Global Logistics & International Trade

US Customs and Border Protection (CBP)

- "gateway agency"- has some control over various aspects of international trade

regional trade agreements impact location decisions:

- European union - North American Free Trade Agreement - Southern Common Market - Association of Southeast Asia Nations - Common Market of Eastern and Southern Africa

challenges that can present when operating your supply chain:

- tariffs or duties - transporting goods can be complex and involve different partners - regulations lower by country - foreign markets are not homogenous

a typical cross-border shipment involves:

- accurately filling out 35 documents - compliance with over 600 laws and 500 trade agreements - interfacing with 25 parties

WTO functions include:

- administering agreements - forum for trade negotiations - trade disputes - monitor trade policies - aid for developing countries - international organizations

trade compliance systems

- became a vital tools for every major importing and exporting company in the US

location evaluation techniques: weight factor rating model

- compares the attractiveness of severe location along a number of quantitative and qualitative dimensions steps: - identify the factors - assign weights to each factor. weights sum up to 1 - determine a score for each factor - multiply factor score by weights, sum weighted score - location with the highest total weighed score is the recommended location

global location factors

- competitiveness - taxes and incentives - currency stability - access and proximity to markets - labor issues - right to work laws - access to suppliers and costs - utility availability and cost - environmental issues - land availability and cost - quality of life issues - business clusters - trade agreements

revenue is determined by items such as:

- correct valuation - correct classification - country of origin - identification of the merchandise - identification of buyer and seller and where they are located

Global Logistics Intermediaries

- custom brokers - international freight forwarders - trading companies - non-vessel-operating common carriers (NVOCC)

quality of life issues

- education - economy - natural environment - social environment - culture - healthcare - government/politics - mobility - public safety - recreation

offshore facility

- factory in a country where labor and raw materials are less expensive - low labor costs ex) clothing produced in Indonesia

outpost factory

- factory set up in an area with the abundance of advance supplier, competitors, and research facilities ex) Silicone Valley, California

server factory

- factory set up that takes advantage of government incentives and reduce taxes and tariff barriers - meets regional or local market needs ex) Coca Cola bottling - mixing final ingredients to exchange rates, tariffs, and taxes

contributor factory

- focus on product development and engineering for products they manufacture - also includes product development, production planning, , supplier development, and procurement decisions ex) Sony factory built a factory in Waless and 15 years later got involved in development, planning, and is now a contributor factory

the benefits of implementing a Trade Compliance System include:

- increased level of compliance - decreased number of physical inspections - faster release of shipments - avoidance of fines and penalties - opportunity to interface with other systems

business clusters reasons for success

- innovation and competition can be geographically concentrated - close cooperation, coordination, and trust among clustered companies - fierce competition among competition - companies recruit from local skilled workers

source factory

- manufactures products at low costs with skilled workers and significant managerial resources - plant management involves in supplier selection & production planning ex) factory in singapore producing calculators and keyboards

foreign trade zones (FTZ)

- physical areas inside the US supervised by customs and borders that are considered to be outside of US territory - usually located at a port of entry

DHS first priority while simultaneously:

- prevent entry of terrorists and the instruments of terrorism - ensuring the efficient flow of lawful traffic and commerce

statutory sanctions

- seizure and forfeit of items in violation, including vessel carrying the items - loss of export and import privileges for the company - detailed inspections of every single shipment

lead factory

- source of product and process innovation and competitive advantage ex) Intel opening up their lead factory in Malaysia in the 70's, and now it is a lead factory the "go to" factory

staying up to date is a major challenge in the international trade compliance because:

- the information changes frequently - often made available only in a foreign language - not always produced in an electronic form

international freight security

- transportation across national boundaries introduces added complexity and security - since 9/11, there is more conflict between the US government and industry regarding more security and restrictions for international shipments

location evaluation techniques: break even model

- useful location analysis technique when fixed and variable costs can be determined steps: 1. identify locations to be considered 2. determine fixed cost of land, taxes, insurance and equipment 3. determine unit variable cost 4. construct the total cost lines 5. determine break even points on the graph 6. identify range over which location has the lowest cost

global locations decisions involve:

1. defining what type of facility 2. determining location 3. identifying the market it serves

12 pillars of competitiveness

1. institutions 2. infrastructure 3. macroeconomic stability 4. health and primary education 5. higher education and training 6. goods and market efficiency 7. labor market efficiency 8. financial market sophistication 9. technological readiness 10. market size 11. business sophistication 12. innovation

global facility types

1. offshore factory 2. source factory 3. server factory 4. contributor factory 5. outpost factory 6. lead factory

goods are not legally entered into US commerce until:

1. the shipment has arrived within the port of entry 2. delivery to the shipping destination has been authorized by CBP 3. estimated duties have been paid

European Union (EU)

1950 following WWII, consists of 26 members

Association of Southeast Asian Nations (ASEAN)

1967 Among 10 member countries in SE Asia

North American Free Trade Agreement (NAFTA)

1994 Removed most barriers to trade and investment among US, Canada, and Mexico

businesses violating trade regulations face fines up to:

40% of the value of the merchandise for "negligence"

while in FTZ, merchandise is not subject to:

US duty or excise tax

CBP protects by doing this at ports of entry:

active inspections

trade compliance systems can ________ of checking every transaction

automate the process

managing international trade activities is a _______

complex process

World Trade Organization (WTO)

deals with the global rules of trade between nations main goal: to ensure that trade flows as smoothly, predictably and as freely as possible

countries with high tariffs discourage & encourage:

discourage importing goods into the country and encourage multinational corporations to produce locally

during the exporting process, shippers must conform to:

export administration regulations

US department of homeland security (DHS)

government agency who's mission is to: 1. prevent terrorist attacks in the US 2. reduce America's vulnerability to terrorism 3. Minimize damage from potential attacks and natural disasters

operating supply chain globally can present these opportunities:

increased revenue and increased sourcing options

global location decisions are due to:

increases globalization, technology, transportation, and open markets

CBP has a strong base of:

industry partnership and technology

customs brokers

move global shipments through customs and handle documentation

CBP is also concerned with:

revenue collection (tariffs and duties)

what is the CBP mission:

safeguard America's borders by protecting the public from dangerous people and materials while enhancing the Nations global economic competitiveness by enabling legitimate trade and travel

On March 1st 2003, DHS assumed responsibility for:

securing our nations borders and transportation systems and connects out homeland to the rest of the world

deemed export

the release of technology or source code that is subject to the Export Administration Regulations, to a foreign national located in the United States. - release can be visual, oral, through on the job trainings, systems access