Proc Final - Chapter 14

Import brokers and agents:

For a fee (usually a percentage of purchase value—and it can be as high as 25 percent), the broker or agent will assist in locating suppliers and handling required documentation.

Maquiladoras:

A Mexican example of the foreign trade zone concept or industrial parks; non-Mexicans can own a maquila, or factory for export goods, in the maquiladora in order to take advantage of low Mexican labor costs, parts and supplies enter Mexico duty free, and products exported to the United States are taxed only on the value added in Mexico.

Sight draft:

A document that a bank in the seller's country, in turn, sends the documents to a bank in the buyer's country, together with instructions covering when the documents are to be released to the buyer—normally at time of presentation.

Bill of exchange (draft):

A document that the seller draws on the buyer and to which it attaches the shipping document before handing it to its bank for collection; used by suppliers with whom the buyer has established a long-term relationship who are willing to ship on open account as long as title to goods does not pass until payment is made.

Letter of credit:

A document which is drawn by the buyer's bank at the buyer's request, and guarantees that the bank will pay the agreed-on amount when all prescribed conditions, such as satisfactory delivery, have been completed.

Trading company:

A large firm that normally handles a wide spectrum of products from one or a limited number of countries.

Tariff:

A schedule of duties (charges) imposed on the value of the good imported (or, in some cases, exported) into a country.

Countertrade:

A term for a barter agreement.

Switch trades:

A third party applies its "credits" to a bilateral clearing arrangement where the credits are used to buy goods and/or services from the company or country in deficit.

Three-corner deal:

A type of countertrade deal in which a commodity changes hands three times.

Two-corner trade:

A type of countertrade deal in which a commodity changes hands twice.

Offsets:

A type of countertrade deal with the condition that part of the countertrade be used to purchase government and/or military-related exports; to make the sale, the selling company agrees to purchase a given percentage of the sales price in the customer country.

Swap:

A type of countertrade in which goods of the same kind—for example, agricultural items or chemicals—are exchanged to save transportation costs.

Mixed barter:

A type of countertrade in which the seller ships product of a certain value—for example, motors—and agrees to take payment in a combination of cash and product—for example, wheat.

Incoterms (International Commercial Terms):

Created by the International Chamber of Commerce, Incoterms is a uniform set of rules to clarify the costs, risks, and obligations of buyers and sellers in an international commercial transaction; they determine who pays the freight, who pays the carrier, who handles the import clearance and export clearance, and two of the terms address insurance.

Barter:

Involves the exchange of goods instead of cash.

Import merchant:

Makes a contract with the buyer and then buys the product in its name from the foreign supplier, takes title, delivers to the place agreed on with the buyer, and then bills the buyer for the agreed-on price.

Temporary importation bond (TIB):

Permits certain classes of merchandise such as samples, or articles for sale on approval, to be imported into the United States with the net effect that no duty is paid on the merchandise, provided it is reexported on time.

Integrated logistics:

Refers to the coordination of all the logistics functions—the selection of modes of transportation and carriers, inventory management policies, customer service levels, and order management policies.

Counterpurchase agreements:

Require the initial exporter to buy (or to find a buyer for) a specified value of goods (often stated as a percentage of the value of the original export) from the original importer during a specified time period.

Foreign trade zones (FTZ):

Special commercial and industrial areas in or near ports of entry; foreign and domestic merchandise, including raw materials, components, and finished goods, may be brought in without paying customs duties.

Certificate of Origin:

The document used to certify the origin of materials or labor in the manufacture of the item used to obtain preferential tariff rates, when available.

Buyback agreements:

The selling firm agrees to set up a producing plant in the buying country or to sell the country capital equipment and/or technology; the original seller agrees to buy back a specified amount of what is produced by the plant, equipment, or technology; agreements may exceed 10 years.

U. S. Foreign Corrupt Practices Act (FCPA), 1977:

This law prohibits U.S. firms from providing or offering payments to officials of foreign governments to obtain special advantages. The FCPA distinguishes between transaction bribes and "variance" or "outright" purchase bribes.

U.N. Convention on Contracts for the International Sale of Goods (CISG):

Uniform international law for the sale of goods (not services) adopted by 74 countries as of May 2009, including Canada, Mexico, the United States, China, Germany, and Japan.

Bonded warehouses:

Used for storing goods until duties are paid or goods are otherwise properly released.