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being members of the American Provision Export Corporation, it can be readily seen that in point of numbers about 84 per cent of the firms engaged in exporting meat products are doing so independently of any external influence or assistance. If the aforementioned 11 members of the American Provision Export Corporation are included, the importance of the “small” packer in our export trade is quite apparent.
Not all in this group of exporters have established agencies in foreign countries, as quite a few do business through export brokers or sell spasmodically to foreign buyers, depending upon freight forwarders to handle the transportation for them. This group of exporters may therefore be divided into two classes——those doing a steady foreign business through foreign agents and those selling for export their surpluses as they accumulate.
An organization intended specifically for the purpose is not necessary to do an export business in meat products. Any American packing house having Federal inspection can, with its existing organization, inaugurate and build up an export trade. The plan is comparatively simple. One may, of course, engage in export trade by selling products on an f. o. b. plant basis to export brokers or dealers, as previously mentioned, but, disregarding this as being rather too indirect to be strictly called export, a packer may still adopt a very simple course. At the beginning connections should be established with two or three domestic brokers of packing-house products having foreign connections. By offering surpluses through more than one broker the packer has a wider outlet and is able to secure competitive bids. Having come to an agreement with the brokers as to commissions and territory in which the products are to be offered, the packer should offer his surplus on either a c. and f. or c. i. f. basis, preferably the latter.
In order to quote in the manner suggested, the packer's representative should inform himself of the extent of his liability under such contracts. For instance, when a sale on a c. and f. basis is made the packer must consider that he is bound to make the freight contract and pay or allow charges sufficient to carry goods to the agreed destination and to deliver to the buyer or his agent clean bills of lading to the agreed destination, and he must also assume all risk of damage to or loss of the goods until they have been delivered to the carrier and a clean bill of lading obtained. The liability of the packer is limited to the foregoing in such a sale and the buyer's responsibility then begins. The buyer must take out all insurance and be responsible for loss or damage after the above requirements have been met by the packer; he must handle all subsequent movement of the goods, delivery, costs of discharge, lighterage, and landing at foreign ports, and assume the payment of all foreign taxes, customs, duties, and wharfage charges. In all sales it is suggested the packer make clear in his contract that consular fees for legalizing invoices, stamping bills of lading or other documents required by the laws of the country of destination are to be paid by the buyer and are not included in his prices.
When the packer's business becomes of such magnitude that it may be carried on directly through foreign agents, a judicious selection of agents will result in a saving of both money and trouble later on.
The Bureau of Foreign and Domestic Commerce maintains a care. fully selected list of agents and purchasers of meats and meat products in foreign countries and has representatives in those countries whose assistance and advice may be secured in such selection. The packer should avoid selecting an agent who is also agent for a firm handling competing products, and he should not permit his agent to act in the capacity of agent and buyer. The reasons for this are quite obvious. An agent representing more than one meat exporter is enabled to “play one against the other.” If then he is permitted to buy for his own account he will garner the most profitable business for himself. To guard against this, a principal may compel disclosure of the agent's buyer and make out documents in buyer's name to be transmitted through the agent for buyer upon payment of draft.
A general commission of 1 per cent on sales is paid overseas agents, but 2 per cent is generally allowed on consignments.
If one's domestic business is of such proportions that an immediate sale of the surplus can not be profitably made and such a condition is continuous, then, and only then, should a consignment business be developed.
A consignment trade, while expediting sales by permitting the foreign importer or broker to.buy from day to day for his immediate needs and to take advantage of variations in exchange, may, unless skillfully managed, react to the owner's disadvantage. The mere fact of having these stocks in a foreign country compels the owner to dispose of them at the prevailing price in order that warehousing, insurance, and other charges shall not eat up the profit.
The people of the United States have voiced their opposition to monopolies and combinations in restraint of trade by passage of the Sherman antitrust law. This law was designed to prevent merging of interests which might through their size be able to control distribution and prices or, in other words, to restrict competition.
In contrast to this policy several European countries, notably Great Britain and Germany, encourage a combination of interests in large companies, thinking that by so doing the units thus created are enabled to more efficiently produce and market with smaller overhead charges and less waste. They are also able largely to control prices of their exportable surpluses. From the standpoint of those countries producing major portions of the world's requirements of certain commodities, such a policy is undoubtedly the correct one, but countries competing in international trade with the former are at a disadvantage when their laws prohibit similar agreements. In order to place American exporters on the same basis as their competitors Congress passed the Webb-Pomerene law, which traversed the powers of the Sherman law in so far as it referred to export trade and a part of the Clayton Act. This law is commonly referred to as the export trade act, and its primary purpose is to facilitate the export of American goods. “Associations operating under this law may be either incorporated or unincorporated, but it has been found that most associations incorporate under State laws.
Among the advantages of associations under the Webb-Pomerene Act may be mentioned: Reduction of overhead through joint advertising, selling, and pooling of administrative expense; securing of valuable exclusive representation; rapidity in filling orders through distribution of such orders among several members; and the securing of all-year-round markets for commodities which in this country may be limited to seasonal sales.
To contrast with these advantages are certain equally manifest disadvantages. Unlike a large organization with branches all over the country, such corporations are composed largely of firms whose export trade must be handled from a single plant. All such plants are not situated in the same city, so possibly of disagreement over allotment of more profitable business is present. For instance, assume a certain maximum amount of business for a corporation of this character and an allotment of it among the members according to capacities or on whatever basis may be agreed upon. A certain amount of the business is, of course, more profitable than the rest. Should this business be apportioned to those nearest export ports where more favorable railroad rates are obtainable or should it be allotted those farther west? Then, again, when business is secured which permits of handling only through eastern manufacturers by reason of its narrow margin of profit, a question might then arise as to whether or not this comparatively unprofitable trade is to be chargeable against that particular firm's allotment. It may again happen that a firm has business allotted which through lack of supplies can not be handled. Again, some firms may secure business during the rise and the allotment of others come during the fall of market prices. These are some of the possibilities for dissension in a corporation operating under the provisions of the WebbPomerene law.
Twenty-two concerns in the meat industry have combined into two groups, each group containing 11 members. One group, the American Provision Export Corporation, is in operation, while the other, the National Provision Export Corporation, is inactive. Each group has established a central office which controls the shipments and export affairs of the group. However, the firms which joined these groups had been engaged in export trade in the British Isles for some years and their trade-marks and brands had become firmly established. Not being willing to surrender this good-will asset, the groups confine their activities to sales in continental European countries.
These groups have established agencies in all continental European countries and at times ship their products on a consignment basis to the agents, at the same time drawing upon them for 90 per cent or the full amount of the sale, the drafts being discounted immediately by American banks. As in the case of the larger concerns, the banks rely upon the shipper to protect them in the event the draft is not accepted. The agents employed are generally natives of the country and operate on a commission basis within certain prescribed territorial limits. When a bid is received in the Chicago office, the price of the product is figured, together with all charges, and a cable reply sent either accepting or rejecting it; if the latter, a counteroffer is made. These corporations quote in foreign units on the basis of dollars, and when a sale is made in a foreign currency a sufficient
amount of this currency to cover the sale is immediately sold for dollars. In this way the exporter is protected against exchange declines. .
All members in the group are called upon to ship on consignment to the different markets. At the time the shipment is made the head office is charged; when the sale is effected a credit is entered in the name of the shipper. In the case of c. i. f. sales the bill of lading is always attached to the draft, together with the United States Bureau of Animal Industry certificate, consular invoice, etc., and the papers sent to the foreign bank for collection. They are not to be released until payment is made. When, as will sometimes happen, the papers are late in arriving, the importer may go to the bank and have it guarantee payment upon delivery of bill of lading. The importer then takes this bank guarantee to the steamship company, which releases the goods and accepts the bank guaranty in lieu of the bill of lading. When the papers arrive the importer generally accepts them and pays the draft. However, it has happened that an untoward turn of the market has caused irresponsible importers to refuse acceptance of the draft. The exporter then must either grant a concession in price or sue for the amount of the draft. Experiences such as this have made the American exporter wary, and where a repeat sale is made by the foreign agent to concerns guilty of such acts the exporter requests the agent to guarantee immediate payment of the draft without recourse, or, as is sometimes called, a " del credere” (broker guaranty). For this guaranty the exporter is charged a certain fee; consequently he generally attempts to avoid the del credere by a careful selection of agents.
Shipments from members in these export groups are usually prorated according to productive capacity, but this is not always the practice. There may be times when one producer has a surplus of a particular product and another a surplus of another product. In these cases the orders are allotted those who have surpluses on hand. All consignments to agents are shipped under a three days' sight draft and the agent finances the transaction, the market loss or gain being for account of the seller.
LARGE PACKERS AS EXPORTERS
The larger packers, whose volume of business necessitates a large exportation to balance domestic distribution, soon learned that in order to protect their foreign trade it would be necessary either to develop their own branches in the important centers or in some other way to control the operations of their foreign representatives, if these representatives were not an integral part of the parent organization. At the present time the larger concerns and many small ones have their own distributing companies and agencies in the more important countries of the world, the foreign business being conducted through a network of selling agencies in these countries. Some are and some are not integral parts of the American companies; quite a few are firms which sell the products of American packing houses on a commission basis, thus functioning as commission merchants, while others are merely brokers. There are three main classes of foreign distributive agencies used by the large packers-(1) those which are an integral part of the American concern and are called “branches,” (2) those which handle products on a commission basis and are known as “foreign agents,” and (3) “brokers” who sell under definite contracts with their American principles.
The size of the foreign branches depends to a great extent on the amount of business done in that particular community, but in general there is a manager, salesmen, clerical force, and other personnel necessary to effect distribution. In those cases where the extent of the trade justifies, stocks of goods and facilities for storing them are maintained. Because of the length of time required in shipping goods to branches from the producing plants in the United States, it is necessary to carry stocks of lard and smoked and cured meats sufficient at least to take care of immediate needs.
The main office of these branches customarily is located in one of the large cities, usually a strategic place for directing operations, its manager being responsible to the parent organization. Only rarely are branches equipped with their own warehouses, and then they are located in centers where the business is so continuous and large as to justify the overhead expense. In most instances the stock is stored in public warehouses and drawn upon as sales are made.
Operations on the European continent at present center around Hamburg as the principal distribution center for Germany and central Europe. At present, when a large transshipment business is carried on, usually through Hamburg agents with central European countries, stocks are stored outside the customs areas in the free ports as described below and later reshipped to other distribution centers. The goods are shipped to Hamburg and then reconsigned to Austria, Czechoslovakia, Poland, or elsewhere, either on order or to replenish supplies. This custom is followed in order that duties may not be paid on products unnecessarily. Hamburg is a free port to which goods may be shipped, stored, and reshipped without being subject to tariff regulations. Goods entering a country from a free port for consumption are treated as ordinary imports. There are free ports at Hamburg, Bremen, Danzig, Rotterdam, Amsterdam, and Copenhagen, each of which has its own rules as to how far the customs regulations may be legally traversed.
Reports on stocks held in the various centers are usually fowarded each week and consignments are made on the basis of these reports and on the recommendation of the foreign agent. It sometimes happens that the parent organization has on hand a surplus of certain meats which it ships on consignment to the foreign agent for disposal at the market price.
The packer seeks to avoid future sales so far as possible, as this business is hazardous from the standpoint of both buyer and seller, and consignments take on the nature of future sales, since the principal is never sure of his market until the products have been disposed of.
The branches, after receiving cabled c. i. f. quotations from the home exporter, compute the handling and landing charges and requote to interior agents. When an acceptable offer is made the branch house issues a release order to the broker or agent, who delivers the goods to the customer.