1、1Prepared By Frank ChenInternational Trade ManagementF The Global EnvironmentF International ComplexitiesF Trade managementF Summary2Prepared By Frank ChenManaging a Global business requires additional integrated processesTo buy,manufacture,distribute and sell any place on earthrequires knowledge of
2、:Culture-Economics-distance-Governments3Prepared By Frank ChenA major difference in doing business internationally is integrating the regulatory requirements into business processesPolitical and Governmental Complexity:Changes in economic blocsTrade-an instrument of powerThe WTO agreementGlobal envi
3、ronmental concernsCountry specific interpretation and regulation for importing and exporting Automated,paperless,process based enforcementConstant Change4Prepared By Frank ChenWhy are governments involved?Impacts on national economiesOpportunity to apply taxes to commerceControl movement of goods or
4、 information5Prepared By Frank ChenHow do governments affect trade?TreatiesThe WTO agreementApplication of taxesTrade restrictionsTrade stimulatorsLogistics processes are directlyaffected by regulatory requirements6Prepared By Frank ChenGlobal markets can have considerable regulatory risk for compan
5、iesU.S.companies are not at liberty to do the business without restrictionsThe U.S.Government defines with we can do businessOver 500 years of suspended export privileges were levied in 1996Millions of dollars in fines and penalties were assessedNumerical companies are under criminal investigationIn
6、dividuals can be charged and imprisonedGenerally violations are not deliberateIn emerging markets,new businesses are formed daily and may be restrictedOld“Soviet Block”government agencies are changing names and missionsAny product can result in violations,not just high tech productsGlobal purchasing
7、 leads to significant import exposuresThreat of terrorist activity emerges from many sourcesChina and other countries have similar but different rules regarding importing and exporting7Prepared By Frank ChenWhy would a company want to deal with all this?Globalization is not an optional strategyCompe
8、tition and customers drive business globalGreater salesIncrease productivityGreater profitsLucrativebutComplex8Prepared By Frank ChenMany international regulatory complexities can beExplored and understood by asking three deceptivelysimple questionsKey:What are the goods?Where did they come from or
9、where are they going?What is their value?9Prepared By Frank ChenWhat are the goods?A question every government asks,for which there are often many answersDescriptions lead to Classification using a harmonized codeA CRT?.Memory chips?An analytical device?A TV or a video device?An Electrical Array?Ass
10、embled Electronics?10Prepared By Frank ChenWhere goods come from is also asked by everygovernment,with a surprising number of answersCountry of origin-substantial transformationPercentage of Foreign ContentSpecial exclusions for trade agreementslocal consumption lawsExample of Uses:Importing-duty ca
11、lculations,entry control and restrictions Exporting-product,country,organization,and individual sales controls Government procurement-such as the Buy America ACT International venture funding Trade Financing-EXIM Bank,AID,OPIC etc.Balance of trade allowances11Prepared By Frank ChenWhat is the value?
12、Is a a question every government asks with a surprising number of possible answersSeller ExporterSeller ExporterBuyer ImporterBuyer ImporterExport Sales PRICEImport Buyer12Prepared By Frank ChenWhy is the price(Valuation)of the goods important?4Establishes the value of the goods4Enables the governme
13、nts to apply taxes4Basis for the asset transfer from country to country13Prepared By Frank ChenTransaction value is the most commonly used method of valuationTransaction Value-price Paid or payable -Identical Merchandise -Similar MerchandiseDeductive ValueComputed Value14Prepared By Frank Chen“Price
14、 paid or payable”simple words,not sosimple in practiceMerchandiseSelling commissionsPacking costsAssists Certain royalties or license fees Proceeds of resale,disposal,or use that accrue to the seller15Prepared By Frank ChenThe concept of“Assists”comes from WTO and creates basic process differences b
15、etween domesticsand international transactions“Assist”means any of the following:I Materials,components parts,and similar items incorporated into theimported merchandiseII Tools,dies,molds,and similar items used in the production of the imported merchandiseIII Merchandise consumed in the production
16、of the imported merchandiseIV Engineering,development,artwork,design work,plans,and sketchesthat are undertaken elsewhere than in the U.S.and are necessary for the production of the merchandise.16Prepared By Frank ChenA Simple Relationship?SellerBuyer17Prepared By Frank ChenThe“Simple Relationship”c
17、an quickly become very complexSellerBuyerToolingForeign DevelopmentIncorporated MerchandiseAdvancedPaymentsSet-upCostsCorrected InvoiceVolumeDiscounts18Prepared By Frank ChenTaking advantage of“Trade Incentives”can be the difference between profit and lossGoods ReturnedGoods Exported for repair or A
18、lterationGoods Assembled AbroadArticles of Metal Exported for ProcessingGeneralized System of PreferenceForeign Trade ZonesDuty DrawbackEU,NAFTA or Other Trading Blocks Duty Provisions419Prepared By Frank ChenLack of knowledge of“Trade Restrictions”canresult in fines,penalties,seizure and personal l
19、iabilityEmbargoes/Trading with the Enemy?country specific controlsGovernment Agencies requirements FCC-FDA-EPAAntidumpingCountervailingQuotasExport Licensing for controlled products&technologyDenied parties20Prepared By Frank ChenTrade processes affect every segment of companys“Value System”ProductD
20、esignInternational&DomesticProcurementBuyingOrderCreationRaw Materials,Components,&ManufacturingForwarders&ConsolidatorsInternationalCarriersBrokersDomesticCarriersDistributionCentersLocal ConsolidatorsCustomersValue System information ChannelImport/Export ComplianceProcurementFinancemanufacturing T
21、rafficStores&DistributionPricing&BuyingExecutive ManagementDCsValue SystemActivitiesReal-timeoperationalmanagementinformation21Prepared By Frank ChenMany Operations and Organizations in a companyare involved and their responsibilities are complexExecutive management(domestics and international)-resp
22、onsible and accountableto direct,inform,and educate business units and employees to comply with laws and regulationsMarketing and sales-must assure product is sold to customers allowed by US exportregulationsDistribution-ships and receives goods to and from approved customers and vendors and is the
23、operational interface to trade regulatory agenciesManufacturing&procurement-sources products and components internationallyand must obey COO,Classification and valuation(product costing),and Trading with the Enemy LawsFinance-related party transfer pricing,proper valuation of goods,country pricing,O
24、EM pricing,royalties,subsidiary dividend remissions,foreign tax preparation,internal compliance audit programsLegal-review of government agency inquires,handling of investigations,andretention of specialized legal assistance22Prepared By Frank ChenEveryone has a part to play in assuring compliance w
25、ith regulations Compliance responsibility begins with the CEO and continues through to operations Corporate officers are responsible to set policy,instruct,and assure documented processes and procedures and in place Operational units are responsible to carry out the policies,instructions,processes,a
26、nd procedures All locations in the world are potentially subject to U.S.Government regulations and audit23Prepared By Frank ChenSpecific actions are necessary to assure a solidcompliance program is in placeUnderstand business environment from a compliance perspective Kinds of products manufactured H
27、ow product moves from suppliers,through plants and to customers The locations where development,manufacturing,and distribution are done Determine the proper compliance program processes and subprocesses Import process and subprocesses Export process and subprocessesDevelop basic trade documentation
28、Policies,instructions,processes,and proceduresProvide compliance education to Management Employees24Prepared By Frank ChenThe primary benefit of enhanced compliance focus isto reduce the risk of business interruptions and loss ofsales and profits due to compliance process failuresFewer compliance er
29、rors reduce the potential loss of import or export privilegesUnnecessary compliance related delays in goods movement result in lost sales,increased costs,higher inventories,and inventory lossesGood procedures and documentation establish intent for compliance and reduce the time spent on regulatory a
30、uditsThe risk of foreign nationals being barred from work will be minimized by appropriate licensing processesDocumented export and import compliance processes reduce the risk of loss of exclusion from government and commercial contracts25Prepared By Frank ChenEfficiency and cost savings are an addi
31、tional result of improved trade and logistics managementWell documented international shipment processes will result in:Elimination of duplicate or non-value add tasks Clear,standardized instructions for associates Control points to eliminate errors or identify them early in the process Measurements
32、 to monitor progress and identify areas for improvement Goods move faster and cheaperDocumented processes and availability of trade information allow companies to increase profits Potential U.S.programs include Generalized system of preferences,Returned American goods,American Goods Assembled Abroad
33、,Returned Goods for Repair,Duty Drawback and Foreign Trade Zoes Similar duty saving programs can be developed for most other countries26Prepared By Frank ChenCompetitive advantage in international operationsis achieved through integrated trade managementInformation InvestmentSourcingLogisticsInvento
34、ryContractsCostsComply with Government Regulations Effective Contract ManagementEfficient Movement of Goods Satisfied CustomersCost Effective Sourcing Decisions “Just In Time”ManufacturingManagement of Financial Transactions27Prepared By Frank ChenPrice TermE Group-EXWF Group-FCA,FAS,FOBC Group-CFR,
35、CIF,CPT,CIFD Group-DAF,DES,DEQ,DDU,DDP28Prepared By Frank ChenEXWEXW-EX Work(named place)The seller only need to put the goods on the Dockof the Factory/WarehouseThe Freight,Insurance,outbound Customs clearance fee and Cost of load the goods on the trucks are belong to the BuyerThis term is not reco
36、mmended since it need seller to provide the export license29Prepared By Frank ChenFCAFCA-Free CARRIER(named place)The seller need finish the outbound Customs clearance andhand over the goods at the pointed place to the pointed carrier.The Freight,Insurance are belong to the Buyer30Prepared By Frank
37、ChenFAS/FOBFAS-FREE ALONGSIDE SHIP(named port of shipment)FOB-FREE ON BOARD(named port of shipment)Only used for sea freightThe FCA is more general.31Prepared By Frank ChenCPTCPT-CARRIAGE PAID TO(named place of destination)The seller pay the freight to the pointed place.Insurance not covered32Prepar
38、ed By Frank ChenCIPCIP-CARRIAGE AND INSURANCE PAID TO (named place of destination)The seller pay the freight to the pointed place.Insurance covered33Prepared By Frank ChenCFR/CIFCFR-COST AND FREIGHT(named port of destination)CIF-COST,INSURANCE AND FREIGHT (named port of destination)Only used for sea
39、 freightThe CPT/CIP is more general34Prepared By Frank ChenDAFDAF-DELIVED AT FRONTIER(named place)The seller need finish the outbound Customs clearance andhand over the goods at the pointed frontier.35Prepared By Frank ChenDESDES-DELIVERED EX SHIP(named port of destination)Used for sea freight.Inbou
40、nd Customs clearance not covered36Prepared By Frank ChenDEQDES-DELIVERED EX QUAY(DUTY PAID)(named port of destination)Used for sea freight.Inbound Customs clearance coveredThis term is not recommended since it need the buyer to provide the import license37Prepared By Frank ChenDDUDDU-DELIVERED DUTY
41、UNPAID (named place of destination)The inbound Customs clearance fee is belong to the sellerbut the inbound duty and other tax not covered.This term is not recommended since it need the buyer to provide the import license38Prepared By Frank ChenDDPDDP-DELIVERED DUTY PAID (named place of destination)
42、The inbound Customs clearance fee is belong to the sellerThe inbound duty and other tax covered by the seller.This term is not recommended since it need the buyer to provide the import license39Prepared By Frank ChenFreight CostF Air freight costF Sea freight costF Land freight costF Hub costF Custo
43、ms clearance feeF Others40Prepared By Frank ChenAIR FREIGHT COSTAir Cargo-Used for heavy weight shipment The freight rate is depend on the route and the shipment weight/size*From Shanghai to Los AngelesMin 45kg 100kg 500kg 1000kg$65.00$4.20$3.80$3.45$3.20$2.95Fuel surcharges$0.10/kgExampleThe rate m
44、ay changed in slack season and peak seasonThe Fuel surcharge also will changed based on the price of crude oil*the volume weight is equal to Volume/0.00641Prepared By Frank ChenAIR FREIGHT COSTCourier shipment-Used for small package The freight rate is depend on the route and the shipment weight/siz
45、e*ExampleThe rate is covered door to door service include Customs clearance fee.*the volume weight is equal to Volume/0.006 Weight(kg)Rate($)0.526.41.033.51.540.62.047.72.554.83.061.93.569.04.076.14.583.25.090.35.597.46.0104.56.5111.67.0118.77.5125.88.0132.98.5140.09.0147.19.5154.210.0161.3Additiona
46、l rates per kg thereafter$11.442Prepared By Frank ChenSEA FREIGHT COSTFCL-Full container load 40 feet container-12.04x2.34x2.39M3 20 feet container-5.75x2.34x2.39M3 40 feet high cube container-12.04x2.34x2.69M3LCL-Less than container load The freight rate is depend on the route and shipment sizeThe
47、rate may changed in slack season and peak seasonExampleFrom Shanghai to Los AngelesFCL 40 feet$3200 all inFCL 20 feet$2200 all inLCL$120/M3 all in43Prepared By Frank ChenLAND FREIGHT COSTThe rate depend on the truck size and route The rate may changed in slack season and peak seasonExampleFrom Shang
48、hai to Nanjing5 Ton truck-$1002 Ton truck-$75.44Prepared By Frank ChenHUB COSTThe Hub cost include:Storage-per carton,per month Receiving Tallying,System registration,Confirmation of receipt Put away,.Inventory Management Maintenance,Cycle counting,Handling Out EDI pick list,Picking,Kitting,Checking
49、,hand shake 45Prepared By Frank ChenCustoms clearance The rate vary from country to country,broker to broker Inspection fee will occur if the shipment need to be examine by CustomsIn SIP Customs,the Customs clearance feefor outbound is around$25/Shipment 46Prepared By Frank ChenOthers We need also c
50、onsider the below cost when calculate the goods value:Insurance License Certificate Fumigation 47Prepared By Frank ChenFreight cost calculation-ExampleRoute-SLR_SZShanghai SFO Santa ClaraPrice Term-DDUFreight model-By airShipment size-10 Pallet,each pallet size 48x36.5x64 inch 16 cartons in a pallet
