What Are Exports? Definition, Benefits, and Examples

What Is an Export?

Exports are goods and services manufactured or provided by businesses in one country and sold or traded in another. Exports, along with imports, make up international trade. Instead of confining themselves within their geographical borders, countries often intentionally seek external markets around the world for commerce, achieving greater revenue and transactional opportunities.

Understanding Exports

Exports are incredibly important to modern economies because they offer people and firms many more markets for their goods. One of the core functions of diplomacy and foreign policy between governments is to foster economic trade, encouraging exports and imports for the benefit of all trading parties.

Export agreements are often heavily strategic, with countries exchanging agreements to ensure their own country can not only receive the goods they need via imports but can distribute goods for more domestic revenue via exports.

Also, governments may use exports as leverage over political situations. In response to the war in Ukraine, the White House issued an executive order prohibiting both the importation and exportation of certain goods to and from Russia.

A country's net exports is the difference between the dollar value of its total exports minus its total imports. Because net exports are a component of a country's gross domestic product (GDP), exports play a factor in determining a country's financial and economic well-being.

Goods may be sent via direct exporting or indirect exporting. Direct exporting entails working directly with an importer. The exporting company handles all of the client communication; as a result, they do not pay a middleman fee.

Because the direct export method may require teams with specialized knowledge, many companies opt to contract out a third party to facilitate an indirect export.

The Export Process

Most countries actively seek out overseas trading partners. Instead of blindly manufacturing goods and hoping for an international buyer, the export process may start with a deal between two governments to facilitate cross-border trade.

Once an order is placed, the seller in the exporting country must receive clearance from their home government to export goods. This may entail obtaining an export license or meeting other country-specific regulations.

The buyer and exporter must settle several financial matters before shipping the goods. First, the exporter may require a letter of credit from the importer to ensure that they receive compensation. They will also decide who is responsible for the costs of shipping and insurance from the country of origin to the destination.

They will also fix the exchange rate for the conversion from foreign currency to the home currency. Once all is agreed, the exporter will issue an invoice to finalize the sale.

As the order is prepared, formal documents are gathered, including a permit issued by the importer's country, financial documents, such as a bill of lading, and shipping documents. Once received, the importer will also be responsible for paying any duties or tariffs of the destination country.

Trade Barriers and Other Limitations

A trade barrier includes any government law, regulation, policy, or practice that is designed to protect domestic products from foreign competition or to artificially stimulate exports of particular domestic products.

The most common foreign trade barriers are government-imposed measures and policies that restrict or impede the international exchange of goods and services. These can include tariffs on imported goods or export restrictions on sensitive technologies.

Trade barriers present a unique set of challenges. Exporters may incur extra costs to research foreign markets and modify products to meet local regulations.

Companies that export are typically exposed to a higher degree of financial risk. Payment collection methods, such as open accounts, letters of credit, prepayment, and consignment, are inherently complex and take longer to process than payments from domestic customers.

Advantages and Disadvantages of Exports

Advantages

Companies export products and services for a variety of reasons. Exports can increase sales and profits if the goods create new markets or expand existing ones. They may even present an opportunity to capture significant global market share. Companies that export spread business risk by diversifying into multiple markets.

Exporting into foreign markets can often reduce per-unit costs by taking advantage of economies of scale. Finally, companies that export to foreign markets gain new knowledge and experience that may allow the discovery of new technologies, marketing practices, and insights into foreign competitors.

Disadvantages

To export goods, countries may need to incur high transportation costs and the risk of loss due to the transportation of goods. If ownership of the goods does not pass to the buyer until the goods are received, this may make the exportation unduly risky for the exporter.

Because of logistical and economic constraints, small and medium-sized businesses or governments may find difficulty in exporting goods. In addition, smaller companies often do not have the in-house personnel needed to potentially navigate international trade regulations.

Exporting of goods is much more common for larger bodies with greater resources to seek out these outside markets.

Last, exporting to foreign countries may result in currency risk. Depending on exchange rate agreements at the time of contract, a foreign currency's worth may deteriorate, negatively affecting an exporter.

Consider when one currency strengthens against another; if the exporter is to be paid in the currency whose value has depreciated, their export may be devalued. This devaluation may also occur based on extenuating tariffs or lower export prices.

Example of Exports

The United States is one of the top exporters of automotive vehicles. In addition to producing for the local market, U.S.-made cars are sold and shipped around the world to non-U.S. entities.

In 2024, the Observatory of Economic Complexity reported that the U.S. exported $59.2 billion of vehicles around the world. The U.S. distributed over $15.5 billion worth of vehicles to Canada, making up 26% of car exports. Other top importers of U.S.-made vehicles were Germany, China, the United Arab Emirates, and Mexico.

The U.S. was also the top importer of vehicles in 2024. It imported $217 billion of cars, most of from Mexico, Japan, South Korea, and Canada.

BMW Manufacturing led domestic companies by the value of cars exported. In 2024, the group's South Carolina plant alone exported over 225,000 vehicles with a total value of over $10 billion.

The Bottom Line

An export is a good that is produced domestically but sold to a consumer overseas. Exporting goods can have advantages and disadvantages for both the producer and the countries in which they do business.

Due to resource constraints, economic policy, and manufacturing strategies of each country, it sometimes makes more sense for countries to make goods to sell for revenue as opposed to retaining them for consumption.