UBI-GM-Presentation15.050112-place pps

Export Restrictions• Export regulations may be designed to conserve scarce goods for home consumption or to control the flow of strategic goods to actual or potential enemies • Export

Exporting and Logistics: Special Issues for Business

Chapter 15

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc All rights reserved.

PowerPoint presentation prepared by:

Alfred Lowey-BallAssociate Professor of MarketingUBI-United Business InstitutesBrussels, Belgium

Chapter Outline

• Austin Inc.: Export of a paper converting machine

• Export restrictions

• Determining export requirements—licenses

• Electronic support for export licensing

• Import restrictions

• Exchange permits Boycotts

• Quotas Voluntary restrictions

• Import licenses Other restrictions

• Terms of Sale

• Foreign commercial payments

• Letters of credit Open accounts

• Bills of exchange Forfeiting

• Determining export requirements—licenses

• Electronic support for export licensing

• Import restrictions

• Exchange permits Boycotts

• Quotas Voluntary restrictions

• Import licenses Other restrictions

• Terms of Sale

• Foreign commercial payments

• Letters of credit Open accounts

• Bills of exchange Forfeiting

Chapter Learning Objectives

1 How the U.S government helps exporters

2 Steps necessary to move good across borders

3 How various import restriction are used politically

4 Reducing import taxes to remain competitive

5 Instruments of foreign commercial payments

6 Export documents and their importance

7 The Problems of the physical movement of goods

distribution system of the target market

You must be knowledgeable about the export/import documents, tariffs, quotas, and other barriers required for the flow of goods between countries

The rules and regulations that cover export and import are discussed in this chapter

The Exporting Process

Export Restrictions

• Export regulations may be designed to

conserve scarce goods for home consumption

or to control the flow of strategic goods to

actual or potential enemies

• Export regulations may be designed to

conserve scarce goods for home consumption

or to control the flow of strategic goods to

actual or potential enemies

• To comply with various regulations, the

exporter may have to acquire export licenses or permits from the home country

• To comply with various regulations, the

exporter may have to acquire export licenses or permits from the home country

• To alleviate problems of exporting, the

Department of Commerce has published a

revised set of export regulations known as the Export Administration Regulations (EAR)

• To alleviate problems of exporting, the

Department of Commerce has published a

revised set of export regulations known as the Export Administration Regulations (EAR)

Determining Export Requirements

• In general, there are three steps to determine the proper Export Control

Classification Number (ECCN) for the commodity to be exported as follows:

1 If you are the exporter of the product but not its manufacturer, you can

contact the manufacturer or developer to see if they already have an ECCN

2 Compare the general characteristics of the product to the Commerce Control

List and find the most appropriate product category

3 The third step is to consult the Commerce Country Chart (CCC), to (Exhibit

15-to determine the reason(s) for control associated with your item

• A general license permits exportation of certain products that

are not subject to EAR control with nothing more than a

declaration of the type of product, its value, and its destination

• A general license permits exportation of certain products that

are not subject to EAR control with nothing more than a

declaration of the type of product, its value, and its destination

• A validated license, issued only on formal application, is a

specific document authorizing exportation within specific

limitations designated under the EAR

• A validated license, issued only on formal application, is a

specific document authorizing exportation within specific

limitations designated under the EAR

• Import regulations may be imposed to protect health, conserve

foreign exchange, serve as economic reprisals, protect home industry, or provide revenue in the form of tariffs

• Import regulations may be imposed to protect health, conserve

foreign exchange, serve as economic reprisals, protect home industry, or provide revenue in the form of tariffs

• The most frequently encountered trade restrictions include:

• The most frequently encountered trade restrictions include:

• a compound duty, which combines both specific and ad valorem taxes on a particular

item, that is, a tax per pound plus a percentage of value

1 Tariffs: Custom duties are based on value or quantity or a combination of

both and are classified as follows:

Custom duties are based on value or quantity or a combination ofboth and are classified as follows:

To conserve scarce foreign exchange many countries impose restrictions on

Import Restrictions (contd …)

3 Quotas: Countries may also impose limitations on the quantity of certain

goods imported during a specific period

Countries may also impose limitations on the quantity of certaingoods imported during a specific period

Health standards, safety standards, and product quality standards are necessary

to protect the consuming public from imported

Health standards, safety standards, and product quality standards are necessary

to protect the consuming public from imported

Import Restrictions (contd …)

6 Boycotts: A boycott is an absolute restriction against trade with a country,

or trade of specific goods

A boycott is an absolute restriction against trade with a

Terms of Sale

1 CIF (cost, insurance, freight) to a named overseas port of import It

includes the costs of goods, insurance, and all transportation andmiscellaneous charges to the named place of debarkation

(cost, insurance, freight) to a named overseas port of import Itincludes the costs of goods, insurance, and all transportation andmiscellaneous charges to the named place of debarkation

2 C&F (cost and freight) to a named overseas port It includes the cost of

the goods and transportation costs to the named place ofdebarkation The cost of insurance is borne by the buyer

(cost and freight) to a named overseas port It includes the cost ofthe goods and transportation costs to the named place of

debarkation The cost of insurance is borne by the buyer

3 FAS (free alongside) at a named U.S port of export The price

includes cost of goods and charges for delivery of the goodsalongside the shipping vessel The buyer is responsible for thecost of loading onto the vessel, transportation, and insurance

(free alongside) at a named U.S port of export The priceincludes cost of goods and charges for delivery of the goodsalongside the shipping vessel The buyer is responsible for thecost of loading onto the vessel, transportation, and insurance

Terms of Sale (contd )

4 FOB (free on board) at a named inland point, at a named port of

exportation, or at a named vessel and port of export The priceincludes the cost of the goods and delivery to the place named

(free on board) at a named inland point, at a named port ofexportation, or at a named vessel and port of export The priceincludes the cost of the goods and delivery to the place named

5 EX (named port of origin) The price quoted covers costs only at the

point of origin (example, EX Factory) All other charges are thebuyer’s concern

(named port of origin) The price quoted covers costs only at thepoint of origin (example, EX Factory) All other charges are thebuyer’s concern

Getting Paid: Foreign Commercial Payments

• Each export shipment requires many documents to satisfy

government regulations controlling exporting as well as to meet requirements for international commercial payment

• Each export shipment requires many documents to satisfy

government regulations controlling exporting as well as to meet requirements for international commercial payment

The most frequently required documents are:

Customs-Privileged Facilities

1 Foreign trade zones (also known as

free trade zones)

2 Free ports, and

3 In-bond arrangements or

Maquliadoras

• To facilitate export trade, countries designate areas called

customs-privileged facilities, where goods can be imported for storage and/or processing with tariffs and quota limits

postponed until the products leave the designated areas

• To facilitate export trade, countries designate areas called

customs-privileged facilities, where goods can be imported for storage and/or processing with tariffs and quota limits

postponed until the products leave the designated areas

Customs-Privileged Facilities include:

Logistics and Physical Distribution Activities

1 Logistics management refers to all activities

involved in physically moving raw material, process inventory, and finished goods inventory from the point of origin to the point of use or consumption

in-2 A physical distribution system involves:

(1) transportation mode (2) inventory quantities, and (3) packing

3 A decision involving one activity affects the cost

and efficiency of one or all others

4 Total cost of the system is defined as the sum of the

costs of all these activities

5 It is important to reduce the total cost instead of

reducing the cost of each component of the logistics system

Foreign Freight Forwarder

• The foreign freight forwarder arranges for the shipment of

goods as the agent for an exporter

• The foreign freight forwarder arranges for the shipment of

goods as the agent for an exporter

• The forwarder is an indispensable agent for an exporting firm

that cannot afford an in-house specialist to handle paperwork and other export trade mechanics

• The forwarder is an indispensable agent for an exporting firm

that cannot afford an in-house specialist to handle paperwork and other export trade mechanics

• A freight forwarder double-checks all assumptions made on

the export declaration, such as commodity classifications, and will check the list of denied parties and end uses

• A freight forwarder double-checks all assumptions made on

the export declaration, such as commodity classifications, and will check the list of denied parties and end uses

Export of a paper converting machine

February 3: Trade Show and order

March 3: Financing

July 3: Import license and letter of credit

August 1: Closing the deal September 4: Production and shipment

Export of a paper machine (cont’d)

November 1: Letter of credit

July 2: Final inspection & shipping schedules

December 13: The Test run

January 2: It’s on the way