Ch 15 Largescale Retail Store Law

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(No Transcript)
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Exporting and Logistics Special Issues for
The Small Business
Chapter
15
Why export regulations?
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Export Administration Regulations (EAR)

• A new country and commodity classification system
  has been devised, making it the exporters
  responsibility to select the proper
  classification number for an item to be exported.
• The exporter must decide if there are end-use
  restrictions on the items, such as their possible
  use in the development of nuclear, chemical, and
  biological weapons.
• The exporter now has the responsibility to
  determine the ultimate end customer and ultimate
  end uses, regardless of who may be the initial
  buyer, or face the legal consequences of doing
  business with unauthorized trading partners.
• A special category for the control of
  encryption-related products has been established.
  

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Export License
General License
15-7
Not subject to EAR control just declare value,
where its going and type of product
Validated License
Is subject to EAR control formal application
required
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Indicators for Possible Unlawful Diversion

• The customer or purchasing agent is reluctant to
  offer information about the end of a product.
• The products capabilities do not fit the buyers
  line of business for example, a small bakery
  places an order for several sophisticated lasers.
• The product ordered is incompatible with the
  technical level of the country to which the
  product is being shipped. For example,
  semiconductor-manufacturing equipment would be of
  little use in a country without an electronic
  industry.
• The customer has little or no business
  background.
• The customer is willing to pay cash for a very
  expensive item when the terms of the sale call
  for financing
• The customer is unfamiliar with the products
  performance characteristics but still wants the
  product.

15-10
Source Red Flag Indicators. Bureau of Export
Administration, http//www.hxa.doc.gov/Enforcemen
t/redflags.htm.
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Indicators for Possible Unlawful Diversion

• The customer declines routine installation,
  training, or maintenance services.
• Delivery dates are vague, or deliveries are
  planned for out-of-the-way destinations.
• A freight-forwarding firm is listed as the
  products final destination.
• The shipping route is abnormal for the product
  and destination.
• Packaging is inconsistent with the stated method
  of shipment or destination.
• When questioned, the buyer is evasive or unclear
  about whether the purchased product is for
  domestic use, export, or reexport.

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Source Red Flag Indicators. Bureau of Export
Administration, http//www.hxa.doc.gov/Enforcemen
t/redflags.htm.
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Terms of Sale
? 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. ? CF- (Cost and
Freight) to a named overseas port. The price
includes the costs of goods and transportation
costs to the named place of destination. The cost
of insurance is born to the buyer. ? FAS- (Free
Alongside) at a named U.S. port of export. The
price includes cost of goods and charges for
delivery of the goods alongside the shipping
vessel. The buyer is responsible for the cost of
loading onto the vessel, transportation, and
insurance.
All costs included in price to foreign
market All costs except Insurance to foreign
market All costs to US port, seller clears
goods for export and buyer loads
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Terms of Sale

• ? FOB- (Free on Board) at a named inland point of
  origin, at a named port of exportation, or at a
  named vessel and port of export. The price
  includes the cost of goods and delivery to the
  place named.
• ? EX- (Name Port of Origin). The price quoted
  covers costs only at the point of origin
  (example, EX Factory). All other charges are the
  buyers concern. Seller does not clear goods for
  export.

Seller pays until US port when they pass ships
rail Buyer responsible for all costs
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Getting PaidForeign Commercial Payments

• ? Letters of Credit
• ? Revocable
• ? Irrevocable buyer cant change it once
  seller has accepted it
• ? Bills of Exchange seller assumes risk until
  the buyer pays upon arrival of goods, date
  specified on dollar draft, or before arrival of
  goods
• ? Cash in advance for doubtful credit or part
  CIA
• ? Open Accounts for long-term relationships
• ? Forfaiting

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Export Payment Terms Risk/Cost Tradeoff
Risk to Exporter Least Risk_______________________
_____________________ Highest Risk Confirmed Ir
revocable Bank Bank Cash in Irrevocable Letter
of Collection Collection Open Advance Letter of
Credit Credit Sight Draft Time Draft Account Cost
to Buyer Highest Cost ___________________________
________________ Least Cost
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SOURCE Business America, February 1995.
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Export Documents
? Export Declaration ? Consular Invoice or
Certification of Origin ? Bill of
Lading ? Commercial Invoice ? Insurance Policy or
certificate ? Licenses ? Others ? Health
Certificates ? Packing Lists ? Etc.
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Customs-Privileged Facilities
Foreign Trade Zones
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• Goods can be stored, repackaged, etc. before
  being brought into the US
• Good to use when there are quota restrictions,
  when company wants to wait to pay the duties on
  goods or when the goods are being re-exported out
  of the country

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Types of transportation

• Ocean
• Air
• Railway
• Roadway (freight)
• Pipeline
• Intermodal

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Real Physical Distribution Costs Between Air and
Ocean Freight - Singapore to the United States
In this example, 44,000 peripheral boards worth
7.7 million are shipped from a Singapore plant
to the U.S. West Coast. Cost of capital to
finance inventories is 10 percent annually
2,109 per day to finance 7.7 million. Transpor
t costs 31,790 127,160 (in transit 21
days) (in transit 3 days) In-transit inventory
financing costs 44,289 6,328 Total
transportation costs 76,079
133,487 Warehousing inventory costs (60 days
_at_2,109/day) Singapore and U.S.
126,540 Warehouse rent 6,500 Real physical
distribution costs 209,119 133,487
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Ocean Air
SOURCE Adapted from "Air and Adaptec'c
Competitive Strategy,
International Business, September 1993, p.44.
Irwin/McGraw-Hill