iba 460 exam 1

export controls (who, what, why)

-DoC: controls most commercial and "dual-use" items -BIS: controls export of military/tech products that can pose a threat to the US -Dept of State: defense items

North American Free Trade Act (NAFTA)

-between US, Mexico, and Canada -removes barriers in exchange for goods -removes investment restrictions -protects intellectual property rights

impact of import tariffs and exchange rates

-can be more costly to export -pro-producer, anti-customer: price of product goes up, customer wants smaller order -short term effects: higher prices reduce consumption, businesses profit, and the gov't sees an increase in revenue -long-term effects: businesses see decline in efficiency due to lack of competition, reduction in profits due to emergence of substitutes

Harmonized Tariff Schedule (HS Code/HTS)

-classifying globally traded products, used for imports -10 digits, 6 harmonized -made by importer, checked by customs -21 sections, about 17,000 codes -recognized by 198 countries

EAR99

-commercial goods that are not ECCN are EAR99 -low level tech and consumer goods

Cluster Theory

-competitive clusters form when companies in the same industry focus in one geographic area. -the companies feed on each other's knowledge, pushed to innovate faster -if they become more efficient and innovative, they eventually become world class suppliers ex. Silicon Valley (IT) and Geneve, Switzerland (watches)

cons of reactive market selection

-competitors might be wrong -mismatched market and product life cycle -higher % of mistakes

Why rank foreign markets?

-don't rely on untested assumptions -avoid hidden agendas in the company -make informed decisions w/ consensus -not a one-time thing, its a process

Factors contributing to growth in international trade over the last 60 years

-economic development worldwide, trade integration -cost for travel, shipments, and telecommunications decreased -more firms trading internationally, more small firms getting involved

Wal-Mart effect

-economic impact felt by local businesses when a large company like Wal-Mart opens near them -forces smaller retailers out of business and reduces wages -forces suppliers to make their products for less money -attributed to their immense buying power -benefits: curb inflation, and keep employee productivity optimal

1. Uruguay Round of GATT 2. Israel FTA with US

-established the World Trade Organization (WTO) -first free trade agreement the US made was with Israel, promoted regulatory transparency

Reactive market selection

-fast-low risk approach b/c you and your competitors have been selling in the market already -ranked/id'd foreign markets -low cost

Proactive market selection

-focus on a set number of markets -global assessment of market opportunity -independent of previous sales/competitors -stimulus from inside the company -more up-front costs

calculation of duties

-landed value of goods, costs and freight -transport costs added to invoice -ground shipped, int'l fee is subtracted from importer's bill

Logistics Cluster Theory

-logistics companies concentrate in one geographic area -manufacturers can operate more efficiently since services are shipped to one area -help one another to attract new customers -ex. Singapore or Memphis, TN

benefits of int'l trade in Alabama and the US

-more large firms are exporting out of alabama

impact and example of non-tariff barriers (NTB)

-reduces the total number of items imported into a specific country -important to decrease NTB otherwise it can put your product out of the market -ex. import licences, labeling, quotas

impact of free trade agreements

-reduces trade barriers -best way to open foreign markets to the US -stable and transparent trading environment -exports to free trade countries grow at a faster rate than non FTA

what is the infrastructure of Alabama's trade ports

-small/med. businesses -deep water port -inland transportation -6 foreign trade zones --store/process shipments in sub zones to delay payment of import taxes -public/private services (export training, marketing, taxes) -Export Alabama Alliance: small companies get involved in trading -more jobs created -exports increased from $2.8B in 1990 to $21.7B in 2017 -ranked #8 in southeast exports

Ad Valorem Tax

-tax based on value of property, follows property from owner to owner -duty is collected "ad valorem" -billed from exporter on invoice

Schedule B Number

-used for exports, made by the US census -10 digits, first 6 digits are based on HS code -about 9000 codes

Top 5 Exporting Countries

1. China 13.8% 2. US 9.1% 3. Germany 8.1% 4. Japan 3.8%

Driver of Int'l trade

1. Cost: companies increase sales worldwide to recover from high investment costs 2. Competition: comp. enter foreign markets to keep up and retaliate against with their competitors 3. Market: firms enter foreign markets because their customer's expect them to be present 4. Technology: firm's customer's use technology to make purchases

global indicators of a product's international potential

1. Demographic: the customer (size, age, density, growth rate), (income, education, religion, lang) 2. Macroeconomics: GDP, inflation, potential of recession, emerging v. mature markets 3. Gov't Policies: import controls, tariffs, regulations, labeling 4. Environmental: weather, geography, infrastructure 5. Import/Export Data: harmonized code, historical data 6. Industry Specific: entry-barriers, rivalry, supplier power, buyer power, risks in industry

Top 5 Importing Countries

1. Us 13.8% 2. China 10.1% 3. Germany 6.3% 4. Japan 3.9% 5. UK 3.7%

Process used to RANK potential foreign markets

1. develop a list of indicators 2. convert data (assign point values) 3. weight each factor and assign it relative importance 4. analyze the results: are they reasonable? what-if analysis

does my shipment require a license?

4 reasons 1. actual item code 2. reasons for control 3. who its going to 4. the end use 5. every variation of the product

Top U.S. exporters/exports

Canada, Mexico, China, Japan -industrial supplies (chemicals) -capital goods (medical) -consumer goods (cells) -automotive -food/bev.

Top U.S. importers/imports

China, Mexico, Canada, Japan -industrial supplies -consumer goods -capital -auto -food/bev.

CCL

Commodity Control List -what can/can't be shipped -WAS: everything not specifically authorized requires a license -NOW: everything is permitted unless it is specifically unauthorized

DRP

Distribution Resources Planning: tool that allows a retail firm when/what/how much to order from suppliers in relation to what they sell to customers

ECCN

Export Control Class. Number -Commerce control list -id reasons for control -tells licensing requirements

T/F: There is currently more trade in in services than merchandise.

False. There are currently more trades in merchandise.

MRP & MRPII

Materials Req. Planning & Manufacturing Resources Planning: tool that allows firms to decide what to produce, how much, depending on sales forecasts and pending orders

T/F: DRP, MRP, and MRP II all depend on the reliable and efficient delivery of smaller shipments.

True.

Factor Endowment Theory

a country will enjoy comparative advantage if its naturally endowed with a larger factor of economic production (ex. land, labor, capital)

Absolute Advantage

if a country can produce another product more efficiently than another country, they will trade

ex. of labeling

in Canada they require almost all products to have bilingual labeling; if you do not understand this before shipping you could waste tons of money re-labeling your products

Process used to IDENTIFY potential foreign markets

indicators of success based on previous data -leads: trends in regions that share the same characteristics -sales: trends of past sales indicate you can actually sell a product in another competitive market -competitive behavior: how/where are competitors selling -trade shows: what countries attend the most, insight about other countries markets -experts/customers: what is their opinion on your plan/product

Absolute Quota

limit set by importing country's government

Comparative Advantage

ratio of products, which country can produce a product more efficiently than another product they are currently making, they will trade for product

what is an import tariff?

taxes applied to all imported goods -local gov't can protect local industries and locally produced products

Tariff-Rate Quota

two-tiered tariff; low rate on products until a specific amount of units have been imported, after limit is reached the tariff will increase

Trade in services

types of service: financial advising, legal, advertising, postal -accounts for around 20% of the total world trade

Alabama's top 5 exports

vehicles, mineral fuels, machinery, iron/steel, plastic