Exporting and Importing
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Transcript of Exporting and Importing
Exporting and Importing
The Essentials
Exporting
Deciding to Export Is the product exportable?
o Legally exportable according to the Export Administration Regulations (EAR)• http://www.bis.doc.gov/licensing/exportingbasics.htm
o Easily imported into the targeted foreign market• Taxes (duties) or administrative expenses
o Exempted from market-related restrictions• Unit size, nature of the product, modification costs
o Possesses unique qualities• Competitive edge in new market (low cost vs differentiation)
o Satisfies demand• AND can meet demand both in the domestic and international
marketo No existing prejudice against country of origin
• US
Market Entry Options Three basic modes of entry for exporting
1. Stocking Distributors• Majority of export sales are done through distributors• Responsible for all aspects of marketing and distribution in the
country importing the product• Purchase in stocking quantities and ship to customers from
warehouse• http://www.dcbattery.com/
2. Piggybacking• Seeking out and tying in with other non-competitive,
complimentary product line exporters in your industry• Learn from others – specifics of overseas distribution• Establish relationships
3. Export Management Companies (EMCs)• Work on salary or retainer plus commission – solicits business• Export Trading Companies (ETC) take title to goods and does the
actual exporting
Follow Through with an Export Order
You go to an expo and a prospect (Mr. X) later contacts you with an order inquiry and request for a quoteo You – pro forma invoice = describe merchandise specifics,
packaging, unit price, and payment terms. Mr. X – responds with a purchase order, including
payment confirmation.o Mr. X arranges financing through banko You begin production
Follow Through with an Export Order
Mr. X (the importer) has bank verify company’s credit worthiness, prepare necessary documents, and informs you (through your bank) that all financial requirements have been satisfied.o You prepare goods for export and contact a freight forwarder to
pick up shipment When the shipper receives goods – you are given a Bill
of Lading (B/L) or air way-bill) = contains full description of shipment contents.o You prepare required documents (insurance policy, consular
invoice, permits, etc) – these go to your bank who notifies Mr. X’s bank
Mr. X’s bank then sends payment to your banko Meanwhile the goods are en route and Mr. X receives the
transaction documents from your bank to claim goods on entry.
Export Administration Regulations
BIS = Bureau of Industry and Securityo Primary agency for implementing and enforcing EARso EEA (Export Enforcement Arm of the BIS) protects
• National Security• Foreign Policy• Economic Interests
o Concerned with exporters, freight forwarders, carriers, consignees, and other involved parties
o Intercepts illegal exports, investigates violations, and prosecutes violators of export control laws• BIS will negotiate settlements• VSDs – voluntary self-disclosure = violator admits to wrong
doing
Export Control Reasons1. National Security
o Strategic commodities or technology2. Foreign Policy
o May be commodity oriented or country specific3. Short Supply
o To protect domestic economy from the excessive drain of scarce resources and reduce inflationary impact of foreign demand (petroleum products)
Anti-Terrorism (AT), Missile Technologies (MT), Nuclear Proliferation (NP), Chemical and Biological Weapons (CB), Crime Control (CC), Regional Stability (RS), Computers (XP), UN Controls (UN)
EAR and Dual-Use Items
Agencies in the EAR – http://www.bis.doc.gov/licensing/index.htm#factsheets
Dual-Use Itemso Regulated by BISo Commercial application but ALSO potential military or
proliferation use (www.gpo.gov/bis/) • Weapons of extreme violence, conventional arms, or end-
use violations by terrorists Regulations are complex
o Freight forwarders used as resource
Foreign End-User Foreign end-user of US high tech products
o VEU = Validated End User – legitimate exports to civilian end-user
o Allows for export of eligible items to specified end-users in eligible locations without a license.• www.bis.doc.gov/finalchina.html - China VEU explanation
Competition and Transparency
Keys to US recovery and securityo Economic Competitivenesso Innovation
Exporters need:o Sufficient information to support security and
competitiveness goalso Transparency fosters awarenesso Communication and participation with reforms
Anti-boycott provisionso allow businesses to refuse participation in foreign boycottso must report boycott-related requests
Export Licensing Any item sent from the US to a
foreign destination is an export! Transfer (even if temporary) and Transaction (does not matter how it gets
there)
Small percentage of total US exports require an export license from the BIS Depends on technical characteristics,
destination, end-user and end-use
What are you Exporting?
ECCN = Export Control Classification Numbero Alpha-numeric code identifying the level of export
controlo Listed in the Commerce Control List (CCL) o Commerce Country Charter (CCC) contains licensing
requirements based on destination and Reasons for Controls
o http://www.bis.doc.gov/licensing/exportingbasics.htm
Classifying is essential – you may submit a request to BISo Determine which of the 10 categories of the CCL your
included ino Then the five specific product groups your exports apply
ClassificationCommerce Control List Categories 0 = Nuclear materials, facilities and equipment (and miscellaneous items)1 = Materials, Chemicals, Microorganisms and Toxins2 = Materials Processing3 = Electronics4 = Computers5 = Telecommunications and Information Security6 = Sensors and Lasers7 = Navigation and Avionics8 = Marine9 = Propulsion Systems, Space Vehicles, and Related Equipment
Five Product GroupsA. Systems, Equipment and ComponentsB. Test, Inspection and Production EquipmentC. MaterialD. SoftwareE. Technology
Where are your Exports Going?
OFAC = Office of Foreign Assets Control o in Treasury Departmento Administers and enforces economic and trade sanctionso Acts under presidential wartime and national emergency
powers or under authority granted by specific legislation
Embargoed countries have most restrictionso Cuba, Iran, Sudan, Taliban controlled Afghanistan, Syria
If sanctions are international – require cooperation with allied governments
Where are your Exports Going?
Trade sanctions o could be revocation of preferential treatment such as
Most Favored Nation (MFN) status or barriers against a country not abiding by agreed international rules of trade.
Economic sanctions are disciplinary in nature and meant to isolate the target. o Economic sanctions may include trade embargoes or
boycotts, freezing of assets, bans on cash transfers, bans on technology transfer and restrictions on travel.
o Embargo – disposition of the state (between countries)o Boycott – private non-state initiative
Control Needed Once you have classified the item, the next step
is to determine whether you need an export license based on the “reasons for control” and the country of ultimate destination. o Compare the ECCN with the Commerce Country Chart
(Supplement No. 1 to Part 738). o “Reason for Control” (e.g., NS for National Security, AT
for Anti-Terrorism, CC for Crime Control, etc.). Below this, you will find the “Country Chart” designator which shows the specific export control code(s) for your item (e.g., NS Column 2, AT Column 1, CC Column 1, etc.). These control codes for your ECCN must be cross-referenced against the Commerce Country Chart.
Control Needed Question: You have polygraph equipment
classified as 3A981 for export to Honduras. Would you be required to obtain an export license from the Department of Commerce before selling and shipping it to your purchaser?
Answer: Yes. 3A981 is controlled for Crime Control (CC) reasons under CC Column 1 and the Country Chart shows that such items require a license for Honduras.
Cross-Referencing the ECCN with the CCC
Cross-referencing the ECCN with the Commerce Country Chart o identifies the “reasons for control” aka reasons for export
license
Table 5.3
The Receiver Violators
o Entity List – risk of diverting exportso Designated Nationals & Blocked Persons
List o Denied Persons List –
www.bis.doc.gov/dpl/thedeniallist.asp o Debarred Listo Unverified List –
www.bis.doc.gov/enforcement/unverifiedlist/unverified_parties.html
Export Authorization Majority of US commercial exports do not require a license
Three types of export authorization1. No License Required (NLR)2. License – export license # and expiration3. License Exception
Export application – through BISo http://www.bis.doc.gov/snap/index.html
Export assistance – NTIS EAR Marketplaceo https://bxa.ntis.gov/ o http://www.ntis.gov/products/export-regs.aspx
Export Documents SED or Form 7525-V = Shipper’s Export Declaration
o Gov’t required for every export item over $2,500o Electronically filed using AESDirect
• http://www.aesdirect.gov/ Automated Export System Commercial Invoice
o Bill for the goods from the seller to the buyer Certificate of Origin
o Required by some countrieso Special trade agreements (NAFTA Certificate of Origin)
CE Mark Requirementso EU – Conformite Europeenne
Exporter’s Bill of Ladingo Contract between the owner of the goods and the carrier
1. Straight Bill of Lading – no negotiating2. Negotiable or shipper’s order bill of lading
Export Documents Continued…
Insurance Certificate = assure the buyer Export Packing List = detailed itemization Import License = not always required but responsibility of the
importer Consular Invoice = describes shipment and transaction
o In language of importing country Inspection Certificate = guarantee that goods shipped are the
same as those ordered Dock Receipt and Warehouse Receipt = transfers accountability Destination Control Statement = item can be exported only to
certain destinations Export License = US gov’t document required for
o “Dual Use” exports (commercial items with military applications)o Exports to embargoed countries
Exporting Steps1. Verify export under US Dept of Commerce
(USDOC)2. Classify item CCL and ECCN
• Export Control Classification Number• Listed in the Commerce Control List (CCL)
3. Cross-reference the ECCN against the CCC to see if license is required
• Commerce Country Charter (CCC)4. Check legality and end-user/uses issues5. EXPORT!
o With ECCN on export documentation (Shipper’s Export Declaration)
Importing
Why Import Number 1 reason = consumer demand and to
make a profit
http://www.cnn.com/video/#/video/international/2011/05/23/mpa.africa.imports.china.bk.a.cnn?iref=videosearch
How is ChinaHurting AfricaHelping Africa
Importing US = largest importing nation in the world
o We want stuff and can pay for stuff
Risks to Importingo Languageo Lawso Forms of protectiono Lead time = time between ordering goods and
receiving shipment• Import controls may impact entry• 70,000 shipments every day• 80% of shipments by infrequent importers
• Container Security Initiative (CSI) – threat of terrorist use of shipments
Reasons for Importing Consumer demand (the market) Offer a unique assortment of
goods/services Price
IMPORT TRADERS – those who import goods for resale
MANUFACTURERS – those who import goods for productiono Components needed
Cost and Delivery First Price = the manufacturer’s
selling price in the factory show roomo Landed Cost = includes all
shipping, entry costs, and duty charges to the port of foreign entry.• Delivered-into-store cost• Delivery and insurance• Overhead expenses• Profit margin• Resale Price
SWOT Analysis for Importing
Analyze domestic and international competitors Is importing a must?
o Is the good you’re seeking already being imported? From where?
o Domestic suppliers can be found in trade association directories, manufacturers’ indexes, or industry journals.• Trade Publications and Shows
If there is a domestic supplier, why import???
Competitive SWOT vs. Environmental SWOTo EXAMPLES???
American Fashion Imports
1. Explain why fashion is a global industry.2. What is fashion week all about?3. How does technology serve the fashion
industry?4. What does the article mean by “new
seasons”?o Opportunity or Concern?
What is the biggest concern for the fashion industry? o (this was not explicitly stated in the case study)
Locating Foreign Suppliers
Identify a country or group of countries where the product is available.o Assistance through gov’t agencies, trade commissions,
chambers of commerce, exhibitions, journals, INTERNET• National Trade and Professional Trade Association Directory, by
Columbia Books
Most foreign manufacturers are eager to export to the USo Why???
Why are relationships important? How do trade shows help?o Meet, Greet, and Compete!o Why do trade shows get overlooked?
Import Penetration The US market became attractive for
manufacturers in Japan, South Korea, Taiwan, and Hong Kong
Protectionism occurred o Tariffs, quotas, and anti-dumpingo Currency revaluation – gov’t changes the
value of country’s currency relative to other currencies, increasing costs of imports
Yet, Americans kept importing
E-Commerce and Manufacturing
Speeds up transactions, increased world tradeo What are e-tailers?
Global sourcing – the process of purchasing imported goods from markets around the world
Sourcing options1. Buy ready2. Buy components3. Off-shore production???• Where is the most attractive location today?
80% of this country’s assembly factories are foreign owned!
Importing by Manufacturers
What has contributed to global sourcing? What are the benefits and what are the
dangers?o Developing countries have almost doubled their share of
world clothing exports since the early 1970s to account for more than half of all exports today.
What has led to the restructuring of the apparel industry?1. Competition2. Mass marketing stores3. Discount retailers4. Consumer attitudes
Apparel Manufacturing Reduce cycle time
o For designo Manufacturingo Delivery
Quick Response = replenishment systems that allow retailers to…o Trim their inventoryo Respond more quickly to changes in preferenceso Restock almost instantlyo Offer wider choices
In the current economic climate – what is the main concern facing the apparel industry?
Production Domestic Production – Foreign Materials
o Produced in the US with foreign raw material components
Foreign Production – Foreign Materialso Produced overseaso Specification Buying: the domestic
company has designed the product and the foreign manufacturer creates it.
Production Foreign Production – Domestic Materials
o Going off-shore… why?o Tariff applied on the value-added portion
Manufacturer-owned Foreign Productiono Low-cost suppliers to supplement US
productiono Contract out assembly operations to
overseas contractorso Shift production• Outsourcing – delegation of non-core
operations from internal production to an external entity specializing in the mgmt of that operation.
Import Debate - Drugs Two Concerns
o Quality and Safetyo “Made (Deadly) in China”
20% generic & over-the-counter drugs, and more than 40% of active ingredients for drugs made in the US, come from India & China.o In 15 years, 80% of key ingredients for drugs will come
from India and China
Import Debate - Food The US FDA inspects less than 1% of
all foods and food ingredients entering the US and tests only .5%
Customs inspections have been decreased for two reasons:1. Food imports have grown dramatically2. Food oversight activities have been reduced due
to lack of funds
China has increased overall its food sales to the US by over 20% in one year
Import DebateProtectionism vs Free Trade
Isolationism – limiting international tradeo Import restrictions to create “level playing field”o Protect domestic manufacturers of unfair competition
Fair Trade – forms of international trade that provide for human rights including o fair wages, safe conditions, environmental protection
Free Trade – voluntary exchange meets the demands of justiceo Exchange augments wealth
Import Planning1. Evaluate Market Demand2. Locate Foreign Suppliers3. Review Import Regulations – HTSUS number4. Pricing Your Imports – freight & insurance5. Comply with US Customs Policies and Procedures
o Customs Automated Commercial System (ACS)o Automated Broker Interface (ABI)
6. Learn Basic Vocabulary – terms o Incoterms – created by the International Chamber of
Commerce (ICC), are rules used for the interpretation of the import-export terms.• What is included or not included in selling price and
responsibility aka “transfer of title”