International Marketing Chapter 15

1
International MarketingChapter 15

• Exporting and Logistics Special Issues for
  Business

2
Introduction

• Exporting is an integral part of all
  international business
• Goods manufactured in one country and destined
  for another must be moved across borders to enter
  the distribution system of the target market
• It is important to be knowledgeable about the
  export and import documents, tariffs, quotas, and
  other barriers to the free flow of goods between
  countries
• The rules and regulations that cover the
  exportation and importation are discussed in this
  chapter

3
The Exporting Process
4
Export Restrictions
5
Determining Export Requirements

• 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

• In general, there are three steps to determine
  the proper Export Control Classification Number
  (ECCN) for the commodity to be exported as
  follows
• 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
• Compare the general characteristics of the
  product to the Commerce Control List and find the
  most appropriate product category
• 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

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Commerce Control List Example
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Example of Commerce Country Chart
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Red Flags
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Violations of Export Controls
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Import Restrictions

• 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

• Tariffs
• Exchange Permits
• Quotas
• Import Licenses
• Standards
• Boycotts
• Voluntary Restrictions

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Import Restrictions
1. Tariffs
Custom duties are based on value or quantity or a
combination of both and are classified as follows

• ad valorem duties, which are based on a
  percentage of the determined value of the
  imported goods
• specific duties, a stipulated amount per unit
  weight or some other measure of quantity and
• 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

To conserve scarce foreign exchange many
countries impose restrictions on the amount of
their currency they will exchange for the
currency of another country
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Import Restrictions (contd )
3. Quotas
Countries may also impose limitations on the
quantity of certain goods imported during a
specific period
4. Import Licenses
As a means of regulating the flow of exchange and
the quantity of a particular imported commodity,
countries often require import licenses
5. Standards
Health standards, safety standards, and product
quality standards are necessary to protect the
consuming public from imported
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Import Restrictions (contd )
6. Boycotts
A boycott is an absolute restriction against
trade with a country, or trade of specific goods
7. Voluntary Restrictions
Countries may themselves impose restrictions on
firms exporting to specific countries
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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
and miscellaneous charges to the named place of
debarkation
2. CF
(cost and freight) to a named overseas port. It
includes the cost of the 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 goods alongside the shipping
vessel. The buyer is responsible for the cost of
loading onto the vessel, transportation, and
insurance
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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 price includes 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 the buyers
concern.
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Getting Paid Foreign Commercial Payments
The five basic payment arrangements for exported
goods include

• Letters of Credit
• Bills of Exchange
• Cash In Advance
• Open Accounts
• Forfaiting

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Letter of Credit
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Export Documents

• 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

• Export Declarations
• Consular Invoices or Certificates of Origin
• Bill of Lading
• Commercial Invoice
• Insurance Policy or Certificate, and
• Licenses

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Export Documents
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Customs-Privileged Facilities

• 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

• Foreign trade zones (also known as free trade
  zones)
• Free ports, and
• In-bond arrangements or Maquliadoras

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Logistics and Physical Distribution Activities

• Logistics management refers to all activities
  involved in physically moving raw material,
  in-process inventory, and finished goods
  inventory from the point of origin to the point
  of use or consumption
• 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

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Foreign Freight Forwarder

• 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

• 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