty when imported into Cuba, and certain of our products are granted tariff favors in Brazil and in Nica- ragua which similar goods manufactured in other countries do not receive. A certain discrimination against American goods exists in some of the British Colonies where a tariff preference ranging from 3 per cent, to 10 per cent, in the duties is ex- tended to the products of the mother country or of sister colo- nies. It is a notable fact, however, that despite these prefer- ences for British goods, British trade has not increased at more than the normal rate, while American trade had grown far more rapidly and even in the very articles which the preference was intended to cover before the war forced new trade to us. Study of Foreign Tariffs Often Profitless. — The reader will do well neither to attach importance to rates of foreign duties on his goods nor attempt to study them out. The rate of duty as affecting possibility of making sales is rarely even of inter- est to the average American manufacturer save when he is con- templating competition in a foreign country with big or im- MAKING THE SSHIPMENT 431 portant native factories. lu such a case customers, prospects or agents on the ground can advise far more intelligently than can any independent study he himself may try to make — espe- cially as there are landing charges, brokerage and a dozen other items of landed costs to be taken into consideration. In every tariff there are hundreds if not thousands of schedules, almost invariably on an entirely different basis from our own. Indexes are neither full nor dependable. After hours upon hours of unsuccessful search one is inclined to take refuge in the ''n.o.e." category, guess that one's goods will be "not otherwise enumerated" — but one never knows whether he will be right in his guess. Tariffs of almost all other countries are unlike our own in substituting specific for ad valorem duties, usually taxes on the basis of weight, which may be gross, net or legal weight. Tare for packages is often established by law. Often an "official valuation" is established, i.e., the law will declare that a cer- tain article is worth a certain price, on which price duties will be levied no matter what the actual invoice says about it. CHAPTER XIII MARINE INSURANCE Why Marine Insurance Is Necessary — When the Duty of Effect- ing Insurance Devolves on Manufacturers — The Principles In- volved in Marine Insurance — An Explanation of "General Average" and ''Particular Average'^ — Insurance Policies awd Certificates Issued Under Them — Pecidiar Phraseology of Pol- icies Explained — Insurance Against War Bisk — How Insur- ance Claims Are Collected. MARINE insurance is perhaps that feature of business re- lations with foreign countries which differs most strik- ingly and radically from practices usual in our domestic trade. We do not often insure goods shipped by rail in the United States, because the railway companies are by our laws the insurers of the goods they transport. They are responsible for loss or damage en route. Ocean steamships, on the contrary, are specifically exempted by the laws of nearly all countries from almost every form of liability excepting when loss or damage arises from negligence, fault or failure in proper loading, stow- age, custody, care or proper delivery of merchandise. Prac- tically all other risks have to be assumed by the shipper or his consignee or some form of insurance protection secured. Since shipments are always insured for the benefit of the con- signee, since he pays the cost of insurance, he may be expected to instruct the shipper as to the form of insurance which he desires and is willing to pay for. Manufacturers should always ask their customers for instructions in this regard and the various kinds of insurance protection may be diplomatically explained to small importers not accustomed to oversea transactions, while in every instance e.i.f. quotations made by manufacturers should specifically define the kind of insurance proposed and included in the e.i.f. prices. Shippers, therefore, must themselves un- 432 MARINE INSURANCE 433 derstand clearly both the general subject and the various facili- ties which are available. WHEN AND HOW TO INSURE Every manufacturer or other shipper of goods for export must invariably cover his shipments by appropriate insurance, or make certain that others do so. When goods are ordered and shipped by an export commission house, the latter will attend to the insurance without instructions from the manufacturer. When shipments are made through forwarding agents they must be told how and for how much to insure — although they seldom fail to enquire for such instructions. Usually in the case of shipments through forwarding agents the manufacturer himself does not effect the insurance, although he may do so if he chooses; the rule is that the forwarder attends to it, following the authority and directions of the manufacturer. But when a manufacturer does his own shipping then he alone is responsible for this very important matter of insurance which he must never overlook or forget. Lists of companies which issue marine policies are included in the Export Trade Directory. Correspondence direct with any of them will result in suitable arrangements. It should be noted that one agency often controls or issues policies for a number of different insurance companies, placing risks with whichever company circumstances may indicate. Hence correspondence should preferably be addressed to agents rather than to special companies. The Insurance Broker. — A shipper may effect his own insur- ance directly with tlie companies which he prefers or, if he chooses, he may employ a professional insurance broker. Ex- port commission houses and other large and regular shippers al- most always employ a broker, believing that the^^ are thus able to secure the most advantageous rates as well as special features of protection. These brokers are paid by the insurance com- panies a commission on the premiums, said to range from 2V2 to 5 per cent. The familiarity of the brokers with the practices of sundry companies, as well as those foreign countries where special organizations may be maintained by certain companies, is often of advantage to shippers in placing their risks. 434 PRACTICAL EXPORTING THE PRINCIPLE OF MARINE INSURANCE Fire and life insurance with all of their ramifications are ev- erywhere familiar. Marine insurance is far older than these other forms but because hitherto less common in this country is seldom understood. It is indeed a complicated subject which can only be reviewed briefly in a single chapter. j\lany more or less elaborate and technical treatises are available to the student who wishes to make a thorough investigation. We have a number of American companies insuring marine risks usually in connection with other forms of insurance. They have active competitors in the shape of foreign companies who began to establish themselves in this country in the '70 's, after numerous American companies had, it is claimed, been ruined by losses of American vessels during the Civil War and had been denied by Congress any share in the $15,000,000 Ala- bama Claims indemnity, although the claims of these American insurance companies had been used by the United States Gov- ernment in contending with Great Britain for this indemnity and in making up its sum. Favored by local legislation, espe- cially in the State of New York, English, German and other European even Chinese marine insurance companies, have com- peted with American companies in the business of insuring American cargoes. Antiquity of Marine Insurance. — Levantine traders of the Mediterranean the great seat of ancient commerce, are known to have evolved certain principles of marine protection which forms a part of our system of to-day, 2,500 years ago, perhaps more. The old Rliodian laws, parts of which were later incor- porated in the Roman law made in times when ships were chiefly propelled by oars, provided that when in case of danger to the ship it was necessary to throw cargo overboard, the loss involved, undertaken for the benefit of all concerned, should be made good by pro rata contributions from all. This, as we shall see, has descended to our own day. It is known, too, that the same an- cient laws protected traders from other losses at sea, although the exact forms have not been recorded. The Lombards from Italy, the richest traders in Europe in the Middle Ages, are believed to have introduced marine insur- MARINE INSURANCE 435 ance into England in tiie fifteenth century. The earliest known marine insurance policy is dated 1680. In the early days of the American colonies their maritime shipments were insured in London, but insurance offices were established in this country as early as 1721, in those days carrying on the business in the fashion common in London, that is through underwriters. Insurance "Underwriters." — "Lloyds" is to-day synonymous with insurance the world over. The Corporation of Lloyds as it now exists in London grew out of an association of under- writers which originated from the practice of gentlemen inter- ested in marine insurance meeting daily at a popular coffee house established in London by Edward Lloyd as early as 1692. To- day there are about 400 members of Lloyds who make headquar- ters in the Royal Exchange, London. They carry on business in very much the same fashion as they did two hundred years ago. Seldom is one risk assumed by one man. A memorandum is usually submitted to various members of Lloyds by an English merchant or shipper, giving particulars of the risk which he desires covered. Any member of Lloyds who wishes to "take a line" on the proposed risk "initials the slip," signifying that he accepts such part of the total value to be covered as he may indicate. If the risk is one for £1,000 it will probably be cov- ered by anywhere from five to ten individuals, each subscribing for a share in the risk of from £50 to £200, at the rate of pre- mium which has been fixed as covering the whole risk. There- after, a formal policy is prepared which becomes the actual con- tract of insurance and is signed, or "underwritten," by the in- dividuals who have agreed to accept proportionate shares of the risk. The effecting of marine insurance through "under- writers" long ago went out of fashion in this country and is now exclusively in the hands of large companies which always as- sume the entire risk in each instance even though they may thereafter re-insure portions with other companies. It is to be noted that individual underwriters do not by any means control the entire marine insurance business in England. Large and im- portant companies exist there also. Liabilities of Ocean Carriers. — In our consideration of the nature and form of bills of lading, we have remarked the limita- 436 PRACTICAL EXPORTING tions to the liability of ocean carriers secured through the Harter Act. It is here to be noted in addition, that if a shipowner ex- ercises due diligence to make his vessel in all respects seaworthy and properly manned, equipped and supj)lied, neither he nor the charterers shall be held responsible for damage or loss resulting from faults or errors in navigation or in the management of the vessel, nor shall they be held liable for losses arising from dangers of the sea, acts of God, or public enemies, or the inherent defect, quality or vice of the thing carried, or from insufficiency of package, or seizure under legal process, or for loss resulting from any act or omission of the slii^jper or owner of the goods, or from saving or attempting to save life or property at sea, or from any deviation in rendering such service. It is obvious, therefore, that the responsibility for a good many kinds of losses which may be incurred can with difficulty be brought home to the carrier. The shipper's protection against any other losses must be secured through marine insurance. Protection Under Simple Marine Policy. — Marine insurance is not primarily intended to cover any other than strictly marine risks properly included under the term "perils of the sea." Loss or damage must be directly traceable to perils of the sea. Loss from other causes, deterioration of perishable goods, break- age, leakage and robbery, are not covered by the marine policy except under special contract and in consideration of special premiums. To the uninitiated the term "perils of the sea" might convey the idea that in obtaining a policy of marine insurance he will be indeimiified against every damage which his goods might suffer in course of their voyage. The definition of this terra in a judgment of Lord Herschell in 1887," is accepted as the best ex- tant. "I think it clear that the term 'perils of the sea' does not cover every accident or casualty which may happen to the subject matter of the insurance 'on' the sea. It must be a peril 'of the sea. Again, it is well settled, that it is not every loss or damage of which the sea is the immediate cause that is covered by these words. They do not protect, for example, against that natural and inevitable action, which results in what may be de- scribed as wear and tear. There must be some casualty, some- thing which could not be foreseen as one of the necessary iuci- MARINE INSURANCE 437 dents of the adventure. The purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen." - Risks not Covered by Simple Policies.— One of the contin- gencies against which an ordinary policy of marine insurance does not protect is thus described by William C. Downs in an article in the Amejncan Exporter: "An importer is simply causing himself unnecessary trouble and expense in making claim for some losses unless his policy expressly covers them. He should carefully study the nature of his imports and determine whether he can run the risk of losses from these causes or whether it is better business to pay the exti-a premium to be insured against them. Many a merchant in certain countries finds upon examining eases received in ap- parent good condition that a portion of their contents has been abstracted by expert pilferers. He naturally makes claim against the steamship line or carrier, and is probably met by a denial of responsibility on the ground that the bill of lading merely calls for the delivery of so many packages 'said to contain' such and such merchandise, and that they have no means of knowing that the packages ever contained the goods said to have been stolen. His only remaining recours'e is the insurance company, but un- less his policy distinctly states that it includes the risk of theft and pilfering, he may as well pocket his loss at once and save himself further disappointment." Loss or damage by fire must be covered by a special clause in the insurance policy. Usually such a special clause covers against risk for specific periods while lying on the quay or in the custom house at port of destination. Sometimes such risk may be still further extended. To exclude apparently inevitable loss which certain goods al- ways seem to sufi^er at the end of a voyage and to prevent many vexatious, petty claims, insurance policies always provide that damage in regard to such articles shall not be paid unless it amounts to a certain percentage of the value of such articles. This is called the "franchise," and this form of insurance is re- ferred to as "free of particular average." It is a featiire of almost all ordinary policies of marine insurance but may be su- jjerseded by special contracts covering "all risks," or, as it is 438 PRACTICAL EXPORTING sometimes termed, ''with average." These expressions we shall shortly examine more particularly. Special Contract Protection. — The scope of marine insurance has been so extended nowadays that it is possible to include in a policy special clauses covering almost any sort of protection de- sired — all, of course, by agreement with underwriters and on pay- ment of agreed upon premiums.^ Eiders affixed to policies in printed and gummed form, or added by rubber stamps, are num- bered by the hundred. It is possible for a manufacturer to in- sure his goods while en route from inland factory through to in- land point of foreign destination by rail, steamer and any other necessary form of transportation; to insure them against fire, theft, leakage, breakage, even against earthquakes and dangers of mule-back transportation in Latin American countries. Wherever possible, arrangements should be made with the in- surance company to cover all risks from the moment the goods leave the point of origin, the factory, until they are placed in the warehouse of the foreign customer, including a good margin, say thirty days whilst the goods are awaiting clearance in a foreign custom house. This latter point must always be discussed di- rectly with the customer, for in some instances customers object to pay a higher insurance than the rate for sea risks only, al- though their objections are based on a wrong conception of the risks to be covered and the making of a single claim is usually enough to convince a customer of the advisability of insuring right up to delivery to his warehouse. Importers Should Dictate Form of Insurance. — All insurance risks are proper subjects for discussion between importer and shipper, between whom a thoroughly good mutual understanding should be arrived at, but it is the importer alone who can indi- cate just the form of insurance which he desires. Large im- porters in the better organized markets of the world are thor- oughly well posted as to insurance conditions, but many will be found in less developed markets, particularly throughout Latin America, who really know very little about the various kinds of protection available. When suspicion develops that this may be the case the American shipper may very well undar- take to point out some of the features of possible protection, thus 1 For some examples, see Form 22, both face and endorsement. MARINE INSURANCE 439 seeking more intelligent direction from his customer who will be charged with the premiums required. War risk insurance is properly no part of marine insurance protection. The word insurance as used between buj^er and seller in times of peace is to be interpreted as usual under such conditions, and cannot be supposed to include war risk. AVERAGE— GENERAL AND PARTICULAR Inexperienced shippers are sure to be puzzled by the word "average" as they encounter it in a study of marine insurance. Average is not used in connection with marine insurance in its usual sense, in fact, it is another word altogether, derived from quite another source, or at least with a very different applied sig- nification. Average in marine insurance seems to be immedi- ately derived from those words in the Romance languages of which the French acarie is perhaps the most familiar example, meaning damage. Definitions of "Average." — One of the good definitions of the two sorts of average noticeable in marine insurance policies, namely, "Particular Average" and "General Average," is that given by the president of one of the American marine insurance companies. "Where there is partial loss and the insured cannot or does not elect to abandon and receive the entire indemnity, it becomes necessary to ascertain the amount for which the in- surer is liable. Such partial losses are known by the name of average. ... It is frequently necessary to sacrifice some part of the ship or cargo in order to save the rest. It is obviously un- just to have the entire burden of loss under such circumstances fall upon the party whose property is thus voluntarily destroyed or injured. Maritime law, therefore, prescribes the way in which such losses shall be apportioned or 'averaged' among all the interests at stake. The term 'average' was later extended to include losses of all kinds. To distinguish those losses which are of such a nature that they ought to be apportioned among all the parties from those which ought to be borne entirely by the party whose property is damaged, the former kind of loss is called 'gen- eral average,' the latter 'particular average.' " According to a prominent English authority. General Average is defined as "all loss arising out of a voluntary sacrifice made of 440 PRACTICAL EXPORTING any part of tlie ship or cargo to prevent loss of the whole or to rescue the whole adventure from unusual peril." If A's goods are damaged or destroyed by water pumped into a ship to save the ship and the whole cargo from destruction it is not equable that A should suffer the whole loss. It is to be apportioned. Particular Average is defined as "damage or partial damage to the ship or to the particular subject to which the policy relates." General Average. — An exporter of slight experience is likely to be surprised and resentful when he is told that he has not only lost his goods but must also pay for the privilege of losing them. Yet the principle involved is well recognized and logical, and has already been referred to in our notice of the antiquity of marine insurance. Even the ancients agreed that when in a storm or on account of an accident it was necessary to sacrifice part of a cargo for the safety of all the cargo and the ship itself, all the parties at interest, the owners of the cargo saved or not saved and the owners of the ship, should contribute to the sacri- fices made for the safety of all. If a shipper of goods, either on his own account or as agent for his foreign buyers, has not protected those goods by a suitable policy of marine insurance he must suffer losses described as "general average" losses. General average exists quite independent of insurance. The lia- bility for a contribution to general average is a common law liability. Not only must those interests which have sustained loss or damage by a general average sacrifice contribute to the costs incurred in making good such a loss or damage, but the amount itself which has been made good must also pay its proper pro- portion toward the general average. The owner of property which has been sacrificed must not be in a better position than those whose property has been saved.. Therefore, whether or not a shipper has received instructions from his foreign customers to insure the goods, he must, none the less, insure them for his own protection, although the ship- ment is regarded as the customer's property, and no matter what the legal aspect of his customer's responsibility may be. A consignee might decline to acknowledge any interest in the shipment. When a general average loss has been incurred the shipper or the known owner of the goods will be notified of an PRICA, BROWllE^ GREEl red for loss of or Id on acceptance pmpany shall not le subrogation of pignment or sub- 1 \MERICA hath eentn President. tr a. 2. •«-" CA CU r> -r ~~ u* ' » rp» <* 03 -^ o O a. crq "5 ■ g. a. c -o 3 CD ^ ^^ x> sr 2r o 5 9 (» a ! o M ty H> rt- O '• O Cl fl> d- I Hj5 O J p. H- P «< i. 03 0) P tr* of whom it may concern, y, payable to them or o: 1 shipmente, their own ] their account or contrj » any known or reported : .ons to insure, excluding t to insure or which are in force at this date, i £6 regards all shipments er date hereof, dise. including prepaid i L deck* : SHIPMEl^TS. unless other the assured' 8 option, as in at time of declaration e of particular average u: erest insured be stranded contact with ice, in whic ure as may reasonably be { claimed; or tmless cause io to pay landing, warehou jurred, also partial loss ^r_Good3s. HardwarAt_M8iohine doWe r appro ved Eej^ eral^m erage unless amounting to tely insured. is also understood and ag ;en insured at other than f ) pay, without regard to th lich would be recoverable u Lthin. SHIPMENTS are insured: Fre , stranding, burning or col washing overboard. ; is hereby understood and a , shall be insured at "With 3rage and/ or robbery, xinlese t is hereby tmderstood and 8 declaration^ shipments of ai Insurance Company of North America, PHILADELPHIA. ARGO. BEOWHE, GREEKE & WHYTE O.V ACCOVKT OF whom it may ccncerii ; of loss to be paid in funds current in the United States, I make Insurance, and cause themselves endorserf.ent hereof As per endorsement hereof to be insured, losi or not lost, at and from •^ i!^\ *'°^^'*"^ «^*'' m I vessel, or by whatever other r fit: •zl- ft upon all kinds of lawful goods and merchandises, laden or to be laden on board or whoevei" else shall go as master in the said i the said vessel, or the master thereof, is or shall be named or called. P IBrgUlltiltg the adventure upon the said goods and merchandises, from and inimediatcly following the loading thereof on board ot 1 the said vessel, as aforesaid, and so shall continue and endure until the said goods and merchandises shall be safely landed as aforesaid. AND it shall and may be lawful for the said vessel, in her voyage, to proceed and sail to, touch and stay at, any ports or i:laccs. if there- unto obliged by stress of weather, or other unavoidable accident, without prejudice to this insurance. The said goods and merchandises, hereby insured, are valued {premium included) at Not more than $75j000« by any one vessel aimirlruig the adventures and perils which the said INSURANCE COMPANY OF NORTH AMERICA is contented to bear, and takes upon itself in this voyage, they are of the seas, fires, jetlistms. barratry of the master and tjmriners, unless the assured on cargo be in part owner of the vessel, and all other perils, losses and misfortunes (iUicit or contraband trade excepted in all cases), that have or shall come to the hurt, detriment or damage of the said goods and merchandises, or any part thereof. AND in case of any loss or mis- . fortune, it shall be lawful and necessary to and for the assured, his or their factors, servants and assigns, to sue, labor and travel for, in and about the defence, safeguard and recovery of the said goods and merchandises, or any part thereof, without prejudice to this insur- ance; nor shall the acts of the assured or insurers, in recovering, saving and preserving the proper^ insured, in case of disaster, be considered a waiver or an acceptance of abandonment; to the charges whereof, the said Insurance Company will contribute according to the rate and quantity of the sum herein insured: having been paid the consideration for this insurance by the assured, or his or their assigns, at and after the rate of As per endorseir.ent hereof Anil in case of loss, such loss to be paid in thirty days after proof of loss, proof of interest, and adjustment exhibited to the insur- ers (the Smount of th* Note given for the premium, if unpaid, and all sums due to the Company from the assured w^hen such loss becomes due being first deducted, and all sums coming due being first paid or secured to the satisfaction of the insurers), but no partial loss or ' particular average shall in any case be paid, miless amounting to ^re per cent. PROVIDED ALWAYS, and it is hereby further agreed, that if the said assured shall have made anv other insumnce upon the property aforesaid, prior in dav of date to this Policy, then the said INSURANCE COMPANY OF NORTH AMERICA shall be answerable only for so much as the amount of such prior insurance may be deficient towards fully covering the propertj- hereby insured. And the said INSURANCE COMPANY OF NORTH AMERICA shall return the premium upon so much of the sum by them insured as they shall be by such prior insurance exonerated from. And in case of any insurance upon the said property subsequent in day of date to this pohcy, the said INSURANCE COMPANY OF NORTH AMERICA shall nevertheless be answerable for the full c.\tent of the sum by them subscribed hereto without right to claim contribution from such subsequent insurers. And shall accordingly be entitled to retain the premium by them received in the same manner as if no such subsequent insurance had been made. Other insurance upon the property aforesaid, of date the same day as this policy, shall be deemed simultaneous herewith; and the said INSURANCE COMPANY OF NORTH AMERICA shall not be hable for more than a ratable contribution in the proportion of the sum by them insured to the aggregate of such simultaneous insurance. IT IS ALSO AGREED, that the subject matter of this insurance be warranted by the assured free from loss or damage arising from riot, civil com- motion, capture, seizure, or detention or from any attempt thereat, or the consequences thereof, or the direct or remote coiisequences of anv hostilities, arising from the acts of any government, people, or persons whatsoever (ordinary piracy excepted), whether on account of any illicit or prohibited trade, or any trade in articles contraband of war, or the violation of any port regulation, or otherwise. Also free from loss or damage resulting from measures or operations incident to war, whether before or after the declaration thereof. In the event of risk of war being assumed by endorsement under this policy, the assured warrant not to abandon in case of capture, seizure or detention, until after the condemnation of the property insured; nor imtil ninety days after notice of said condemnation is given to this Company. Also warranted not to abandon in case of blockade, and free from any expense in consequence of detention or Blockade; but in the event of blockade, to be at liberty to proceed to an open port and there end the voyage, mrmontitlUun. it is also agreed, that bar, bundle, rod, hoop and sheet iron, wire of all kinds, tin plates, steel, madder, sumac, brooms, wicker-ware and willow (manufactured or otherwise), straw goods, salt, gi-ain ot all kinds, rice, tobacco, Indian meal, fruits (whether preserved or otherwise), cheese, dry fish, hay, vegetables and roots, paper, rags, hempen yam, bags, cotton bagging, and other articles used for bags or bagging, pleasure carriages, household furniture, sldns and hides, musical instruments, looking-glasses, and all other articles that are perishable in their own nature, arc warranted by the assured free from average, unless general; hemp, tobacco stems, matting and cassia, except in boxes, free from average under twenty per cent., unless general; and sugar, flax, flax-seed and bread, I are warranted by the assured free from average under seten per cent., unless general: and coffee, in bags or oulk. pepper, in bags or bulk, I free from average under len per cent., unless general, Profits warranted free from claim for general average, but subject to the same per I centum of partial loss as if the insurance were on goods. In case a total loss of profits be claimed, the Underwriters to be entitled to a . credit of the same per centum of salvage as if the insurance were on goods, and in case of contribution in General Average for any por- J tion of the goods at the customary sound value, this Company to be free from claim for loss on such portion. Not liable for loss arising '. from wet. breakage, leakage, or exposure of goods shipped on deck. Warranted by the assured free from damage or injurj' from dampness, change of flavor, or being spotted, discolored, musty or mouldy, unless caused by actual contact of sea water with the articles damaged, occasioned by sea perils. In case of partial loss by sea damage to dry goods, cutlery, or other hardware, the loss shall be ascertained by a separation and sale of the portion only of the contents of the packages so damaged, and not otherwise; and the same practice shall obtain as to all other merchandise as far as practicable. Not liable for leakage on molasses or other liquids, unless occasioned by stranding or collision with another vessel. Warranted by the assured that this insurance shall not enure directly or indirectly to the benefit of the carrier or other bailee, by stipulation in bill of lading or otherwise, and any breach of this warranty, and any act or agreement by the assured, prior or subsequent hereto, whereby any carrier or party liable for or on account of loss of or damage to any property insured hereunder, is given the benefit of any ^insurance effected thereon, shall render this policy of insurance null and void. m b of abandonment or payment of a loss by this Company, liave enured to its benefit, but for such agreement or act, this Company shall not be bound to pay any loss, but its right to retain or recover the premium shall not be affected. Warranted by the assured, that the assignment of this policy or of any insurable interest therein, as also that the subrogation of any right thereunder to any party, without the consent of this Company, shall render the insurance aflected by such assignment or sub- rogation, void. 3ln BmtfM fflt(prfnf. the President or Vice-President of the said INSURANCE COMPANY OF NORTH AMEfUCA hath hereimto subscribed his name, and this Policj' is made and accepted upon the above express condition, the thirteenth day of August A. D. one thousand nine hundred and I ^ BROWNE. GREENE & WilYTC. § .-doo^ sail, on or after date hereof. 5 2 S

S a'o a a nUDER DECK SHIPMENTS , unleee otherwise specified or unless otherwise de- rtxa^^njo Glared at the aesured'a option, as provided within, or unless otherwise ^^ >^ K ^ .H = 'S » and other approved general merchandis e are insured: Free of particiilar Qjcoo^o "o " S. average unless amounting to 3'j, each case or shipping package sepa- ^"g> -^ -i "" " rately insured. p.-t'woj3 M^— It is also understood and agreed that In all cases where goods have o^O'o"'* ;| x S been insured at other than f.p.a.e.c. conditions this company agrees .dc -i S £ ^° P*y< without regard to the particular average franchise, any loss 'M'SrH 0) —is which would be recoverable under the f.p.a.e.c. conditions as provided S°>.Srto - '" within. oouooo OH DECK SHIPMEHTS are insured: Free of particular average unless caused by 0) m o o sinking, stranding, burning or collision but to cover the risk of jettison ij o, tl tJ a '^ and/or washing overboard. >.'d 01° It is hereby understood and agreed that all shlpnents of Shoes, Boots o c -d d-x and Sandals, shall be insured at "With Average" conditions, including the risk of ^3)^ OH .2 theft, pilferage and/or robbery, unless otherwise stated on the declaration. o Ma>ci M It is hereby understood and agreed that unless otherwise applied for .3^ "54^5 "•* ti^e of declaration, shipcients of automobiles shall be insured at the oonditioas .a a 0) m-a • >.5d-o5o "This insurance attaches f rom^ the time the goods are "■^gMaJ^ shipped from the office or warehouse of the assured and/or ■»j«3o.Hg from the time of delivery to their packers for export, until o)s.i>.o) ;^ delivered to the consignees at final destination, and covers ""em Sal against total loss, general average and salvage charges and o.aoQ.Q.S damage and/or breakage to the goods themselves sustained during the continuance of this insurance however arising, but the assurers not to pay for any claim unless amounting to Twenty Five ($35) Dollars, each automobile being separately insured." The rate of insurance for shipments of automobiles insured at the above conditions, from New York via London to Hew Zealand, by owned steamers of the Atlantic Transport Line and connections, will be---------- 3/4^ Net. It is hereby understood and agreed that the rates of premium on ship- ments of merchandise as provided within under deck are fixed as follows: From places in the United States and/or Canada, by railroad - ' To New York and at and thence to ports and places in Australia, Tasmania, Hew Zealand - Via ports in the United Kingdom and the Continent of Europe, B/H - By Class "A" Lines -..-_-_ 5o^«; 60#^ Net Via Cape of Good Hope or Suez - Dy approved steamers -------- 650^ 75^55 » Via ports on the Pacific Coast of North America - By approved steamers of regular lines 35#^ 45^55 " For theft and/or pilferage, add ----- i/g^ Rate .e.c Other risks held covered at rates to be agreed at time of endorsement Rates on shipments of merchandise "on deck" three times the under deck f.p.a.e.c. rates. (U 0) 3 So of risk. '^ a, . Valued, premiuni included, at invoice cost, including prepaid freight and/or o " charges and 10^ added, unless otherwise declared prior to shipment or prior to ^ known or reported loss or accident, and then at amount insured; it being however, Q^ understood and agreed that in case of loss prior to declaration, the assured rt » Shall be entitled to declare and recover on whatever basis they have written m- J3P,,; etructions. Issued prior to known loss, to insure or have made it a practice to ^^jH insured for account of their respective clients. Per steamer and/or steamers and connecting conveyances. United To he insured, lost or not lost, at and from ports and places in the a States and/or Canada to ports and places in the World and vice versa, direct or via port or ports including risk of transshlpiaant by land and/or water. TE & WHYTE. rder. property or that of others made by them :>!, or which prior to inception of the Loss or accident^j they have agreed or re- I, however^ all shipments which they have covered under open policies with this or inless cancelled or expired. by steamers sailing, or scheduled to ind/or gixaranteed freight and/ or charges, .vise specified or imless otherwise de- provided within, or unless otherwise , are insured fop«a,e«c, as follows^ Qless the vessel, lighter or craft or the , sunk, burned, on fire or in collision or ii latter case xhe contact to be of such a supposed to have caused or led to the da»f- d by forced discharge in a port of distress sing, forwarding and/ or special charges, if arising from transshipment," IX^ C&ffl eA g.QpA^jj, .^ ffl'^^^f , ^ B o ots aM 8hoe_s_ ircHandiie''^e" inenlred: Free' of particular 3^0^ each" case or shipping package sepa- reed that in all cases where goods have •p.a.e.c. conditions this company agrees e particular average franohiise, any loss nder the f«p.a.©oC. conditions as provided e of particular average unless caused by lision but to cover the risk of jettison .greed that all shipments of Shoes, Boots Average" conditions, including the risk of 1 otherwise stated on the declaration. igreed that \inles8 otherwise applied for itomobiles shall be insured at the conditioner / MARINE INSURANCE 441 assessment to meet general average costs and a bond will be reciuired of liiui to cover ultimate contributions. If he is pro- tected by a marine insurance policy he has only to turn such notification over to his insurance underwriters and they will take care of the matter for him. What Are General Average Losses? — Losses which occasion a demand for a general average contribution may be either due to sacrifice of property or to expenditure. In either case they must be voluntary, as distinguished from accidental, and in- curred with a view to the general safety' ; extraordinary, that is not forming part of ordinary expenses necessarily incurred, and they must be reasonably made. They are usually construed ac- cording to what is known as "York-Antwerp rules," framed by conventions of shipowners, merchants and underwriters held many years ago in the two cities indicated. That basis for the adjustment of general average losses -is often indicated in the bills of lading. In the absence of such a provision it is the laws of the country of destination of the ship which govern adjust- ment. As examples of looses among many others admitted as general average the following may be mentioned : Damage sustained by a steamer's engines when used to float her when ashore in a dangerous position ; masts, spars, sails or rigging cut away for the common safety during a storm ; loss of cargo and the freight thereon, when thrown overboard; damage to cargo, which has not been on fire itself, by water used to extinguish a fire on board; wages and provisions of the master and crew during detention in a port of refuge and expenses there incurred; cost of salvage of ship and cargo when picked up at sea or when ashore. Particular Average.— "Particular Average," as has been noted, is virtually identical with "partial damage." The measure of indemnity for partial loss on goods arriving at des- tination in a damaged condition is defined by the British law in the following words: "Where the whole or any part of the goods or merchandise insured has been delivered damaged at its destination, the measure of indemnity is such proportion of the sum fixed by the policj^ as the difference between the gross sound and damaged values at the place of arrival bears to the 442 PRACTICAL EXPORTING gross sound value." The damaged value of goods is what they realize by sale. The sound value is their market value had they arrived sound, as taken on the day of sale of the damaged portion. The difference between the two values represents the depreciation of loss and this ratio of depreciation is then applied to the insured value of the damaged goods. 'Particular Average is chiefly called to the attention of ship- pers or importers who are fortunate enough not to experience losses or necessity for claims, through that clause in the policy called the "memorandum" which exempts the insurers from cer- tain percentages of loss, or, in other words, declares certain goods free of particular average, i.e., not subject to claims for damage, unless the damage amounts to certain stated percent- ages. "F. P. A." — -The custom of insurance underwriters in de- manding that certain kinds of goods be free from claim for loss unless such loss amounts to 1 per cent., 3 per cent., 5 per cent., 7 per cent, or some other per cent, of their total value, originated in the very early days of modern insurance and has given rise to scores of lawsuits. As we have seen, the theory is that the percentage of the "franchise," as it is called, is only a fair risk for a shipper himself to carry in view of the reduced rate of premium demanded for such insurance. "With Average" and F. P. A. Compared. — Insurance AVith Particular Average, equivalent to A. A. R. (against all risks), is adopted in the case of goods liable to be damaged through rough handling or exposure to the weather or whenever they can be spoiled to any extent by water, owing to the covering of the pack- ages not being of character suitable to withstand immersion. In practice, however, insurance With Particular Average is more or less confined to textiles or delicate machinery and the higher rate may be lowered by packing in tin lined cases. Many of the large British shippers of piece-goods habitually cover gray goods on F. P. A. terms when printed and colored goods are insured With Particular Average to the same markets. This is because gray cloth does not deteriorate so materially through contact with sea water. By way of further illustration" of conditions attending insur- ance free of particular average, another quotation may be of- * ss - " •■ ■gro 5 a J! -w^ .Its 1 1 l! -11 si ^ s » « • > 5' «^ 3 2 - - Mlf: ° » # = :- Is ^ I s S'S S ^ I « * s o -^ _•« « 1 ^. ■ = H S J? ; - 3 o »? c - J C . «v Q--3 ^ i £ ^ »• I ^ = - J. S -' £ ■; Sri-* 7 ;■" •pasnoijajBAA njun aSjBqosip jam put luouidiqs SujjjBMB 8|mM )|oop uo )jSjj Suipnpui psjnsut I<\9\tsv69t •Sv)|Oid Sujddj4s JO asea 4363 111 Ui Z X oS tt < Q ? o s O I/-) * fc <" ^ S < 5 O 5 C/3 >- c be c/> — <•- rs JJ *> ^05 :E Cj Q a; 2 uj 2 U lil O Q S •^ z z lU o < sis f CO >^ CO ^ O O o =5 O) H *- c/7 C. U V -^ w m cr ■♦-' -. ?■ o *^ rm to e- C ^ Z. ^ C C/5 ~ — -' O) ■^ r^ >- " <0 3 - — O CO t_ O) L. '^ E ^ C « ® o -o c O L. O = 0-5; ^ o P C\2 r4 I • Q O T- M £i « H « V « •0 ^ u » ;i a «i »H iS c 3 0} S-1 a h-l ■" a d W n •g •5 s ft s A a HI e*i _2 >> U CQ a o< B a a 0. Ph £ e; 1^ u •9 a Insurance Company of North America PHILADELPHIA. Policy No. 50376 J/o. 141347 (^c. -=D..r. New York, August 31 Wo\& is to dCrtlfl?, That on thia date . this Company insured, under Policy made for BROWHE, GREENE i . WHYTE ^ - - - - - -t__, of CiDcimiati ~ _ $1835. on Twelve (12) Caees Gaaollne Euginee and Parts - ----- » valued at -.-___- - - - sum inauxed ------____ , shipped on board of the r ---.-^T S*S. "ADEIATIC" . -...rr. -...- ..^--^^^^^ ■^.r,...--.-- New York to LiTerpool --t?--^-*!..,,^;.^,-,..^^. -r,..,?t:„,.^ - -,- -,-r It is hereby understood and agreed tl BROWNE, GREEHE which represents and takes til Policy-holder, (for the purpt ^^ ^^ „ _ the property were covered by kap^cial pdicr'^J liability for unpaid premiums. ilXVW^ ^P»^VuU\\<^» loss is payable to the order of \\\u^ "" surrender of this Certificate. qJfV;^,Hnd tuaVW ^'I the rights of the Original ghts of the Original i or damage), as fully as if hereof, and is free from any Not valid unless such purpose. ntersignedVpyilie Attorney of the Company especially appointed foi ^^■^■t.' c H '"'■•"°'""' " "'■ cu^liWb ."u t«.-Slo.Ti;5i.^ ?,iSH "^—^^^ZH"""' ^„.^^ MARKS AND Nli> iti:Ks C1.AVSES - MACHINERY CLAUSE ,3| \340 > H08. LIVERPOOL 1-12 In case of loss or injury to any part 1 ofamachine.consisting, when complete - for sale or use, of several parts, the in. I't surersshallonlybcliable.rortheinsur- t, jj ed value of the part lost or damaged. -S "s *■ 1- Oplion lo the isBored 1» collect loss under this ? -« | cerlilicale al Ihe elTices of the Underwriters in £« .| a> New York, upon presentation of this cerlificale -5 3 g s' While on railroad, free of claim f«r 51 ^^ loss or damage unless caused by fire, "si 1- collision or derailment. "' " S| i 1 f 1 pi '% z ?«• if • Form 23 — Certificate of Marine Insurance. r«tiG«t... .imilsr to Ibi. .r, .opplicd .. .i.*ciDc ihlpm.ol. .r. d.d.red G r ELlZAnETH-SOU ri c c > E. WO ^ 3> y^ ^= 2 o- IT '* ?» og o3 m z 75 J O o b PO 5 3 = c o MARINE INSURANCE 443 fered from William C. Downs' articles on this subject in the American Exporter: "Misunderstandings are liable to occur in regard to the in- surance of goods which from their very nature are usually con- sidered free of particular average, and which in default of any specific instructions are so covered by the shipper. In many cases, however, such goods can be insured 'with average' in con- sideration of the payment of an extra premium, and it may suit the importer to pay the higher rate to cover the greater risk, or it may have been his custom to have received them from other sources so insured. In such an event it is clearly the duty of the importer to advise the shipper that he desires the more ample form of insurance. On the other hand, the shipper may be guilty of negligence should he not call the buyer's attention to the possibility of obtaining particular average on such goods and ask for definite instructions. "The usual printed form of an insurance policy gives a long list of articles which are considered free of particular average, among which generally appear 'all articles manufactured of iron and steel.' Edge tools and cutlery are certainly manvifactured of steel, but if they were wet by sea water they would undoubt- edly suffer partial damage which would detract from their sale value. The average importer of goods, not too familiar with the technicalities of marine policies, would in all probability, if a prevous understanding did not exist, expect somebody to make good his loss and would feel aggrieved if not satisfied." Some other considerations of the free of particular average clause in the policy will be referred to in a general examination of the phraseology of those documents. POLICIES AND CERTIFICATES Large shippers rarely consult their original Policies of marine, insurance, perhaps never have occasion to look at them after they have first been arranged for. Shipments of goods, as they are made, are usually "declared" against an "open policy"^ and it is certificates " of insurance which are the documents usually handled, forwarded to consignees abroad, or used for 1 See Form 22. 2 See Form 23. 444 PRACTICAL EXPORTING banking purposes. Practices in declaring value for marine in- surance illustrate another point of difference between that pro- tection and fire insurance, for example. It should be noted that we can here only deal with insurance on cargo. Space does not permit a consideration of insurance on the hull, that is, on ships as such, the hull representing the whole vessel. Open and Floating Policies. — Shippers who are constantly forwarding goods over sea usually arrange for one or more poli- cies covering risks up to large sums of money and including in their terms all of the various contingencies against which protec; tion is desired for a given length of time, for example, pilfering, leakage, breakage, from warehouse to warehouse, fire risks, etc., at certain specified rates of premium according to destination of the goods and according to the rating of steamships which trans- port the goods. These Open Policies, as they are called, remain in force for a given length of time or until the values covered have been exhausted. As individual shipments are made the shipper notifies the insurance company concerned that protection under the open policy is required for certain values covering goods described, shipped by such and such a boat, on such and such a date, etc. The risk thus covered is endorsed on the open policy and a certificate of insurance is returned to the shipper by the company, which has all the force of an original policy, al- though the full terms of the original are not repeated in it and it must be construed according to the terms of the full original. Large foreign importers of goods, particularly if they are deal- ing with a great many suppliers in the United States and per- haps in Europe also, often arrange for their own insurance, tak- ing out for themselves" in their own localities very much such a policy of insurance as has just be described. When this is done manufacturers or shippers of goods which such houses may order are instructed to declare values of such shipments with the company which has issued the consignee's policy. Such notifica- tion is all that is necessary and the risk is held covered from the date of the sailing of the vessel from port. Then, shippers do not cover the risk under their own policy; it is the consignee's policy that is used. Declaring Values. — IMarine insurance, it has just been re- marked, differs from fire insurance in another particular. In MARINE INSURANCE 445 case of total loss the actual value has to be proven under a fire insurance policy. No proof of value is required in such cases under a marine insurance policy. The insured value is ac- cepted as the indemnity value in case of total loss. In case of partial loss, as has already been intimated, the amount of such loss is determined by a comparison of the damaged value and the sound value with the insured value. The actual value of a shipment is seldom that declared for marine insurance protection. The cost of the goods placed on board vessel, including all charges up to that point, is increased from 10 per cent, to 20 per cent, in order to cover the costs of ocean freights, other incidentals, and possibly, sometimes, loss of the foreign importer in the non-arrival of goods on which he was depending. Fractional parts of a dollar and even odd dollars are always excluded from the amount so declared for insurance which is usually made up to the nearest $25 or $50 above the figured amount. Thus, if the amount were to come out at say $790, the amount declared for insurance would be $800. Complete indemnity cannot be obtained by the assured unless all the elements which enter into the gross sound value of goods shall be computed. The contract of marine insurance is not intended to benefit the interested parties by returning any actual profit. It is a contract of indemnity only. Prospective profits are not as a rule insurable as such. However, it is clear that the market value of goods at point of destination will nec- essarily include a certain element' of profit and such market value may be insured. Attention is called to still another ele- ment in this value against which insurance may be effected, by Mr. Downs, who writes : Insurance of Foreig-n Duties. — "Under a marine policy al- most any kind of risk may be covered if the insured is willing to pay for it, and it may be stated in passing that he gets ex- actly the amount of insurance for which he has paid. If he has valued his merchandise at 10 per cent, or even 20 per cent, more than its actual cost and pays a premium on that valuation, he will receive that amount in case the merchandise is lost, or in case of partial loss the exact percentage of that loss applied to the insured amount. Yet a lack of familiarity with the estab- 446 PKACTICAL EXPORTING lislied niles of marine adjustments may at times lead an im- porter to believe that he has been unfairly treated by his insurers. This is liable to happen in countries having high import duties from which no rebates are allowed in case the goods are re- ceived in a damaged condition, or when the damage has not been discovered until after the duties have been paid and the goods despatched for consumption. "Suppose that the actual invoice value of the merchandise is $1,000, and that it has been insured for $1,100. Import duties of 50 per cent, ad valorem are paid, making the market value of the goods in sound condition $1,500. It is found, however, that the goods have been badly damaged by sea water on the voyage, and the importer calls in the underwriter's agent, who orders them sold at public auction in which they bring only $1,000. It is evident that the importer's loss is $500. The un- derwriter's agent duly issues a certificate to the effect that the sound value of the merchandise was $1,500 and that only $1,000 was realized, which certificate the importer forwards to his in- surers, expecting to be reimbursed for his loss, as he was fully insured and his documents are all in order. He receives, how- ever, an adjustment showing that the percentage of loss being 3314 per cent., he is entitled to receive 33^/^ per cent, of $1,100, or only $366.67. He is consequently still out of pocket $133.33, which he cannot recover from any source. "The higher the rate of duties the greater will his loss be. Unless he has already been informed that it is the universal practice in the adjustment of marine losses that paid import duties shall be added to the cost of the merchandise to deter- mine its sound market value and that the percentage of loss to that value shall be applied to the insured amount, he will feel aggrieved and suspect that his shipper has treated him unfairly. ' ' There are two remedies for this difficulty. The first is that goods should always be inspected before duties are paid, and losses adjusted before the merchandise is withdrawn from the custom house. It is obvious, however, that in most cases this cannot be done. The second remedy is that duties shall also be insured. This can be done for a small additional premium, generally only a small percentage of the regular premium." Cost of Premiums. — Premiums for marine insurance protec- MARINE INSURANCE 4-17 tion vary not only according to the kind of protection required but according to tlie nature of the goods, tlie character of the ship transporting them and the port of destination. In a very rough and general way it may be said that in normal times ordinary rates of marine insurance may range from say one quarter of 1 per cent., to the principal European ports, up to li/> per cent, or even 2 per cent, on voyages around Cape Horn to the w^est coast of South America. Ordinary rates of pre- mium are not modified according to the flag borne by the vessel, in normal times, but may be by its rating by inspectors. If a policy for which a premium at the rate of one-half of 1 per cent, may be demanded as covering ordinary conditions, is desired broadened to include contract for indemnity against pilfering, the usual rate may be increased to, say five-eighths or much more. This or other risks — such, for example, as protec- tion against risk of breakage (as of machinery), or against leakage of liquids — usually require an inspection by insurance authorities of the usual packages shipped prior to a ruling as to rates which will be demanded. PHRASEOLOGY OF POLICIES Old fashioned, not to say antique phraseology is still em- ployed in their policies by the marine insurance companies, much of it really unintelligible to the novice without explana- tion. Our American policies, however, are much simpler and clearer than are those used in England where Lloyds policy, first adopted in 1779, is still in use although it includes terms which no one can do more than guess at, like the letters S. G. appearing on its upper left hand margin, which seem to have absolutely no significance. Among many other expressions in the policy the following may be selected as those most necessary for the ordinary shipper to understand. The Voyage. — The phrase of the policy reading "at and from " followed by the description of the voyage, covers the property of the assured should his goods, already loaded on the vessel while lying alongside her pier, be burned before the beginning of the voyage. If the policy only read "from — ■ — " the risk would only begin with the sailing of the ship. The Ship.—' ' Called the whereof its master for this pres- 448 PRACTICAL EXPORTING ent voyage " identifies the vessel by which the goods are shipped in case there should chance to be two vessels of the same name. In 1805 an American ship called The President was in error called in the policy "The American ship President." In a suit occurring in consequence it was held that the variation was immaterial because the underwriters had not been misled as to the identity of the vessel. Loading on Board.- — The ordinary policy contains the ex- pression "beginning the adventure upon such goods and mer- chandise from the loading thereof aboard said ship," This clause is nowadays invariably modified by a rider which usually reads "including risk of craft to and from the ship or vessel, each craft to be considered a separate risk." Unless so modi- fied the plain policy would not apply until the goods had actu- ally been placed on board the vessel. Many vessels are loaded from lighters or barges while lying at anchor in the stream and are therefore exposed to considerable risk. The application of the rider just described has now become so universal that some policies include it in their printed provisions. Perils of the Sea. — The term perils of the sea has already been defined. Under this head in the policy, however, there are certain other expressions which are strange and require ex- planation. For example, reference to "thefts" as used in the policy ; this here refers to theft by violence and does not cover petty thievery or pilfering by crews or stevedores, which must be covered by special contract for which increased premium is de- manded. "Jettison" is the throwing overboard of a part of a cargo or part of the equipment of a ship. "Barratry of the master and mariners" is rare nowadays, though common before the advent of steamships and the cable. Barratry is described as every wrongful act wilfully committed by the master or crew to the prejudice of the owner or char- terer. When a crew mutinies and seizes a ship and runs her ashore or otherwise uses her for their own purposes, that is con- sidered as barratry. However, if the owner himself connives at the casting away of a ship that act is not barratry but fraud. The word "warranted" frequently occurring in insurance practice is best described in the language of the English law. MARINE INSURANCE 449 A promissory warranty is said to be "a warranty by which the assured undertakes that some particuhir thing shall or shall not be done or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts." The Memorandum. — The clause known as the memorandum was introduced into marine insurance policies, as has been ex- plained, in order to secure a minimum limit to the under- writer's liability for damage to perishable articles. The terms of the policy are almost always modified by special conditions attached, referring to contracts covering special goods or ship- ments. There is no uniformity at all about the "franchise," that is, the amount of the exemption of the underwriters from liability. That exemption may be 3 per cent, in one country or 7 per cent, in another country, as referring to the same com- modity. Furthermore, since a large shipper might suft'er a considerable loss and yet not be able to recover from the insur- ance companies, the plan has been adopted of breaking up a large number of packages into small subdivisions, called series, and the liability of the insurance company is made to cover each series in phrases reading, for example, "To pay average on every ten bales running landed numbers," or "to pay average on each package as if separately insured," or other similar phrases. English vs. American F.P.A. Clauses.— What we call the F.P.A. clause occurs in two different forms, one English (F.P.- A.E.C.), the other American (F.P.A.A.C). There is an impor- tant difference between them which has thus been explained : "There is room for misunderstanding as to the meaning of the term 'free of particular average' and as to the conditions under which goods insured under that proviso would be pro- tected against particular average, or partial damage. It should be clearly understood whether the English or the American con- ditions apply. The clause covering the first reads: 'Free of particular average unless the vessel be stranded, sunk, burned or in collision'; while the American conditions are 'Free of particu- lar average unless the damage be caused by the vessel being stranded, sunk, burned or in collision.' It is evident that the little clause in the American conditions makes a vast difference in the application of the insurance. In the first case, the claim 450 PRACTICAL EXPORTING for any partial damage is a valid one from the very fact that the vessel met with one of the casualties specified ; in the second case it must be proven that the damage was actually caused by one of the mentioned mishaps to make a claim effective — often very difficult if not impossible to prove. "The effect of the different conditions may be shown in the ease of a shipment of barb wire, insured free of particular aver- age, and carried by a steamer which on leaving port collides with another steamer, but without sustaining any damage that would cause water to be admitted to the hold and reach the cargo. The barb wire, nevertheless, on being landed is found to have been wet by sea water and rusted and otherwise damaged to such an extent that on sale there can be realized only 90 per cent, of the amount that it would have brought if it had arrived in a sound state. Under the English conditions the insured could recover from the underwriters 10 per cent, of the insured value; under the American conditions he would have no claim whatever. Even if it were shown that in consequence of the collision seams in the deck or hull of the steamer opened and admitted water to the holds, the insured would be called upon to prove that the barb wire was stored in the particular hold to which the water was admitted before his claim for damage would be recognized und(n" a strict interpretation of the American clause." ^ Added Clauses. — Tt has already been observed that all sorts of special risks may be covered by contract. A marine insurance policy, therefore, may include a great manj- added clauses. Some of the commonest have already been referred to. Others in every day use include those applying to cargo carried on deck ; for example : "AVarranted free from claim for jettison or wash- ing overboard." Premiums of insurance for goods carried on deck are usually about double the rates if carried under deck. When such a premium is paid the clause inserted is "Including the risk of jettison and washing overboard." Another clause applying to similar shipments reads: "Free of claim for dam- age but liable for the total loss of a part if amounting to 5 per cent." A clause applying especially to shipments of machinery reads : 1 William C. Downs in American Exporter. 151 ng all I." ial ne to he Ill- Mr en as ot ed ar ir- ce r- m id es re II- t- 36 id Is 3t n it CERTIFICATE OF INSURANCE WAR RISK ONLY Insurance Company ii _ PHILADELPHIA of North America IRo. $ 1B25 (PLACE -o DATE, Hew York, August 31 ttbiS is to Certify, Tlmton the. 31a.t "day 01 ^Augual..- - .,...19 this Company, in consideration of the premium agreed to be paid insured, - ^ BROWIIE, -GEEENE- i.-TSHrT-E for _._ „ _ _..D2ie ..Thoujaflnd, Eight ..Huudred.and. - Tw.eiity-f iv.e „ Dollars War Risk on„GaB,oliiLe-EiigiJie£_ and^Pazta , valued at sum hereby insured, per ('"ofS''} ~- BxltlBll - S/S -QADRUlIiC'' Warranted sailing on or before SepteJEfo.ex,.-l ionr, but excluding d •rarrnDW d . Ll-veFpo-ol r, b; letters of mart, by takines kt lea, tea belligerent A'arranted covering wl|i(2yiafci^dlrnt^ land. Warranted no Qerman\ yMJstri^V''\TurkTsli jwg^ consignee or destination; and warranted free of cono^mpatWn op k^e^&s^*na^ot such ownership, interest, consignee, or destination. /■Cr^\VS\^^ On shipments to neutral coyOTrres in Europe it is warranted that the bills of lading shall show the name and address of the neutral consignee. In cute of any lou or mufortune, it aball be lawful and neceauy to ted for the leBured, hio or their fsctore, eerv&nU ami BAsigDa, In ewe of loss, Buch loss to be paid in thirty daye alter full proofi of lo»s, proofs of interest, and adjuatmenl exhibited to tbe itaurer*. Iliahereby underetood and agreed that, in CMC of loM.BuehloMia payable to the order of .._ _ - - „ BROKEE, .. GBEEKE.-5t. KHYTE on .urrendet of tbi> policy, wbioh conveyB all rights ^ polic; fl ieeued io Dollars ai :■ CompaDf at Philadelphia or to Mewn- Wendt d Com Not valid unless Countersigned Countersigned,-. ^ *o^^ o^^ H .^P 34C, & Op. LIVERPOOL Twelve (12) Cases Gasoline Engines and Parts Form 24— Insurance Against War Ruk. o MARINE INSURANCE 451 **In case of loss or injury to any part of a machine, consisting when complete for sale or use of several parts, this company shall only be liable for the insured value of the part lost or damaged. ' ' The foregoing are only specimens of the hundreds of special clauses in frequent use. THE WAR RISK War risks are not assumed in the ordinary contract of marine insurance. When this protection is desired it is necessary to issue a separate policy in each case.^ Until the outbreak of the great war in Europe in August, 1914, most Americans had en- tirely forgotten the very existence of war risk insurance. Their last practical experiences w'cre in our war with Spain, and then Ho real risks were involved, and that kind of insurance was chiefly speculation. The developments of the European War not only made insurance against war risk imperative, but introduced new conditions into insurance practice in this regard. No "war risk, " be it noted, is ever required when the world is at peace. The Flag". — The particular steamer carrying a shipment for- ward must be specified in all applications for war risk insurance as well as its nationality, that is, the flag of the steamer. Natur- ally, higher rates are charged for the greater hazard involved in the sailing of steamers owned by belligerents than those owned by neutrals, at least during the European War, on other routes than those of the North Atlantic and the Mediterranean where the operations of German submarines came to be directed im- partially against vessels of all flags. For example, at the out- break of the European War, no war risk insurance was to be had on steamers flying German, Austrian or Turkish flags, and there was soon no occasion for such insurance as those vessels quickly disappeared from the seas. Steamers flying the British, French, Russian, Italian or Japanese flags were, however, subject to war risk insurance, although taking a higher rate than steamers owned in neutral countries, that premium being about double the other. War risks are only assumed while the property is actually afloat. This is usually covered by a phrase in the contract read- 1 See Form 24. 452 PRACTICAL EXPORTING ing much as follows: "Warranted covering while water borne only and excluding any risks on land." Ownership of Merchandise. — Other conditions affecting insur- ance against war risks six months after the outbreak of European hostilities were thus explained by C. M. Campbell, of the Insur- ance Company of North America, in a letter to the author: "In view of the practice of the belligerents controlling the high seas in detaining steamers flying neutral flags, in order to examine the cargo to determine whether a vessel carries any mer- chandise absolute contraband of war which may be ultimately consigned to her enemies, it is necessary to attach certain clauses eliminating this protection, as the underwriters will not assume any expense, loss or damage incurred thereby. Further, no mer- chandise can be insured which is owned by German, Austrian or Turkish subjects or citizens, for the reason that this would be considered absolute contraband and condemned, irrespective of its nature. It is, therefore, necessary to protect the under- writer's interest that certain clauses be used, and in our case, the following clauses are affixed to certificates : "A" "Warranted no German, Austrian or Turkish Owner- ship, Interest, Consignee, or Destination ; and warranted free of condemnation on the ground of ^ich Ownership, Interest, Con- signee or Destination." "B" "Warranted free from any expense, loss and for dam- age arising from capture, seizure, arrest, restraint, preemption or detainments by the British Government or their Allies. ' ' ' ' In the case of merchandise consigned directly to British sub- jects or their Allies, the clause marked 'B' is not attached, the reason for its attachment not existing; but on shipments made to Great Britain or her Allies, but destined ultimately for con- signees in other neutral countries, for instance, Spain, 'A' Clause, as well as 'B' Clause, are both included for the reason that there is no assurance at the time of accepting the risk that a steamer flying the British flag, or that of one of her Allies, will carry the shipment to ultimate destination, and, there is, there- fore, the existing likelihood, in the case of a neutral steamer, of her being detained for examination by any one of the Allies." Government Insurance. — A Bureau of War Risk Insurance in the United States Treasury Department was established by Act MARINE INSURANCE 453 of Congress in August, 1914. It followed shortly after the estab- lishment of a similar Government insurance scheme by Great Britain. The sum of $5,000,000 was appropriated by Congress as a fund to be placed at the disposal of the new Bureau to meet possible losses to American shipping. A year later the opera- tions of the Bureau were officially reported to show large profits. The resources of the Bureau were afterward multiplied many times over to provide protection for the large fleet which the United States commandeered and built after their entrance into the War, The law provided that protection should be confined strictly to American owners of vessels and cargo, that is, to ships flying the American flag, and accordingly all cargo policies were imprinted with the following clause : ' ' Warranted that the title to the property insured remains continuously in citizens of the United States during the term of this policy." The Bureau was not empowered to issue any other insurance than that against risks of war and such risks on cargo could only be accepted when usual marine risks on the same cargo had pre- viously been issued by approved companies. While terms and necessary clauses naturally and frequently varied according to conditions and the nature of each risk, the following may be re- garded as typical high rates for insurance on cargo in American ships, rates, almost if not quite unprecedented in history, and re- flecting the danger to shipping of German submarine piracy : Between ports of the United States, its possessions or any ports in tlie Western Hemisphere, from ^/^ to 1^ per cent. Be- tween ports on the west coast of the United States and Japan, China, Australasia and East of Good Hope generally, from % to % per cent., or from the east coast of the United States via Panama Canal, ^2 to 1 per cent. To European or Mediter- ranean ports, and not north of Havre, in Europe, nor east of Sicily, in the Mediterranean, from 5 to 20 per cent. To other ports, from 4 to 25 per cent. These rates, be it obseri'^ed, applied to the war risk only and did not include usual marine protec- tion. COLLECTION OP INSURANCE CLAIMS Although the collection of claims for loss or damage is usually assumed to be the duty of the consignee, it actually is often 454 PRACTICAL EXPORTING performed for them by the shippers, usually as a matter of courtesy. The shippers do not assume any responsibility, how- ever, but merely act as agents for the consignee. Owing to many facilities to be obtained in the collection of claims when the insuring company is represented at port or in the country of destination by resident agents or some other organization, it is always desirable that policies be secured from companies so rep- resented abroad. Any comjoany will accept statements made by one of its own agents with far less hesitation than reports from other authorities. The burden of proof is always on the insured to sustain his claim for loss. The first step necessary is to satisfy one's self that the loss is one actually covered by the terms of the policy. Placing Responsibility. — There may often be a question whether the ship owners or the insurance companies are responsi- ble for some losses. A receiver of cotton seed oil in some foreign country may find that he has suffered leakage greater than the "under 1 per cent." apparently owing to shifting or chafing of the cargo. A receiver of paper may find that his goods have been seriously damaged by leakage from neighboring barrels of lubricating oil, probably caused by similar reasons. Shall such owners present their claims to shipowners or to underwriters? It is the shipowner who will be responsible in such instances unless, as usually happens, the captain of the vessel has imme- diately upon his arrival in port filed what is known as a Protest.* If his vessel has experienced in the course of the voyage any un- usually rough weather or other conditions which have led the captain to believe that shifting or damage may have taken place in the cargo, he is quite sure to file such a Protest duly attested before his consul at port of destination. The document will recite the incidents of the voyage which it is feared may have caused damage, and in consequence disclaim responsi- bility. When such a Protest has been filed, claim for damage must be laid before the insurance people who may, but usually do not, dispute the captain's sworn allegations. Procedure in Collecting. — A good epitome of the usual prac- tice, when properly insured goods have been received in a dam- 1 Roe Form 2.'). o o o o O ft •H OQ O •P rd Pi H 1 ^ 1 ""^ o ^ H Ch g "^ § -P o (1) O CD (D pj ft CQ ^ CQ Ch (D O > CQ (D (D P! ^ -H -H •H h ^ O H 03 H CvJ ^ s S p -*^ +^ < +J (D ^ O CD » -H -P -P « O ^ ^ fH O H o . 5 P Ch '^ Sm ^ bDH ^ H *\ i CQ CD ^ c^ 5=1 H ^ H CD tiD S^ 'C^ ^P CQ ba a > ^ ^ d Jm CD CD Cv5 CO ro oj cv3 ^ f^ Q> Q^ S O H E-i P ,£4 r^ ra A ■P CD • CD a.-^ -s ^ ^ ^ ^ and hat t ther as ^i- «-, ^ i a c, a a is ^ '^ ^ S i i^ ^ a ^ § s requtr may s the sa K «. !5 f^ s- ^3 :; 5^ 5 1, P r^ ^^ <~t. •-i ^ ^ rn C) "^^ ;^ <\> CQ --+, a. ^ t-> C+ ^ f^i ^^^ - a Otary, 11 fore a doth »>♦. (Ti t"* «-j > ^b. 5=|3 e s^ a ^ »>»_ r^ S Hi his lue, t, a cs a c s ^ ?^ ^ t-5 a ^ ^ "^ "^ V S" s ;^ a. <^ "^ (^ rs. V; all a, is pu all a d N ^d- ^ xahiteb States of Hinecica STATE Of NEW YORK.! CITY OF NEW YORkJ Co all people to toftom tbcse JptcBcnts sball come or mag Contetn: i 1,0. V. Schlichter, a Public Notary In and for the Courtly af King!, and Stale oj New York, by letters Patent, under the Great Seal of said Slate duly commissioned and suorn. residiny in said County, and havinij filed a certified copy of my appointment with my autorjraph siijnalure in the Clerii's Office of the County of New York, ©cnD ©tteting: Jttnotn Pe, that on the third day of March in the year of our Lord one thousand nine hun- dred and fifteen before a Notary Public appeared G. Barstad, Master of the steamer called the ' 'WASCANA\4 and noted in due form of law with him the said No- tary his Protest for the uses and purposes hereinafter mentioned, and now, on this day, to wit, the day of the dale hereof, before me, the said Notary, at the City of New York, afore- said, again comes the said G. Barstad and requires me to extend his Protest, and together with the said G. Barstad also came Peder Pedersen, Chief Officer, Kristian Eilertsen, Boatswain and Jolm Carlson, Seaman, belonging to the aforesaid vessel, all of whom being by me duly sworn, voluntarily, freely and solemnly do declare, and depose as follows: That is to say. that on the second day of February last, he, the said G. Barstad departed in and with the said vessel as Master thereof, from Santos having on board the said vessel a Cargo of coffee, laden there and at Rio de Janeiro and bound for the Port of New York: that the said vessel was then stout, staunch and strong; had her cargo well and sufficiently stowed and secured, was •well masted, manned, tackled, victualed, appareled and appointed: and was in every re- spect fit for sea and the voyage she was about to undertake. At 6 A.M., the vessel proceeded on the voyage, variable weather being experienced with nothing worthy of note herein occurring until Feb. 18th when she arrived at Barbados. A supply of coal was received and on Feb. 19th the voyage was resumed. Feb. 21st In the latter part a strong Northerly gale was experienced accompanied by a high sea in which the vessel pitched and labored heavily and shipped much water over forward. Feb. 22 & 2Srd. The gale continued with a heavy sea running and the vessel pitched and labored heavily and shipped much water fore and aft. Feb. 24th The weather moderated but on Feb. 25th a gale was encountered, accompanied by a high cross sea causing the vessel to pitch and labor violently and to ship large quantities of water fore and aft. Feb. 26th The gale continued, withhurricane force, and there was a tremendous sea running causing the vessel to pitch and labor heavily and to ship large quantities of water fore and aft, heavy seas breaking on board continually with great force and the top tarpaulin on No. I hatch was torn being secured i again as well as possible, considerable water, however, finding its way into ttie hold before this could be done , Feb. 27th There was no abatement in the weather during this and the following day and the vessel continued to pitch and labor heavily and to ship large quantities of water fore and aft. March 1st The weather moderated somewhat but the sea continued high and the vessel pitched and labored heavily and shipped much water. March 2nd The vessel arrived in New York. On discharge of cargo it was found that owing to the pitch- ing and laboring of the vessel in heavy weather met with on the voyage, as above set forth, some of the riveting in the bow plating had been damaged in consequence of which sea- water found its way into the fore peak, and that owing to the straining of the forward bulkhead in the heavy weather water had penetrated into No. 1 lower h^d and damaged bags of coffee stowed there; also that owing to the tearing of the tarpaulin on February 26th, bags of coffee in No. 1 between deck and lower hold had been damaged by seawater. and the said G , Ba.T3ta.d further says, that, as all the damage and injury •which already has or may hereafter appear to have happened or accrued to the said vessel or her said cargo, has been occasioned solely by the circumstances hereinbefore stated, and cannot nor oiKjht not to be attributed to any insufficiency of the said vessel or default of him, this deponent, his officers, or crew, and he now requires me. the said Notary, to make his Protest and this pub- lic act thereof that the same may serve and be of full force and value, as of right shall ap- pertain: 9nD thereupon the said G. Barstad doth Protest, and I. the said No- tary, at his special instance and request, do by these presents, publicly and solemnly protest against winds, weather and seas and against all and every accident, matter and thing had and met with as aforesaid, whereby or by means whereof the said vessel or her cargo has or hereafter shall appear to have suffered or sus- tained damage or injury, for all losses, costs, charges, expens the said Steamer the owner or owners of the said vessel or tl of her said cargo, or any other person or persons interested have or may hereafter pay, sustain. Incur or be put upon, by or on i or for which the insurer or insurers of the said vessel or her cargo, is ( to pay or make contribution or average according to custom, or tl or obligations; and that no part of such losses and expenses already in incurred, do fall on him, the said G. Barstad, his officers or cr. mages and injury which ers, freighters or shippers tcerned in either, already J or are respectively liable their respective contracts ed or hereafter to be CbU0 Done and Protested in the City of New York, this f ift. day of March in the year of our Lord one thousand nine hundred and f if th Sn CeStimonp mhtttoU as well the said appe, have subscribed these presents, and I have also a hereunto affixed the day and year last above writ I. the said Notary. V Seal of office to be MASTER, G. Barstad ist MATE, p. Pedersen Boatswain, Kristian Eilertsen Seaman, John Carlson G. V. Schlichter ( Seal ) "OT*"^ ''"^'■'<^- '^'^^^ ^°""" i 5i ::t a ^>^ a a ^ i Z- a td ^ H ^ 03 a C+ ^j. {a a- 2 a~^ a "" 5^ ^ ri ■-% s o - a . <^ a o Si ^ I ^. a a- ^ "i a- ^ '^^•a .^ O 4 P ]^ H O CD 4 P CD CD 03 C+ P H- O H P^ CD U' P p ^ pj lO h- O' C55 03 CD c+ O CD tr p p p CD O pi H3 o H o o l-t) CD ^3^ H) CD CD H CD CD O Hd C+- CD P C+ CD pJ H- !=! C+ O ^ O • H H O ^ CD Pj P Pj Pj P B P Oti CD pJ cr p 03 o PJ a* c^- H- O tJ^ t=! ^ CD Cfq o O d- c+ [3^ 03 CD ^ O ^ hi H- p ^ d- p H-Oq p pJ P Pj Pj 03 &^ ^ CD y O o Pj^d o 3 P cm CD Pj O CD O c+ CD CD P <^ CD P d- H) O 4 c+ 03 o B CD O H) c+ CD C+ P 03 Hi ^ P^ P CD P P c+ O 4 O < Hj CD d- H CD cfq 4 d- ^ o P d- CD 4 03 CD P !=^ d- P 4 o ^^ Pj ty p CD H *» © •" u 03 fl *3 5S ^ S "^ 0} 3 »-l 5 c O C o (]> s g t— 1 "K " 1 a o -<-s o > §° a> " ca t-* a ^ C«-l .9 fl -3 o ^ O a o rt « O 2 e ■M o **~' o >H « 525 ^ fi 1 « o ;? p. r>. m F O C3 termi draw onditi o t< m u 114 ■♦^ Ph imili draf and ea ^ CO o .ts M 3 o H .a ;= 5i ^ //fu/i^f>/ July 30 r Irrevocable Kxport Credit No. 16731 ICxpiring Deoenber 1 H«nry H. Flagg, Inc., Cleveland^ Ohio. ,ar€»fy///y/'5a^Va.e 4 Hornblower, Sydney, NSB '(M eixty days' eight /ei-^«^ii:^/t(A/ not to exceed $650 ■^ .eefpeu^n^-' shlpmenta of nerchandlee ^i/^f/L/frf/f//a rjJ//fyfi" |W0^ order and ondoraed in blank o^/ry«T^.> in duplicate vSv' •>//fJetU///rr againatjjiarine and war rieke .■6'^/'gi.€^///'fi'u//y'//j»^M//h/ our aooeptanoe ,^nf ,f Iff// //////>/ /'f /// //'ir//f//y f/ri' ^//////i' f/ j rr/ .j/////y///( ff'.J f'///ttJ,JOa/lA~^ ^M//'///f^J/////j/rU//i'///.y////f/y //ir ////M/r^ /■/ f/itJ Oi'm/A ^ V/r//i'J /f i // /ir/f/// 4^ O/f/ff^-f/^^- Form 27 — Notice of Irrevocable Credit. lis he ro- is ly- 4, *ce to 3se )se ch ire in- te. ed I 1^ ue aw Vn nk ch lat ed ik- ts, he of or ire lin m- et- rk ist ed Export Credit No. 17384 y^k^^/- August 14 Expiring November 1 Henry Jamee & Co., Stone Out, 111b. ^a^yxH^/i^/^'^^* Vaoquez y Cla.,Sevilla,Spai«^ Sight >M4««8W<%!<^ not to exceed $3,000 ^^^ yCeypetifW' shipment of one ttareehing Dachlne, ^faglne and appurtenances -iftaMia;tJJe/^^yife>^ your order and endorsed in blank tSt.vM't'euJ/nff- B z/^t€ue'tnai/mM^yCiui.i^,^i^iec^'yne'/ftuM^ ^1 &fv&ta^— ^ C*^ <^ Form 28 — Banker's Permission to Draw. a bHiflcniion o( ibis son . b.ckor aJvi.iB lhf.1 li,) will proliBbly I « T} FINANCING FOREIGN BUSINESS 465 favor it is issued, although not always in so many words, that his drafts, drawn under and in conformity with and within the amount of the credit, shall be duly honored on presentation, pro- vided that he complies with the text of the credit. This is usually regarded as practically equivalent to guaranty of pay- ment to the holder. It is usually stipulated that the credit is not to remain in force after a specified date, and the firm accredited is requested to state in each draft "against L/C No. "^ These letters of credit may sometimes refer to clean drafts, i.e., those which need not be accompanied by the documents against which the bills are drawn. ]\Iuch more frequently, however, they are documentary credits requiring that drafts drawn under them be accompanied by a full set of bills of lading,' with invoices, in- surance certificates and any other necessary papers in duplicate. Sometimes a "marginal credit" is issued covering only a stated percentage of the value of shii^nents. At some large commercial and financial centers banks issue credits directly to foreign shippers who are authorized to draw on them instead of on a bank in the shippers' own country. An English merchant, for example, may arrange with a London bank to issue a credit in favor of an American manufacturer which will provide that drafts shall be drawn directly against that London bank in liquidation of purchases made in the United States by the Englishman. When exhibited to American bank- ers when drafts are negotiated, or when attached to such drafts, these letters greatly facilitate the satisfactory transaction of the business, and sometimes secure a fractional advantage in rates of exchange. An authorized draft against a reputable bank or banker is always regarded on the most favorable basis. Familiar examples of the so-called letters of credit which are merely authorizations to American bankers to negotiate certain foreign drafts are the documents invariably supplied by im- porters of American goods in the Far East.- These so-called let- ters of credit are nothing but authorizations to New York bankers to purchase drafts on the customers in the Far- East under certain specified conditions. The shippers are not relieved 1 See Form 33. 2 See Form 30. 466 PRACTICAL EXPORTING of responsibility until snch drafts have actually been paid by their customers. But even in such cases the fact that a strong banking house issues a "letter of credit" of this sort is a suf- ficiently satisfactory indication that the business involved has been examined by a disinterested third party and found worthy. Partial Payments in Advance. — Manufacturers or shippers are often willing to execute orders even from unknown foreign customers without requiring cash in full, providing a partial payment of the values involved be made in advance and an agreement entered into to complete the payment on some satis- factory terms. Such partial payments on account may be pro- vided for in any of the ways we have just been considering. It is, however, highly important that manufacturers offering such terms to foreign prospects require something more than mere "evidence of good faith." If their prospects are not thor- oughly well known to them as honorable and responsible con- cerns, only a small payment on account may not be sufficient to deter treacherous and tricky importers abroad from sharp prac- tices which are just as possible to them under such conditions as they would be had no payment whatsoever been required in advance. That is to say, upon arrival of the goods on which only a small payment had been made importers of this sort may decline to pay the balance, whereupon the goods will go into storage and may, for any one of many reasons, be sold locally for a mere fraction of their real value. The original buyer is then able to bid them in at much less than he would otherwise have had to pay for them. There are a great many more expenses connected with the re- turn of rejected foreign goods than American manufacturers usually appreciate. Any payment in advance or deposit on ac- count should be required to be ample to cover all contingencies among which are : ocean freights in both directions, remember- ing that return freights to the United States are morally certain to be much heavier than those paid on the outward journey. Consular invoices have to be secured for the return of Ameri- can goods. They cost something and involve the employment of some kind of an agent, and a fee, at the other end of the line. There are almost certain to be quay dues, landing charges, storage expenses to be paid abroad before the goods can be re- I o Manila, ..ila.]l..lS /p/.. an and Asiatic Bank: Jianila In crjnsideration of your Bank al lIe»..York. negotiating the DIP Draft, or Draft!, at SOdays after sight, drawn or endorsed by -.J.olm..Sini.th..i..S.OI1...0f... Bu££alO,lI.Z.<>n ?5L for any sum or sums not exceeding -...tllxee..th.QUaalui..dQllarH ^hereby agree duly to accept the same on presentation, and pay the amount thereof at maturity, provided such Draft or Drafts shall be negotiated liithin aix months from this date. fVith interest added at ..fllx.. per cent, per annum from date of bill to ap- proximate date of receipt of remittance in Hew.. .York at your rale for Bank Demand Drafts on ...Hew...Yor.k... At the lime negotiating the above Drafts, the shippers will hand over to your bank, in hypothecation, as collateral security to you for the due acceptance and payment thereof, /n^o.V.-, '^tT"'^"'" °^ ""'g'" BUls of Lading, and Policy of Marine Insurance, in- eluding war risk, for merchandise, and— agree that, in case of need, you shall he at lib- erty to sell the said merchandise, and apply the net proceeds (after deducting freight and insurance if effected by you. and all charges together with the usual Merchants Commission which you are to be entitled to) towards payment of the said Drafts without prejudice to your recourse thereon against and all other parties for any deficit. The word "proceeds" is to be understood to include the amount recoverable under any insurance policies covering the said merchandise. It is further agreed that you are not to be responsible for any loss or damage 'which may happen to said merchandise, either during its transit by sea or by land, or after its arrival, or by ant reason of the non-insurance thereof, nor for any deficiency in the quality or value, nor for any incorrect representation of the quality or value thereof, nor for the stoppage or detention thereof by the shipper, or any other person whomsoever, and inas- much as the above stipulation for handing you bills of lading is intended for your security, — ■ agree to be liable as aforesaid on the negotiation of such Drafts with your bank whether the bill or bills of lading be or be not of sufficient value to cover any advances made by you on negotiating such Drafts; and. further, in case of'"!^ accepting such Drafts condition- ally or your handing over the aforesaid documents to »■""* undertake to pay the said Drafts al maturity, on performance of such condition, and — authorize you to make such agreements as you think proper with the aforesaid drawers ^^ endorsers, touching the dis- position of such bills of lading or the proceeds thereof, or of any goods consigned thereby. Il is further agreed that the negotiation of the Draft or Drafts above re- ferred to shall he optional on the part of your Bank. ^-» ^ ^^ Tru Copy The Ameg n and Asiatic Bank .t\^3::^^^..Agent & Manager. Form 29 — Importer's Guaranty to Bankers. c c ^ ^ ^ Ul « ^ > 03 ■^ ^ > <« ■o "S _B a .2 ^ '3 (4 u 0! 1^ 0) P o p a> ID J3 .5 o O +3 a a s> >i -a "> .t5 2 < ^ Xi CQ o «tH QQ o -1-3 o 03 a fcB U ^ J3 ,^ O ^ ^ !» a 0! n J3 ,a pq 1) o o tJ o CO 3 o ^ s a o J3 o o s-^ o fl ■tS o c: 03 o a O M 05 M S C-I IS -=^ fe a IT* tp C O •- 3 &. Ul < Z b < a < w HONGKONG a Shanghai Banking Corporation NEW YORK ^OU.a, £ - '9 .z>t.(f.aZ-.-^---- Dear Sir/s. 1 beg lo inform you that I am instructed by the Manager of our Branch at y^W^^n-O^tVA- - — i ' ' ^ •"'° P"''<=hase^s offered, your ^i/fTfu'yt-vl^l^^l/U^ ^'i\'i A^^^^^^ . — — Jf ' rio the extent of Ijo^-if-a), - fot _ . Invoice cost of /--^/i.^'E/C.^C^U^^Jli^^ — ' : shipped to thai port. The Bills must be accompanied by full sets of Bills of Lading, made out to "Order," blank endorsed and marked by the Shipping Company "freight paid," together with Invoices and Policies of Insurance, all duly hypothecated to the Bank against payment of the Bills. Please note that this is not to be considered as being a Bank Credit and does not relieve you from tlie liability usually attaching to the Drawer of a Bill of Exchange also that although it is considered to be open for ("Q^i^, months from JJ^jIjlI it maybe cancelled by us upon givmgyou notice. (/ v Bills drawn under the above-mentioned inslruclions must be plainly marked "Drawn under •UiiJ-U^/ Letterof Authorily No. t?(»»f(f " and must be accompanigjl by this letter in order that the amount of same may be endorsed on the back hereof. i faithfully. .«P <^ ^"^ Form 30 — Banker's Authority to Draw. Agent. FINANCING FOREIGN BUSINESS 467 turned. There are charges for protesting of draft, charges for entering goods at United States custom houses when they arrive Jiere, and the employment of American custom house brokers, in addition to marine, fire and possibly war risk insurance while goods are in storage no less than while they are afloat. Such expenses mount up very rapidly and their aggregate is quite sure to astound the inexperienced shipper. A partial if not total payment in advance is the practically invariable custom of manufacturers of special machinery or other products which have to be made according to buyers' re- (luirements and are not generally marketable. In such eases advance pa3'ments on account are required when the order is placed, not merely upon shipment of the goods. This again is not purely an American practice. It is customary among manu- facturers of Europe as well under such circumstances, and even as applying to the biggest and richest houses in the world and contracts made by Governments of undoubted credit. It is a legitimate business precaution which should not be overlooked. This refers, it should be noted, to the manufacturer of special goods and not to the shipper of staple articles or goods in regu- lar commerce. OPEN CREDITS TO FOREIGN COUNTRIES Doubtless most men begin their export trading by acknowl- edging the truism — "there are just as big, sound and honorable business houses in other countries as in our own." Even when this acknowledgment is made, a manufacturer's disposition to demand ''cash with order" is not modified in some cases. In others, too many chances are taken, too little allowance made for differences of blood and environment. We hear a good deal of eloquence from the platform on the high sense of honor, the fine and delicate sensibilities of mer- chants in other lands, very particularly in Latin America. All may be true, doubtless, but any business experience of breadth or length is not likely to increase an exporter's confidence in relying upon the qualities extolled. Early in their experience as a colonizing power in China, the Germans extended credits right and left. Ultimate results were disastrous, even the Ger- man Government in thoroughly characteristic fashion was called 468 PRACTICAL EXPORTING to the aid of the merchants in an effort to bring pressure to bear on the Chinese Government to compel payments to Germans by Chinese debtors. So good an authority as John F. Fowler, in charge of the merchandizing interests of W, R. Grace & Co., of New York, who rank as the largest merchant house on the West Coast of South America, has used the following language: "Casual visitors, also self -constituted authorities, and even 'official' in- vestigators, may report the foreign customer generally as ex- ceptionally high in commercial morality and rarely a defaulter in his payments ! Oh ! The contrast in really commercial ex- perience! Writers of such misleading articles justly deserve rebuke. ' ' No doubt business can be and is done with some reputable, high class merchants in other countries in the same way, or in much the same way, and with at least equal safety, as here at home, but if such business involves open credits of the sort that we give to our customers in the United States, then the manu- facturer must have his own branch office on the ground, or must have a suitably qualified agent there, unless he is making such unusual and exorbitant profits on his goods that he can afford to "take chances" with his eyes open. Otherwise, losses, annoy- ing if not disquieting to the average exporter, are bound to occur. When we talk of export trade being the safest in the world, of the trifling losses experienced during years of busi- ness, we refer only to business on conservative, sound lines, meaning in general the established basis of most oversea trade — the documentary draft which we shall proceed to study in the course of a few pages. We do not mean general or frequent ex- tension of open credits to customers abroad. What Is Meant by "Open Credit." — The open credits now in question we may define as the usual book accounts which characterize the great bulk of domestic business. Merely ship- ping goods, sending an invoice, making a charge on the books and trusting to customers' honor or financial abilities to pay within a specified length of time is frequent enough within the borders of any country. It characterizes trade throughout Europe where, as we long ago remarked, trade between close lying nations ditt'ers but little from trade between two of our FINANCING FOREIGN BUSINESS 469 own adjoining States. German niannfacturers. do not regard trade with Switzerland or with Holland as "export trade." Excepting in certain branches of industry, business throughout the Continent of Europe is handled by European manufacturers in a general way very much as we handle our trade within the United States. When, however, German, French or any other European merchants ship oversea, then an entirely different set of condi- tions is encountered and quite another procedure adopted. American manufacturers in selling their goods in Europe often run counter to the experiences and practices of their European prospects who have not been accustomed to import goods from oversea and strenuously object to meeting the terms which usually and properly rule in oversea trade. They may demand that the American who wants to sell them goods shall do busi- ness with them on the basis to which they are accustomed in dealing with their usual European suppliers. It is not only in Europe that demands for open credit some- times come to American manufacturers. The practice of de- manding such terms has been frequent among buyers in Mexico, in Cuba and the West Indies. In these other territories, how- ever, it is not by any means so strenuous as a rule as is the de- mand from European buyers. A diplomatic argument is usually likely to result in an agreement to terms of ninety-day drafts, or something of that sort, instead of the open credit demanded. A certain amount of trade with the British West Indies is car- ried on by export commission houses on open credit terms, the understanding usually being that remittances shall be made by return of the sleamer which takes out the goods, an understand- ing as often notable in its breach as in its observance. Simi- larly, a good deal of the business of export commission houses with Central America, in fact, with all of the Caribbean coun- tries, is on an open credit basis because so much of it consists in an exchange of imports and exports. Americans have sometimes been charged with being re- sponsible for spoiling these near-by markets, particularly Mexico and Cuba. They have been accused of having attacked these near neighbors in ignorance of established export trade prac- tices, of having been so anxious to get business, so fearful of 470 PRACTICAL EXPORTING competition, so eagerly fighting each other, especially in Cuba after the Spanish-American War, that they willingly oifered extravagant and quite unnecessarily generous terms. Of late, a change for the better in both of these markets has been noted and tJie disposition of manufacturers entering them should be to hold their customers to terms just referred to as usual in over- sea business. Open Credits as Affected by Organization of Foreign Busi- ness. — When a foreign shipper attempts to do business on open account terms with a customer in another country he is likely immediately to encounter many local customs which are unusual to him and which may seriously interfere with the satisfactory and regular conduct of his business, especially with the receipt of remittances in anticipated time. For example, in some coun- tries it is customary to pay bills on certain days of the month ; in some, collection by ordinary draft when credit term has ex- pired is common — in others, this course is virtually unknown. Without necessarily implying any lower ideals of commercial honor in the business communities of other countries, yet it is to be remarked that indebtedness to a distant foreign creditor, when merely in the form of an open account, is far more likely to be neglected or abused by the average trader than would be similar accounts owing to local or neighboring suppliers by whom pres- sure may be more promptly, more severely and more effectively exerted — with whom excuses are of less avail. Customers' Objections to Drafts. — Objections frequently made by foreign customers to purchasing goods subject to pay- ment or acceptance of draft attached to documents, may be based either on their unfamiliarity with this form of business or on the claim that such terms are a reflection on their stand- ing and character. Or they may be based on the fact that by the acceptance of a draft they are legally compelled to pay at a certain time, whether convenient or not, while conditions of trade, of the crops, or of the foreign exchange market might make such definite payment inconvenient. The American salesman who personally encounters such ob- jections in the course of his effort to negotiate a sale, may easily enough convince his prospect of the reasonableness of his re- quirement for draft terms, if he is thoroughly well acquainted FINANCING FOREIGN BUSINESS 471 with international business. He may point to the invariable practice of all shippers in oversea trade. He may emphasize the lo\^ prices which he has named which are only available in case his house can, through the sale of a draft, obtain prompt cash. He can explain how it is possible to extend drafts and as- sure the prospective customer of the willingness of his principals to offer every facility to him. When this question is one which has to be arranged by letter, a little thought and study are required, although very much the same arguments are to be brought into pla}^ The letter must be made effective and convincing. When Open Accounts May be Accepted. — Now and then manufacturers will be found who declare that their experience in extending direct open accounts to foreign customers has been uniformly, or on the w^hole, satisfactory. Much more frequently results of such accounts have been unpleasant in the extreme, if not costly. The supplier, thousands of miles away, is in the worst possible position to ask, to say nothing of enforcing prompt settlements. He is invariably subject to exasperating and to him inexplicable delaj^s, usually accompanied by claims of one sort or another. There is really but one way in w^hich general business of con- siderable volume can be satisfactorily conducted on open ac- count terms in foreign markets. That is, through the strict supervision of such accounts by a resident representative of the manufacturer. In our discussion of features involved in doing business through local commission agents we have alread}^ noted the advantage which such agents may be to their foreign prin- cipals in the way of promptly and diplomatically adjusting troubles that are apt to arise in any business. Those observa- tions may well be reviewed at this point. Few American manufacturers understand the extent to which local commission agents are sometimes relied upon by European houses whom they represent. A certain well known firm of com- mission agents in South Africa represents half a dozen Ameri- can manufacturers of hardware. As salesmen and introducers of these hardware lines the services of this firm are highly re- garded by their American principals. However, this branch of the business of the South African concern in question is only a 472 PRACTICAL EXPORTING side issue with it. The firm 's chief business is the oversight and regulation of loans extended to South African importers by a big British merchant, whose representatives these South African commission agents also are. They determine -whether one im- porter's credit shall be cut down from £10,000 to £5,000, whether another's shall be increased from £1,000 to £2,000, and so on. Their judgment, based on their experience and backed by all the information they are able to gather, is accepted by the London merchant as the basis on which he will risk something like $250,000. When able, experienced, reliable agents of such a class are to be secured, then business in their markets may be safely done on any terms usual in such markets of which the agents approve. In the absence of similar representatives permanently located in the market, open credit terms such as we are now discussing ought never to be extended — unless ex- porters are fully prepared to risk and accept gracefully actual losses as well as frequent disputes. FOREIGN BILLS OF EXCHANGE Drafts drawn against foreign bankers or merchants are often referred to as bills of exchange. Absurd as it may seem, expe- rience has taught that American manufacturers who are not familiar with international trading are quite sure to confound such drafts with the domestic devices of their collection depart- ment in trying to secure payment from delinquent debtors. Notifying such a debtor that unless his account is paid by the fifteenth proximo "we shall draw" a draft on you" seems to be a favorite American practice not so generally employed in other countries and usually regarded as of little ef^cacy here at home. Drafts so drawn bear not the remotest relation to drafts known as bills of exchange in foreign trading. The imports and exports of all countries of the world are virtually in toto financed by means of these bills of exchange, as they have been for a hundred years and more. Whether these foreign bills of exchange are drawn under commercial letters of credit or whether they are simply drawn at shipper's risk and sent abroad to foreign bankers for collection from customers does not afiPect the character of the drafts. They may be "clean" bills, that is, a draft unaccompanied by any other FINANCING FOREIGN BUSINESS 473 papers. Possibly even a clean bill when used in international banking carries a trifle more weight with it, because of its un- usualness, than does such a draft in this country. When, how- ever, foreign bills of exchange are discussed in connection with commerce, what is called the "documentary draft" is almost always referred to. The "documentary draft" is adopted in order to safeguard the interests of shippers. It ensures that delivery of a ship- ment to consignee will only be made after terms of the shipper have been met. Bills of lading drawn to the shipper's order are the chief "documents" which give these drafts their name. By attaching such bills of lading to a draft and presenting all to consignee through a responsible third party (almost always a banker) the shipper makes certain that his draft, i.e., his terms of sale, will be satisfied before he parts with his goods. The third parties handling the draft and documents as agents for the shipper will not otherwise surrender the bills of lading whose possession gives title to the goods they represent. Perhaps a further distinction should be emphasized. A mer- chant in Buffalo speaks of buying a "draft on New York" for remittance to the latter city in payment of indebtedness there. A New York importer buys a "draft on London" to forward to some supplier of goods abroad in payment of an account. These are bankers' drafts or checks, and are accepted as the equivalent of so much cash because confidence is reposed in the standing of the banker issuing the drafts and his credit if not his cash balance with his correspondent bank on which the draft is drawn. A merchant's bill of exchange does not necessarily imply anything of this sort. By itself unaccompanied, that is, a "clean bill," it has no value whatsoever apart from the signa- ture of its maker. Bankers who issue the drafts which are accepted as cash main- tain deposits or carry accounts in the foreign banks on which they draw drafts. In somewhat similar fashion a merchant who ships goods and draws a draft on his customer requiring the latter to pay certain sums of money, " may accompany those drafts by valuable securities. He may attach to them an in- voice for goods shipped, the bills of lading so drawn as to con- vey the ownership of the goods and a certificate of marine insur- 474 PRACTICAL EXPORTING ance indemnifying its holder against possible damage or loss in transit, the whole papers completing a transaction which on its face is proven to be legitimate. Merchandise drafts, or bills of exchange, accompanied by these papers are called "documen- tary drafts." How different they are from "clean" drafts be- comes evident; they may and usually do form the basis for an advance of money by bankers or others. Since at least nine- tenths of the international trade of the world is now and has for many years been conducted on this basis, additional se- curity has developed from custom and importers the world over are exceedingly jealous in protecting their names in such trans- actions. What Are Foreign Drafts? — The definition of a bill of ex- change as given in the English Bills of Exchange Act in 1882 is "an unconditional order in writing addressed by one person to another, signed by the person giving it and requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specific person or bearer." All over this country and all over every other country there are exporters of merchandise who are shipping goods and draw- ing drafts against their customers in foreign lands. All over this country and all over every other country there are im- porters who have bought merchandise abroad and who need bills of exchange to pay for their purchases. If an exporter of cotton in New York and an importer of champagne in the same city know each other and have business relations together, it might be a comparatively simple thing for one to balance his account against the other, the importer of champagne paying the ex- porter of cotton and the foreign shipper of the champagne col- lecting from the foreign importer of the American cotton. That there are obstacles in the way of the successful termina- tion of international business affairs in so simple a fashion is obvious. The exporter of cotton wishes his pay in dollars. The shipper of champagne in France requires his in francs. He therefore must draw a draft or bill of exchange against his debtor, unless he has required that debtor to place the actual cash in his hands before the goods have been shipped. This, as has been indicated, is the exceptional not the usual practice in FINANCING FOREIGN BUSINESS 475 times of peace — at least has been in the past and undoubtedly will in the future continue to be. Because both the shipper of the cotton and the shipper of the champagne wish to be quite certain of receiving payment for their shipments and because they may not wish to be out of their funds for a considerable length of time and therefore want to raise money from bankers, they accompany the bills of ex- change which they draw with the shipping documents, as we have already noted. Foreign commercial bills of exchange may therefore be said to be almost invariably accompanied by ship- ping documents. They are not simply demands to pay.^ How Foreign Drafts Are Drawn. — Foreign drafts are always drawn in duplicate, known as First of Exchange and Second of Exchange, one becoming void when the other has been duly satisfied.- This is in accordance with the general practice of seeking safety in the transmission of valuable documents to oversea destinations through forwarding one set by one mail or steamer, and duplicates by a succeeding mail or another vessel.^ They are seldom drawn direct to the order of a specific payee, that is, instead of writing "Pay to the order of J'he First Na- tional Bank" (or, The Anglo-South American Bank) or some- thing of that sort, they are drawn to read "Pay to the order of ourselves." This gives greater flexibility in their handling, for such bills, when endorsed in blank by the drawers, become bearer instruments and can be utilized at discretion by the parties in whose hands they are placed. However, w^hen such drafts are forwarded direct by shippers of the United States to given bankers at foreign points (usually for collection only) then they may either be drawn payable directly to the name of the bankers to whom they are forwarded or may be specifically endorsed to such bankers.* It will be understood, of course, that drawing a draft to one's owfi order and endorsing it in blank is a procedure not to be risked unless the document in question is passed immediately by the drawers 1 Adapted from Franklin Esclior in American Exporter. 2 See Form 31. 3 The old custom of drawing in triplicate is sometimes required by bankers in times of war or unusual risk of interruption or loss to trans- oceanic mails. 4 See Form 32. 476 PRACTICAL EXPORTING to responsible bankers to whose care such a bearer document can be trusted. Most foreign drafts are so transferred directly to bankers in this country and are, therefore, usually endorsed in blank. Shippers must never lose sight of the fact that these drafts when accompanied by properly endorsed order bills of lading, etc., represent actual property and must be treated with care and respect. It may be noted in this connection that drafts drawn by busi- ness houses against their own branches in foreign countries are not generally approved of by foreign exchange bankers, are re- garded as in an entirely different category from ordinary mer- chandise drafts on non-related -customers which on their face seem to indicate legitimate transactions in the regular course of trade. Every draft, to be utilized, must be endorsed by its drawer, if made payable to his own order. Without such endorsement it is valueless to any one else. Sight Drafts. — Foreign drafts may be drawn payable at sight or at a given time after sight or, less usually, after date.^ A bill drawn at sight must, theoretically, be presented by bankers at address immediately upon its receipt and then and there promptly paid. As a matter of fact local customs in a great many markets modify practices of bankers in this regard. Customs are too firmly established to be easily uprooted in numerous countries of holding even sight drafts until the ar- rival of goods, sometimes until long thereafter.- This is a con- sideration, however, which does not usually concern shippers but is taken into consideration by bankers in naming rates of exchange or in purchasing such drafts, when allowance is made for probable interest charges. It may, however, directly affect returns to shippers when drafts are sent forward for collection only. In order to provide consignees with ample notice for the payment of nominal sight drafts drawn against them in markets where the foregoing is not the usual custom, as for example in 1 Drafts drawn paya])le "after arrival" are to be avoided. Many bank- ers refuse to liandle them. 2 In Holland it is i]l('<,'al to present a draft initil bankers have in their possession duplicate and a "full set" of all documents. /d ' 1 > -£ i-ijai-' nc -i«ssaL(Mti' ff?5«!?i-c4AiS~^^«. .*,•>_ u:'.'- f »'• stfca^i-^- a «-^-rjg^t«^£^ «i/ y^/_ <^^yj. /g// ^/^*i^e^i^^. BROWNE, GREENE 4 WHVTE: ^^j^^t.t^tr' 3/ *t -/Si/. &^, «^<3y gWw,e^ H^ ^ijltf . /^x/. °<^W^^tft>«>^^ BROWNE. GREENK * WHYTE Form 31— Simple Sight Draft. ^ FINANCING FOREIGN BUSINESS 477 Great Britain, such drafts are sometimes drawn payable three days, seven days, or perhaps ten days after sight. Time Drafts. — Time drafts may be drawn at seven, ten, thirty, sixty, ninety days, or sometimes at one month, three months, four months or even six months "after sight." ^ Sometimes they may be drawn at similar periods "after date," and so doing would embody some desirable improvements in the handling of time bills, but the custom of drawing "after sight" instead of "after date" is the general and well established one and, therefore, at present usually preferable. "After sight" means, of course, the period of time named after the bill has been presented to drawee. Bankers in negoti- ating such bills have therefore to take into consideration in- terest for the running time of the bill itself after sight in addi- tion to the probable or usual time occupied in transit by mail to and from point on which drawn. Mere exhibition of a draft to the drawee is not enough to establish "sight." Legal .evi- dence of the fact is indicated by notation of the actual date when presented, thus starting the running term of the docu- ment, coupled usually with the signature of drawees. Foreign bills of exchange are usually drawn a certain number of days, say thirty days or ninety days after sight, instead of at one month's or three months' sight. Greater exactness and less liability to confusion on account of possible variation in local laws is thus secured. In principle, however, the word "month" in a bill of exchange means a calendar month. Of course, all bills not draw^n on demand or at sight are subject in some countries to days of grace ranging from one up to ten days. In other countries, as in the State of New York, no days of grace are allowed. This again is a consideration which bankers rather than shippers have to consider. Bankers as Buyers or Collectors of Drafts. — To safeguard himself and to provide that his goods shall only be delivered to his customers when terms on which those goods have been sold have been complied with, a shipper makes his bills of lading deliverable to his own order, endorses them, preferably in blank, and passes 1 A draft at "three days after sight" is not classed as a "time bill" — partly, perhaps, because in Great Britain three days' bills are not subject to stamp-tax, longer bills are. 478 PRACTICAL EXPORTING them through a responsible banker accompanied by a draft drawn on his customer in accordance with terms on which the sale has been negotiated. The banker will not surrender title to the goods that have been shipped until the terms of the draft have been satisfied. The shipper may simply hand the documents over to a banker in the United States to be sent abroad to that banker's correspondents at point of destination for collection, or he may forward by mail directly to som6 known and reputable banking house established at point of destination. The shipper may either merely instruct collection of amounts involved and ultimate return to the United States, or he may "sell" his drafts to American bankers and put him- self immediately in funds, if he does not care to have the amounts involved outstanding for possibly a considerable length of time. The latter is the course usually pursued by exporters of the United States as well as by European exporters. Many large banking houses are organized chiefly for dealing in foreign exchange. Many other bankers establish special de- partments for handling the same sort of business, largely on account of the profits involved. How the "sale" of foreign drafts is arranged we shall proceed in a moment to examine. It is to be noted, however, that some large and rich American manufacturers prefer simply to send their foreign bills of ex- change forward for collection without attempting to realize cash for them when the goods are despatched. Probably few American concerns are in position to carry on any extensive export trade on this basis. Even in Europe there are few among the large exporters who can afford to have outstanding the considerable amounts of money which would be necessitated were all their drafts to be sent forward for collection only. SELLING DRAFTS TO BANKERS "The primary function of the international banker is to finance imports and exports of merchandise by purchasing and selling bills of exchange drawn against shipments of merchan- dise or by establishing commercial credits in foreign markets." This statement is made by F. A. Goodhue, Vice President of the First National Bank, of Boston. Franklin Escher, writing in the American Exporter of the many banks and trust companies S g ^ ^ O g£-J t3 eg .=° 2 5 PsQ c3 -^ - J^ W 1 2 J a> r: a fl & -3 .Sf h K ^1 CO Jag ^ 5 ■- d M 3 .Sf 5 c " B => .^ o f^USd NOS ^ HXIMS NHOI* JO HaaHO aHX ox xtj FINANCING FOREIGN BUISIXESIS 479 iu New York City in addition to the great international bank- ing houses, all of them carrying on a regular foreign exchange business, buying bills from those who have them to sell and sell- ing bills to those who want to buy, observes : "For a national bank to have a foreign department was, until only a few years ago, an unusual thing, the business being concentrated almost entirely in the hands of private bankers. Recent ytars have, however, seen a great change in this re- gard, AVhere it was the exception for the big bank or trust com- pany to do a regular foreign exchange business only a com- parativel}' short time ago, it is now the rule. As the business has grown in scope and importance it has come about that the progressive bank has felt itself called upon to supply to its cus- tomers those facilities which they have come to demand. In- ability to furnish drafts drawn on foreign countries, letters of credit and other foreign exchange facilities, caused the transfer of many deposit accounts to rival banks able to furnish, those facilities. When the banks began to see it that wa}- they were quick enough to install foreign departments capable of render- ing satisfactorily any service which depositors might require. In the great majority of instances the installation of a foreign department has opened up such possibilities of profit that the necessary arrangements have been made for doing the business on a wholesale basis. Function of the Foreign Exchange Banker. — "The under- lying business of these institutions and of the private bankers who handle foreign exchange on a large scale, is to buy bills in this market, deposit them with their banking correspondents in London, Paris, Berlin and other great financial centers abroad, and then to draw and sell their own drafts, on these deposit ac- counts. However complicated the business may be, the under- lying principle is always the same — that is to say, the house is all the time establishing balances at London and other financial centers and then selling them out for more dollars than it cost to put them over there. Whether the bills that are sent over to create these balances are drawn against grain or steel or meat, or whether they are drawn at sight or at thirty days' sight or at sixty days' sight makes not the slightest difference. Underlying every transaction is the fact that these houses engaged in the 480 PRACTICAL EXPORTING foreign exchange business keep balances with one or more corre- spondents at all the principal centers abroad, and that as they sell their own drafts against these balances, they are constantly under the need of replenishing them. Beyond a certain mini- mum the balance cannot be allowed to fall. If the house wants to sell its own drafts, therefore, it "has got to keep sending over deposits to make its account good." f No one can estimate the great future possibilities in financing our foreign trade, or possible developments in this country as likely to be influenced by the Federal Reserve Act, the establish- ment of foreign branches of American banks and the extraor- dinary and totally unanticipated financial developments arising from the war and the trade of the world as affected by it. What is imperative for us to-day is to know and to understand our actually existing position and facilities. The primary, out- standing fact is that bankers establish themselves in the foreign exchange business for the express purpose of buying and selling foreign drafts and issuing and receiving commercial letters of credit. If shippers of merchandise did not require immediate funds with which to undertake fresh operations and were content to forward their drafts for collection only, then the foreign ex- change business of New York bankers would be reduced to a small fraction of its present magnitude. It is essentially the foreign exchange banker's province to buy and sell exchange. That is the prime reason for his existence and the practice of selling foreign drafts to these bankers, that is, of realizing cash for the values of invoices of goods shipped abroad, is so much the rule that exceptions are notable. AVe have, then, to inquire how this business is done an'd how advantage can be taken of the facilities offered. Bankers as Buyers and Sellers of Foreign Exchange. — We have just noted the increase in the -number of New York and other American banks devoted wholly or in part to foreign ex- change business. We have remarked that only a small part of the business in question consists in the mere collection of drafts. An overwhelmingly large proportion of this business consists in the purchase and sale of foreign drafts, yet the usual expression "sale" or "discount" is not the proper term to apply to the FINANCING FOREIGN BUSINESS 481 transaction indicated. When an exporter wishes to secure cash for a shipment of goods to a foreign customer and negotiates his drafts and documents representing that shipment with a foreign exchange banker, the transaction is neither sale nor discount. It is virtually the negotiation of a loan from the bank on the security of the exporter's signature, plus the realizable value of the property, covered by the bills of lading and protected by marine insurance, which is hypothecated to the bank through endorsement of the exporter as a b.asis for the loan which he seeks. Rather curiously, some bankers who are chiefly devoted to this sort of business are fond of emphasizing the loan char- acter of such negotiations on which they really depend for an- nual dividends. No exporter should, however, be unfavorably affected by the use of the word "loan" in this business. Clearly there is slight difference between advances of money against the hypotheca- tion of valuable merchandise shipped in the legitimate course of trade, and the hypothecation of stock exchange securities as a basis for advances. Moreover, the securing of advances of cash against shipping documents is the established and well nigh universal practice in international trade the world over. It is followed not alone by American exporters but to an even greater extent by European exporters as well as by the Japanese and Chinese and every other nationality which ships its products to the outside world. Few if any manufacturers or exporters in any country have capital enough of their own to carry on an extensive or general foreig-n trade unless their shipments are financed by bankers, who indeed, as we have noted, are primarily established for the express purpose of performing this very kind of finance. These bankers will, on intimate acquaintance, at least in times of normal finance, be found amenable to almt)st any kind of legitimate argument and some of them are always to be dis- covered who will assist shippers in the most generous fashion. For instance, when an exporter has had occasion to load a steamer with a quantity of goods for which his ready funds did not permit him to put up the necessary prompt cash, ar- rangements have been made with New York bankers for advanc- ing the necessary funds day by day as the ship is loaded, against 482 PRACTICAL EXPORTING dock receipts for the quantities of cargo that have been put aboard the previous day. Let no one fancy, however, that quite a new acquaintance can go to a banker and pledge him in advance to any general pro- cedure in future or in regard to indefinite business, can expect a banker as a rule to give a definite reply to a purely hypothetical question. When a shipper has a certain and specific business proposition in hand, then he can make a firm deal with some banker who will be found to be interested in it. Inland Bankers and Foreign Drafts. — Bankers making a specialty of dealing in foreign exchange are not confined to New York or to other American ports. A number of prominent banks at inland cities have of late years established their own foreign exchange departments, maintaining direct relations with at least those principal foreign markets with which manufac- turers and shippers in their respective cities and districts do most of their foreign business. It is probable, as it is devoutly to be hoped, that the example of these banks may be followed by many others. While, of course, it is possible for a manufacturer at any point to put his drafts accompanied by shipping documents through his local banks, yet there are certain objections and unnecessary expenses accompanying that practice. Too few of our inland banks understand anything at all about foreign exchange rela- tions or appreciate the distinction between a foreign documen- tary bill of exchange and the manufacturer's every-day clean draft on an American debtor. It happens, therefore, that a manufacturer who wishes to cash his foreign draft with his local banker may be accommodated by the latter only by having the amount advanced against his documents charged up against his regular line of loans and discounts, that is, considered in precisely the same light as would be his note presented for dis- count. This is an utterly indefensible practice of inland bankers and the proof of it is that, quite irrespective of the manu- facturer's existing indebtedness to his local bank, he can take the documents representing a foreign business transaction to a professional foreign exchange banker, who may be personally unknown to him, and under suitable conditions, i.e., when the FINANCING FOREIGN BUSINESS 483 banker is satistied as to his standing, secure from the latter the cash which he requires. Another consideration to be borne in mind in attempting this , i. „£ 1 :„„„^ i-i 1, 1.1 ^ 1 • ,1 xorK as a lavor, not aoaaing tncir own enaorsemcnt ana nonce, charging no commission for themselves. HENRY M. FLAGG, INC. -' ^ // JREASUHER r^iJ^'^- ^^ri|^^o^(( ^Slr^/^UM^^^ y/^^m/^Ji^j^/ymi^A/'Mf^ Form 33 — Draft Against Banker's Credit. CwJ FINANCING FOREIGN BUSINESS 483 banker is satisfied as to liis standing, secure from the latter the cash which he requires. Another consideration to be borne in mind in attempting this sort of business through local bankers is the extra expense sometimes involved through unnecessary bank commissions. Thus, if a local bank in Buffalo, N. Y., has not its own foreign exchange department maintaining direct relations with bankers in foreign markets, it must forward the documents presented by a Buffalo manufacturer to that bank's New York correspondent bank. The latter, in turn, may not be engaged in the foreign exchange business. One or two of the most popular New York correspondents of inland American banks are still counted among those New York banks that do not have their own for- eign departments. If this is the case, the New York bank in question must send the Buffalo manufacturer's bills to some of its friends who are engaged in the foreign exchange business. By this time the manufacturer's drafts, bearing his own signa- ture, the endorsement of his local bank and the endorsement of that bank's New York correspondent, have become prime paper, 3'et it is to be doubted if the best rates of exchange are always secured because such bills are not usually offered in competi- tion but are more often simply placed with some foreign ex- change house with which the New York bank is on especially intimate terms. In any case the proceeds of the bills, when sold, may go back to the Buffalo manufacturer with one unneces- sary bank commission if not two of them.^ On these accounts, while doing business directly with his local banker may seem to a manufacturer to be preferable in some respects, yet he ought to consult economy and advantage in carrying on his foreign business and he should insist on re- ceiving as favorable treatment as he can receive by instituting the altogether possible direct relations with New York foreign exchange bankers. Bringing this business home to inland bankers may assist in promoting their dispositioil to establish their own foreign exchange departments, a development neither 1 Some inland banks forward their customers, foreign drafts to New York as a favor, not addding their own endorsement and hence, charging no commission for themselves. 484 PRACTICAL EXPORTING difficult nor expensive for them. In fact, in any community boasting numerous manufacturers carrying on a large foreign trade in the aggregate such local foreign exchange banking ar- rangements can almost certainly be made profitable to the local bankers. Who Can Sell Drafts and How? — The first thing that a for- eign exchange banker looks at, when off^ered drafts accompanied by shipping documents, is the foreign country on which the drafts are drawn, the second is the signature attached to these drafts and the rating accorded such signature in the books of the principal American commercial agencies. Next, the banker is interested in the character of the merchandise that is being shipped. The market on which a foreign draft is drawn affects a banker's disposition to advance cash against a tendered draft either because he may or may not have very close or intimate relations with the market in question, or because he, having a large business there, may or may not be anxious for more bills on that market at just the moment a given draft is presented. He may be "full up" of bills on London, for example, on a certain day or week. His balance with his London bankers may be large or small and the state of his relations with that market will influence to some extent his disposition toward new drafts on it which are offered him. Large bankers, however, are seldom influenced by such considerations as affecting the prin- cipal commercial markets of the world. However, bankers do- ing a large business with European countries may not be espe- cially desirous for bills on Mexico or on Chile, while other bankers may make a specialty of the latter markets. Foreign exchange bankers look for their security primarily to the responsibility resting in the makers of foreign drafts which they negotiate. In case they advance money against these docu- mentary drafts and the consignees of the goods refuse to meet the drafts then recourse is had on the maker of the draft who is expected to refund the amounts which have been advanced, to- gether with charges which may have accrued. In general ship- ments of ordinary merchandise, the foreign concern against whom a draft is drawn is seldom known even by name to the American banker who negotiates these drafts. The American FINANCING FOREIGN BUSINESS 485 manufacturer or exporter is, however, known to the banker, at least through the readily available printed rating accorded him in the commercial agency books. A manufacturer quite un- known to any New York foreign exchange banker but who is well rated in these books will, therefore, usually find it possible without other introduction to persuade some of these bankers to negotiate bills of exchange in which they may be interested. It is true that a few bankers discourage the practice of in- land manufacturers attempting to do direct business with them, naturally preferring that such manufacturers put their papers through local bankers. The additional security and sometimes profit of the foreign exchange banker have already been noted. None the less, even an inland manufacturer who enjoys a good commercial rating and who has a fairly large volume of foreign drafts to sell in the course of a year, will find it possible to institute direct mail relations with some foreign exchange bankers in New York. The problem is simplified immensely if such a manufacturer has a capable agent in New York who will make himself personally known in foreign exchange circles and undertake personally to negotiate the drafts as they are availble. As a matter of fact, even the small man of no great resources and possibly no commercial rating has found it possible in normal times to find foreign exchange bankers in New York not only to assist him in financing his export business but willhig to devise ingenious ways for him to finance operations otherwise impossible to him. This, of course, presupposes an exception- ally intimate acquaintance on the part of the banker with the character of the shipper and of his business, and a knowledge of his customers abroad with whom important transactions are pro- posed, with perfect assurance of the safe and legitimate char- acter of such business. When all these matters are frankly ex- plained to and fully understood by bankers it will often be found possible to arrange exceedingly favorable terms of financing. Saleability of Drafts. — The saleability of a foreign draft, and the rate which bankers are willing to give for it, vary not only with the standing of the maker of such a draft and according to conditions in the foreign exchange market, but depend to some extent on the character of the merchandise against which the bill is drawn. Undoubtedly drafts drawn by houses which are 486 PRACTICAL EXPORTING not well known among foreign exchange bankers, or which are not of the highest commercial standing, fail to command as good rates of exchange as those prime bills bearing the signature of firms widely and favorably known. Bills drawn against staple articles for which there is always a market everywhere, for which market quotations are regularly published — cotton and grain, for example — are, of course, always more in demand than bills drawn against specialties upon which it would be difficult for a banker to realize in the case of non-payment of the drafts which he has "bought." Obviously, a shipment of lanterns to a certain foreign importer might not, if refused by him, command anything like invoice value when, because of such refusal, sub- jected to forced sale. Machinery, too, is in the nature of a specialty. Hence, drafts covering such shipments usually com- mand a little lower price than do grain bills or cotton bills. Advances Against Drafts. — In the United States ordinary shippers expect to obtain cash in full for the drafts which they sell to bankers. Large exporters, particularly the professional export commission houses, and very especially those houses doing business with certain parts of Latin America, do not always succeed in securing full cash but may have to accept from bankers from 75 per cent, to 90 per cent, of the face value of their bills. This is the custom also in England and in Europe generally. Perhaps 95 per cent, is the maximum which British bankers usually advance, while in Germany the average advance is said to have been in the past from 65 per cent, to 70 per cent, with 90 per cent, as a maximum. The ordinary exporter, how- ever, has comparatively little difficulty in financing his regular shipments in full. The usual procedure follows steps similar to these: Process of Negotiating' Foreign Drafts. — When a shipment is ready to go forward and the invoice value has been computed, inquiry is made of foreign exchange bankers, who it is thought may be interested in negotiating the transaction, as to terms which they will offer for a draft amounting approximately to a given sum, drawn on certain terms, with full particulars of the nature of the goods, name of consignees, etc. Usually several bankers are approached, because one of them may not care for the draft in question, or one may be willing to give a little better - 'a ^ V. 3 > ^-^^ 3 c ft ^ V: a - ^ — ^ E - c < ' 5 = individuaU i lUllOU) ail egcn bg tticac IpCCSCntB, Thai Ihr undersigned may fr, future, sell lo Brijomhall & Company llieir bills of exchange drawn o in Great Britain, or on the Continent, against shipments of merchandise lo be represented by bills of lading "to order" and endorsed in blank, ■uhich bills of lading are to be at- tached lo said bills of exchange as collateral security for said bills. CTbCCCfOCe, in case of sale to Broomhall & Company of any bills of exchange as above, the undersigned hereby agrees with Broomhall & Company and the holders of the bills of exchange for the time being; I. That if the said bills of exchange are accepted the bills of lading may be given up to the drawees absolutely, or the holders may in the exercise of their discretion, before sur- render of the bills of lading, require a banker's guarantee for the due payment of the bills of exchange, or a broker's undertaking to account to them for the proceeds of the goods othe ■itte. Or, if so indicated by a memorandum signed by the undersigned and attached to the bills of exchange when sold, the bills of lading may be given up to the drawees absolutely, when said bills of exchange are accepted, without prejudice to claim upon the undersigned, in the event of the bills of exchange not being paid at maturity; Or, if so indicated by a memorandum signed by the undersigned and attached to the bills of exchange when sold, the bills of lading may be held until the bills of exchange are paid. 2. And the undersigned further agrees that in the event of default in acceptance, or pay- ment at maturity, of any of the bills of exchange, or on the drawees' or acceptors' sus- pension before surrender of the bills of lading then Broomhall & Company or the holders of the bills of exchange for the time being, are hereby authorized to sell the merchan- dise covered by the bills of lading at discretion as to time, place, and manner, without any demand upon or notice to the undersigned, and for account and sole risk of the under- signed, and to apply the proceeds when received (after deducting all expenses and com- missions, for sale and guarantee) in or towards payment of the bills of exchange. 3. The merchandise shipments will be fully insured either here or abroad and the un- dersigned hereby agrees in case of loss, tlial the said insurance shall be held for the benefit of Broomhall & Company for payment of the bills of exchange. In case the insurance shall at any time before surrender of the bills of lading be considered unsatisfactory lo the holders of the bills, they at their discretion are authorized to re-insure the merchandise for account of all concerned, and the undersigned hereby agrees to refund to Broomhall & Company on application, the cost of said re-insurance, 4. It is hereby understood and agreed that any action taken under this agreement by the holders of the bills of exchange for the time being, or by their agents, shall be for the account and sole risk of the undersigned and shall in no case be construed as prejudicing their claim against the undersigned as drawers of the bills of exchange in case of de- fault of the acceptors or guarantors to pay said bills of exchange at maturity, or of in- sufficiency of proceeds, and the undersigned hereby undertakes that any claim arising there- from shall be paid to Broomhall & Company or their assigns, on demand. " If the documents, hereby hypothecated, are turreiidered against paymeal 0/ Bills of Exchangr before malurily, the allowance of Jis-BKOWNE, GREENE 4 WHYTE count to the acceptor is to be at the rate of half per cent, per annum, above the then advertised rate for short deposits of the leading Joints «/or* Baah in London." " PRESIIIENT c FINANCING FOREIGN BUSINESS 487 price for it than another. Usually, it is necessary to know in advance of the actual writing of the draft what rate will be paid by bankers willing- to negotiate it. This may be because the amount of the draft is to be written in sterling or some other foreign money and the rate of exchange offered by bankers must be known in order to make the conversion of the total amount of dollars into such a sum in the foreign currency as will return the exact invoice amount in American currency. Or, it may be because, if the draft is drawn in dollars, the charges for bank interest, commission, etc., must be added to the invoice totals. The process of obtaining offers on a given draft is usually carried out in New York by personal interviews with interested bankers. An inland house may, however, take it up by corre- spondence with New York foreign exchange houses, describing the nature of the transaction in an initial letter, receiving telegraphic reply as to rate which will be offered, which must be promptly accepted by telegram and drafts and documents despatched by immediately succeeding mail. The understanding between buyer and seller of drafts always is that the seller shall be held responsible for refund of advances made by buyers in case drawees fail to honor terms of drafts which have been negotiated. A few foreign exchange bankers still require firms from whom they buy drafts to execute a form of agreement to this effect.^ The principle, however, is so well established and so generally understood and accepted that specific agreements are not required in each and every instance, or even in a general way from regular shippers who are con- stantly doing business with bankers. In any case, this responsi- bility remains and is recognized. When a banker's offers have been secured and found satis- factory, all the documents covering the proposed transaction are placed in the banker's hands and the latter immediately de- livers a check covering the required amount. Such a cheek is, of course, placed in the hands of parties located in New York, In the case of out of town concerns it may be remitted direct to them by mail, or may be deposited to their account in their New York banks, or may be carried to their credit on the books of the bankers negotiating the drafts in case the out of town concerns 1 See Form 29. 488 PRACTICAL EXPORTING desire to open such accounts, or, as is not alwaj^s the case, foreign exchange bankers carry such accounts. These are features of the business arranged according to circumstances of individual transactions. The Documents Necessary. — In doing business with foreign exchange bankers it is essential to have a complete set of all necessary documents and to have all in perfect order, because if there appears to be any discrepancy between evidences of ship- ment and details of buyers ' orders the latter may refuse to accept drafts drawn on them. The documents necessary are the follow- ing: Draft in duplicate, drawn "to ourselves," endorsed either in blank or specifically to the banker with whom the transaction is to be negotiated,^ preferably in blank; evidence of shipment in the shape of a "full set," that is, all the negotiable copies of the bills of lading signed by representatives of the ship owners drawn "to order" and endorsed usually in blank; at least two copies of invoice and (if necessary) statement of all additional items going to make up the total sum for which draft is drawn ; certificates of marine insurance in duplicate, perhaps also of war risk, endorsed in blank; special requirements of certain trades, such as certificates of analysis, weight, inspection, etc. — one copy of such certificates may only be necessary although it is better to have them in duplicate if possible ; consular invoices or cer- tificates of origin, when goods are destined to countries requiring such documents. Types of these documents are illustrated. It may be noted that courts of the United States as of other countries have held that the mere attachment of bills of lading to a draft does not make the former a part of the latter. The one who accepts such a draft is assiuned to do so on the faith of the draft itself. None the less, bills of lading if fraudulent do of course render those responsible open to criminal prosecution. Bankers, therefore, naturally assume that the title to property represented by an endorsed bill of lading is legitimate and has honestly been acquired. The security conveyed to bankers by proper endorsement of the several documents in a transaction is an important element affecting rates and risks, even possibili- ties of negotiating such transactions. Instructions to Bankers. — When foreign drafts are handed to 1 See Endorsement Form 17. FTNANaiNG FOREIGN BTIRINEHH 489 TO THE NATIONAL CitY BANK OF NEW YORK ITS BRANCHES AGENTS & CORRESPONDENTS. INSTRUCTIONS REGARDING ATTACHED 6RAFT. !Prese)iton receipt 9^ tJ tM ^n> Of J ft \sd f% ^€s»ei J/eliver documents against Accqjtcuwe Protest /or nonpayment Protest ^rnonaccepttpice ^€da^attherateof_o,percentperait- mtmmca/beaUffwedifpaidbe^maiia^. In case ofneedre/erto J.M«amith^B.Mltre 840 ^ "mease of'need' is fidfy empowered to instruct i/ou with regard to disposi- tion of draft and documents. A. B.G. MOMAM CO. . (Ky tMtanMMMMiMMMannF r^w^tvif^^^ BT t:^ < «^ q: m t^ CO 4ll52u m. ji '^ J'ir^/'>^jv^^-'"-'-C-'-^y_~^^j*"v"y-^-'' -'-'-'.'".'".' Foi hence in a : to be .Pnsenta. Chica go , May 16 -^^<2_ At alxty e^t. date cases iLacbiheiy ex S.S.Verdi c FINANCING FOREIGN BUSINESS 489 American banking houses to be taken care of, certain instruc- tions must accompany them.^ It is customary to give these in- structions in separate memoranda pinned to the drafts, or in a perforated, detachable stub, instead of including them on the face of the document. The most usual and necessary instruc- tions include: As to delivery of bills of lading. If a draft is drawn at sight then, of course, the accompanying bills of lading are only handed to consignee when the draft has been paid. If, however, the draft is drawn at a given period after sight (or after date) then the presenting bankers may be instructed to hand over the bills of lading to consignee either (1) only against payment, or (2) when the consignee "accepts" the draft. The former course is referred to as "documents for payment" (ab- breviated "D.P. "). The latter is called "documents for ac- ceptance" ("D.A."). Instructions should also be given to bankers as to whether or not a draft is to be locally protested if unpaid, if acceptance is refused, or, if acceptance is dishonored. The rule should be to instruct such protest in every instance. Non-protested accept- ances have little legal value in many countries. "In case of need" instructions are sometimes written imme- diately on the face of a draft,- for example, at top or at bottom, usually abbreviated to "In case of need with 3Iessrs. So-and-So." Many shippers, however, believe it preferable to give these in- structions, with others, in separate form accompanying the draft, rather than written on its face.^ When this is done such sepa- rate instructions may read: "In case of need and before in- curring notarial or other expenses, including cabling dishonor, refer to . " What the "in case of need" reference implies has been explained in our discussion of the functions of foreign agents. Another matter about which bankers holding foreign drafts may require instructions is as to possible rates of discount for cash or for allowance of interest in anticipated payments which they may be authorized to accept. In the Far East, and some- times in other parts of the world, owing to special conditions 1 See Form 36. 2 See Form 37. 3 See Form 36. 4dO PRACTICAL EXPORTING that may be ruling, importers often prefer to take advantage of favorable opportunities for settling a draft in advance of its due date. In such eases the rate to be allowed for anticipated pay- ments is usually agreed upon in advance between shipper and consignee, although in the Far East usually the "rates of re- bate" are in accordance with rates published by the local bankers and their small differences, including discount rates, go to swell the profit of the bankers. The German and usual American custom is to rebate one-half of 1 per cent, per month (6 per cent, per annum) for payments in advance of the nominal running time of a draft. In the United Kingdom it is usually based on an increase (usually 1 per cent.) under the published discount rate of the Bank of England. Instructions in these regards are sometimes written on the face of the draft itself but more often, and probably by preference, should be given in separate form attached to the draft. It may not be out of place at this point to re-emphasize the necessity, when drafts are drawn, of notifying customers imme- diately to that effect, naming the amount of the draft, the terms on which drawn, and identifying the shipment to which it re- lates, coupled with a solicitation for the customer's kind and prompt attention. Bank Charges. — Costs of collecting a draft are composed of the following items: Commission for the collection and post- age and revenue stamp taxes. The latter include the revenue stamp of the country where the collection is made and may some- times include revenue stamps of intermediate countries where drafts are negotiated; also when proceeds are returned in the shape of a counter remittance, the stamps on the latter. The postage item is especially figured on each transaction. Banks charge established rates for collection in the form of special tariffs. They may vary from one-eighth of 1 per cent, to 2 per cent. Perhaps from one-eighth to one-half of 1 per cent, is most usual. Collection costs and commissions are, of course, apart and separate from the interest charge involved in the period for which a draft may run and for the time involved in getting draft fhrough to point on which drawn and for returning pro- ceeds from such point to place of origin. What such interest f FINANCING FOREIGN BUSINESS 491 may amount to may be illustrated in taking the usual form of draft on so important a South American market as Buenos Aires. Drafts on that city are usually drawn at ninety days' sight. If draw^i in dollars and remittance be made direct to New York, bankers nuist calculate interest for the ninety-day term of the draft nlns tliirtv r!av«' muil tJino Mo^ir v^vV +r. DO NOT PRESENT THIS WITH DRAFT. AFT No _......45 /.. ..$1153.00 Jimenez.. yCia. „ able tlirough Hatioiaal City Bank of New York _...,„ _ irrender documents ca»= yajauiaU.j o«rfy~ on acceptance. ttts must be accepted on presentation . ival of Goods has no bearing on time of acceptance. In case of need and before incurring Notarial or other expenses, including cabling onoiir, refer to J. Mt SmitJi, „ B. Mitre .840, „ ' Yours truly, A. B^q^ FfpAfAN CO. PER„ -^mA- TREASURER. Form 36 — Instructions to Bankers. Instructions in style similar to that shown are attached to drafts which are passed through bankers, governing their handling of such drafts. Sep- arate slips are much commoner than stubs attached to drafts. worth a trille less than 4.S2, liguring intorcst for 00 days at 5 per cent, per annum. Bankers would proliably quote i.HlVj, the margin coverinoj Englisli bill-stamp, postage and commission. Interest may run from 3 to 6 per cent., according to market and various conditions. 2 See Form ."37. .Some Ijaiiks prefer the clause to read for South Africa: "At Exchange as per Endorsement." 490 PRACTICAL EXPORTING that may be ruling, importers often prefer to take advantage of favorable opportunities for settling a draft in advance of its due date. In such cases the rate to be allowed for anticipated pay- ments is usually agreed upon in advance between shipper and consignee, although in the Far East usually the "rates of re- separate from the interest charge involved in the period for which a draft may run and for the time involved in getting draft through to point on which drawn and for returning pro- ceeds from such point to place of origin. What such interest FINANCING FOREIGN BUSINESS 491 may amount to may be illustrated in taking the usual form of draft on so important a South American market as Buenos Aires. Drafts on that city are usually drawn at ninety days' sight. If drawn in dollars and remittance be made direct to New York, bankers nnist calculate interest for the ninety-day term of the draft plus thirty days' mail time New York to Buenos Aires and thirty days' return time, or five months in all. Interest charges, or, when amounts in dollars are converted into foreign currencies, rates of exchange which we may regard as practically the same as interest charges, are usually figured by bankers and quoted by them to shippers on application. The advantage often found in drawing in foreign currencies, making conversion at rates named by bankers, is that interest like other bank charges is covered up in the rate of exchange that is named.^ Otherwise, if bills are drawn in American dol- lars, to realize the face value of the invoice without deduction, it is necessary to add and specify the bank rate of interest or discount and its charges. This sometimes, especially with small and inexperienced importers abroad, creates suspicion and opposition, althou-gh a recognized and established custom. But it is clear that if a manufacturer's invoice amounts to $1,000 he cannot draw simply for $1,000 and avoid suffering the loss of interest and collection charges. He must draw for such an amount as will cover both the face of the invoice and these charges. Some one must pay for them, and unless their sum be included in the amount for which the draft is made there is no way of collecting them from consignees. Modifying Clauses. — A variety of clauses may be included in the text of foreign bills of exchange as required by custom or local conditions in countries where payable. The most usual of these clauses are the following: That known as the Colonial clause, included in drafts drawn on South African and Australa- sian points.- This reads, "Payable with exchange (English and 1 A concrete example may make this clearer. If the demand rate on London in normal times is 4.Sfl, a bill at 00 days' sight would seem to he worth a trifle less than 4.S2, figuring interest for On days at 5 per cent. pt?r annum. Bankers would prohal)ly quote 4.81%, the margin covering English bill-stamp, postage and commission. Interest may run from 3 to 6 per cent., according to market and various conditions. 2 See Form 37. Some banks prefer the clause to read for South Africa: "At Exchange as per Endorsement." 492 PRACTICAL EXPORTING Colonial stamps added) at the current rate in London for nego- tiating bills on the Colonies." This clause makes such drafts subject to the ruling rates of exchange as between New York and London, eliminating all other considerations for local charges, interests, etc. These bills are passed by New York bankers to London, not to Australian or South African, banks. The exchange (i.e. interest, etc.) between London and the Colo- nies is, with other incidentals, charged to drawees. In New York the exchange between New York and London only is cal- culated. "When thus drawn these bills have usually been prime favorites among New York foreign exchange bankers. However, during the war and owing to the unprecedented rates for Lon- don exchange, it became a serious problem with Australasian im- porters of American goods how most cheaply to have drafts drawn. Drafts drawn on most parts of South America (practically all of South America south of the Equator) are usually in one of two forms.^ (1) Drawn in dollars, United States currency, reading "Payable in legal currenc}^ at the bank's drawing rate on day of payment for sight bills on New York," or, (2) Drawn in pounds sterling, reading "Payable in legal currency at the bank's drawing rate on day of payment for ninety days' sight bills on London." In the first instance — i.e., drafts drawn in dollars — interest charges, bank commissions, etc., should be in- cluded in the face amount of the draft if the drawer expects to recover the amount of his invoice in full without deduction.^ In the second instance — bills drawn in sterling — interest, commis- sions, etc., are included in the rate of exchange named by bank- ers for the bills in question and payment by bill on London is arranged by drawees with their local banks as ruling conditions may make possible, "Dollar exchange," owing to the financial developments of the war, came into favor with startling sudden- ness. Another clause sometimes included in drafts may read after the following fashion: "Payable with interest at 6 per cent, per annum from date of draft to approximate date of receipt of 1 See Forms 35 and 30. 2 This can only be done after previous and the fullest possible mutual understanding with customers has been arranged. T^^R^ •V3d NOS ^ HJLIP^S NHOP FINANCING FOREIGN BUSINESS 493 hitherto been one advantage in drawing in sterling — the most 1 See Form 38. 2 Because of frauds brought to Ught in conneetion with certain fictitious cotton bills of lading, some New York bankers object to notation on drafts above indicated. r*C;'> r^^ Payable wttn exchange, a the rate of _ 6, - oe arTn. ^'^-i: — A-^^^—^af Issue to aoprox.mate a.» , ^^ »!?.> ', o ^1 FINANCING FOREIGN BUSINESS 493 proceeds in (New York)." This is sometimes employed in drafts on the Far East, the British West Indies and other mar- kets where it is impossible to calculate the exact term for which interest ought to be tig'ured.^ There is an element of great un- certainty about it, and a great many foreign houses object to this practice, in fact, object to paying more than charges specif- ically named by invoices. The clause in question, therefore, should not be included except by previous agreement with the customers. It should be noted that what has above been called the Colonial clause, used in transactions with South African and Australa- sian houses, should not be extended to other markets. In some countries, for example, in the Argentine Republic, it is under- stood that it is illegal to require payment of a draft in larger amount than the sum indicated on its face. For the sake of definiteness as identifying a foreign draft with a given transaction, it is often desirable to modify the customary phrase "value received" by making it read "Value received in goods per S. S. ," or it may be made still more specific by indicating, for example, "500 bales of cotton ex S. S. ."^ Exchange Payable by Drawee. — Reference to the customary terms of payment by drawees in case of South American drafts prompts an explanation of what is expected of drawees when drafts are drawn against them payable in some other currency than their own. A drawee in Brazil or in Russia, for example, cannot always, of course, tender to the presenting bank the amount of his indebtedness, as represented by the draft, in American gold dollars or in British pounds sterling. He has to pay in his own currency such an amount as the banker will ac- cept as the equivalent of the amount named in dollars or pounds. Unless specifically indicated by such expressions as those above noted as customary in South American bills, the rates at which drawees must pay are usually dictated by the presenting bankers, based on locally ruling rates of such foreign exchange. This has hitherto been one advantage in drawing in sterling — the most 1 See Form 38. 2 Because of frauds brought to liglit in connection witli certain fictitious cotton bills of lading, some New York bankers object to notation on drafts above indicated. 494 PRACTICAL EXPORTING common, stable and economical exchange. A rate of exchange may, however, sometimes be indicated in the draft itself, always by prearrangement with drawee. The privilege of paying in the currency in which the draft is drawn is sometimes granted, i.e. of paying by approved counter draft in such currency. When a fixed rate of exchange is indicated in the draft bank- ers themselves are relieved from any uncertainty, and the cus- tomer knows that on the due date of the bill in question he will be required to pay in gold (not paper, or, if in paper, at an en- hanced rate to cover the difference between gold and paper money) the cost of the bill at the rate of exchange indicated. Foreign Exchange Brokers. — There exists in New York quite an important body of men engaged in the foreign exchange busi- ness who are not bankers, who do not carry any accounts with foreign bankers, but who are merely "brokers" in foreign ex- change, buying and selling foreign drafts from and to bankers for account of commercial houses, as a stock broker buys and sells shares of stock. Included in this class there are a number of firms having very considerable capital, who buy and carry bills for their own ac- count when they think that the market is favorable for such op- erations, but by far the great majority of these houses are small and do business merely on a straight brokerage basis. Neither dealer nor broker is of particular interest to the small or occasional exporter. Both may be of great importance to large and regular exporters. Probably most export commission ihouses in New York of any importance at all sell their foreign drafts through some broker who is employed for that purpose and who is paid a small fraction of 1 per cent, commission by the sellers. An important part of their work, too, is acting as intermediaries between bankers in buying and selling bills as required for their foreign balances. A large exporter making shipments every week or several times a week usually collects his foreign bills of exchange on days prior to foreign mail days and gives a memorandum of what he has to offer, say on Tues- days and Fridays, to his broker who takes this memorandum into "the street," proceeds from banking house to banking house ex- plaining what his principals have to sell and securing the best available bids. FINAM'IXG FOREIGN BUSINESS 495 How Exchange Brokers Work. — The broker's principals, the exporters, may on a given day liave, for example, a draft on Australia for $5,000, a draft on Loudon for $2,000, a draft on Italy for $10,000, a draft on Egypt for $500, a draft on Buenos Aires for $1,000, etc. The broker will probably find a number of foreign exchange bankers willing to make good offers for the London and Australian bills, but those bankers may not offer as good prices for the Italian or Buenos Aires bills as will some other bankers who do not care for those first named, while a good deal of difficulty may be found in finding the banker who is willing to accept on satisfactory terms the. $500 bill on Egypt. The broker, in due course, reports back to the exporter the sev- eral offers which he has obtained, the drafts are made out in ac- cordance with the rates offered, and are then taken to the bank- ers whose offers have been accepted together with all the neces- sary documents — of course, all in ample time to catch the out- going mails. Foreign exchange brokers who are thus found of great advan- tage by large exporters may sometimes arrange to take care of the occasional drafts of smaller or of inland shippers. They negotiate sales, rates, etc. The documents should, as a rule, be passed directly to the bankers to whom sales have been made. Brokers do not usually handle the actual drafts, bills of lading, and other papers. It is these brokers, or the larger operators among them, that is those who handle the big financial bills, who virtually "make the market" in foreign exchange day by day. Beginning with the opening of business in the morning they consult with the larger bankers, learn what they have to offer on that day and at what rates they are disposed to buy and sell. These brokers' reports, voluntary, or in reply to enquiries, indicate the fluctua- tions in the various foreign exchanges from hour to hour. CHAPTER XV CREDITS, ACCEPTANCES AND COLLECTIONS Credit to Foreign Customers May be Extended on Drafts While Shippers Secure Cash — How Drafts Are '' Accepted" by Cus- tomers — Advantage and Security of Acceptances — Principles and Rates of Foreign Exchange — Facilities of Discount Mar- kets — Ways of Collecting Past Due Foreign Accounts. WHAT happens when goods and drafts reach point of destination and both are in the custody of bankers? The latter 's first care is, of course, to scrutinize the documents he has received. Probably but one set of these docu- ments arrives at first, for the transmitting bankers will have for- warded a single bill of lading attached to "First of Exchange" and a duplicate bill of lading will follow by later mail attached to "Second of Exchange." It is customary, however, for bank- ers in transmitting documents abroad to certify that they have received a full set of documents and have attached same to vari- ous copies of the drafts. Such a certificate may read something like this: "All negotiable copies of the bill of lading relating to this bill have been received and will be forwarded by follow- ing mails." BANKERS' RELATIONS WITH CONSIGNEES When satisfied that it has received or will receive all necessary documents in connection with a given shipment the local banker abroad presents drafts to drawees. A draft drawn at sight is nominally payable on presentation, but (as we have noted) there are comparatively few of the world's markets where this rule is strictly followed. Probably in most countries, outside of the United States and Europe, even a draft nominally payable at sight is held by bankers until the arrival of goods. The facility of examining goods before paying or promising to pay is often claimed by importers. 496 CREDITS, ACCEPTANCES AND COLLECTIONS 497 Examination of Goods Before Payment. — Theoretically, ev- ery buyer has a right to examine goods before pajdng for them. No buyer can be compelled to accept and pay for goods he has never seen. It is expected that such an examination will be made in a convenient way that will not interfere with the car- rier's business or with that of others in whose possession the goods may be. The buyer cannot be expected to know what sort of goods have arrived or whether they are the same goods that have been invoiced to him without such right of inspection. It is not necessary, although allowable, to give instructions to bankers or carriers to permit inspection of this sort, as is some- times requested by foreign clients who probably in such cases are not very familiar with technicalities of importing from abroad. However, in practice such right of inspection is seldom or never taken advantage of, because confidence is reposed in the character and reputation of the shipper, and it is assumed that if errors have been made they will be cheerfully and promptly rectified by the shippers, or if goods have been pilfered or have suffered damage in transit, losses so involved will be recovered in due course from the insurance companies or the carriers, wherever the liability may attach. Reclamations of this sort are recognized as inseparable from the importing 'business. "Documents for Acceptance." — Drafts drawn at certain periods of time after sight or after date are usually subject to instructions to bankers to deliver documents against acceptance (D.A.). Even such bills, however, may be drawn subject to de- livery of documents only against payment (D.P.). Drawing in the latter fashion (D.P.) is intended to give ample leeway of time for the arrival of slower freight vessels and necessitate pay- ment by consignee only at about the time goods will reach him. From what has just above been remarked it is evident that in but few of the world's markets is it necessary to take this pre- caution because of the established custom of bankers in holding sight bills for the actual arrival of the goods. Drafts at a stated length of time, usually after sight, "documents for payment," do not permit the turning over to the customer of the bill of lading until actual payment has been made. Drafts forwarded with instructions "documents for accept- ance" give actual possession of the goods as soon as drawee has 498 PRACTICAL EXPORTING "accepted" the bill. If the consignee settles his indebtedness to the satisfaction of the presenting bank in cash or by accept- ance, in accord with instructions received from the drawers of such drafts, then he becomes the immediate possessor of the mer- chandise involved through receipt of the bills of lading. The consignee may, however, arrange credit terms with the local presenting bank. For example, he may arrange with the bank to put the goods into a storage warehouse as the banker's property and withdraw portions of the shipment as he may sell them or otherwise be able to pay for them, such payments in in- stalments being credited against his total indebtedness for the consignment in question. This is frequently done in the Far East where all bankers maintain what they call "go-downs" where goods are warehoused and deliveries of goods to customers made as occasion warrants. This is a practice, too, which pre- vails generally, in New York as elsewhere, in the case of impor- tations under letters of credit issued by bankers at the solicita- tion of importers. Such letters of credit are not often paid for in cash, but are issued by bankers on their faith in the solvency of the importer, plus the security the banks will have in the possession of the bills of lading. When an importation is made under such letter of credit the documents may be turned over to the importer, who has not paid a cent thus far on account, upon his signature to a "trust re- ceipt." How-ever, usually the banker will himself take charge of the merchandise, put it in storage and parcel it out as it is actually sold and paid for by the importer. These are matters of individual arrangement between bankers abroad and their local customers and must evidently be influenced by the credit standing of the importer and the relations maintained between him and his bankers. These considerations in no wiS'e affect the American shipper. His credit problem is of another nature. HOW CREDIT IS EXTENDED ON DRAFTS "How to have one's cake and eat it, too," is usually a prob- lem of some complexity. In international trading it is solved to some extent through the long established practice of bankers in buying, i.e., of advancing cash against documentary drafts. The shipper's responsibility usually remains, it is true, but the CREDITS, ACCEPTANCES AND COLLECTIONS 499 interesting fact stands out that if the shipper is financially sound, or at least well reported by the agencies, he can get cash in full or nearly in full for such of his products as he exports, while his foreign customers may not have to pay for his goods for some time after they have been received. Bankers enter the foreign exchange business for the express purpose of dealing in commercial and other bills of exchange with accompanying documents. The profits in that business are attractive. Bankers advance the money which shippers wish to realize quickly. They carry the shipper's customers for the agreed upon time. This is the true basis of credit in interna- tional business of ordinary character and volume. The big in- ternational business in cotton, grain, coal, lumber, shipments of scores of thousands of dollars' worth at a time, is thus financed (and credit given in normal times), while by long odds the greatest share in our exports of miscellaneous goods follows the same course — for example, almost the whole business of most export commission houses in normal times. This, however, is not to be confounded with certain other aspects of enterprise in foreign lands. A steamship company wishes to have a vessel built, a railway company wants to ex- tend its lines or add new equipment, a municipality is anxious to electrify its tramway system, a local company is ambitious to build a big, new hydro-electric plant — these are enterprises dif- fering radically from ordinary commerce. Governments, Mu- nicipalities, Public Utility corjDorations may pay the suppliers of the equipment required in bonds issued to finance the project, or on such other terms as those suppliers may be induced to ac- cept. Credit in such cases is not comparable to anything usual or desirable in the waj^ of ordinary business. It is only in the latter regard that we are now concerned. It is not too much to say that the granting of more attractive terms than cash before shipment of goods will easily influence a 50 per cent, increase in any manufacturer's foreign business. Credit on Sig-ht Drafts. — No credit is extended, or is sup- posed to be extended, when a sight draft is drawn against a for- eign customer. Shipments subject to such terms are not deliv- ered to buyers until drafts are paid and a draft at siglit is ex- pected to be paid just as soon after its arrival at destination as 500 PRACTICAL EXPORTING receiving bankers can present it to drawee. As a matter of fact, however, and as has been already noted, even sight drafts are in many other countries frequently held awaiting actual arrival of steamer bringing the goods. But in any case a sight draft is in principle a C.O.D, transaction. This is true even when in some countries time allowed to cus- tomers against whom sight drafts have been drawn may extend for months after the arrival of goods. For example, when im- porters have no need for the shipping papers until the goods have been cleared through the custom house and clearance may be delayed either by officials or by the importer himself. Par- ticularly in South America, in countries where customs duties are paid in gold, if the price of gold is high the importer may leave the goods in the custom house an indefinite length of time awaiting a fall in the price of gold, M'hile bankers wait complaisantly, either because of competition or because forced by long established local ciLstom. Still the importer is not given possession of his goods until he pays the draft. This holding of sight drafts is a serious abuse in banking practice. Credit on Time Drafts. — Time drafts are those drawn at 30 days, 60 days, 90 days, 4 months, 6 months or some other period after sight, that is, after the day when such drafts have been presented to consignees, or they may be drawn after date of draft. Credit in international trade is in the great majority of instances based on acceptances of such drafts. The draft when accepted becomes the equivalent of a promissory note, but it has the additional character of bearing on its face evidence of cov- ering a legitimate and undisputed business transaction. With the delivery of the bills of lading upon his acceptance of a time draft the extension of actual credit to the customer begins. Nature of Acceptances. — When a bill is presented to the drawee for acceptance if on presentation he agrees to its condi- tions, he signifies his assent in writing, usually across the face of the bill, the word "accepted" and signing his name, but when a bill is drawn "after sight" the date of acceptance must also be inserted, for it is this date that gives life to the bill.^ One important feature of the acceptance of a draft by the customer is the fact that it forms an acknowledgment of indebt- i See Form 39. i^i»^.^./^.-«:a.aa«i^a^ ninety daye after ^OlAT«l4ZUl^ Ohio, -SIGHT OF THIS FIRST paid) pay to the order of the ANGLO-SOUTH AMERICAN BANK. LIMITED. ence iVS-EGALfTcai^NCY AT THE BANK'S DRAWING RATE ON DAY OF PAYMENT FOR lAYS sh^H^J^BI^S ON LONDON. VALUE RECEIVED IN GOODS PER S.S. "Cell n " TO ^ floroorw'p R Sanchez sSLoh Valpara.iAn,nhnB. HENRY M. E.LAGG. INC. Form 39 — Draft Bearing "Acceptance.' c CREDITS, ACCEPTANCES AND COLLECTIONS 501 edness which it is then unnecessary to prove item by item in the case of litigation. In most cases acceptances are far simpler to collect judicially than open accounts. It must not be forgotten that it is always essential that a full and complete understanding be arrived at with foreign custom- ers as to the form of draft that shall be drawn and its terms. Such understandings vary, of course, according to the char- acter of the customer involved and to some extent according to the risk as a whole. Thus, it is often the custom of large English shippers to exact definite agreements from some if not all of their foreign customers as to protection for their drafts. One contract order form which is prescribed by British ex- porters, after instructions as to how a draft shall be drawn — for example, at sixty days ' sight — involves their customers in the following undertaking: "which we hereby bind ourselves to ac- cept immediately on presentation and to pay at maturity, or if not then to suffer all losses and expenses arising from failure to do so and from a sale of said goods to be effected by you on our account and risk." Legal Status of Accepted Drafts. — When a draft is accepted by a good house (with, emphasis on good) it may almost be re- garded as insurance of due payment at maturity, since an ac- cepted draft is in all countries looked upon as a debt of honor because the signature has been given. The paper becomes val- uable as a promise to pay, so that in any court such an accept- ance figures as a distinct obligation on the part of the acceptor, and in some countries it takes precedence of all other debts not guaranteed in this way. Besides this, uncertainty is eliminated in cases where bad trade, revolutions, disturbances, earthquakes or fluctuations in exchange might otherwise incline the debtor to postpone payment. Very often also, when legal procedure be- comes necessary, courts are prepared in many countries to admit a draft bearing the signature of the drawee, that is accepted by him, as sufficient prima facie evidence of the indebtedness of the drawee, because an acceptance constitutes the most definite recognition of liability on the part of a debtor. It is a volun- tary acknowledgment of such debt, whereas there may be a vast deal of bother, if not difficulty, in getting a court to recognize such indebtedness when it can only be proved by invoices and 502 PRACTICAL EXPORTING accounts current, even when those invoices have been legalized by the consul of the respective country. Arranging Long Terms. — When a manufacturer or other shipper is disposed to carry foreign credits on his own account, without seeking advances of cash from bankers against ship- ments as they are made, it is, of course, possible to make such terms, against acceptances or otherwise, as may seem good and proper. But there are few manufacturers in a position to do more than a limited export business on this basis. Most people who believe that export trade is worth having are anxious to get as much of it as possible, and in order to develop it in adequate measure they are obliged to have recourse to bankers who, in- deed, as has been pointed out, are really established for the pur- pose of extending such assistance and profiting thereby. No hesitation need be felt by any manufacturer in seeking to utilize banking facilities in this direction. However, in buying foreign documentary drafts foreign, ex- change bankers are rarely willing to negotiate documents drawn at more than ninety days after sight, at least unless they are holders of approved letters of credit authorizing longer terms. Incidentally, it may be remarked that banking practices, with the development of our American discount markets, will prob- ably become more generous as to terms which are acceptable. It may also once more be repeated that while the term "sale" or "discount" of foreign drafts is here used in the common, collo- quial way, the operation is not properly described by those words ; it is purely a loan against hypothecation of securities. It has already been argued that ninety days credit, that is, credit against acceptance of a ninety-day draft, is and should be all that need usually be extended by any American shipper to thoroughl}^ good and responsible foreign customers. However, it is not to be denied that in some trades longer terms may be- come necessary as they may also seem desirable with some cus- tomers. How Drafts May Be Extended. — There are several ways in which longer credits may be arranged in this country and sellers of goods still enjoy the use of funds advanced by bankers. Thi!=; is quite often done by renewing drafts. By this is meant that if upon approach of the due date for a ninety-day acceptance, the CREDITS, ACCEPTANCES AND COLLECTIONS 503 foreign customer finds that it will not be convenient for him to pay it at that time, he can advise the shipper's local agent or he can cable direct to the xVmericau shipper. The latter can then arrange with the bankers to whom he sold the original bill to cable or write the local bankers in the customer's city to avoid protest. The American house can then forward a fresh draft on the customer, again at ninety days' sight, if necessary, to be substituted for the first one wiien the customer duly ac- cepts the second. The customer will thus receive on the two drafts a total of six months' credit. Additional and sometimes considerable charges are involved in following this procedure, including, of course, extra bank charges for interest, commis- sion, postage, etc., and probably costs of cablegrams. Such costs, of course, must be borne by the cvistomer. The same result is perhaps secured rather more frequently in the following manner: The acceptor of a draft which he may not wish to pay on due date may draw his own draft against the drawer of tlie original draft, and with its proceeds take up liis own obligation. The original drawer will in his turn re- draw against original drawee, with added interest and costs in- cluding commission, postage and revenue stamps, etc. Naturally, bankers do not look with entire approval on methods such as these. It is, however, sometimes necessary to follow them, and when bankers are on suitably intimate terms with shippers little difficulty is experienced in putting through such operations. The author has known of one instance where a New York exporter carried drafts amounting to something like $60,000 for almost two years' time by similar methods. Draft Renewals not Always Discreditable. — It should be noted that a request from a foreign customer that an accepted draft be extended by no means always implies that the customer is in financial straits. Such a request is frequently made from countries enjoying the blessings of silver or paper currency be- cause exchange rates are at an abnormally low figure. If no stated rate of exchange has been named on the face of the draft, or agreed upon when customer gave his acceptance, then paying on a given day miglit involve needlessly heavy charges. Again, in many parts of Latin America the funds of some of the larg- est importers may be tied up in extended credits to agriculturists 504 PRACTICAL EXPORTING whose payments depend on the crops. Even a strong and rich importer may sometimes be disappointed and embarrassed in his local collections owing to backwardness of the crops, un- favorable weather and similar conditions. Time Granted by Series of Drafts. — Another way of extend- ing credit for longer periods than are usually covered by drafts which bankers are willing to buy, may be adopted by shippers who are willing to carry a part of an account for a portion of the credit term required. Thus, suppose a sale to be made on six months' time and arrangements concluded with customer to split up the total invoice value among several drafts, each to be drawn at ninety days' sight. There may be two drafts, one of which at ninety days' sight the shipper would cash as soon as shipment was made, and the other, at six months' sight, he would send forward for acceptance, to be then returned to New York, where it would arrive in time for it to be discounted ninety days prior to its due date. This would involve the ship- per in carrying one-half of the amount for half the period, that is, say for ninety days, the other half being advanced by the bankers on shipment. Such a plan is susceptible of extension and all sorts of modifications. Longer time may be covered and the amount involved divided among a series of drafts at any desired running time, one at 3 months, others at 4, 6, 8 months, etc., each being discounted with bankers at such period prior to maturity as bankers are willing to consider in negotiating such bills. (See also discussion of bankers acceptances, page 510.) COOPERATION OF BANKERS A great deal of advantage may be found by American ship- pers in utilizing commercial letters of credit in some ways which do not at first suggest themselves to the uninitiated. For ex- ample, within a year or so ago a ruling of the Federal Reserve Board was made under which "an American merchant de- siring ultimately to export merchandise, can under proper ar- rangements with his banker, draw on time in anticipation of the actual export, using the funds in the purchase or preparation of his shipment and, when ready actually to export, use the pro- ceeds of the drafts that he draws on the buyer or the buyer's banker in liquidation of the acceptance."^ 1 J. E. Gardin, when Vice-President, National City Bank of New York. CREDITS, ACCEPTANCES AND COLLECTIONS 505 How Letters of Credit May be Utilized. — Another way in which letters of credit have already been utilized by American shippers is described by Franklin Escher, author of "Elements of Foreign Exchange," in articles appearing in the American Exporter, from which the following may be condensed: "A lot of agricultural machinery, we will say, has been sold in Buenos Aires. The New York merchant who has sold the ma- chinery goes to his banker and asks for an export letter of credit. 'We have sold a lot of machinery down there,' he says, 'which will be paid for within thirty daj^s after its arrival. In the meantime we do not want to be out of the money. Here are the bills of lading made over to yourself, and here are the invoices and all the necessary papers. Give us a letter of credit so that we can get our money at once on this shipment and take up other business.' ' ' To the banker this is an attractive proposition. A bona fide trade has been put through ; he has all the evidence of it in his own hands. He knows that by the issue of an export letter of credit, he can cause the exporter to get the money he wants without he himself, the banker, putting up any actual cash. If the exporter be allowed to draw a ninety-day draft on the New York banker's London correspondent, for instance, that draft can be sold for dollars in the New York exchange market and the exporter will get the money he needs at once. This ninety- day draft drawn by the exporter will be 'accepted' upon its arrival in London, but it will not have to be actually paid for ninety days. In the meantime the merchandise will have been sent to South America, will have been paid for, and the proceeds remitted to the London banker on whom the American exporter drew the ninety day draft. No actual cash will have been put up by either banker engaged in the transaction. The bills of lading and other documents are turned over to the banker who issues the credit so that they may be forwarded by him to his correspondent in Buenos Aires, who will attend to the collection of the money from the buyer of the merchandise in that place. This money, as it is collected, is remitted, not back to New York, but to the banker in London on whom the export letter of credit gives the American shipper a right to draw." Advantages of London to American Bankers. — London has 506 PRACTICAL EXPORTING heretofore been brought into these transactions for a number of reasons. For one, because until the passage of the Federal Re- serve Act, National Banks in the United States were not al- lowed to accept time drafts. Another reason has been that the New York bankers have not wished to put up any actual money and have required a foreign point on which their clients might draw long bills. For such bills, issued under first class letters of credit, there has always been an excellent market in New York, and by bringing into the transaction a third point, such as London or Paris, the bank here has been able to loan its credit and keep its cash. That cash has ultimately come out of the great discount market in London, which -has absorbed drafts drawn under bankers' credits. When ''accepted" by a London banker they have been readily discounted in that market. Some- thing of this sort is rapidly developing in New York. American banking and discounting practices are just now shaping them- selves to meet new conditions, are quite dissimilar from those we knew prior to the Great War or during it. Improved serv- ices and greater facilities will undoubtedly result, with material assistance to exporters. However, before we attempt to consider this vital and most interesting matter, we shall do well to review the general subject of what are called ' ' the foreign exchanges. ' ' PRINCIPLE AND RATES OF FOREIGN EXCHANGE The ground work on which the system of foreign exchange rests and for which it was originally established is the financing of in- ternational trade. To make it possible for the exporter to con- vert his drafts into francs or marks or pounds sterling, enabling his foreign customers to pay for the goods which he ships them in money with whicii they are familiar, at the same time obtain- ing for himself the exact equivalent of his invoice in dollars, and, on the other hand, to make it possible for importers who have debts to pay abroad similarly to satisfy such indebtedness — these are the many functions of the foreign exchange market. What Governs Rates of Exchange. — The rate of exchange is the i)rice given in one country for the money of another coun- try. Tliese rates are regulated by the laws of supply and de- mand, which in turn are influenced by the balance of trade be- CREDITS, ACCEPTANCES AND COLLECTIONS 507 tween the two countries. But one of the principal factors in determining the rate of exchange in normal times is the cost of remitting specie, or what in New York is called the gold ex- port point. It is obvious that when better results can be ob- tained by shipping specie debtors will adopt that course, in- convenient though it be, in preference to buying bills. When operating in exchange a merchant does not trouble to inquire whether exchange is above or below par. All he is concerned with is the actual rate of exchange for the day and whether it is likely to go higher or lower. Different rates of exchange, as quoted on a given day by bankers and reported in the newspapers, represent rates ruling for bills of different qualities, as for example bankers' bills, that is bills drawn on concerns whose credit is beyond dispute and ordinary commercial bills drawn in the usual course of trade. Different prices are, of course, quoted for bills payable at sight, and those payable at sixty or ninety days after sight, since the interest for the period must be calculated. At certain times of the year when a country like the Argentine or the United States is harvesting and exporting a large por- tion of its crops — for example, wheat, corn and cotton — Euro- pean countries may have large paj^ments to make to those coun- tries, without such payments being counterbalanced at the mo- ment by a correspondingly large set of payments to Europe, speaking now, as always, of international trade as it exists in all normal years, in the usual commerce of all countries of the world. At such a time, the demand for bills will be light as com- pared with the offerings and the rate in New York will fall until specie point is reached and gold imports become likely At an- other season the current of remittances may be all the other way. Thus the law of supply and demand governs the seasonal fluctuations of the international exchanges. We had dur- ing the war an extraordinary, unprecedented illustration of the principle in the fall in value on the New York market of pounds, francs, lire, roubles, etc., chiefly due to the fact that the great movement of trade was all one way — from the United States to Europe. We did not buy values in Europe to offset Europe's purchases from us. To this major cause some authorities in- 508 PRACTICAL EXPORTING cline to add actual depreciation in national currencies in Europe because of bond issues, depletion of reserves, etc. So far as international indebtedness is concerned, bills of ex- change constitute a sort of floating currency. One bill is a record of a debt payable by say a London merchant to one in New York at a fixed date ; another is a record of a debt payable by a New York merchant to one in London. By selling these bills to bankers the transmission of gold is avoided, and only when the banks have not sufficient bills on one country to set against those of the other, and cannot buy cheaply enough in their monetary centers further bills payable in the desired country, does it become necessary to ship gold. It is the clear- ing house principle. Paying in Specie Instead of by Bill of Exchange. — When a merchant in one country purchases goods of a merchant in an- other, he is, in the ordinary way, under the obligation of paying over to the seller at a certain date so much gold coin in the cur- rency of the country in which the seller resides. How is he to do this ? Somehow or other he is under the necessity of pur- chasing the requisite amount of foreign gold coin. If the debtor could not purchase a bill of exchange payable in the country of his foreign creditor wherewith he could liquidate his debt he would be under the compulsion of purchasing in his own country foreign gold coin, if it were available, or the exact weight equiva- lent in some form of gold of the foreign gold coin. In that case he would have to pay over and above the actual gold equivalent of his debt the cost of carriage and insurance. Consequently if he can purchase a bill of exchange, i.e., an order on some one in the city or the country of his creditor to pay to some one else there the amount of his debt in local foreign coin, it will be profitable for him to do so, so long as it does not cost him more than sending gold over. When, however, rates at which such remittance can be purchased rise above a certain point it be- comes cheaper to ship the actual gold. When this point is reached gold does actually leave the country, not that the debtor himself actually buys gold and ships it, but the bankers who constitute the market in these foreign exchanges find themselves under the necessity of exporting gold.^ 1 Adapted from Heelis, "Tlieory and Practice of Commerce." CREDITS, ACCEPTANCES AND COLLECTIONS 509 In the case of each country the "gold points" are just as much higher or lower than the par of exchange, that is the rela- tive actual weight of gold in coins of different countries, as is represented by the cost of forwarding and insuring gold from one center to another.^ A DISCOUNT MARKET AND ITS FACILITIES'^ Since the establishment of the Federal Reserve system we have heard a good deal about the advantages of a discount market and the chances for the establishment in New York of a market of this description comparable with that of London. To take advantage of any such discount market there has first to be de- veloped the system of acceptances, and particularly bankers' acceptances, which long ago was firmly established in London, but which prior to the present Act was forbidden to National Banks of the United States. The Federal Reserve Act permits National Banks to accept bills involved in the export or import of merchandise. Advantage of the facilities offered by the Federal Reserve Act was quickly recognized and to a very large extent because of many enormous financial operations growing out of pur- chases of war supplies in this country ,especially those financed under bankers' letters of credit. The passage of the Edge Act (1919) was intended as a further assistance to exporters in granting long term foreign credits, that is, credits running over the 90 days to which bankers ordinarily prefer to con- fine themselves. Edge Law banks do both accepting of foreign bills of exchange and discounting of such bills. The Acceptance System. — Reduced to its simplest terras, the acceptance system may be roughly described as follows: first, an importer of goods in one country may authorize a bank in another country to accept drafts drawn for the account of the importer covering shipments of merchandise which he orders from that country. This is almost always arranged by the 1 When a nation is involved in war it may and usually does prohibit the export of gold, perhaps also silver, in order to conserve its own resources as well as to prevent gold from reaching its enemies. On the other hand, enormous exports of gold to creditor nations may be necessary in order to maintain, at least, approximately, the par of exchange. We have had il- lustrations of both courses in the United States. 510 PRACTICAL EXPORTING importer's local bank with its corresponding bank in the ex- porter's country. Second, an exporter arranges with a bank where he is favorably known and which is satisfied as to his financial responsibility to accept drafts which he may draw on that bank, no credit having been established by the importers. Bankers may charge all the way from one-eighth to five-eighths of one per cent, for their complaisance in accepting such bills drawn against them and to cover whatever risks may be in- volved in so doing. The bills thus accepted by a known and highly responsible banker become short term investment secur- ities of prime order and may be discounted with bankers or discount companies organized for the purpose at the best ruling money rates, or as quoted from time to time by the Federal Reserve Banks in the United States and by the Bank of England in London. These bankers' acceptances may even be bought by the very bankers who lend their acceptance to them, if the latter desire to make such investments. They are readily con- vertible into cash at a moment's notice through re-sale to other investors or through re-discount with the Federal Reserve Bank. Funds thus invested are therefore highly liquid and this feature always appeals strongly to bankers. The advantage to all concerned of the acceptance system thus roughly outlined consists, first, in the fact that when money is comparatively easy, it is possible through the discounting of such bankers' acceptances to secure a very low annual interest charge, sometimes as low as four per cent, per annum or less, including bankers' charges for accepting. Next, a very great advantage is found by bankers in granting acceptances, rather than in buying the foreign bills of exchange themselves, in that they do not have to put up any money as they are obliged to do when they buy a foreign draft, unless in the case of the acceptance they want to make an investment, and then such an investment can be converted into cash at any time prior to maturity of the acceptance. The Federal Reserve Board in 1921 made six months bankers' acceptances available for re-discount by Federal Reserve Banks. This should be a further help to exporters wishing to extend such credits, although in times of tight money or financial stress bankers invariably prefer shorter terms, not to exceed CREDITS, ACCEPTANCES AND COLLECTIONS 511 90 days. Edge Law banks have been especially promoted to grant longer terms as well as make foreign investments, and it is understood are prepared to consider proposals looking to as long as twelve months maturities. These facilities, how- ever, have thus far chiefly been utilized by very large shippers of bulk commodities, cotton, grain, provisions, etc., and terms exceeding six months are chiefly, if not solely, contemplated in connection with railway building, mine or other similar developments in foreign countries where credits of this descrip- tion may be required, as they are not required in the transaction of any ordinary merchandise business. Under rulings of the Federal Keserve Board bankers are per- mitted to finance transactions between buyers and sellers in other countries not connected at all with the United States, just as London bankers have done for many years past. If this facility be taken advantage of, the scope of financial opera- tions in the New York market will be greatly extended. In negotiating for a banker's acceptance, a manufacturer or exporter introduces himself to a banker who fully investigates the exporter's credit position, his banking and trade references, etc. The exporter signs an acceptance agreement, under which he stands behind the credits which are extended to him, then he draws a draft to his own order and endorses it in blank, and almost always deposits with the bank, bills on his foreign custom- ers accompanied by the usual shipping documents. The bill drawn on the bank is a clean bill which the banker stamps accepted, payable at a stated place and signs. At ma- turity the bank must pay it. The purpose of creating a second draft which the bank accepts is to enable a bank to refund itself. The term of the clean draft which the banker accepts is usually long enough to cover the period which must elapse from the shipment of the goods to the return of the funds. Suppose, for example, a shipment has been made to Buenos Aires on sight terms. The bank would probably figure that it would take about ninety days for the goods to reach Buenos Aires and for the funds to arrive back. Accordingly the clean draft which the exporter would draw and which the bank would accept, would be at ninety days sight. When the proceeds of the foreign 512 PRACTICAL EXPORTING collection are received, the advance made to the exporter by the bank is paid off. Bankers therefore consider their acceptances as self-liquidating. Advances Against Consignments and Collections. — ^While many special arrangements are possible in the New York foreign exchange market, a good many others have been customary in London, some of which it is worth mentioning merely as an in- dication of ways in which bankers' assistance may, under suit- able conditions, be invoked in the future, if not to-day. In the case of financially weak exporters sending goods to buyers whose standing is well known to an international bank- ing concern, it frequently awaits cable notice of acceptance of the draft before making an advance. It might be thought that the bank is secured by the shipping documents, but when it is remembered that the bank has no means of knowing the contents of the shipment or whether they correspond to the invoice, it becomes clear why it may not regard such security alone as ample. It is even possible in London for shippers who are highly re- garded by their bankers to arrange drafts on those bankers, on the security represented by shipments to customers who do not accept drafts but send remittances when it suits them within certain terms of credit. Bankers in doing this sometimes re- quire copies of the invoices and of the bills of lading, but such operations are merely a matter of faith and confidence in the shippers on the part of the bankers, and virtually amount to an over-draft of the shippers. Methods frequently used in Europe in connection with con- signments of merchandise (consignments as distinguished from outright sales), include financing by bank acceptance, the bank in this case acting as agent of the seller. The bank finances the transactions by lending its acceptance. It receives the ship- ping documents and letter of hypothecation. The consignee re- ceives the documents against a "letter of lien" and promises to pay the bank direct in first class bank bills or by a cable trans- fer. If the funds are not received at maturity the consignor is obliged to cover the bank in cash, or he may draw again and again by paying an extra commission of about one-half of 1 per cent, every three months. The business is still financed by CREDITS, ACCEPTANCES AND COLLECTIONS 513 the bank through these renewals. This is customary English practice, for instance, in business with China. At this point, having noted some of the ways in which bank- ers' capital and credit may be utilized in export trading, we may refer to certain other facilities which they may extend in other phases of foreign operations. Some Ways of Collecting- Open Accounts. — Collection of open credit indebtedness may be made in several ways. It may be agreed that each invoice shall be settled in so and so many days by a direct remittance in London or New York funds, or remittances may be arranged each month on the basis of set- tling for items shipped 30, 60, 90 or more days back ; or instead of the remittance, the manufacturer may draw at sight or at three days' sight, the draft to be presented about the time the items are due. Or, again, the manufacturer may draw for the amount of an invoice at the time of shipment, the bill maturing at the expiration of the credit limit granted, but being accepted at the time of the arrival of the goods. The latter system is naturally favored, as it fixes a definite time for the payment of the individual invoice. The drafts in question, of course, are so-called "clean bills" in contradistinction to "documentary bills." The banks sometimes, but not often, buy these clean bills; usually they only accept them for collection. In the British wool trade with Germany terms were formerly "thirty days and three months' bill." The British shippers forwarded their invoices through their local agents at point of destination with a draft at three months dating from the expira- tion of the thirty-day term. The agent for the British princi- pals saw to it that the draft was accepted by the German cus- tomers, returned it so accepted to England where it was dis- counted by the manufacturers, its proceeds credited less ex- penses for discount, stamps, etc., and remittance for balance, if any, requested from the buyers. In our general consideration of ways of negotiating drafts through bankers we have already seen how it is sometimes pos- sible to draw against bankers even when goods have been shipped on open account, usually supplying certified copy of invoice and non-negotiable bills of lading. With such a draft on a banker one or more separate drafts on customers may be 514 PRACTICAL EXPORTING supplied covering the total amount involved, but at sufficiently shorter sight to enable bankers to secure proceeds on them from customers before due date of the bill drawn on and accepted by the bankers. The foregoing are only hints as to possibilities which it is worth while investigating as one's export trade ex- pands They should not be undertaken or so much as com- templated by the beginner. COLLECTING PAST DUE FOREIGN ACCOUNTS There ought seldom to be any occasion in export business for forcing collection of any accounts save dishonored and protested acceptances. Reference is now made to the ordinary exporter, doing business at long range. Most bad debts or overdue ac- counts with foreign customers result from the extension of open account terms and, fortunately, are usually for small amounts of little or no importance, that is, for sample ship- ments or small balances which have happened by chance. An exception is to be noted, namely, when an exporter is repre- sented in a foreign market by his own branch house or an agent. Then he may sometimes operate there just as do local concerns anywhere. Collections in such cases will be handled locally. What we now have to consider are collections by Americans who have no local foreign representation in a debtor's market. Collections from foreign debtors are necessarily more trouble- some than those from domestic customers. The distance makes an amicable understanding less easy of accomplishment. Ac- counts which cannot be amicably settled at home are consid- ered by credit men bad enough but they are far less satisfac- tory abroad. But no matter how small the amount, the cred- itor is usually loth to lose it. What can he do? Collection Letters.— An attempt to adjust a foreign account by correspondence from the home office in the United States is an affair of great delieac3\ No end of tact and diplomacj^ is absolutely essential. In the first pla<;e it must be remembered that the seller's rights and obligations are governed by the laws of the foreign country where the goods have been sold. Amer- ican laws and customs do not count. In the next place the manufacturer must remember that there may often enough be many other causes for belated remittances than carelessness or CREDITS, ACCEPTANCES AND COLLECTIONS 515 a disposition on the part of buyers to pay when they get ready, irrespective of terms of sale. In all countries of fluctuating currencies the rate of exchange from week to week and month to mouth governs remittances to a large extent. A customer in such a country may feel sure that by waiting a few weeks to make remittances he will be able to save a large amount of money, because more favorable rates of exchange will then prevail. It will not do for a specific manufacturer to counter this argument with the plea that his account is only a small one, for his customer may not be regard- ing one account alone, but may wish to group all accounts pay- able together to take advantage of the favorable rate of ex- change which he anticipates. Furthermore, while ocean mails, except in times of war, are reasonably safe, yet loss or miscar- riage of mails does happen and disasters to mail steamers do occur from time to time. Valuable letters which have included remittances may for such reasons never arrive. However, making all due allowances for conditions which may excuse dilatory tactics on the part of one's customers abroad, yet there sometimes occur cases when it is necessarj^ to press for payments with some firmness. Assuming that a care- ful manufacturer will never have permitted the possibility of an overdue account except with customers whom he regards as exceptionally desirable, then it must follow that extreme care should be exercised to avoid giving such customers offense or undue annoyance. If they are of the sort which we have as- sumed, then they will be presumably desirable customers in the future on some mutually satisfactory terms. For a manufac- turer to permit his bookkeeping department or his domestic col- lection department to write the short, stiff collection letters em- ployed in the United States, will almost certainly be fatal to any prospects for future trade with foreign customers. One such letter addressed abroad will not only fail to bring the de- sired remittance but so antagonize the customer that he will be disposed to give the manufacturer all the trouble possible in col- lecting the account in question, and discontinue future business. Pleas to Induce Remittances. — There are any number of ways of making urgent requests for prompt settlement of over- due accounts. One favorite way is to point out that in the 516 PRACTICAL EXPORTING manufacturer's export trade especially low prices have been made in the confident expectation that remittances will follow on agreed upon terms, that it will obviously be impossible to maintain such prices in the future unless the terms are rigidly adhered to. Again, it may be pointed out that the shipper is a manufac- turer and not a banker, that in the United States our business is strictly a cash one and that, owing to the manufacturer's great desire to favor the particular customer in default, excep- tional terms were made in his case at best involving loss of the use of the money involved for much longer than is customary here at home, and that therefore the conduct of the manufac- turer's business will be seriously deranged if the term of credit granted is exceeded. Or yet again, that the margin of profit in the export prices that have been quoted does not permit the extension of credit terms. The manufacturer may also employ a weapon that is rather uncommon in the United States but that is frequently used by Europeans, namely, the demand for interest. It may be pro- posed to the debtor that, on some of the foregoing accounts, it is only fair that interest on the overdue account be paid not merely for the overdue time but from invoice date at the rate current in this country, say, 6 per cent., or at a higher rate be- lieved to be customary in the debtor's country. This will often ensure prompter attention on the part of such debtors in future transactions, in countries where local rates of interest range as high as 12 per cent, or 18 per cent, per annum. In other coun- tries where a charge of 6 per cent, only can be made it would probably be well to provide that it shall not be made a prece- dent for future business because of the policy which governs American domestic and foreign trade. Whatever arguments are adopted, the principle of unvarying good nature and tact must not for a single instant be forgotten. Kinds of Collections. — Open accounts are much more diffi- cult to sue on in most countries than claims based on accept- ances or notes. The reason for this is that in most countries it is unnecessary to prove the account item by item where an ac- ceptance or note furnishes prima facie evidence of the claim. In the case of a claim by the debtor on the shipper as an off- CREDITS, ACCEPTANCES AND COLLECTIONS 517 set in part against the latter 's account, the shipper who cares for his foreign trade will do well to show the utmost fairness and even liberality to his customer, provided there is a substan- tial justification for the claim. It may frequently be worth while to agree to an unjust claim, but to communicate the in- cident confidentially to mercantile agencies, the export trade press and various organizations interested, for the protection of American trade. In the case of insolvency it is best to consult- an attorney with experience in foreign countries or a bank having branches in the debtor's place of residence. Many countries have stringent regulations as to the filing of claims against insolvent estates within a certain time limit, or on the subject of representation of foreign claims, or with regard to the form in which powers of attorney and proofs of claims are to be made out. There are so many different features of claims against bankrupt estates abroad that it is unwise to handle them direct. By far the most usual cases in which proceedings against debtors become necessary are those involved in drafts protested either for non-payment or non-acceptance. Care must be taken to instruct the banks handling drafts to protest same within the legally required limit in case of non- payment if there is the slightest indication that the account will be dishonored. Non-protested acceptances in many countries are nothing more than mere evidence of indebtedness. A pro- test by a notary public is looked upon in most foreign courts as the only legal proof of dishonor and the protest papers there- fore play an important part in suing in a foreign court in re- spect of a dishonored bill. If the person on whom a bill is drawn refuses to accept it or to pay it at maturity it must in some countries be "noted," that is, taken to a notary public who presents it for acceptance or payment as required. If the notary is refused he notes this fact on a ticket which is attached to the bill. "Noting a bill" is in England required as proof that the bill has been duly pre- sented and dishonored. In addition to noting the bill it must be protested in case it has been dishonored. This is a legal for- malitj'- in which the notary presents the bill for acceptance or payment and if this is withheld he, the notary, draws up a 518 PRACTICAL EXPORTING declaration protesting against the refusal of the drawee to ac- cept or pay. When a bill is either noted or protested, notice is given by the holder to the last endorser of the bill and also to the drawer. Possible Procedure in Making Collections. — By all means the best way of handling delinquent debtors from whom ac- counts are due is to place the whole matter in the hands of one's resident agents in the debtors' territory. In default of such agents it will usually be found profitable to abandon a small claim, for in any except accounts aggregating considerable sums of money it is emphatically true in relations with foreign countries that "the first loss is the best." It is possible, of course, to forward claims to foreign attorneys or collection agencies in the debtor's city and this may be done either direct, or through the many similar agencies in the United States which have foreign correspondents. Great care must, however, be exercised in either case in making a selection of a foreign at- torney or collection agency of any description and a fixed agree- ment arrived at as to terms acceptable for collection and as to the amount of the costs. If lawyer or collection agency is contemplated, then legal proof of claim, and usually assignment, must not be overlooked. No actual step towards collection can otherwise be made. A mere "statement of account" furnishes a basis for nothing more than the emptiest of "bluffs" which will impress no debtor. A full and detailed story of the whole transaction is called for with whatever documents and correspondence (or copies of them) may be available, including especially debtor's original order and proof of shipment. All must be duly at- tested by affidavits submitted in form to give them standing in the foreign courts that may be involved. This usually means that the creditor's oath shall be taken before a notary public, his signature verified by the County Clerk, the latter 's bj^ the Secretary of the State of which the creditor is a resident, and finally by certificate of the resident consul of the foreign coun- try in the creditor's city. Sometimes the certificates of the Secretary of State of the United States will be required attested by the Minister or Ambassador at Washington of the debtor's country. Adequate legal substantiation of a claim is. indis- CREDITS, ACCEPTANCES AND COLLECTIONS 519 pensable if any serious attempt at collection is to be made. Neglect of this primary essential means dangerous loss of time, if nothing worse. Bankers will sometimes forward drafts on delinquent debtors with instructions to their corresponding banks abroad, if the draft is not paid, to turn it over for collection to the local at- torney usually employed by the bank itself. Many banks, how- ever, decline to accept the responsibility implied in following this course. Even without such disposition of the claim, that is, its transfer to the banker's attorney, it is sometimes effica- cious to make such a draft, or several repeated drafts — when they are passed through the debtor's own local bankers. The debtor might pay no attention to a draft of this sort if pre- sented by local concerns with whom he has no business and for whose opinion he does not much care. But in such instances the debtor is usually rather jealous of his standing with his own bank and a single draft with a peremptory letter attached, or a series of such drafts, presented by his own bank might result in payment when other methods fail. Of course, no language that is to be described as peremptory will ever be employed by a creditor until ever}^ reasonable argu- ment and appeal has been exhausted and the point reached where it has become certain that the delinquent is never again wanted as a customer. Foreign Law and Lawyers. — Outside of a few great coun- tries of the world foreign law^^ers are by no means always of the caliber of those to whom we usually entrust our legal af- fairs in the United States, although it is to be confessed they are sometimes quite as shrewd. Their shrewdness may, how- ever, react on their American employers unless precaution has been taken as to amounts of their fees and costs. It will usually be found that a foreign lawyer's scale of fees appears decidedly modest. But as his accounts are rendered and the total footed up the amount due will not compare unfavorably with expenses of similar procedure in the United States. Litigation for the collection of foreign accounts "is seldom satisfactory and always expensive." Indeed, it is not too much to assert that costs of litigation abroad are usually prohibitive, and this is always and emphatically true of small accounts. 520 PRACTICAL EXPORTING Furthermore, delays of the law are even more exasperating in foreign countries, as a rule, than are those of which we com- plain at home. The opinion just given may be supplemented by that of Benjamin Joy, when Vice President of the Shaw- mut Bank, of Boston: ''Litigation is to be avoided in South American countries above everything, for the expense and trouble often more than outweigh the total value of the goods shipped." It is not to be forgotten that the laws of other countries are not often identical with our laws, in fact, usually are very dif- ferent from ours. When an American creditor goes into a for- eign court he makes himself subject to the laws of the country of that court. American laws no longer apply and foreign creditors are at a great disadvantage when suing in many coun- tries. In some of them a debtor, even if he is in the wrong, can force an American creditor to put up considerable costs, as a foreign plaintiff. These costs may, at the discretion of the court, include a security for the debtor's expenditure in de- fending the suit. Of course, if the creditor wins, the security is returned to him. A simple plan to avoid extra costs is to sign a so-called "session of claim" in favor of the foreign at- torney who then becomes the domestic creditor as the represent- ative of an American principal. The costs are borne in some cases by each party and not by the losing party alone. In general, American exporters will be well advised in shun- ning foreign litigation as they would the plague, because of its expense, the time and annoyance involved and the disadvantage under which they must labor because absent from the scene of action. Only when an amicable adjustment is unattainable and at the same time the claim itself is more than usually im- portant is it advisable as a last desperate recourse to resort to litigation. INDEX PAGE "A. A. R," Defined 443 Acceptance — DocunieHts for ("D. A.") 497 Example of draft with, Form 39. . 500 Legal status of 501 System of financing described. . . . 509 Accounts, Collection of Advantages of acceptances in 501, 514 Letters designed for 514 Possible procedure in.. 298, 471, 518 Adapting Goods to Markets 60, 343 Addresses, foreign business. ... 99, 100 Advances of Cash — By bankers 486, 498, 512 By foreign customers 459, 4B6 Advertising Media — American, Kinds of 202 Export trade papers, American.. 196 Export trade papers, European.. 207 Foreign local 196, 206,208 Advertising to Get Export Trade — As an introduction 219 Copy, effective for 213 Devices on shipping cases 374 Results from 220 Sample offers and prices in 216 Agents — American manufacturers' export. 12 Cooperation with 16, 133, 306 Export commission houses as 267, 272 Foreign merchants as 301 Not peddlers 126 Protection of 264, 308 Agents, Local, on Commission — Advantages of 12. 294, 297, 518 Choice of, How made 289 Conflict with commission houses. 264 Contracts with 291 Defined 285 Functions of, varied 297 Responsibility of 288 "American Exporter," Quoted — Large and small exporters com- pared 55 Symposium on shipping facilities 51 American Exporters' and Importers' Association — Complaints to 265 Purpose of 242 Armour, J. Ogden, of Armour & Co. Opinion as to export combinations 55 Arrival Noti-ce, of Railways 389 Ashburner, A. E., Foreign Mgr., Am. Multigraph Sales Co. Advises support of agents 133 PAGE Ashburner, A. E. — continued Opinion as to advertising 213 Suggestion as to sales letters 139 Attestation of Documents. 184, 292, 424, 518 Austin, Col. O. P., Statistical Expert On international trade statistics. . 6 Statement as to trade of the world 74 Australasia, Australia, New Zealand. Catalogues for 240 Commission house trade with.... 247 Drafts on, how drawn 492 Invoice details for 380 Markets in, characteristics of . . . . 82 Non-Dumping Certificate required 428 A verage, in Marine Insurance Defined 439 Free of Particular (F.P.A.) .437, 442 General and particular 440, 441 Ayrcs, Howard , Sec'y, China and Japan Trading Co. Opinion as to foreign banking. ... 47 Quoted on Merchant Marine 50 Baggage, of Traveling Salesmen... 188 Banks and Bankers — Assistance given by. 26, 43, 481, 504 Authority to Draw, Forms 28, 30 464, 466 Brokers employed in dealing with 494 Buy and collect drafts 477, 518 Cash advanced by.. 481, 486, 498, 512 Charges for collecting drafts.... 490 Confirmation of credits by.... 402 Credit, Letter of. Form 26 462 Credit, Notice of. Form 27. .... . 464 Credit- Reports, facilities for. .43, 337 Credits issued by 235, 462, 504 Drafts issued by 474 Foreign branches of American, 42, 46 Foreign loans issued by 48 Functions of foreign exchange. . 478, 479 German Oversea 45 Guaranty to. Form 29 466 Hypothecation to. Form 34 486 Inland, methods of 482 Instruction to, Forms 35. 36, 488, 490 Introduction to. Letters of 184 London, Advantages of 505 Rates of exchange quoted by.... 476 Recourse by, on drawers of drafts 487 Relations with consignees 496 Selling drafts to 478, 484, 486 Barratry, Defined 448 521 522 INDEX PAGE Barrett, Hon. John, Director, Pan American Union Opinion as to traveling salesmen. 166 Speech on Latin American trade 78 Bills of Exchange. See Drafts. Bills of Lading, Ocean Certification of, consular ... .423, 426 "Clean" 4ii0 Copies of, required 415, 455, 488 Costs of 406, 415 Endorsements of 418 Freight forwarders', explained. . . 403 Freight forwarders', Form 10.... 404 How should be written 415, 419 Liability .of shipowners under... 421 Minimum 400 Property right in 415, 419, 498 Styles of, Forms 15, 16, 17 416, 418. 420 Terms of, explained 419 Bills of Lading, Railway Defined 390 Through railway. Form 8 392 To inland foreign points 394 Bond, shipments in, Pi'ocedure. . . . 412 Brandies, Foreign, of American Manufacturers As merchants or agents 309 Local conditions and laws govern. 315 Unsaleability of drafts against. . . 476 Brazil — Distinct markets in 79, 293, 303 Language of 118, 119 Sending advertising matter to. . . . 241 Breakage, Insurance against 438 Brokers — Export houses not brokers 501 Foreign exchange 494 Insurance 433 See also agents. Bureau of Foreign and Domestic Commerce, As source of infor- mation 22, 24, 26, 113, 349 Buyers, of Commission Houses 263 Buying Ofices, of foreign houses... 248 Cable, Use of the Addresses for, registration of.... 151 Codes, private, compilation of ... . 155 Codes, public, generally used.... 153 Code Words, use of 154, 230, 380 Plain language cablegrams 153 Prices quoted by 153, 326 Repetition of messages 157 Responsibility in 156 •'C. A. F.," Defined 331 Cartage, Charges at New York 391 Cash Terms — American and European 39 Bankers' credits equivalent to... 462 Cash with order 461 Discounts for 235, 277 Partial payment in advance 466 Catalogues, E.rport Character of circulars and 222 FAOB Catalogues, Export — continued Distribution of 236, 255 Duties on, in some countries 238 Foreign language 224 Preparation of 225 Price and discount sheets 231 Shipments of, freight. . .238, 367, 380 Certificates — Non Dumping 428 Of Inspection, etc 383 Of Marine Insurance. . .443, 455, 488 Of Origin, illustrated, Form 21.. 428 Changes in Goods, Making 60, 343 Cliartering, tiJiip 395 Charter Party, Explained 396 Checking of Shipments, Necessary.. 149 Cherington, P. T., Professor, Har- vard University — Advice on character of salesmen. . 164 Describes operations of salesmen. 186 Quoted on American export packing 351 Chicaneurs, Defined 148 C. I. F. Prices — Engagements under. Form 3 332 Explained 328 How quoted and figured 331 "C. /. F. a E." Defined 331 Circular Letters, Kinds and Use of 143 Circulars, Printed. See also Cata- logues. Follow up trade literature 237 Claims — - By customers, adjustment of. 148, 298 Marine insurance 453 Otfsetting sellers' accounts 516 On carriers 421 Proof of, required 518 C. O. D. Transactions — Freight forwarders useful in.... 406 Sight drafts equivalent to 500 Unsafe with unknown houses.... 336 Codes. See Cable. Collections. See Accounts. "Colonial Clause," in drafts — Illustration of. Form 37 492 Combinations of Manufacturers — Advantage of 57, 177 History of 313 In export managers 105 In own offices abroad 57, 312 In traveling man 57, 105, 175 Legality of 53 Similarity to commission houses. 282 Commercial Papers, Rate of Postage 388 Commission Houses, Export Advantages of, to foreign buyers. 252 Branches and agents, abroad.... 268 Brokers, distinguished from.... 245 Business of, explained 251, 261 Business varies with markets 269, 272 Character of. varied 244 Commission charged by. Rates of 258 Concessions to, special 279, 280 Conflict with established agents. 264 Credit extended by 252 INDEX 523 PAGE Commission Houses, Export — continued Future of 282 Importance of 243 Inquiry for prices from, Form 1 258 Limitations of 271, 274 Merchants, as distinguished from 247 Order for goods from, Form 2 . . . 260 Orders from, origin of 221, 263 Organization of 257 Prejudice against 244 Relations with ....11, 254, 264, 273 Rislis incurred by 276 Terms extended in selling to 276, 278 Travelers for 270, 274, 280 Conant, Charles A., financial expert — Statement as to German banks . . 46 Conferences, Shipping Freight rates made by 53, 400 "Confirmed" Credit — Notice of, illustrated. Form 27.. 464 Consignments of Goods — Bankers' advances against 512 Local agents as depositories of... 299 Samples on consignment 320 Consular Documents. See Docu- ments. Consuls, American Catalogues filed with 205, 237 Usefulness of 24, 25, 337 Contracts — C. I. F. Conditions, ^orm 3 332 Sellers bound by 344 With agents 291 Conversion of Moneys 92 Copies, Duplicate or Triplicate By different mails 130, 475, 496 Correspondence — Addresses, foreign business. . .99, 100 Circular letters 143 Collections, Making by 514 Composition of foreign 127, 132 Copies of 130, 475 Despatch of 109, 111, 124 Diplomacy in 148, 514 Eflficiency record for 116 Export manager's ability in 101 Facsimile and mimeograph letters 145 Filing devices for 112, 113 FolIowUp systems 145 Form letters 136 Languages to be employed in... 119 Mailing lists for 113, 143, 200 Postage, rates of foreign 110 Receipt of 108, 134 Replies, Prepayment of 131 Selling by 10, 137 Signatures to 102, 127 Stationery, suitable Ill, 125 Support of foreign agents by.... 133 Tone of foreign 90, 126 Translations of 120 Costs of Goods — Affected by export packing 357 Affected by special processes. ... 346 Counting, Foreign Methods of 95 PAGE Credentials, Of traveling men .... 183 Credit Reports — Character of 339 How obtained 44, 200, 296, 336 Inquiries for, best form of 339 Keeping up to date 342 Personal statements abroad 338 References by foreign houses. 290, 341 Credits — Agents as judges of 160, 29S Bankers'. See Letters of Credit. Commission liouse 42, 252, 256, 259, 277 Delusions regarding terms of. 38, 42 Long terms of, how arranged.... 502 On drafts 498 Cubic Measurement 373 Currencies, foreign Conversion of 91, 92, 93 Symbols, Monetary 95 Systems of 90, 188, 333 Use of 94, 237, 324, 381 Custom Houses — Clearing shipments at 411 Shipper's Manifest, Form 14 412 Traveling men's experiences in... 189 Customs in Foreign Business Life — Counting 95 Government control of business. 340 Hours of business 189 "Cwt." Meaning Hundred- weight. 370 "C. di F.," Defined 331 "D. A.," Explained 489, Damages. See Claims and Losses. "Del Credere," Defined Demurrage, Defined Directories — As advertising media Consular indices "Export Trade Directory" quoted 243, 392, World's Trade Detroit Board of Trade — Quoted on mistakes of shippers.. Discount Market 44, Discounts — Cash discounts 236, Deduction of, in invoices European understanding of How should be named Price and discount sheets Disputes, Adjustment of By correspondence Through local agents Distributors. See Merchants and Wholesalers. Dock Receipt illustrated. Form 13. Documents — Attestation of 184, 292, 424, Required by bankers 488, Documents, Consular — Bills of lading, certification of... Brazilian invoice. Form 20 Certificate of Origin, Form 21.. 497 300 396 204 205 433 113 389 509 277 381 333 324 231 148 298 518 496 424 428 428 524 INDEX Documents, Consular — continued Cost of, not quoted in c. i. f 329 Cuban invoice, Form 19 424 Description of goods in.... 424, 425 Invoices, consular 326, 423, 424 Non-Dumping Certificates 428 Where required, table 426, 427 Dollar Exchange 44 Douglas, W. H., of Arkell & Douglas — Quoted as to commission houses. . 245 Downs, William C, Commercial Attache — Explains insurance 437, 443, 450 On commission houses.. 255, 261, 277 "D. P.," Explained 489,497 Drafts, Foreign, or Bills of Exchange — Acceptance of 500 Accepted, Legal status of 501 Advances against, by bankers.... 512 Against letters of credit 464 Bankers' 474 Clean 473 Collection of, by bankers. . . . 477, 490 Copies of, required 475, 496 Definition of 474 Drawing, manner of 475, 491 Documentary 473, 488 Endorsements of 475 Examining goods before paying.. 497 Extensions of 501. First and Second of exchange 475, 496 Inland bankers, negotiating with 482 Instructions as to handling 488 Kinds of Forms, 31, 32, 33, 35. .. 36, 37, 38, 39 476, 478, 482, 488, 490, 49! Negotiating, through brokers... Objections by customers to 470 Past due accounts collected by.. 568 Responsibility of drawer of.... 486 Saleabilitv of, how affected .. 484, 485 Sale of, to bankers 477, 480 Security surrounding 485 Series of. Terms extended by.... 504 Sight 476, 496. 499 Time 477, 500 Drawback, Benefit of 413 Duties — Advertising matter, subject to... 238 Imposed on basis of weight 367 Insurance of 445 Packing as affected by 367 Rates of, difficulty in estimating. . 429 Samples, subject to 191 Embargoes, export and import 346 Endorsements — Of foreign drafts 475 On .steamship bills of lading.... 418 English Language — Where spoken. 119 Escher, Franklin, Author Explains financing through banks 505 On foreign exchange business. . 478 Quoted on international finance. 475 Europe, Markets of Characteristics of trade in.... 69, 76 500 494 PAGE Europe, Markets of — continued Commission house business in 247, 253 Open accounts with 468 Expenses of Traveling Salesmen. . . 190 Export Commission Houses — See Commission Houses. Export Department — Location of 103, 104 Office systems for 108 Specialized attention necessary. . 96 Export Manager, The New York agent as 104, 485 Salary of 103 Training and qualities of 97 Export Managers, Combination 105 "Export Teclinik," German Text Books — Praises American packing 351 "Export Trade Directory" — Commission houses named in.... 243 Insurance companies named in. . 433 Steamship services named in 392 "Expositions." American 57, 313 Express Checks, as funds 183 Expresses, Foreign 402 "E. ols — Monetary 95 Shipping 375 Tariffs, Foreign 429 Terms. See Payment. Theft. See Pilfering "Theory and Practice of Commerce" Outlines international payments. . 508 Quoted as to insurance claims. . . 455 Times, London Newspaper — Quoted as to German goods 65 Ton, Shipping, Defined 397 Trade Marks, foreign 70 Trade Papers — American export 197 European export 207 General foreign 207 Translations — Americanisms cannot be translated 229 Costs of 120 How obtained 120, 200 Languages commonly requiring. . 117 Printers, by 225 Quality of 120 I'ransshipment — Freight rates influenced by. . . .53, 394 Notification of 418 Packing as affected by 356 INDEX 529 Traveling Salesmen — Baggage carried by 188 Careers as 162, 169 "Combination" ....57, 175, 177, 179 Commission houses, work with . . 271, 273 Conditions encountered bj- 161, 173, 187 Credentials, desirable for 183 Credits extended by 160, 470 Documents to be carried by 182 Export managers as 101 Funds, how carried by 182 Licenses required of 193 Preparations for trips of 182 Principals' relations to 160 Qualities desirable in.. 159, 164, 171 Routes of 180 Samples of 185, 188, 191 Selection of 159, 160, 164, 171 Training of 170 When to employ 10, 158 Trust Receipt, Explained 498 Underwriters, Insurance 435 TJnited Einydom — Money of 91 Status of agents in 287 Weights and measures of 370 Yan, T W., Koken Barber Supply Co. Asserts salesmen need only Eng- lish 167 Statement as to long term credits 42 PAGE "IF. A." Defined 442 n'arranty, in M arine "Insurance. . .^ 449 Way Dill, Forwarder's, Form 11. . . . 404 Weiyht — Desirable, of cases 360 Duties on basis of 366 "Legal" defined 358 Net, Legal and Gross, explained. 367 Weights and Measurements — British 370 Calculating 369 Cases, Should be marked with. . 375 Catalogues should include 230 Cubic measure, how calculated.. 373 Freight rates per 397 Metric 370 Wholesalers, Doing Business With Often also retailers 88 Policy of 60 Wilson, Woodrow, President Statement as to export combina- tions 54 Wolfe, Archibald J., Special Agent Quoted as to long term credits.. 41 Statement on foreign branch banks 45 Wynian, W. F., Carter's Ink Co. — Advice as to follow-up letters.... 145 Characterizes export sales letters. 137 Opinion of export advertising. . . . 219 On character of correspondence.. 127 Statement as to export departments 97 7 6 14 6 This book is DUE on the last date stamped below NOV 2 1 193fK Y / HBr 1^1948 Torm L-9-10Hi-2,'31 H61 Hough - Practical exporting UC SOUTHERN REGIONAL LIBRARY FACILITY AA 001 008 299 RBR Juaa 6,1944 4^ergrad.U\^g^^_^_^^^ HF 30a3 UNIVERSITY of CAIJPORNI/ AT LOS ':'■■' VllsES