AM 330 Exam 2
Cut make trim (CMT)
Type of sourcing: Original sourcing company (customer), bears all the costs, does development, sources the fabric, delivers the fabric to the vendor, and pays duties and transportation costs and the production contractor (vendor) provides the expertise and equipment for the actual production of the garments
Full package
Type of sourcing: the vendor must contribute to and finance most of the manufacturing process, including product development and sourcing.
Customs and border protection (CBP)
US customs service: Evaluators in the US have traditionally used the FOB (free on board) import values
Care Labeling
There is still an issue of whether this labeling should be provided in multiple languages, so ISO and ASTM developed pictograms but they are not globally standardized
Country of Origin
These labeling rules are still needed, because they continue to be used to help establish the tariff rate for duties charged on imported products; complexity of international sourcing increases the difficulty in determining this
Bill of lading, commercial invoice, packing list
To clear customs, a shipper must provide 3 forms of documentation:
Legal Transshipment
To transfer or be transferred from one conveyance to another to continue shipment; standard part of moving goods from one country to another
40
Today's basic merchandise sourcing calendar is about _____ weeks
23
Today's fashion goods sourcing calendar is about _____ weeks
Private brand importer
A brand manager or retailer who sources private brand products in foreign countries for import into the domestic economy
Beef up their production capabilities, increase speed to market
In a post-MFA world some countries tried to do what 2 things?
can, sometimes
Counterfeiting operations are both sophisticated and diverse, and (can/cannot) produce merchandise quickly. They are (never/sometimes) available before the genuine article hits the market
Western, Eastern
(Eastern/Western) Europe includes many of the most developed countries in the world, whereas (Eastern/Western) Europe includes a variety of developing countries
Nominal tariffs, specific tariffs, ad valorem tariffs, rate of duty, effective tariff
5 tariffs and duties
designing and grading patterns for different sizes, samples, producing markers, spreading the fabric, cutting the pattern pieces, sewing the garments, applying finishes and trims, pressing and packaging, inspection, overhead and administrative expenses, profit
11 things that go into production costs
Cut make trim (CMT), full package
2 basic factory direct models used for contracting production of finished garments
Costs as product moves through supply chain, logistics required to move the product to selling floor
2 considerations when exploring options and processes required for acquisition of necessary materials and considering selection of vendors for production
ISO, ASTM
2 systems of pictograms for care labeling that are not globally standardized
Socialism, communism
2 systems where resources are cooperatively or state owned
Marine, Inland marine
2 types of insurance
Lean, Agile
2 types of manufacturing philosophies
Globalization of countries, globalization of companies, globalization of individuals
3 phases of globalization (oldest to newest)
Misrepresentation of country of origin, misclassification of goods, illegal transshipment, undocumented immigrant workers
4 customs violations beyond those covered by intellectual property law that are commonly found in the textile and apparel industry
Trademark or trade name infringement, deceptive advertising, simulation of packaging, false country of origin
4 examples of things unfair competition laws govern
Trade shows or trade fairs, joint ventures, licensing agreements, hiring of sourcing agents
4 other methods of sourcing
Export policy, import policy, protectionism, free trade
4 things a country's trade policy determines
Domestic, international, global, multinational, transnational
5 classifications of political perspectives that may apply to firms and trade associations. These classifications evolve from the protectionist perspective to a global transnational fair trade perspective
Conduct throughout production cycle, ability to meet contractual obligations, reliability in meeting contract deadlines, factory conditions, necessary equipment, capacity, trained operators, and expertise
5 considerations when selecting a vendor for a production run
Quality Assurance
A commitment to product quality that utilizes error prevention as integral to the entire product development process
Multinational
A company thinks about the political perspectives of multiple countries and adapt accordingly as they move into other countries
Transnational
A company thinks about the political perspectives of the countries they move into and adapt accordingly as they move into other countries
Global
A company thinks about the political perspectives throughout the entire world and the overall effects
International
A company thinks about the political perspectives within a few different countries
Domestic
A company thinks about the political perspectives within their home country
Royalty
A fee for the privilege to produce or source merchandise that will carry the merchandising property, usually between 1 and 15 percent of wholesale value, paid by the licensee to the licenser.
Export subsidies
A firm receives the price of the goods exported, plus a payment from the government at whatever rate is specified for the product
Foreign trade zone
A free trade zone that allows manufacturing for export
Multifiber Arrangement (MFA)
A general framework for determining the conditions under which the textile and apparel trade could be controlled. Provided for unilateral trade restraints in the absence of bilateral trade agreements. Establish the norms for the bilateral export-restraint agreements
Totalitarian government
A government system where one family or some other entity maintains complete political and economic control under a dictatorship
Trading bloc
A group of countries (developed and developing) that have created regional trade incentives and that jointly participate in trade negotiations (free trade practices within the region)
Textiles Monitoring Body
A group within the WTO tasked with phasing out the MFA who established a four stage system to guide countries through phaseout
Lean manufacturing
A manufacturing philosophy that emphasizes efficiency and strives to eliminate waste of time and materials throughout the entire process, while also improving quality
Electronic data interchange (EDI)
A means of passing document information between companies
Letter of credit
A means of transferring intellectual property rights; extending the value of a brand name on a product produced by someone else for a contracted percentage of the sales (payment for imported merchandise is often done through this)
Government subsidy
A payment from a government to a company
Sourcing time line
Current EDI (electronic data interchange) and integrated product development systems are essential for controlling the __________________
Merchandising properties
A primary means of product differentiation and a source of customer loyalty
Costing
A process: In order to remain in business, the firm must acquire goods for less than the price they will ultimately charge their customers
Free trade zone
A site within a nation designated for duty-free entry of selected goods to be displayed, stored, or used for manufacturing
54
A traditional sourcing calendar is about ____ weeks
Inland marine
A type of insurance that covers the shipment at other times, such as on a truck, airline, or other conveyance
Marine insurance
A type of insurance that protects merchandise when it is in port or being shipped
World Trade Organization (WTO)
Absorbed the GATT in 1994 but operates on the same fundamental assumptions: trade protection weakens the global economy, freer trade strengthens the global economy.
CMT
Africa became a more significant contributor through the development of _____ facilities
Africa Growth and Opportunity Act (AGOA)
African nations working toward a regional presence with such international agreements such as the _________________
Middle East
Defined as the area from Turkey eastward through Iran
The Reciprocal Trade Agreements Act
In 1934 this act became a turning point in international trade relations for the US; allowed the executive brand of the US government to negotiate up to a 50 percent reduction in tariff rates as long as other countries reciprocated the reductions
Government red tape trade barriers
Among the chief obstacles to growth in almost all poor countries
Labor Unions
An association of workers with the purpose, in whole or in part, or bargaining with employers on behalf of workers about terms and conditions of employment
Capitalism
An economic system in which private ownership of property exists, income from business operations accrue to the individuals or firms that own it, individuals and firms are free to compete for economic gain, profit motive is basic to economic life
Knockoff
An imitation, usually using lower-cost fabric and production methods and sold at a lower price with no use of trademarks
Agile manufacturing
An operational manufacturing strategy focused on inducing velocity and flexibility in a make-to-order production process with minimal changeover time and interruptions; As a part of quick response, were at first promoted as tools contributing to flexibility and speed on the production floor
Trade Associations
An organization of executives or managers, or both, that share common professional interests. They pay membership fees to support the services and activities of the association. Services include industry research, publications, seminars, trade shows, opportunities for sharing challenges and solutions, government relations, and lobbying. Represent the perspectives of management. Respond to social activists, and nonprofit organizations whom serve common needs of members
Sourcing calendar
Based on the merchandising calendar that sets the classifications of merchandise and the retail selling periods and that provides a time line related to the sequences of merchandise development
Free trade
In 1994 GATT morphed into the world trade organization (WTO) with focus on ______________
Memorandum of Understanding
Both the EU and the US did extend textile and apparel quotas on a limited basis via the _______________ approach to limiting trade in some product categories (expired in 2008)
China
By 1997, ______ had become the largest apparel exporter in the world and was struggling to develop a free market system
Misclassification of goods
Claiming something is made of different materials, effecting the tariffs of that product and care instructions; another way to avoid quota limitations and duties. Either happens by accident of as a method of getting merchandise into the country illegally. Customs uses a statistical, random sample selection system to physically check goods
Consolidator
Combines cargo from a number of shippers going to the same destination into one container to reduce shipping rates
Vendor, Customer
Common for the _______ to pay for transport to the ship or airplane (FOB), the ________ customer pays for transportation to the new port
Price support programs
Commonly applied to agricultural products in developed countries to rise the commodity price paid to farmers
Specifications
Detailed graphic and written descriptions of styling, materials, dimensions, product procedures, and finishing instructions for a garment style
Exchange rates
Determine the ratio at which one currency can be traded for another; this can cause a country to lose money if the dollar is worth less money when they pay
Sourcing
Determining the most cost-efficient vendor(s) of services, materials, production, or finished goods, or a combination of these, at a specified quality and service level for delivery within an identified time frame
Type and quantity of products needed, monetary costs of acquisition, time required to produce and deliver, customs requirements in different countries, manufacturing philosophies, manufacturing control, sourcing calendars, product development systems
Determining which sourcing option is best for a business is influenced by and dependent on these 8 factors
Higher levels of management expertise, latest technology, fully developed infrastructure, financial resources to assume the majority of manufacturing expenses
Efficient full-package production requires what 4 things?
28
Europe and European Union trading bloc includes ___ countries
Design, product development, vendor compliance, materials and factory sourcing, manufacturing control, logistics
Exploration of supply chain components and expanded global sourcing options supporting production and delivery of finished products today, include what 6 things?
Customs compliant
Exporters prepare to be _____________________
Human trafficking
Facilitating the emigration of people for monetary gain
Focusing on utilizing available fabrics
Fast-fashion firms shorten their calendars by _________________________ to cut the waiting time for fabric production, otherwise the traditional schedule for production of textile fabrics begins almost a year ahead of decisions about fabric preferences
Civil War
Following what war were tariffs politicized in the US
World Customs Organization (WCO)
Global organization whose purpose is to improve operation and efficiency of Customs services; describes the HTS as the "language of international trade"
Damages and a portion of the revenue from sale of the illegal merchandise
If the patent owner wins the case of patent infringement, the company is likely to be awarded:
Strong, best, were, department stores
In the 1950s and 1960s: Free trade spirit was (weak/strong) in the US; multilateral negotiations regarded as (best/worst) way to resolve international trade and financial problems; textile and apparel manufacturing industries (were/weren't) close allies; retail landscape was dominated by _________________
Protectionism
In the 1970s, ____________ was on the rise; to protect domestic industries
phased out, decline
In the 2000s, the MFA _________, turmoil through the textile complex and there was a dramatic (incline/decline) in demand for domestically produced products
long lead times, inconsistent quality, bad merchandise assortments, drastic markdowns, excess inventory
In the 2010s, chasing the lowest labor cost around the world resulted in what 5 things?
Faster, sourcing risks
In the 2010s, there is a trend toward (faster/slower) turnover of inventory in the retail setting and the focus shifted from sourcing goods at the lowest cost to reducing _____________
Item 807
In the 70s, ______ allowed garments cut in the US to be exported, assembled off-shore and then imported, with tariff based only on value added
Multifiber Arrangement (MFA)
In the 80s, the _________ limited quantities of exports, forcing suppliers to upgrade value to increase sales; apparel product migrated to other developing countries and materials supply became an issue; quota avoidance strategy included using fibers not covered in the bilateral agreements
Decline
In the 90s, US industry experience continuous (incline/decline) in employment, although increased productivity lead to increases in quantity
growth, mergers, and acquisitions
In the 90s, retailers became huge through what 3 things?
ASTM
In the US the voluntary sizing standard monitored by _______ provides tables of body measurements, giving designers and manufacturers a basic blueprint for sizing apparel they produce
2000s
In the _______, although quota-type trade regulations were in place, anti-dumping and countervailing duty trade remedies were rarely applied
1980s
In the _______, quick response business systems promoted as means of sustaining domestic production; manufacturers and designers developed own name brands
2010s
In the _________, the worldwide recession and high energy costs impacted business operations and least-developed and newly-developing countries struggled
2000s
In the __________, American Apparel and Footwear Association (AAFA) formed
Pro Forma Invoice
Includes all information for the sale, that the customer requests after receiving the quotes and deciding which bid to accept
Undocumented immigrant workers (UIWs)
Individuals from foreign countries without legal identification papers; there are estimated about 11.6 million in the US and they are the most exploitable workers
Lobbying
Influences the formation of legislation and the administration of rules, regulations, and policies
Develop and product materials and garments in-house, purchase finished garments, contract a vendor to develop and product the garments
Informed decisions must be made regarding whether to do 1 of 3 things when it comes to sourcing and production
Licensing contract
Intellectual property rights are legally transferred from the owner to another legal user via a ______________
Patent
The law the grants a monopoly for a limited period of time for the use and development of inventions; for garment designs they have to require creative engineering for assembly
Counterfeiting
The making or selling look-alike goods or services bearing fake trademarks
Trademark infringement
The most common violation of intellectual property rights
Transaction value
The price that is actually paid or payable for the goods when sold for export
North American Industry Classification System (NAICS)
Introduced in 1997 to standardize the identification of textiles and apparel for Canada, Mexico, and the United States in a manner consistent with the world market
Political strategy
Makes it possible for governments, firms, other organizations, and individuals to deal with and manipulate important and powerful components in their environments
Trademark
May be a brand name or logo, but may also be letters, numbers, package design, color, or other aspects of a product. A word, phase, logo, or other graphic symbol used to distinguish one firm's products or services from those of other firms
Customs services
Monitor imports and exports, assess and collect duties, reports imports and exports against quota, protect the country's borders against illegal entry
Product development systems
New ______________________ allow the creation of styles directly on three-dimensional avatars draped on the computer, revised and altered on the computer, to be translated directly into two-dimensional patterns without the need of developing actual samples
Illegal transshipment
Occurs when goods are shipped through a third country or port to produce counterfeit documents that illegally change the country of origin. Benefits are that some countries may have no quota limitations or duty due on the products, but if there is an suspicion the goods can be detained
22
Of the 80 billion produced annually, up to __ percent of all branded apparel and footwear sold is counterfeit
customer, vendor
One entity desires some material, product, or service (the _____), while the other provides it (the ______)
Gray market goods
Original goods (not knockoffs) sold by unauthorized vendors
40 to 50
The single largest cost of apparel is the fabric, which is usually between _______ percent of the total cost of goods
China
The world's leading violator of intellectual property rights during the past decade
Trade protection
Prevents domestic companies from having to compete with foreign companies in their own domestic markets; makes competition more fair in international markets
Trademark infringement
Produces counterfeit or pirated products
Intellectual Property Law
Protects intellectual property rights of creators/owners by ensuring exclusive use of these creations and includes: copyright law, trademark law, patent law, trade secret law
General Agreement on tariffs and trade (GATT)
Provided an international framework of ground rules for worldwide trade among its members, called contracting parties when established in 1947. Its purpose was to reduce trade barriers, particularly tariffs and quotas, among its members, but also commercial policies. Absorbed by WTO in 1994 to make it more permanent and efficient
Tariff Costs
Rates of duty charged on products to gain their entry into a country, vary significantly, depending on the type of garment and the COO; each classification of garment is given a 10-digit HTS code
Europe and European Union
Region with trading bloc that moved towards regionalization first
Tariff barriers
Restrict imports to increase domestic production
Quotas
Restrict quantities of goods for import or export
Nontariff trade barriers
Restrict trade by some means other than applying a tax on products
Voluntary export restraints
Restrict trade, but are not formalized into international law
Dumping
Selling a product in another country at less than the domestic sales price or less than the product costs to produce
Joint Venture
Shared ownership of a business or facility by two or more firms
Countervailing duties
Special type of tariff designed to counteract subsidies and dumping; eliminates unfair competition of the subsidized low-price products' competing with nonsubsidized products
Most favored nation (MFN) or Normal trade relations (NTR)
Specifies that a party granting a trade advantage to one country must grant the same advantage to all contracting parties
Restrict trade, accumulate revenue for the government
Tariff's 2 purposes:
Protecting intellectual property rights, monitoring and documenting identities and quantities of imports and exports
The 2 purposed and activities of customs services in each country
Europe and the EU, The Americas and Caribbean, Asia and Oceania, The Middle East and Africa
The 4 primary regions that form trading blocs in the textile and apparel industry
Central America, North America, South America, West Indies
The Americas and Caribbean Basin trading bloc includes: (4)
Harmonized System (HS)
The international harmonized commodity description and classification system, developed by the World Customs Organization
Merchandise cost
The European Union uses CIF for tariffs and duties: the C means
Freight
The European Union uses CIF for tariffs and duties: the F means
Transport Insurance
The European Union uses CIF for tariffs and duties: the I means
Multilateral trade agreements
The WTO and ATC are primarily concerned with ______________________________
North American Free Trade Agreement (NAFTA)
The agreement in 1994 that unified North America beginning their trade bloc
Standards
The basic characteristics used to determine acceptability of the quality and resulting performance and appearance of products and services. Examples: Voluntary standards developed by American Association of Textile Chemists and Colorists (AATCC); Government restrictions stemming from application of the Consumer Product Safety Improvement Act (CPSIA); Government-mandated standards related to flammability and product safety, overseen by the Consumer Product Safety Commission (CPSC)
Harmonized Tariff Schedule (HTS)
The classification of goods used to determine tariffs on specific products imported into the United States, based on 97 product classifications called chapters (based on the HS)
Rules of origin
The country of origin of a product is determined by ______________
Country of origin
The country where goods are wholly obtained or the country of the last substantial transformation
Association of Southeast Asian Nations (ASEAN)
The creation of the __________________ in 1977 helped establish the Asia and Oceania trading bloc that is a combination of mainland and island countries including the two most populous nations on the globe (China and India)
Vendor compliance
The customer's established set of rules provides manufacturing control and defines standards for ________________
rate on the products
The duty levied by customs is to be paid before the importer can take possession of the goods, so it is critical to know what the _________________ will be prior to their arrival at port. For novice importers, it is recommended to select a customs broker
Caribbean Basin Access Initiative (CBI)
The fabric-forward rule guaranteed domestic textile manufacturers would supply fabric, regardless of place of assembly (1987)
Fabric
The largest cost of apparel production
Trade regulations, lack of trade regulations, lack of enforcement of trade regulations
What 3 things are all blames for illegal activities associated with the exchange of goods between nations
Copyright, trademark, patent, trade secret
What 4 laws are included in the Intellectual Property Law
Agreement on Textiles and Clothing (ATC
What was the Multifiber Arrangement (MFA) replaced by in 1994?
Misrepresentation of country of origin
When the country of origin tag is changed in between shipments to final destination. This can substantially effect tariffs, therefore cheating the system
Quota system
With elimination of the _________________, US apparel firms moved many apparel sourcing operations to Asia
India
_______ has become a major world supplier yet low manufacturing productivity remains a major stumbling block
Regionalization
________________ continued to develop as manufacturers sought the benefits of free trade in the 90s
Unfair competition law
governs commercial activity that tends to confuse, mislead, or deceive customers and provide unfair business advantages
Multifiber arrangement (MFA)
in 1974, the _____________ established import quotas
Quick Response
rapid change in production systems
Private brand
reflects the ownership of an exclusive label by a brand manager or retailer
Labor unions, trade associations
the 2 primary vehicles for political positioning and lobbying by business and industry are:
Trade
the buying and selling or bartering of goods and services
Production subsidies
were regarded by GATT 1994 as a form of unfair competition (US ignored a 2005 ruling by the WTO to discontinue subsidies for cotton production)
