Chapter – VI

Pricing and Terms of Payment

In any country, three basic factors determine the boundaries within which
market prices should be set. The first is product cost, which establishes a
price floor, or minimum price. Although it is certainly possible to price a
product below the cost boundary, few firms can afford to do this for
extended periods of time. Second, competitive prices for comparable
products create a price ceiling, or upper boundary. Apart from these in
international marketing, a firm's costs of doing business vary widely by
county. Differences in transportation charges and tariffs cause the landed
price of goods to vary by country. Differences in distribution practices also
affect the final price the end consumer pays. If an exporter's home country
rises in value, the exporter must choose between maintaining its prices in
the home currency and maintaining its prices in the host country.
International marketer must consider these factors in developing their
pricing policies for each national market they serve. They must decide
whether they want to apply consistent prices across all those markets or
adapt prices to meet the needs of each. In reaching this decision, they must
remember that competition, culture, channels of distribution, income levels,
and legal requirements, and exchange rate stability may vary widely by
country. In addition, in price setting cognizance must be taken of
government tax policies, resale prices, dumping problems, transportation
costs, and middlemen and so on. International competition almost always
puts pressure on the prices of domestic companies. A widespread effect of
international trade is to lower prices. Indeed, one of the major benefits to a
country of international business is the favorable impact of international
competition on national price levels and, in turn, on a country’s rate of
inflation. Between the lower and upper boundaries for every product there
is an optimum price, which is a function of the demand for the product as
determined by the willingness and ability of customers to buy. As the gray
marketing example illustrates, however, sometimes the optimum price can
be affected by arbitrageurs, who exploit price differences in different
countries.

Basic International Pricing Concepts

As the experience of many companies show, the global manager must
develop pricing systems and pricing policies that address price floors, price
ceilings, and optimum prices in each of the national markets in which his or
her company operates.
The task of determining prices in global marketing is complicated by
fluctuating exchange rates, which may bear only limited relationship to
underlying costs. According to the concept of purchasing power parity,
changes in domestic prices will be reflected in the exchange rate of the
country's currency. Thus, in theory, fluctuating exchange rates should not
present serious problems for the global marketer because a rise or decline
in domestic price levels should be offset by an opposite rise or decline in the
value of the home-country currency and vice versa. In the real world,
however, exchange rates do not move in lockstep fashion with inflation. This
means that global marketers are faced with difficult decisions about how to
deal with windfalls resulting from favorable exchange rates, as well as
losses due to unfavorable exchange rates.

A firm's pricing system and policies must also be consistent with other
unique global constraints. Those responsible for global pricing decisions
must take into account international transportation costs, middlemen in
elongated international channels of distribution, and the demands of global
accounts for equal price treatment regardless of location. In addition to the
diversity of national markets in all three basic dimensions-cost, competition,
and demand-the international executive is also confronted by conflicting
governmental tax policies and claims as well as various types of price
controls. These include dumping legislation, resale price maintenance
legislation, price ceilings, and general reviews of price levels. For example,
Procter & Gamble (P&G) encountered strict price controls in Venezuela in
the late 1980. Despite increases in the cost of raw materials, P&G was
granted only about 50 percent of the price increases it requested; even
then, months passed before permission to raise prices was forthcoming. As
a result, by 1988 detergent prices in Venezuela were less than what they
were elsewhere.

Environmental Influences on International Pricing Decisions

1) Currency Fluctuations: Fluctuating currency values are a fact of life
in international business. The marketer must decide what to do about
this fact. Are price adjustments appropriate when currencies
strengthen or weaken? There are two extreme positions; one is to fix
the price of products in the currency of target country. If this is done,
any appreciation or depreciation of the value of the currency in the
country of production will lead to gains or losses for the seller. The
other extreme position is to fix the price of products in home country
currency. If this is done, any appreciation or depreciation of the
 home-country currency will result in price increases or decreases for
customers with no immediate consequences for the seller.

In practice, companies rarely assume either of these extreme positions.

Pricing decisions should be consistent with the company's overall business
and marketing strategy: If the strategy is long term, then it makes no sense
to give up market share in order to maintain export margins. When
currency fluctuations result in appreciation in the value of the currency of a
country that is an exporter, wise companies do things. They may double
their efforts to reduce costs. In the short run, lower margins enable them to
hold prices in target markets, and in the longer run, driving down costs
enables them to improve operating margins.
2) Exchange Rate Clauses: Many sales are contracts to supply goods
or services over time. When these contracts are between parties in
two countries, the problem of exchange rate fluctuations and
exchange risk must be addressed. An exchange rate clause allows the
buyer and seller to agree to supply and purchase at fixed prices in
each company's national currency. If the exchange rate fluctuates
within a specified range, say plus or minus 5 %, the fluctuations do
not affect the pricing agreement that is spelled out in the exchange
rate clause. Small fluctuations in exchange rates are not a problem for
most buyers and sellers. Exchange rate clauses are designed to
protect both the buyer and the seller from unforeseen large swings in
currencies.
3) Pricing in an Inflationary Environment: Inflation, or a persistent
upward change in price levels, is a worldwide phenomenon. Inflation
requires periodic price adjustment. These adjustments are
necessitated by rising costs that must be covered by increased selling
prices. An essential requirement when pricing in an inflationary
environment is the maintenance of operating profit margins.
Regardless of cost accounting practices, if a company maintains its
margins, it has effectively protected itself from the effects of inflation.
4) Government Controls and Subsidies: If government action limits
the freedom of management to adjust prices, the maintenance of
margins is definitely compromised. Under certain conditions,
government action is a real threat to the profitability of a subsidiary
operation. In a country that is undergoing severe financial difficulties
and is in the midst of a financial crisis (e.g., a foreign exchange
shortage caused in part by runaway inflation), government officials
are under pressure to take some type of action.
Government control can also take the form of prior cash deposit
requirements imposed on importers. This is a requirement that a company
has to tie up funds in the form of a non-interest-bearing deposit for a
specified period of time if it wishes to import products. Such requirements
clearly create an incentive for a company to minimize the price of the
imported product; lower prices mean smaller deposits. Other government
requirements that affect the pricing decision are profit transfer rules that
restrict the conditions under which profits can be transferred out of a
country. Under such rules, a high transfer price paid for imported goods by
an affiliated company can be interpreted as a device for transferring profits
out of a country. Government subsidies can also force a company to make
strategic use of sourcing to be price competitive.
1) Competitive Behavior: As noted at the beginning of this chapter,
pricing decisions are bounded not only by cost and the nature of
demand but also by competitive action. If competitors do not adjust
their prices in response to rising costs, management even if acutely
aware of the effect of rising costs on operating margins-will be
severely constrained in its ability to adjust prices accordingly.
Conversely, if competitors are manufacturing or sourcing in a
lowermost country, it may be necessary to cut prices to stay
competitive.
2) Price and Quality Relationships: Is there a relationship between
price and quality? Do you, in fact, get what you pay for? During the
past several decades, studies conducted have indicated that the
overall relationship between price and quality as measured by
consumer testing organizations is quite weak. The authors conclude
that the lack of a strong price-quality relationship appears to be an
international phenomenon. This is not surprising when one recognizes
that consumers make purchase decisions with limited information and
rely more on product appearance and style and less on technical
quality as measured by testing organizations.

Global Pricing Policies

1) Standard Price Policy: An international marketer following a
geocentric approach to international marketing will adopt a standard
price policy. Under standard price policy the firm charges the same
price for its goods and services regardless of where they are sold.
Firms that adopt this policy are generally of two types: first, firms
whose products or services are highly visible and allow price
 comparisons to be readily made. Second, a firm that sells commodity
goods in competitive markets.
2) Two- Tiered Pricing Policy: An international firm that follows an
ethnocentric approach will use two-tiered pricing policy. Under two-
tiered pricing policy, the firm sets one price for all its domestic sales
and a second price for all its international sales. A firm that adopts a
two-tiered pricing policy commonly allocates to domestic sales all
accounting charges associated with research & development,
administrative overheads, capital depreciation, and so on. The
international marketer can then establish a uniform foreign sales
price without having to worry about covering these costs. Domestic
marketers that are just beginning to go international often use two-
tiered pricing policy. International marketers that adopt a two-tiered
pricing policy are also vulnerable to charges of dumping.
3) Market Pricing Policy: International marketers that follow a
polycentric approach to international marketing use market-pricing
policy. Market pricing policy is the most complex of the three pricing
policies and the one most commonly used. An international marketer
utilizing market pricing policy customizes its prices on a market - by -
market basis to maximize its profits in each market. Two conditions
must me bet if an international marketer is to successfully practice
market pricing:
 The firm must face different demand and / or cost conditions in
which it sells its products.
 The firm must be able to prevent arbitrage.

Assuming these conditions are met, the advantages of this polycentric

approach are obvious. For example, the firm can set higher prices where
markets will tolerate them and lower prices where necessary in order to
remain competitive. International marketers most likely to use this
approach are those that produce and market their products in many
different countries. A market pricing policy can, however expose a firm to
dumping complaints as well as to two other risks: Damage to its brand
name and Development of gray market for its products. Under each of these
policies, accompany may follow different pricing strategies which are
clarified below one by one.
1) Market Skimming: The market skimming pricing strategy is a
deliberate attempt to reach a market segment that is willing to pay a
premium price for a product. In such instances, the product must
create high value for buyers. This pricing strategy is often used in the
 introductory phase of the product life cycle, when both production
capacity and competition are limited. By setting a deliberately high
price, demand is limited to early adopters who are willing and able to
pay the price. One goal of this pricing strategy is to maximize revenue
on limited volume and to match demand to available supply. Another
goal of market skimming pricing is to reinforce customers'
perceptions of high product value. When this is done, the price is part
of the total product positioning strategy.
2) Penetration Pricing: Penetration pricing uses price as a competitive
weapon to gain market position. The majority of companies using this
type of pricing in international marketing are located in the Pacific
Rim. Scale-efficient plants and low-cost labor allow these companies
to blitz the market. It should be noted that a first-time exporter is
unlikely to use penetration pricing. The reason is simple: Penetration
pricing often means that the product may be sold at a loss for a
certain length of time. Companies that are new to exporting cannot
absorb such losses. They are not likely to have the marketing system
in place (including transportation, distribution, and sales
organizations) that allows global companies to make effective use of a
penetration strategy. However, a company whose product is not
penetrable may wish to use penetration pricing to achieve market
saturation before the product is copied by competitors.
3) Market Holding: The market holding strategy is frequently adopted
by companies that want to maintain their share of the market. In
single-country marketing, this strategy often involves reacting to price
adjustments by competitors. For example, when one airline announces
special bargain fares, most competing carriers must match the offer
or risk losing passengers. In global marketing, currency fluctuations
often trigger price adjustments. Market holding strategies dictate that
source country currency appreciation will not be automatically passed
on in the form of higher prices. If the competitive situation in market
countries is price sensitive, manufacturers must absorb the cost of
currency appreciation by accepting lower margins in order to
maintain competitive prices in country markets.
4) Cost Plus/Price Escalation: Companies new to exporting frequently
use a strategy known as cost -plus pricing to gain a toehold in the
global marketplace. There are two cost-plus pricing methods: The
older is the historical accounting cost method, which defines cost as
the sum of all direct and I indirect manufacturing and overhead costs.
An approach used in recent years is known as the estimated future
 cost method. Cost-plus pricing requires adding up all the costs
required to get the product to where it must go, plus shipping and
ancillary charges, and a profit percentage. The obvious advantage of
using this method is its low threshold: It is relatively easy to arrive at
a selling price, assuming that accounting costs are readily available.
The disadvantage of using historical accounting costs to arrive at a
price is that this approach completely ignores demand and
competitive conditions in target markets. Therefore, historical
accounting cost-plus prices will frequently be either too high or too
low in the light of market and competitive conditions. If historical
accounting cost-plus prices are right, it is only by chance. However,
novice exporters do not care-they are reactively responding to global
market opportunities, not proactively seeking them. Experienced
global marketers realize that nothing in the historical accounting cost-
plus formula directly addresses the competitive and customer-value
issues that must be considered in a rational pricing strategy. Price
escalation is the increase in a product's price as transportation, duty,
and distributor margins are added to the factory price.

Using Sourcing as a Strategic Pricing Tool against Price Escalation

Price escalation is the increase in a product's price as transportation, duty,
and distributor margins are added to the factory price. The global marketer
has several options when addressing the problem of price escalation. The
choices are dictated in part by product and market competition. Marketers
of domestically manufactured finished products may be forced to switch to
lower-income, lower-wage countries for the sourcing of certain components
or even of finished goods to keep costs and prices competitive.

The low-wage strategy option should never become a formula, however. The
problem with shifting production to a low-wage country is that it provides a
one-time advantage. This is no substitute for ongoing innovation in creating
value.

Dumping
Dumping is an important global pricing strategy issue. GATT's 1979
Antidumping Code defined dumping as the sale of an imported product at a
price lower than that nominally charged in a domestic market or country of
origin in addition, many countries have their own policies and procedures
for protecting national companies from dumping. There are several types of
dumping: sporadic, predatory, persistent, and reverse.
Sporadic dumping occur when a manufacturer with unsold inventories
warts to get rid of distressed and excess merchandise. To preserve its
competitive position at home, the manufacturer must avoid starting a price
war that could harm its home market. One way to find a solution involves
destroying excess supplies, as in the example of Asian farmers dumping
small chickens in the sea or burning them. Another way to solve the
problem is to cut losses by selling for any price that can be realized. The
excess supply is dumped abroad in a market where tee product is normally
not sold.

Predatory dumping is more permanent than sporadic dumping. This

strategy involves selling at a loss to gain access to a market and perhaps to
drive out competition. Once the competition is gone or the market
established, the company uses its monopoly position to increase price. Some
critics question the allegation that predatory dumping is harmful by
pointing out that if price is subsequently raised by the firm that does the
dumping, former competitors can rejoin the market when it becomes more
profitable again.

Persistent dumping is the most permanent type of dumping, requiring a

consistent selling at lower prices in one market than in others. This practice
may be the result of a firm's recognition that markets are different in terms
of overhead costs and demand characteristics. For example, a firm may
assume that demand abroad is more elastic than it is at home. Based on this
perception, the firm may decide to use incremental or marginal-cost pricing
abroad while using full-cost pricing to cover fixed costs at home. This
practice benefits foreign consumers, but it works to the disadvantage of
local consumers.

The three kinds of dumping just discussed have one characteristic in

common: each involves charging lower prices abroad than at home. It is
possible, however, to have the opposite tactic-reverse dumping. In order to
have such a case, the overseas demand must be less elastic, and the market
will tolerate a higher price. Any dumping will thus be done in the
manufacturer's home market by selling locally at a lower price.

Transfer Pricing
Transfer pricing refers to the pricing of goods and service bought and sold
by operating units or divisions of a single company. In other words, transfer
pricing concerns intra-corporate exchanges-transactions between buyers
and sellers that have the same corporate parent. As companies expand and
create decentralized operations, profit centers become an increasingly
important component in the overall corporate financial picture. Appropriate
intra-corporate transfer pricing systems and policies are required to ensure
profitability at each level. There are three major alternative approaches to
transfer pricing. The approach used will vary with the nature of the firm,
products, markets, and the historical circumstances of each case. The
alternatives are:
1) Cost-Based Transfer Pricing: Because companies define costs
differently, some companies using the cost-based approach may arrive
at transfer prices that reflect variable and fixed manufacturing costs
only. Alternatively, transfer prices may be based-on full costs,
including overhead costs from marketing, research and development
(R&D), and other functional areas. The way costs are defined may
have an impact on tariffs and duties on sales to affiliates and
subsidiaries by global companies. Cost-plus pricing is a variation of
the cost-based approach. Companies that follow the cost-plus pricing
method are taking the position that profit must be shown for any
product or service at every stage of movement through the corporate
system. While cost-plus pricing may result in a price that is
completely unrelated to competitive or demand conditions in
international markets, many exporters use this approach successfully.
2) Market-Based Transfer Price: A market based transfer price is
derived from the price required to be competitive in the international
market. The constraint on this price is cost. However, as noted
previously, there is a considerable degree of variation in how costs
are defined. Because costs generally decline with volume, a decision
must be made regarding whether to price on the basis of current or
planned volume levels. To use market-based transfer prices to enter a
new market that is too small to support local manufacturing, third-
country sourcing may be required. This enables a company to
establish its name or franchise in the market without committing to a
major capital investment.
3) Negotiated Transfer Prices: A third alternative is to allow the
organization's affiliates to negotiate transfer prices among
themselves. In some instances, the final transfer price may reflect
costs and market prices, but this is not a requirement. The gold
standard of negotiated transfer prices is known as an arm's-length
 price: the price that two independent, unrelated entities would
negotiate.

Cartels
A cartel exists when various companies producing similar products or
services work together to control markets for the types of goods and
services they produce. The cartel association may use formal agreements to
set prices, establish levels of production and sales for the participating
companies, allocate market territories, and even redistribute profits. In
some instances, the cartel organization itself takes over the entire selling
function, sells the goods of all the producers and distributes the profits. The
economic role of cartels is highly debatable, but their proponents argue that
they eliminate cutthroat competition and “rationalize” business, permitting
greater technical progress and lower prices to consumers. However, in the
view of most experts, it is doubtful that the consumer benefits very often
from cartels.

Sale and Forms of Payment in International Marketing

1) Terms of sale
Terms of sale or trade terms differ from country-to-country so international
chamber of commerce has come up with standard international trade terms.
International terms indicate how buyers and seller divide risks and
obligations and therefore, the costs of specific kinds of international trade
transactions. When quoting prices it is important to make them meaningful.
The most commonly used international trade terms include:
 CIF- (Cost, insurance, freight) to a named overseas port of import. A
CIF quote is more meaningful to the overseas buyer because it
includes the costs of goods, insurance and all transportation and
miscellaneous charges to the named place of debarkation.
 C&F-(cost and Freight) to named overseas port. The price includes
cost of goods and transportation costs to the named place of
debarkation. The cost of insurance is borne by the buyer.
 FAS- (Free Alongside) at a named port of export. The price includes
cost of goods and charges for delivery of goods alongside the shipping
vessel. The buyer is responsible for the cost of loading on to the
vessel, transportation and insurance.
 Ex (Named Port of origin) the price quoted covers costs only at the
point of origin (example ex factory). All other charges are buyers
concern.
It is important for the exporter to understand exactly the meanings of terms
used in quotations. A simple misunderstanding regarding delivery terms
may prevent the exporter from meeting contractual obligations or make that
person responsible for shipping costs, he or she did not intend to incur.

2) Forms of payment
The four basic forms of payment arrangement are practiced in international
marketing:
a) Letter of credit: Worldwide, letters of credit are very important
mode of payment. The letter of credit is an undertaking by a bank, so
the seller can look to the bank for payment instead of relying on the
ability of willingness of buyers to pay. Letters of credit shift the
buyer’s credit risk to the bank issuing the letter of credit. When a
letter of credit is employed the seller ordinarily can draw a draft
against the bank issuing the letter of credit and receive payments by
presenting proper shipping documents. Except for cash in advance
letters of credit afford the greatest degree of protection for the seller.
The Procedure for a letter of credit begins with completion of the
contract when the buyer goes to a local bank and arranges for the
issuance of a letter of credit, the buyer’s bank then notify its
correspondent bank in seller’s country that the letter has been issued.
After meeting the requirements set forth in the letter of credit the
seller can draw a draft against the credit (in effect, the bank issuing
the letter) for payment of the goods. The precise conditions of the
letter of credit require presentation of certain documents with the
draft before the correspondent bank will honor it.
b) Bills of exchange: - A bill of exchange is defined as an unconditional
order in writing, addressed by one person to another signed by the
person giving it requiring the person to whom it is addressed to pay
on demand or at a fixed or determinable future time, a certain sum in
money to, or to the order of a specified person or the bearer. The
exporter draws a bill of exchange on an overseas buyer or third party
as designated in the export contract for the sum agreed. When the
customer signs it, it becomes accepted and this means that the
customer has accepted the terms and agreed to pay by the date
designated in the document. In letters of credit, the credit of one or
more bank is involved and the seller risk is reduced considerably but
in the use of bills of exchange the seller assumes all risk until the
actual payment is received. Bills of exchange have one of three time
periods- sight, arrival or date. A sight draft requires acceptance and
 payment on presentation of the draft and often before arrival of the
goods. An arrival draft requires payment be made on arrival of goods.
Unlike the other two, a date draft has an exact date of payment and in
no way is affected by the movement of good. There may be time
designations placed on sight and arrival drafts stipulating a fixed
number of days after acceptance when the obligation must be paid
usually this period is 30 to 120 days, thus providing a means of
extending credit to the foreign buyer. For exporters a sight bill would
be preferred to a time bill, as it would delay payment once the goods
had already been delivered.
c) Cash payment in advance: Cash places unpopular burden on the
customer and typically is used where buyer is unknown or known to
be unstable and there is little likelihood of further orders being
requested and being paid for. It is also used when exchange
restrictions within the country of destination are such that the return
of funds from abroad may be delayed for an unreasonable period.
Usually, when the character of the merchandise is such that an
incomplete contract can result in heavy loss-like complicated
machinery or equipment manufactured to specification or special
design would necessitate advance payment which would be in fact a
non refundable deposit.
d) Open account: Sales on open accounts are not generally made in
foreign trade except to customers of long standing with excellent
credit reputations or to a subsidiary or branch of the exporter. As this
is based purely on trust, it offers the least security to the exporter. It
saves money and procedural difficulties but increases risk. It is
popular within EU.

Export Documents and Shipment

Each export shipment requires various documents to satisfy government
regulations controlling exporting as well as to meet requirements for
international commercial payment transactions. The most frequently
required documents are export declarations, consular invoices or
certificates of origin, bill of lading commercial invoices, and insurance
certificates. In addition documents such as import licenses, export licenses,
packing lists and inspection certificates for agricultural products are often
necessary. These documents are prepared by exporters or their freight
forwarders so that the shipment may pass through customs, be loaded on
the carries and sent to its destination. Principal export documents are as
follows: -
a) Export Declaration: - To maintain a statistical measure of the
quantity of goods shipped abroad and to provide a means of
determining whether regulations are being met, most countries
require shipment abroad to be accompanied by an export declaration.
Usually, such a declaration presented at the port of exit includes the
names and addresses of the principals involved, the destination of the
goods a full description of the goods and their declared value.
b) Bill of Loading: The bill of lading is the most important document
required to establish legal ownership and facilitate financial
transactions. It serves the following purposes (1) as a contract for
shipment between the carrier and shipper (2) as a receipt from the
carrier for shipment (3) as a certificate of ownership or title to the
goods. Bills of lading are issued in the form of straight bills, which are
non-negotiable and are delivered to a consignee. It may be explained
in a way that only the person stipulated in it may obtain the
merchandise on arrival. Order bills of lading are negotiable and can
be endorsed like a check. Bills of lading frequently are referred to as
being either clean or foul. A clean bill of lading means the items
presented to the carrier for shipment were properly packaged and
clear of apparent damage when received: a foul bill of lading means
the shipment was received in damaged condition and the damage is
noted on the bill of lading.
c) Commercial Invoice: Every international transaction requires a
commercial invoice. Commercial invoice is a bill for good sold stating
basic information about the transaction merchandise description, cost
of goods shipper and seller addresses and delivery and payment
terms. Commercial invoice for exports are similar to domestic invoices
but include additional information such as the origin of goods, export
packing marks and a clause stating not to divert goods elsewhere it is
one of the financial documents required in international commercial
payments.
d) Insurance policy or certificate: Insurance certificate is evidence
that insurance has been obtained to cover stipulated risks, during
transit. The risks of shipment due to political or economic unrest in
some countries and the possibility of damage from sea and weather
make it absolutely necessary to have adequate insurance covering
loss due to damage, war or riots. Typically the method of payment or
terms of sale require insurance on the goods so very few export
shipments remain uninsured. The insurance policy or certificate of
insurance is considered a key document in export trade.
e) Export/Import Licenses: In many countries for exporting/importing
goods the exporter/ importer require license. Export license is a
government document that permits the exporter to export designated
goods to certain destinations. Export licenses are of two kinds, they
are general export license and validate export license. General export
license is any export license covering export commodities for which a
validated export license is not required. It requires no formal
application. Most products can be exported under the general export
license for which no special authorization is necessary. Validated
export license is a required document issued by the government
authorizing the export of specified commodities validated export
license is a special authorization for a specific shipment and it is
issued only on formal application. In those cases where import
licenses are required by the country of entry a copy of the license or
license number is usually required to obtain a consular invoice.
f) Certificate of product origin: Certificate of product origin confirms
that the goods being shipped were produced in the exporting country.
The importing country may require this so that it can assess tariffs
and enforce quotas. Local chamber of commerce commonly issues this
document.
g) Inspection Certificates: Inspection certificates may be needed to
provide assurance that the products have been inspected and that
they confirm to relevant standards like absence of disease and pests.
Buyers of agricultural products, grain, foodstuffs and live animals
frequently require inspection certificates, before a country allows
goods to enter its borders. For example imported foodstuffs must
often meet rigorous standards regarding pesticides, cleanliness,
sanitation and storage.