AM330 Exam 2
carry forward
(MFA) an exporting country was allowed to borrow from next year's ceiling to apply to the present year's level
carry over
(MFA) an exporting country was allowed to use some of any unused ceiling from one agreement year to apply to the subsequent year's ceiling
swing
(MFA) the ability to use a portion of the unfilled ceiling of one category for another category
copyright
a legal right gained by an author, composer, playwright, publisher, or distributor to exclusive publication, production, sale, or distribution of a literary, musical, dramatic, or artistic work
licensing contract
a means of transferring intellectual property rights; extending the value of a brand without having to produce the product; putting a brand name on a product produced by someone else for a contracted percentage of the sales it includes: - description of merchandising property - definition of the products that can bear the property - time frame for the agreement - responsibilities for the licensor/ licensee - basis of royalty - amount of royalty
primary effect of the MFA
driving apparel production around the world by stimulating search for new production sites in countries with no quotas
intellectual property rights
legal protection for exclusive use by owners of copyrights, trademarks, trade secrets, and semiconductor chips
agreement on textiles and clothing (ATC)
purpose was to phase out MFA in 10 years and reintegrate the textile and clothing sector ito the WTO
outsourcing technical design advantages
- cost
1960s
- entrepreneurism - domestic production, protected trade with textiles and apparel - domestic buying and moving toward international sourcing with retailing
1950s
- entrepreneurism - protected trade, domestic production, and with textiles and apparel - domestic buying with retailing
1990s
- horizontalization/ globalization - mostly domestic production, protection with yarn and fabric forward rules with textiles - free trade, global sourcing, international marketing with apparel and retailing
customs violations
- misrepresentation of country of origin - misclassification of goods - illegal transshipment - undocumented immigrant workers
characteristics of countries for sourcing by level of development
- overall stability and security - bureaucratic efficiency - education - human rights - infrastructure - labor cost
2000s post-quota trade and sourcing
- post-quota trade and sourcing - moving toward international production, protection with yarn and fabric forward rules with textiles - free trade, global sourcing and marketing, social responsibility with apparel and retailing
apparel importers
- private brand retailer - brand manager - apparel sourcing intermediary
1970s
- protectionism - domestic production, protected trade with textiles and apparel - domestic buying and international sourcing, free trade with retailing
2010s
- regionalization/sustainability - combination of domestic and international production, protection with yarn and fabric forward rules with textiles - free trade and fair trade, moving toward transnational sourcing and marketing, emerging pockets of domestic production with apparel and retailing
characteristics of countries for sourcing by geographic location
- shipping cost - shipping time - cultural values and norms - import duties - risk of natural disasters
1980s
- verticalization/internationalization - domestic production, protection with fabric-forward rules with textiles - domestic production, protected trade, and moving toward international sourcing with apparel - international sourcing, free trade with retailing
economic benefits and risks of illegal transshipment
1 some countries may have no quota limitations or duty due on the products - if there is suspicion of transshipment or other violation, goods can be detained
FOB (free on board) vs CIF (cost, insurance, freight)
EU uses CIF, US uses FOB CIF means end product on imported goods costs more with the same markup
trade agreements
GATT, MFA, and WTO
agile manufacturing
an operational strategy focused on inducing velocity and flexibility in a made-to-order production process with minimal changeover time and interruptions
private brand
a brand owned and marketed exclusively by a brand manager or retailer
quality assurance
a commitment to product quality that utilizes the concept of error prevention as integral to the entire product development process
intermediary
a company that has expertise in design, product development, acquisition of materials, logistics, and importing as well as an established network of apparel factories they contract with
vendor
a company that supplies services to other companies
human development index
a composite index measuring average achievement in three basic dimensions of human development; a long and healthy life, knowledge, and a decent dtandard of living
specific tariff
a fixed amount of tax per physical unit of imported product
world trade organization (WTO)
a global organization whose purpose is to improve the operations and efficiency of customs service
customs service
a government agency responsible for monitoring exported and imported goods, assessing and collecting duties, and protecting the country's borders against illegal entry
trading bloc
a group of countries that have created regional trade incentives and that jointly participate in trade negotiations 1. europe and the european union 2. the americas and the caribbean 3. asia and oceania 4. the middle east and africa
letter of credit
a guarantee to the seller that the buyer has the funds to complete the purchase and that they are reserved for the seller
omnichannel retailing
a multichannel approach to sales that seeks to provide a seamless shopping experience to customers whether they are shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store
protection subsidy
a negative trade tax; a payment of money from a government to a business to defray costs of making goods and commodities
trade association
a nonprofit organization formed to serve the common needs of its members
government subsidy
a payment from a government to a business to defray business costs
export subsidy
a payment from a government to a firm as a reward for exporting products
consolidator
a person or firm that combines cargo from a number of shippers going to the same destination into one container for the purpose of reducing shipping rates
lean manufacturing
a philosophy of production that emphasizes efficiency and economy of scale
trade policy
a political strategy or program designed to stimulate or control the exchange of goods between nations
free trade zone
a port or other site within a nation designated for duty-free entry of selected goods to be displayed, stored, and/or used for manufacturing
transshipment center
a port where merchandise can be imported and then exported without paying import duties
most favored nation (MFN)
a principle that each country must treat all nations the same in terms of trade restrictions and policies, and no country should have preferential trade agreement
manufacturing control
a process in which expected performance is compared with actual performance
free trade area
a region made up of two or more countries that have a comprehensive free trade agreement eliminating or reducing trade barriers on products traded among the countries
item 807
a ruling that allowed garments cut in the United States to be exported and assembled in Caribbean countries and then imported with tariff based only on value added
voluntary export restraint
a self-imposed limit on the amount of product that one country can export to another country, also known as export tariff restraint agreement
import policy
a set of regulations that determines what products and services can enter the domestic economy from another country and under what conditions
export policy
a set of regulations that determines what products and services can leave a country for another market and under what conditions
countervailing duty
a special tax that increases the price of goods to a competitive level; used against illegal trade activities such as subsidies or dumping
ad valorem tariff
a tax set as a fixed percent of the value of an imported product
pirated
a term used in the US and EU; an imitation of the original, counterfeit
fabric-forward rule
a trade rule that limits tariffs or provides quota-free imports, or both, for garments made of fabrics produced in on of the participating countries
trademark
a word, phrase, logo or other graphic symbol used to distinguish one firm's products ot services from those of other firms
multifiber arrangement (MFA)
an international trade agreement that allowed textile and apparel trade to be regulated through quotas established in bilateral agreements between nations
corruption
abuse of political office for private gains
unfair competition
activities defined by legal rulings and statutes that protect against unethical business practices
bureaucracy
administrative system leading any large institution or government
knockoff
an imitation of an original that does not carry the original brand, made with lower-cost materials and production methods and sold at a lower proce
counterfeit
an imitation of what is genuine, with the intent to defraud the customer
general agreement on tariffs and trade (GATT)
an international framework to establish ground rules for worldwide trade and promote reduction of trade barriers
yarn-forward rule
apparel can be imported tariff- and quota-free if garments are made of yarns and fabrics from one of participating countries
trade regulation
barriers and limits on types and quantities of goods and services that cross political boundaries
cmt vs. package vs. full package factories
cmt- apparel assembly package- acquisition of fabrics, times, and packaging materials, apparel assembly, and delivery of goods on board full package- acquisition of fabrics, trims, and package materials, product development (preproduction), apparel assembly, and delivery of goods on board
intellectual property
copyrights, trademarks, patents, trade secrets, and semiconductor chips; inventions or other discoveries that have been registered with government authorities for the sale and use by their owner
landed duty paid (LDP)
covers the costs of goods, insurance, freight, and import duty in the destination country
rules of origin
criteria used to determine the national source of a product
sourcing
determining the most cost-efficient vendors of services, materials, production, or finished goods, or a combination of these, at a specified quality and service level for delivery within an identifies time frame
non-tariff barriers
exchange rates quotas safeguard measures voluntary export restraint technical barriers to trade government subsidies production subsidies price support programs dumping and countervailing duties
human trafficking
facilitating the emigration of people for monetary gain
the big four
hong kong, japan, korea, and taiwan
cyber crime
illegal activity that uses a computer as a means of commission of a crime and as storage for the evidence of the crime
package factory
in addition to apparel assembly to customer specifications, the factory can source and finance all materials and deliver goods on board; they do not offer and product development services
customer
in the sourcing world, the sourcing company that contracts for delivery of services, materials, product development, or finished goods orrrrr a person or organization that receives or consumes goods or services from a vendor and can choose between different products and vendors
preproduction
includes design, patternmaking, grading, making first production samples, and development of tech packs for materials and production processes
souring agent
individual or firm that provides services to procure and deliver products
undocumented immigrant workers
individuals from foreign countries without legal identification papers
pro forma
invoice an estimate cost of goods or services sent by vendor to customer, no request for payment; includes description of products such as quantity, value, weight, transportation charges, etc that can be used for customs purposes
multilateral trade agreement
involves more than two countries
seconds
irregulars because the are not first quality off the production line
LCL
less than full container load
trade fair
massive, usually regular trade event where producers display products and services to wholesalers and retailers
MFA violations of GATT
most favored nation principle and it used quotas when GATT stated there would be no other trade restrictions other than tariffs
substantial transformation
occurs when the processing of an article results in a new and different article having a distinct name, character, or use; occurs when an HS classification changes
price support program
purchasing and storing products from the market to reduce the supply, relative to demand, to drive up the price
gray market goods
original goods that are sold by unauthorized vendors
vendor compliance
performance standards or rules established by the customer related to things like working conditions, wages, and age of workers that a vendor must follow in order to do business with that customer
unfair non-tariff barriers
price support program subsidies dumping
first quality
product that meets materials, design, and production, appearance, and fit standards
import agent
professional who assists a business in a foreign country and acts as intermediary between the customer and the vendor; is paid on commission basis by the company they represent
cmt factories
provides cutting fabric, sewing garments, and providing trims as a service. everything else (preproduction) is provided by the customer
regionalization
reducing trade barriers in selected geographic regions to facilitate trade
full container load (FCL)
refers to a standard 20 or 40 foot shipping container loaded with merchandise from one consigner; it is a common measure for calculating shipping rtes and typically is less expensive than the same weight of loose cargo
free on board (FOB)
reflects the cost of goods and the cost of loading them on board a vessel at the foreign port of export
cost, insurance freight
reflects the cost of goods as well as shipping and insurance to requested port
private brand retailer
reflects the ownership of an exclusive label by a retailer, it allows retailers to reduce merchandise costs by bypassing the manufacturer or brand manager and sourcing directly with a production contractor for finished apparel products
technical barriers to trade
regulations, standards, and testing and certification procedures that obstruct trade
dumping
selling a product in another country at less than it is sold in the home country or less than it costs to produce why? temporary strategy for establishing or maintaining market share, for of inventory control, or result of government production to provide domestic employment
joint venture
shared ownership of a business or facility by two or more firms
illegal transshipment
shipping goods through a port or country to facilitate the change of country of origin or to avoid quota limitations or import duties, or both in the destination country
tariff barriers
specific tariffs and ad valorem tariffs
export processing zone
tariff-free trade zone that is set up by governments in developing countries to promote export through simplified import and export procedures
nominal tariff
tax rates on imported goods published in each country's tariff schedule
safeguard measures
temporary action to protect an industry from fast and sudden rise of imports
facilitated illegal immigration
term that covers a number of serious different crimes all aimed at assisting, for financial gain, the entry into or residence in a country, in violation of the laws of that country
trademark infringement
the act of misleading the public into believing the items bearing the trademark/brand name are produced and sold by the owner of the trademark, when they are not
seizure
the act of taking control of illegal merchandise, drugs, or other products by CBP officials at border crossings after being legally inspected before being admitted to the US
licensee
the buyer of the right to use a merchandising property
morals
the degree of conformity wwith generally accepted or prescribed standards of goodness or rightness in character or conduct
political strategy
the general approaches used by the governments, firms, other organizations, and individuals in dealing with and manipulating important and powerful components in their environments
licensor
the owner of a merchandising property
espionage
the practice of observing furtively to obtain secret information regarding a business or government
merchandising property
the primary means of product differentiation and a source of customer loyalty
lobbying
the process of influencing the formation of legislation or the administration of rules, regulations, and policies
product life cycle management (PLM)
the process of managing a products life cycle from inception design, development of related materials, manufacturing, delivery, distribution, marketing, sale, and in some cases service and disposal
non-tariff trade barriers
the quota, quality standards, or other regulations or conditions that restrict the flow of goods between countries, not including taxes on imports or exports
free trade
the unrestricted exchange of goods among nations
full package factories
the vendor, in addition to cutting, making, and trimming provides a full range of preproduction and postproduction services
customs compliant
to act in accordance with customs rules and regulations
purpose of trade protection
to prevent domestic companies from having to compete with foreign companies in their own domestic market
transshipment
to transfer or be transferred from one conveyance to another in order to continue shipment
fundamental assumptions of GATT and WTO
trade protection weakens the global economy and freer trade strengthens the global economy
protectionism
use of trade barriers to minimize imports in order to protect domestic industry
evolution of the us textile complex four political perspectives
~ international companies are importers and exporters simply to support domestic operations ~ multinational/multidomestic companies emphasize the differences among national suppliers, markets, and operating environments; they sacrifice efficiency in favor of responsiveness to local environments and customizing their products ad strategies for each individual national market ~ global companies use one common strategy and coordinated image/brand to market their products in different countries, assuming that national tastes and preferences are more similar than different ~ transnational companies are responsive to local needs in multiple countries while retaining the global efficiency; they have a central corporate office but give decision making, R&D, and marketing powers to each individual foreign market