ENTR 4460 - Final
The inability or unwillingness of the buyer to accept delivery of a shipment when it is ready is referred to as: a) Economic risk b) Political risk c) Commercial risk d) Country risk
a) Economic risk or c) Commercial risk
Which entity publishes the incoterms? a) International Chamber of Commerce b) World Trade Organization c) World Customs Organization d) US Department of Commerce
a) International Chamber of Commerce
A Brazilian company filed and received a Brazilian patent against a particular technology it created. Without any further action or filings, which is true? a) Its patent will not be protected in the US. b) According to WTO rules, its patent is protected in the US. c) According to the Rome Treaty, its patent is protected in the US. d) Due to the MERCOSUR trade agreement, its patent is protected in the US.
a) Its patent will not be protected in the US.
Generally, this term of payment is the one most desired by importers. a) Open account b) Cash in advance c) Bill of exchange d) Letter of credit
a) Open account
Individuals from high-context cultures are sensitive to body language and try to avoid embarrassing others. a) TRUE b) FALSE
a) TRUE
On the EEI, what is the Principal Party in Interest? a) The party in the U.S. that receives the primary benefit of the export transaction. b) The party in the foreign country that receives the primary benefit of the export transaction. c) Always the exporter. d) Always the importer.
a) The party in the U.S. that receives the primary benefit of the export transaction.
cross cultural risk
a situation or event in which a cultural misunderstanding puts some human value at stake -cultural differences -negotiation patterns -decision making styles -ethical practices
Standard International Trade Classification
a standard numerical code system developed by the UN and used in international trade to classify commodities, primarily designed for statistical and economic purposes
standard industrial classification (SIC)
a standard numerical code system used by the US government to classify goods and services
Balance Sheet
a summary of a person's or organization's assets, liabilities and equity as of a specific date
anti-dumping duty
a tariff imposed to discourage the underpriced (below foreign country's) domestic market/sale of foreign goods in the US market, which might hurt U.S. manufactures
Collectivism
a term used to desire any moral, political, or social outlook, that emphasizes the interdependence of every human in some collective group and the priority of group goals over individual goals
Trade show
a trade show is a stage-setting event in which firms present their products or services to prospective customers in a pre-formatted setting
quota
a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time
The method of financing poses a high degree of risk to the seller/exporter a) Consignment b) Cash in advance c) Bill of exchange d) Letter of credit
a) Consignment
Siemens is headquartered in Germany but maintains operations in the United States. The United States is the _____ country. a. home b. host c. parent d. subsidiary e. none of the above
b. host
combining intermodalism and containerized
has increased efficiency and lowered shipping costs globally
export documentary collections
have established relationship less risk
Industries or products affected by distance: Geographic Distance
-products have a low value to weight or bulk ratio -products are fragile or perishable -communications and connectivity are important -local supervision and operational requirements are high
managerial orientations
1. Ethnocentric 2. Polycentric 3. Geocentric --Strive for geocentric orientation
Tips for Selecting Indicators
1.Find indicators that relate to the total size of the market 2.Use a single source for each indicator 3.Incorporate trade statistics 4.Research demand for comparable products 5.Avoid general or vague indicators; quantitative indicators are best 6.Determine foreign market entry mode 7.Investigate tariff and non-tariff barriers
Attributes creating distance: Cultural Distance
-different languages -different ethnicities; lack of connective ethnic or social networks -different religions -different social norms
Direct market entry Benefits
-direct Control -Excellent feedback -Greater sales? --Success depends on execution of strategy
2) diversification of customers and risk
-diversification of customers and markets -leads to diversification of risk
trade mission: why participate
-exposure -cost -hands-on learning
structure of a harmonized number
-first 2 digits chapter -Up to:4 digit heading --6 digit subheading --8 digit: tariff item --The final two digits in a 10 digit number: statistical suffix
input from customers
-foreign customers are helpful because they often have international contacts and can provide industry-specific details on trade regulations and market conditions -Your goal is to develop indicators of success
tariff engineering
Changing or reconfiguring what is imported to minimize import duties
Complementary product or industry substitution
Ex: heart monitor device is classified as a 8517.62.0050 'machine for reception ... of data' which is not medically related. So substitute 9021.50.000 'pacemakers ...'
forfaiting
Forfaiting, similar to factoring, is an arrangement under which exporters actually forfeit their rights to future payment in return for immediate cash. The arrangement is commonly used for sales of capital equipment with terms of one to five years.
FCA
Free Carrier (named place) -The seller delivers the goods to the carrier or another person nominated by the buyer at the seller's location or another named place.
Organization for Economic Cooperation and Development (OECD)
The Organization for Economic Cooperation and Development was established in 1961 by the industrialized "free market" nations of the world to promote the economic and social welfare of member nations and to stimulate efforts on behalf of developing nations
Paris Convention
The Paris Convention for the Protection of Industrial Property, the first adopted in 1883, is the major international agreement providing basic rights for protecting industrial property. It covers patents, industrial designs, service marks, trade names, indications of source, and unfair competition. 1. the principle of national treatment provides that nationals of any signatory nation shall enjoy in all other countries of the union the advantages that each nation's laws grant to its own nationals 2. the right of priority enables any resident or national of a member country to, first, file a patent application in any member country and, thereafter, to file a patent application for the same invention in any of the other member countries within 12 months of the original filing and receive benefit of the original filing date
beneficiary
The person in whose favor a draft is drawn or a letter of credit is opened.
What to do when more than one harmonized code seems to apply?
Then you turn to the six general rules of interpretation (GRIs)
Risk scenario 4: overseas sales and marketing office and staff
-Foreign direct investment --commercial risk --FX econ risk --FX transactional risk --political risk
small scale entry
- Time to learn about market - Reduces exposure risk
Group E / Departure
-ExW least responsibility for the seller
wholly owned subsidiary disadvantage
-bear full cost and risk
financial solutions for managing foreign exchange risks
-hedging -spot -forward
WiserTrade
-provides detailed, monthly trade statistics for 35 countries
documentary collection
A method of effecting payments for goods whereby the seller/exporter ships goods to the buyer, but instructs his bank to collect a certain sum from the buyer/importer in exchange for the transfer of title, shipping and other documentation enabling the buyer/importer to take possession of the goods.
Letter of credit (L/C)
A method of payment for goods by which the buyer establishes his/her credit with a local bank, clearly describing the goods to be purchased, the price, the documentation required and a limit for completion of the transaction. Upon receipt of documentation, the bank is either paid by the buyer or takes title to the goods themselves and then transfers funds to the seller. The bank will insist upon exact compliance with the terms of the sale, and will not pay if there are any discrepancies.
back-to-back letter of credit
A new letter of credit opened in favor of another beneficiary on the basis of an already existing, nontransferable letter of credit.
cash against document
A payment method by which title to the goods is given to the buyer when the buyer pays cash to an intermediary acting for the seller, usually a commission house.
cash in advance
A payment method for goods in which the buyer pays cash to the seller before shipment of the goods. Usually required by the seller when the goods are customized, such as specialized machinery.
After sight (A/S)
A payment on a draft or other negotiable instrument due upon presentation or demand to the payee.
At sight
A phrase indicating that payment on a draft or other negotiable instrument due upon presentation or demand.
open account
A trade agreement in which goods are shipped to a foreign buyer without guarantee of payment, with 30-45 days accounts payable, for example. The buyer's integrity must be unquestionable, or the buyer must have a history of payment prices with the seller.
hedging
A type of economic insurance used by dealers in commodities, foreign exchange and securities, manufacturers, and other producers to prevent loss due to price fluctuations. Hedging consists of counterbalancing a present sale or purchase by a purchase r sale of a similar commodity or of a different commodity, usually for delivery at some future date. The desired result is that the profit or loss on a current sale or purchase be offset by the loss or profit on the future purchase or sale.
Overseas Private Investment Corp (OPIC)
A wholly owned government corporation designed to promote private US investment in developing countries by providing political insurance and some financing, including project financing
past sales
Actual sales made to a country establishes that your product can compete; Also, look for past trends that may indicate a market profile
political union
By encompassing both political and economic integration, the union effectively transforms itself into one country
The Code: 2120.92.3000, 2120.92.3000 is the? a)commodity number b)subheading c)chapter d)heading
a)commodity number
UN Comtrade
UN Commodity Trade Statistics Database (UN Comtrade) contains trade data (imports, exports and re-exports) from countries world wide
Which of the following incoterms would mean the main carriage and insurance is paid by the seller? a)FAS b)CIF c)FOB d)EXW
b)CIF
MERCOSUR is an agreement concerning trade on the continent of: a)Asia b)South America c)Europe d)Africa
b)South America
When a parent company makes an inter-company sale to a foreign subsidiary, it may invoice the products at any price, as long as: a)the price does not result in a loss on the eventual sale by the subsidiary. b)the price can be shown to be the same price for a similar sale to a non-subsidiary. c)the landed price matches the retail price. d)the price does not result in a loss on the sale by the parent.
b)the price can be shown to be the same price for a similar sale to a non-subsidiary.
____ is where the parent company's headquarters is located a. Host Country b. Home Country c. ParentalCountry d. The US e. None of the above
b. Home country
The purpose of USMCA preference criteria is to: a)Determine if a company qualifies b)Determine if an importer qualifies c)Determine if the country qualifies d)Determine if the product qualifies
d)Determine if the product qualifies
Madrid agreement
treaty, administered by the World Intellectual Property Organization (WIPO), for the repression of false or deceptive indications so source on goods. The primary international system for facilitating the registration of trademarks in multiple jurisdictions around the world
rules of origin
used to determine the country of origin of a product for purposes of international trade. there are two common types of rules of origin depending upon application, the preferential and non-preferential rules of origin
ethnocentric orientation
using our own culture as the standard for judging other cultures
obligations
what the seller and buyer has to do (who organizes carriage, insurance, clearances, etc)
risk
where and when the risk transfers from seller to buyer
costs
which party is responsible for which costs
Harmonized Code - HTSUS
www.usitc.gov -harmonized tariff schedule of the United states code -10 digit import classification system that is specific to the US. HTS codes, also called HTS numbers are administered by the US international Trade Commission (ITC)
arbitration clause
a clause in a sales contract detailing how any contract disputes will be settled
joint venture
a combination of two or more individuals or legal entities who undertake together a transaction for mutual gain or to engage in a commercial enterprise together with mutual sharing of profits and losses
Full Absorption pricing
a costing method that charges all the production costs to the units produced
Trademark
a distinctive identification of a manufactured product or a service taking the form of a name, logo, motto, and so on; a trademarked brand has legal protection and only the owner can use the mark
certificate of origin
a document used in international trade. it traditionally states from what country the shipped goods originate, by "originate" in a CO does not mean that country the goods are shipped from, but the country where their goods are actually made
ISO 9000
a family of voluntary generic management system standards established by the ISO (international standards organization) that are concerned with "quality management"
denied persons list (DPL)
a set of lists maintained by the US Bureau of industry and security (formerly the US Bureau of Export Administration) of individuals and firms denied export privileges, specifically for strategic and controlled materials, components and products
fixed costs
fixed costs are defined as expenses that do not change in proportion to the activity of a business, within the relevant period
Avention
for fee, but all data is vetted
FAS
free alongside ship (named port of shipment) -The seller delivers when the goods are placed alongside the vessel nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
FOB
free on board. (products delivered with all transport charges paid) -The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
customs union
free trade area policy + members also adopt common trade policies toward nonmember countries
Range of options
from least involvement to most: -overseas sales person -overseas sales office -overseas marketing office -overseas customer support, training, warranty repair -overseas joint venture -overseas product finishing (labeling, packaging) -overseas assembly -overseas manufacturing joint venture -overseas manufacturing, wholly owned facility
Forms of economic integration
from low degree of economic integration to high -free trade area -customs union -common market -economic union -political union
Trade Mission
generically, a trade mission is composed of individuals who are taken as a group to meet with prospective customers overseas
selecting markets based on previous experience
-past leads -past sales -competitor behavior -domestic trade shows -discussion with industry experts -input from customers
management issues
-payback period -allocation of resources -overhead allocation -staffing decisions -decision-making -risk aversion level -willingness to allow failure
past leads
Leads from overseas markets during domestic marketing are a good indicator of foreign market potential especially if leads indicate trends
civil law legal system
Legal system that leverages codified laws or statutes to determine what is considered within the bounds of law.
product
Localization/adaptation: how to adapt product, packaging, literature.
subdivisions
Represents statistical subdivisions -EX: Commodity code for Chinook (king)Salmon
standard letter of credit
The standby letter of credit is very similar in nature to a guarantee. The beneficiary can claim payment in the event that the principal does not comply with its obligations the beneficiary. Payment can usually be realized against presentation of a sight draft and written statement that the principal has failed to fulfill his obligations.
international investment
The transfer of assets to another country or the acquisition of assets in that country (also known as FDI)
Employees from Competitors
There are oftentimes barriers to hiring employee from competitor but it doesn't hurt to investigate
ECCN Example
-0A982 Restraint devices, including leg irons, shackles, and handcuffs; straight jackets, plastic handcuffs; and parts and accessories, n.e.s. =Reason for Control: CC
dealing with data problems
-Complementary product or industry substitution -National statistics substitution -Ratio Comparisons -Timeline Comparisons
Risk scenario 3: direct export sales: sales denominated in the foreign currency of the buyer
-Export sales/no foreign direct investment --commercial risk --FX exon risk --FX transactional risk --political risk
drawback rates and dates
-Exporter usually receives full amount of duty as a refund, less a 1% handling fee -Products that need to be destroyed also qualify for duty drawback
reliance on freight forwarders
-Extremely important for small businesses or beginning exporters -They work with the containerization and booking of freight -Some will specialize in different areas, so many freight forwarders may be needed
terms for sea and inland waterway transport
-FAS : Free Alongside Ship -FOB: Free On Board -CFR: Cost and Freight -CIF: Cost, Insurance and Freight
political system
a set of formal institutions that constitute a government. It includes legislative bodies, political parties, lobbying groups, and trade unions
Group F / main carriage unpaid
-FCA -FAS (only with non-containerized freight and waterway/ocean shipments) -FOB (only with non-containerized freight and waterway/ocean shipments) Second least responsibility for the seller
The Foreign Corrupt Practices Act applies: (a) to all foreign countries (b) only to countries that have reciprocal Foreign Corrupt Practices Acts (c) only to countries that have bilateral trade agreements with the U.S. (d) only to countries on the Embargoed Country List
(a) to all foreign countries
Which of the following Incoterms would mean the main carriage is paid by the seller? (a) FAS (b) CIF (c) FOB (d) EXW
(b) CIF
Which of the following is a source of primary data about foreign markets? (a) Newspaper (b) Customer survey (c) Chamber of Commerce (d) Trade journal
(b) Customer survey
Variations in consumer behavior, needs, and ability to buy
-Factors vary --Ex: Climate, Geography --Basic Behavioral activities such as driving patterns -Can be socioeconomic differences as well
Risk scenario 5: overseas manufacturing, sales and marketing and staff
-Foreign direct investment --FX translation risk --commercial risk --FX econ risk --FX transactional risk -- political risk
Which of the following government resources would be appropriate to pre-arrange meetings with potential foreign buyers? (a) Trade Information Center (b) U.S. Commercial Service (c) Country Desk Officers (d) Export Administration Hotline
(b) U.S. Commercial Service
U.S. Exports Should Include the Destination Control Statement
"These items are controlled by the U.S. government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations"
after date
(A/D) A payment on a draft or other negotiable instrument due a specified number of days after the date the draft is presented to the payee
If a company charges different prices for the same product in different foreign markets, it may be encouraging one of the following market conditions for its product: (a) Gray market (b) Market exchange (c) White market (d) Blue market
(a) Gray market
Which of the following payment terms presents the LEAST risk to the exporter? (a) Irrevocable letter of credit confirmed by a major U.S. bank (b) Irrevocable letter of credit advised by a major bank in the buyer's country (c) Bank guarantee advised by a major bank in the buyer's country (d) Documentary collection
(a) Irrevocable letter of credit confirmed by a major U.S. bank
A manufacturer located in the customs territory of the United States imports lenses from Japan. The lenses are incorporated into sunglasses that are then exported to Malaysia. Which of the following statements is correct? (a) Nearly all the of the customs duty on the import of the lenses may be recovered from U.S. Customs (b) No duty is charged on the lenses upon import, because they are destined for export in the form of sunglasses (c) None of the customs duty on the import of lenses may be recovered from U.S. Customs (d) U.S. Customs duty charged on the import of lenses may be deducted from the Malaysian duty paid on the sunglasses
(a) Nearly all the of the customs duty on the import of the lenses may be recovered from U.S. Customs
An irrevocable letter of credit can be changed by the: (a) agreement of all parties (b) beneficiary only (c) advising bank only (d) applicant only
(a) agreement of all parties
A company has decided to sell its products internationally through the use of an Export Management Company. This would best be described as: (a) indirect exporting (b) direct exporting (c) broker exporting (d) management exporting
(a) indirect exporting
Government standards and restrictions
--Local environmental, product safety, or labeling requirements dictate need for modification --Import Barriers necessitate modification as well
Imported products become more expensive to U.S. importers when the: (a) interest rates rise in the foreign exporter's country (b) U.S. dollar weakens in relation to the foreign exporter's currency (c) U.S. dollar strengthens in relation to the foreign exporter's currency (d) U.S. reduces tariffs on imports
(b) U.S. dollar weakens in relation to the foreign exporter's currency
Which of the following forms of assistance is available to US exporters from the Export-Import Bank in connection with export contracts? (a) Confirmation of letter of credit (b) Forward exchange (c) Credit insurance (d) Protesting bills of exchange
(c) Credit insurance
A primary function of ________ is/are to anticipate the possibility of default or delay in payments by foreign borrowers. (a) market size and trend analysis (b) competitive analysis (c) country risk assessment (d) supply chain and logistics models
(c) country risk assessment
The U.N. Convention on Contracts for the International Sales of Goods has: (a) not gained sufficient multilateral support (b) little impact in court (c) established a uniform framework for international sales contracts (d) established the means for determining fair market value
(c) established a uniform framework for international sales contracts
A country's use of quotas is an example of: (a) foreign exchange controls (b) tariff barriers (c) non-tariff barriers (d) local content requirements
(c) non-tariff barriers
negotiable bill of lading
(can be bought, sold, or traded while the goods are in transit) a.k.a. an "order bill of lading" -Negotiable bills are commonly used with letter of credits
A manufacturer is interested in shipping its product to a foreign country. The product costs $1 per unit to make. The duties and taxes are $.50 per unit, and the shipping costs are $.10 per unit. What is the landed cost to ship 1000 units? (a) $600 (b) $1100 (c) $1500 (d) $1600
(d) $1600
Which of the following is primarily responsible for regulating the export of non-military U.S. goods and technologies? (a) Customs and Border Protection (b) Department of Defense (c) Department of State (d) Bureau of Industry and Security
(d) Bureau of Industry and Security
For an exporter considering open account terms with a foreign buyer, which of the following is an appropriate source of financial information on the buyer? (a) International Monetary Fund (b) www.export.gov (c) World Trade Organization (d) Dun & Bradstreet
(d) Dun & Bradstreet
Which of the following would be a common element found in most distributor agreements? (a) Incoterm clause (b) Logistics clause (c) Tariff clause (d) Exclusivity or non-exclusivity clause
(d) Exclusivity or non-exclusivity clause
SNAP can be used to apply for a/an? (a) ATA Carnet (b) Certificate of origin (c) Letter of credit (d) U.S. export license
(d) U.S. export license
Transfer pricing is an issue facing U.S. exporters: (a) when selling to any foreign buyer (b) when selling to any foreign buyer and the invoice price is less than comparable U.S. price (c) when selling to any foreign buyer and the invoice price is more than comparable U.S. price (d) only when selling to a related foreign buyer
(d) only when selling to a related foreign buyer
Forwards
- Forwards is between two parties. Obligation rain or shine to show up with your currency
Financial risk
- currency exposure - taxation - asst valuation - inflation - transfer pricing
global trade solutions & Trade finance
- depends on risk appetite of buyer and seller to which method they use --import documentary collections --export documentary collections --standby letter of credit --import letter of credit --export letter of credit --delegated authority US export finance working capital loan program
what factors help regional integration succeed?
- economic similarity - political similarity - similarity of culture and language - geographic proximity
options - presenter
- it is optional, exercise it or walk away - End of specified period they exchange, there is risk
commercial risk
- poor choice / execution of strategy - partner selection timing of entry - operation issues - competition
Swift
- send highly encrypted messages from one bank to another. Different types of swift messages, LC, foreign exchange, deposits -Each country has system of moving money around, 5 trillion dollars are moving around via swift. Provides transparency and happens in real time - Swift gpi - allows you to track the money real time. Not every country is a member
NDFs
- some currencies are not tradeable, (Malaysia, rubies) works as forward hedge, but settlement is made in USD - Non deliverable are bc regulation, managed speculation want movement to be driven by trade not speculation. Has no underlying trade
large scale entry
- strategic commitments - a decision that has a long-term impact and is difficult to reverse - may cause rivals to rethink market entry - may lead to indigenous competitive response
country / political risk
- unstable political systems - law and regulations - poor legal systems - bureaucracy and red tapes - corruptions - government intervention - trade barriers
container dimensions
-20-foot or 40-foot; 40-foot is more typical -Slightly more than 7 ½ feet wide and tall -Weight limit of 60,350 pound -Specialized containers: --Refrigerated containers --Bulky commodity containers --Open top containers --Ventilated containers --Insulated containers --Flat rack containers with two or more sides missing
foreign exchange risk
-A company's tolerance of foreign exchange risk (and overall financial risk) linked to the significance of international business as a percent of total business (sales) -Three phases
Time draft
-A financial instrument that is payable at a future fixed or determinable date.
At Sight draft
-A phrase indicating that payment on a draft or other negotiable instrument is due upon presentation or demand.
list of reasons for licenses
-AT Anti-Terrorism -CB Chemical & Biological Weapons -CC Crime Control -CW Chemical Weapons Convention -EI Encryption ItemsFC Firearms Convention -MT Missile Technology -NS National Security -NP Nuclear Nonproliferation -RS Regional Stability -SS Short Supply -UN United Nations Embargo -SI Significant Items -SL Surreptitious Listening
managerial guidelines for cross cultural success
-Acquire factual and interpretive knowledge about the culture; try to speak its language -Avoid cultural bias -Develop cross-cultural skills, such as perceptiveness, interpersonal skills and adaptability -self reference criterion -critical incident analysis
BIS penalties
-Administrative cases: a civil penalty amounting to the greater of $250,000 or twice the value of the transaction may be imposed for each violation of IEEPA (International Emergency Economic Powers Enhancement Act) -Under IEEPA, thePresident can regulate, investigate, prohibit certain financial transactions following a declaration of an "unusual and extraordinary threat" originating outside the United States -For criminal violations: violators may be fined up to $1,000,000 and/or face up to 20 years of imprisonment -maximum penalties increased to $250,000 for civil violations and $1 million and 20 years' imprisonment for criminal violations
foreign exchange risk Phase 1:
-Adverse approach: international sales are not significant -Risk tolerance: --
sales agents - key characteristics
-Agents represent (sell) products but never take legal title to product (no ownership) -The agent makes the sale but the manufacturer assumes all risks such as non-payment
how harmonized system works
-All products are described by a ten-digit number that is broken down by chapter, heading, subheading, and commodity code -Subject to frequent changes as well as updates as in 2010 -Overseen by the World Customs Organization (WCO) -There is a harmonized code for everything exported traded globally -Numeric based coding system is used instead of words and industry specific terminology to avoid confusion
what is eligible for drawback
-Any product imported into into the U.S., and then exported, or incorporated into a product in the U.S. that is later exported -Can be complications
free trade zones (foreign trade zones)
-Areas designated by U.S. Customs to allow entry into the U.S. without importation -Allows for delay of import duties -Allows for destruction / testing to avoid import duties -Bonded warehouses not the same - but offer delayed import duties and good for re-exporting
choosing a freight forwarder
-Ask for company details and references -Nurture strong communication -Make sure both parties understand their responsibilities thoroughly
Industry Market Potential
-Assess industry market potential in each market by examining criteria as: --Size and growth rate of the market and industry trends --Tariff and nontariff trade barriers to market entry --Standards and regulations that affect the industry --Availability and sophistication of distribution --Unique customer requirements and preferences --Industry-specific market potential indicators
product suitability
-Assess the firm's current products -Evaluate fit between the current product line and customer needs -Is adaptation required? -Laws and regulations?-Nature of the competition?
common legal system
-Based on custom, precedent and tradition -Court system needed for validation
theocratic legal system
-Based on religious principles
finding an EMC
-Be careful since a firm is effectively turning over its international sales to an outside company -The first company to contact a firm is not always the best -Consider finding an EMC to be like finding an employee. It may require: --Networking: asking your peers, gaining referrals --International trade centers/local contacts: find local EMCS --Internet: Kompass, Avention --Industry associations --Trade Journals: search for articles relating to international expansion
US Department of Commerce
-Bureau of Industry and Security (BIS) -What they do: --Controls exports of products / technology and lists of individuals and companies controlled
Group C / Main carriage paid
-CFR (only with non-containerized freight and waterway/ocean shipments) -CIF (only with non-containerized freight and waterway/ocean shipments) -CPT -CIP Second most responsibility for the seller
U.S. Antitrust Laws
-Collection of laws intended to keep markets competitive -Also applies to international activities such as acquisitions or mergers that reduce competition -For companies only exporting, these laws may have little effect
forward contract
-Common foreign exchange hedging tool -Locks in a specific exchange rate (forward rate) for a specific amount of money, for a specific date
product strategies: standardization vs Adaptation
-Companies prefer a standardized product strategy to maximize economies of scale and reduce marketing, sales, and distribution expenses -In practice, this is generally not possible because international consumers demand products that meet local needs and wants
Obstacles to Collecting International Secondary Data
-Comparability -Country versus market data --Historically data is only at the country level --More data needed at the market level (city, region, etc.)
Shipper's Letter of Instruction
-Completed by the exporter for the freight forwarder -Contains essentially information associated with the shipment -Forwarded uses for related documents including bills of lading and Electronic Export Information filing through AES Direct
Importance of Tariff Classification - Exporter
-Compliance (export documentation, compliance with export laws) -Proper application of trade agreement Rules of Origin
letters of credit (L/C)
-Confirmed Irrevocable Letter of Credit: bank guarantee to pay if seller fulfills obligations --Risk to seller: little to none --Risk to buyer: little to none, but may tie up cash --Buyer Receives Goods: generally after payment --Cost: can be high, related to value of transaction -Creative use: Standby Letter of Credit
Local Market Conditions
-Consumer's ability to purchase -May need to consider redesign of product to keep prices realistic & be acceptable to local market -Product life cycle implications -Consumer purchasing patterns
distributor contracts
-Contract / Agreement guidelines: --Definitions --Exclusive vs. non-exclusive (performance targets) --Term of the agreement --Technical information --Duties of each partner --Termination --Dispute resolution: growing use of arbitration --Choice of forum (where a compliant would be filed) --Choice of law (which country's laws apply in case of dispute)
key components of international business plan
-Corporate International SWOT -Product selection - adaptation issues -Foreign market selection matrix, and targeted countries -Entry mode, partner selection -International marketing plan -Sales and expense forecast -Timeline, responsibilities, evaluation
Country Versus Market Analysis
-Countries should be described not by borders, but by geographical units -What determines these units? -The flow of --Investment --Industry --Information Technology --Individual Consumers
Ratio Comparisons
-Creating ratio using data from two markets to predict a third -Assumption is that consumption in one market is proportional to another based on known indicator
credit risk
-Credit insurance from private Bank or other private companies.
Avoid DDP
-DDP assigned the role clearing the goods for import •Yet this has to happen in the buyer's country
Group D / Arrival
-DPU -DAP -DDP The seller has the most responsibility here
Market Segmentation
-Defining a market opportunity by focusing on a subset of prospects that share a common need or similar characteristic -Common ways to define the subset would be geographic(city, region), demographic(age, income), psychographic(behaviors, value), and behavioralistic: (brand loyalty, first adopters) --Market segmentation helps with large markets to identify most profitable or easiest sales opportunities
civil legal sytem
-Detailed laws by government -Set codes -Court system does not review
Quotation
-Details a price proposal from a seller to a buyer -Confirms the selling price of the goods -Confirms what costs are expected of the buyer -A quotation may or may not include freight to the buyer's country, but any freight items should be clarified -No specific format - often sent as an email or fax
why harmonized codes are needed
-Disagreements on products being shipped between nations can lead to higher import duties on products -International Harmonized Codes provide a way for different nations to classify products in the same way -This prevents disagreements between nations on the products that are being shipped. All countries "speak the same language" for international trade
BIS Export Licensing Terminology
-EAR: Export Administration Regulations -ECCN: Export Control Classification Number (to determine if a product is controlled) -CCL: Commerce Control List: details all the ECCNs -Commerce Country Chart: shows by country the specific limitations for that ECCN -Simplified Network Application Process Redesign (SNAP-R) to file an export license
EMCs
-EMC is like your international sales department. -EMC has your full and open support. -In most cases, the EMC will include your product on their business cards. -EMC helps in the development of brand awareness for your product.
Avoid EXW
-EXW assigns the role of export clearance to the buyer, and to load the goods on the carrier •Yet this has to happen in the seller's country
terms for any more or modes of transportation
-EXW: Ex-works -FCA: Free Carrier -CPT: Carriage Paid To -CIP: Carriage and Insurance Paid To -DAP: Delivered At Place -DPU: Delivered at Place Unloaded -DDP: Delivered Duty Paid
Obtaining long term financing
-Exim/SBA Pre-Export Working Capital Programs --Reasonable assurance of repayment --Minimum 1-year operating history --Debt service ability --Adequately capitalized relative to requested loan amount --Business operations in U.S.
why do nations pursue economic integration
-Expand market size -Enhance productivity and economies of scale -Attract investment from outside the bloc -Acquire stronger defensive and political posture
international contracts
-Expert assistance is key -Distributor contracts are most common -Initial contract and negotiation --Provided by manufacturer or service provider --Negotiation techniques are important, but some provisions will remain after negotiation
Risk scenario 2: Direct export sales: all sales denominated in the home currency of the seller
-Export sales/no foreign direct investment --Commercial risk --FX econ risk --political risk
Risk scenario 1: Indirect export sales: (EMC, Piggyback)
-Export sales/no foreign direct investment --Political risk
political risk
-Foreign receivables, confiscation, nationalization, expropriation risks insurances from OPIC, EXIM Bank -Used in exporting financing, this term represents the risk of losses incurred by war, government prevention of merchandise entry, confiscation, currency inconvertibility, etc.
what to look for in your freight forwarder
-Forwarder background, history, ownership -Customer references -Specific areas of expertise and service offered -Foreign market strengths -Surface, air, ocean strengths -Import Services -Technology Support -Third Party Logistics (3PL)
product liability
-Generally the U.S. has the most product liability risks so expanding internationally may seem 'easier' -Warranty terms should be reviewed for international implications -International partners should carry insurance -Legal assistance will be needed
Other Motivations to go Global
-Global brands can become powerful --global consumers --faster market entry --stronger local partners -Worldwide distributions and manufacturing --Growth in strength of distribution partners --contract manufacturing -Extra-national scale economies and experience effects --economies of scale go beyond just R&D to include the whole company's supply chain --companies that are global bring lessons learned overseas to their home market and other markets (extra-national experience effects) --Business practices merging
Grease payments are allowed
-Grease payments are small payments made to lower-level foreign official to carry out a routine governmental action --For Example: Documentation, obtaining permits and licenses, processing governmental papers, etc...
Direct market entry Disadvantages
-Greater investment required than indirect exporting --Due to manufacturer being in control of entire process -Time-to-market may be higher -Higher risk --Due to higher financial commitment
For US Companies:
-Harmonized Tariff Schedule of the United States is for IMPORTS (HTSUS) -Schedule B is for EXPORTS
foreign exchange
-Hedging Techniques, currency convertibility insurance from EXIM Bank.
finding international customers without travel
-Helpful indicators for distributor/agent selection --Company size --Product lines currently represented --Number of currently represented --Industry focus and technical knowledge --Number of employees --Years of experience --Sales volume --Sales structure --Key accounts --Professionalism and attitude --Customer support --Office locations --Product launch experience --References
Ex: GRI 3(a)
-How do we classify Goober Grape if it were ~50% Peanut Butter and ~50% Jelly? -Two headings apply, but 3(a) states that we can't use either since neither cover the entire good 2008"peanut butter" 2007"fruit jelly" Go to 3(b) -There's nothing in Schedule B that refers to the combination of PB & J... -Two headings may apply, but 3(b) states that we can't use either -neither describe the good's essential character Go to 3(c) 3(c) states that we should use 2008...
indirect/direct exporting considerations
-How much experience does the company have in a market compared to another? -How many different products does the company produce? -What kinds of customers are the company's products designed for?
Tax incentives for US Exporters: IC-DISC
-IC-DISC: Interest Charge Domestic International Sales Corporations -Essentially IC-DISCs are paperless companies created to obtain tax benefits for U.S. exporters -They earn a commission for the U.S. exports -Commissions kept outside the U.S. are not taxed until remitted to the U.S.
intracen.org
-ITCs market analysis tools -import and export info for more than 220 countries and territories -understand and supply demands for 5,300 internationally traded products
when is the EEI required?
-If a shipment contains multiple products with harmonized codes, some of which over $2500 and others less or equal to that, only those items over $2500 require EEI. -If an export license is required for shipment, so is EEI.
Insurance certificate
-Important for seller to ensure insurance has been arranged -Insurance amount established at CIF value plus an additional 10%
tariff schedules
-In most cases (depending on the Incoterm) the importer pays the import tariff -However, exporters should be aware of the expected import tariff -Most tariff schedules are online (start with www.export.gov) -tariff engineering
international financial risks
-Incomplete international data --Lack of complete and of comparable information --Chance of unpredictable economic issues -Greater likelihood of procedural errors --International transactions are extremely complex -Events outside the company's control --Currency devaluation -Company financials contain risk --Difficulty in receiving loans --More sales does not always mean a better financial situation
subheading
-Incorporates the first six digits of the ten-digit code -By this point, the descriptions are pretty complete. As an example with the heading: --03.02- Fish, fresh or chilled, excluding fish fillets and other fish meat of heading 0304 --Selected subheadings including ---Ex: 0302.12 -Pacific Salmon, Atlantic Salmon, and Danube Salmon ---0302.13 - Pacific Salmon -Note the heading includes most fish, but subheading details specific types of fish Represents the harmonized system code subheading -EX: Pacific salmon, Atlantic salmon and Danube salmon
sales agents may provide better control than distributors
-Increased control over sales process (pricing, delivery, etc.) -Manufacturer is much more involved in sales process, knows who's purchasing, and has greater feedback from foreign markets -Sales agents or reps may be most effective way to represent your product
Documents Against Acceptance - D/A
-Instructions by a shipper to a bank indicating that documents transferring title to the goods should be given to the buyer only after the buyer's signing a time draft. Thus the exporter extends credit to the importer and agrees to accept payment at a named future date.
indirect market entry
-Involves a third party in entering a foreign market -The third party coordinates entry and assumes the risk -Types of Indirect Exporting --Export management company --Piggyback exporting --Domestic distributors and gray marketing
Ocean bill of lading
-Issued by the steamship line with information provided by the freight forwarder -Exporter should understand how to read an ocean bill of lading to review costs and if applicable, that it complies with letter of credit requirements -Includes all shipping information including shipper, consignee, reference such as invoice number, vessel details, L/C number, labeling, and number of boxes
Selection process of a foreign partner
-It is like hiring a new employee. -The effectiveness is more critical for exclusive contract. -Assess ability and enthusiasm for representing your products. -Assess each candidate's capability in the following: --Company strength. --Market access. --Marketing ability. --Infrastructure. --Sale projections.
Obstacles to Collecting International Primary Data
-Language -Infrastructure -Cultural
Benefits of reactive market selection
-Low Cost -Easy -Fast --Strong indication there at least some potential --Competitors can provide market insights and offer past experiences
certificate of origin
-Main document for USMCA qualification -Prepared by producer/manufacturer
domestic legal considerations for companies
-Many laws do not 'follow' a company as it expands into foreign markets (such as minimum wage laws) -When laws do follow a company, they are applied extraterritorially (beyond a home country) -U.S. examples of extraterritorial laws: -Foreign Corrupt Practices Act (FCPA) -U.S. Embargoes and Export Controls -Antitrust laws -Product liability
Using Two Models as a Screening Tool
-May be beneficial to develop two models -One simple model that uses only a few indicators to screen all potential markets -And a second to perform a detailed analysis on markets that passed the first screening
Pitfalls of a Reactive Market Selection Strategy
-May lose first mover advantage -Past indicators may mislead you -Competitors may be wrong --You don't establish the rules in the market --It ignores global product lifecycles
SBA Working Capital Eligibility
-Meet SBA size standards --based on SIC Code --manufacturers generally under 500 employees --distribution/warehousing under 100 -Exim has no size restrictions
International Public Relations
-Meet with international editorial staff -Plan public relations events -Press releases
International Advertising
-Modifications to domestic Advertising -Modifications to marketing materials -Direct international advertising -Cooperative advertising
L/Cs come in different forms
-Most common for US Exporters: Not Confirmed, drawn on a U.S. bank, payable in US dollars --Confirmed: a U.S. bank adds its guarantee to pay assuming terms of the L/C are met --Irrevocable: can not be changed or cancelled without permission of the seller (all L/Cs are irrevocable under UCP600) --Drawn on a U.S. bank: payment will be available to seller through a U.S. bank --Payable in US dollars: avoids foreign exchange issues
FX Summary
-Most companies invoice in their home currency and can remain competitive -However, home currency pricing pushes foreign exchange risk onto the buyer -As a company grows, some use of foreign exchange hedging tools may be helpful
VAT - Foreign sales tax
-Most countries have a national sales tax -Many are "value-added" taxes: tax is applied at each stage of production and sales channel• Export only? Importer generally liable for VAT. -But ... if U.S. company is 'importer of record', they must pay VAT -Remember: ALL companies and products have VATso it is NOT an 'import' tax
NAFTA (canada, mexico, US)
-NAFTA passage (1994) was facilitated by the maquiladora program -U.S. firms locate manufacturing facilities just south of the U.S. border and access low-cost labor without having to pay significant tariffs. NAFTA has: --Eliminated tariffs and most nontariff barriers for products/services. --Initiated bidding for government contracts by member country firms --Established trade rules and uniform customs procedures. --Prohibited standards / technical regulations to be used as trade barriers. --Instituted rules for investment and intellectual property rights. --Provided for dispute settlement for investment, unfair pricing, labor issues, and the environment.
Benefits of Indirect Exporting
-No international experience required -Management is not distracted -Faster to the international market -Little to no increased financial commitment -Low Risk
US Customs and Border Protection (CBP)
-No specific program -What they do: --Imports (border security) & Exports (AES Direct)
Finding a Piggyback Partner
-Obvious partners are manufacturers in your domestic market whose products are enhanced or complemented by your products -The true challenge is qualifying partners --Will they sell the product under your brand or not? --Will they represent your product? -Potential piggyback partners: --Current customers --Current suppliers --Noncompeting companies in your industry --Competing companies that don't produce the product you want to export -Focus on finding industry related partners -Before contacting a potential partner, be sure to know what its products and level of familiarity with piggyback exporting are -Potential resources for finding partners: --Networking --Trade shows --Industry press --Trade associations --Sales staff
US Department of the Treasury
-Office of Foreign Assets Control -What they do: --enforce trade sanctions to countries and individuals
distributors
-Order directly from exporter, take title of goods per sales terms, and inventory the merchandize locally in foreign market -Larger organizations than agents -More aggressive in marketing activities• Customer support activities -Extensive knowledge of local importing practices and restrictions
preference criteria
-Origin criteria which explains the way in which your product meets the USMCA Rules of Origin. Only goods that meet these criteria can qualify. -In general, most manufactured goods that qualify for USMCA satisfy the rules of origin pertaining to either preference criteria or criteria B or C.
intellectual property rights - patents
-Patents: protecting technology --Receiving a U.S. patent does not provide international protection though it would likely stop the same technology receiving a patent in another WIPO country. --U.S. now uses the 'first to file' rather than previously the 'first to invent standard' was used --Grace period through the Patent Cooperation Treaty (PCT): companies have at least 12 (generally more) months in which to file for international protection when filing for their domestic patent
Documents Against Payment - D/P
-Payment for goods without a guaranteed form of payment in which the documents transferring title to the goods are not given to the buyer until he/she has signed a sight draft. Document of title evidence f entitlement or ownership, such as a carrier's negotiable bill of lading, which allows a party to claim title to the goods in question.
Piggyback Partners
-Piggyback partner does not intend to develop an international distribution network for your product. -Piggyback partner uses its own existing international distribution channel for your product. -If you stop using the piggyback partner, the opportunity to use their distribution channel does not exist -Piggyback partner does not market your company.•Piggyback partner capitalizes on the fact that your product enhances or complement its own product offering and leverages its stand on the market. -Piggyback partner provides customer support. -Piggyback partner provides industry and technical knowledge.
types of financial risks
-Political Risk (includes economic risk) --Sovereign risk - the risk a foreign government entity does not pay an invoice, or breaks a contract -Commercial Risk --Company specific risk associated with foreign buyer's ability to pay -Foreign Exchange Risk --Transaction: loss on a particular transaction due to foreign exchange movements --Economic: over time, seller is non-competitive --Translation: loss from restating values of assets and liabilities
Disadvantages of indirect exporting
-Poor Control --Little control over fundamental sales and marketing decisions -Wrong market, wrong distributor -Inadequate market feedback --May lose out on very important info. such as customer feedback -Potentially lower sales -Higher risk?
Electronic Export Information (EEI) Filing through AES Direct / ACE
-Previously known as the Shipper's Export Declaration -Used to track exports, but linked to Export Controls -AESDirect is the website through which the Electronic Export Information (EEI) is filed. It is accessed through the Automated Commercial Environment (ACE) managed by U.S. Customs and Border Protection -AES Record not required if the total value of any single Schedule B number is less than $2,500 (invoice value plus inland freight)
negotiating contracts with indirect partners
-Pricing Considerations. -Exclusive contracts vs. nonexclusive contracts. -Territory covered by the contract. -Marketing and customer support considerations -Length of contract. -Grandfather clause. -Errors and omissions insurance policy.
Choosing a sales agent or distributor
-Pricing considerations --Exporter more likely to impose price schedule on foreign markets with agents --Distributor calculates its landed price and applies markup; manufacturers have no control over price -Product considerations --Large products with low per unit value favor distributor since warehousing is needed --Product requiring fast delivery times favor distributors
economies of scale in R&D
-Products must be standardized to achieve max. economies of scale -Products cannot always be standardized due to the foreign market place
C-TPAT & CSI
-Programs implemented after 9/11 to address increased security concerns
Foreign Corrupt Practices Act (FCPA)
-Prohibits U.S. companies or individuals from making corrupt payments to foreign officials for the purpose of obtaining or keeping business -The law extends to distributors and agents of U.S. companies as well as subsidiaries.
commercial
-Protection through legal contracts.
international documentation essential documents
-Quotation -Pro Forma Invoice -Commercial Invoice -Packing List -Electronic Export Information (EEI) - formerly Shipper's Export Declaration -Certificate of Origin, NAFTA Certificate of Origin -Insurance Certificate• Ocean Bill of Lading, Air Waybill -Drafts -Shipper's Letter of Instruction
Why rank foreign market opportunities?
-Ranking markets is like writing an outline for a paper -Companies often do a poor job at evaluating their markets and rely on assumptions -Ranking markets is a good starting point for a consensus-oriented decision
Tool For Selecting Foreign Markets: An Illustration
-Reasons for Ranking Markets Using Analytical Model•Helps highlight factors of success in markets --Applying model to already entered markets provides benchmark for success --Data will be useful in market-entry plan --Highlights non-industry and product-specific barriers in particular market --As international experience increases, the model can be refined and used as a sales projection tool
containerization benefits
-Reduced shipping costs -Reduced damage to products -Reduced shipping risk and theft -Faster movement of goods
Licensing Advantages
-Reduces costs and risks of establishing foreign enterprise -overcomes restrictive investment barriers
country screening
-Screen countries to identify target markets: Reduce the number of countries that warrant in-depth investigation to a manageable few. -Identify five or six countries that hold the best potential by assessing each country according to: -Size and growth rate• "Market intensity" (customers' buying power) -"Consumption capacity" (size and growth rate of the middle class) -Country's receptivity to imports -Infrastructure for doing business -Economic freedom and country risk
Container Security Initiative (CSI)
-Seeks to identify potentially high-risk freight in foreign ports before it reaches the U.S. -Working to make containers "tamper proof"
GRI 1: read the notes
-When you refer to the notes, they might send you someplace else --So, read the notes and follow their instructions•You may have to look elsewhere --The titles of sections and chapters are only a guide.
Resolving Primary Vs. Secondary International Data Challenges
-Segment the research task/define budgets --Most important to break marketing research requirements into realistic short, medium, and long-term goals that correlate to your international strategy --The more aggressive the goals, the greater the budget requirement -Utilize resources --Affordable data is not limited to secondary ---The USDOC offers Customized Market Analysis (CMA) reports which provide cost-efficient primary data
international payment methods
-Selection of payment method often dictated by the exporter -But the method preferred by exporter (payment in advance) is the most risky for the importer -Payment method preferred by importer (open account) is the most risky for the exporter
Best foreign sales prospects
-Sell well in the domestic market. -Cater to universal needs. -Address a need not well served in the foreign market. -Address a new or emergent need in the foreign market.
Letter of credit steps
-Seller (exporter)- 1st sales contract to buyer (importer) -buyer (importer) - 2nd request to open a letter of credit to issuing bank (importer's bank) -issuing bank (importer's bank) - 3rd letter of credit issued to advising bank (exporter's bank) -advising bank (exporter's bank) - 4th letter of credit confirmed to Seller (exporter) -Seller (exporter) - 5th send products to buyer (importer) -Seller (exporter) - 6th send documents to advising bank (exporter's bank) -advising bank (exporter's bank) - 7th sends documents to issuing bank (importer's bank) -issuing bank (importer's bank) - 8th sends payment to advising bank (exporter's bank) -buyer (importer) - 9th sends payment to issuing bank (importer's bank)
USMCA (US, Mexico, Canada)
-Signed by the three countries in November 2018. -Will replace NAFTA once it's ratified by the three countries' parliaments. -Only Mexico has ratified so far (June 2019). -NAFTA 2.0 with the following changes: --Country of Origin -75% domestic contents ( up from 62.5%) to qualify for zero tariffs --Labor provisions - 40-45% of automobile parts must be made by workers earning at least $16/hrby 2023 --US farmers get more access to Canadian dairy markets. --Intellectual property and digital trade - terms of copyright extended to 70 years (up from 50). --Sunset clause -agreement expires or sunsets after 16 years.
industry assessment
-Size and growth rate of the market - industry trends. -Tariff and non-tariff barriers. -Distribution network (supply chain). -Customer requirements, needs, and preferences. -Industry-specific market potential indicators. --How are the competitors doing? --Is there room for an additional player? --What are some unique industry drivers
Noncontainerized Cargo (Breakbulk cargo)
-Some cargo must be sent breakbulk (corn, wheat) or as individual shipments (large truck) -Noncontainerized cargo is call Ro-ro freight: "Roll on, roll off" freight
analytical model
-Step one: Developing Indicators such as: --Product Specific --Industry Size (Population, Per capita income, total market) --Market Growth (Avg. annual growth projections of total market) -Step two: Converting Data into Comparable Indicators -Step Three: Weighing Each Indicator -Step Four: Analyzing the Results
foreign exchange risk Phase 3:
-Strategists approach: fully involved global company with integrated risk management
industry contacts - Press and Advertising
-Takes time and effort to build reliable relationships -Info may not always be true because they can be in contact with competitors as well
Selecting agents or distributors without travel
-Techniques --Email questionnaire --Phone or Skype calls --Financial background checks --Check references --Ask for written marketing plan --Participate in a domestic trade show with significant international visitors
US Department of State
-The Directorate of Defense Trade controls (DDTC) -What they Do: --Controls defense / military articles through the International traffic in Arms Regulations (ITAR)
Use of a sales agent - implications for exporters
-The exporter will be selling to multiple customers in foreign market as contrasted with using a distributor -No overseas inventory is maintained by foreign agent -Agent and foreign customer may not be familiar with specific import regulations or restrictions because they don't import directly -Local laws of some countries may recognize agent as employee of company leading to challenges when agent contract is not renewed
$775,000 Penalty for Illegal Exports of Controlled Alloy
-The firm exported aluminum alloy to China, Singapore, Malaysia and Mexico without the required licenses. -The alloy is controlled under export control classification number 1C202 for nuclear nonproliferation reasons -The company also agreed to complete an audit of its export controls compliance program
what is the foreign partner's motivation
-The most difficult to determine. -A good partnership is key in building your global business. -Enjoy success but also overcome failures. -Does your product fit into the partner's strategy? -Avoid: Line Collector and Block-your-Product Buyer. -Avoid: the "First is Best" Temptation.
Choosing the right indicators
-Think of a company and product -Brainstorm the ideal five indicators that you might use as an initial scan -Indicators should be available via secondary research -Be specific -Focus on demand indicators rather than market barriers
international logistics solutions - 3 PLS
-Third-party logistics (3PL) --allows firms to outsource logistics needs to another company --Provide complete global solutions --Solves international logistics problems without further investment in warehousing, etc. --Using a 3PL can be turned into a competitive advantage
documentation issues
-Though some documents don't have a specific format (e.g. quotations, invoices) the required information is critical and must be accurate -Documents may repeat some of the same information but they each have their own purpose -Consistency and accuracy is essential
Market selection questions
-Which markets are best to pursue? -What's the best entry strategy for each market? -What's the action plan to implement the strategy?
Other Expansion Views
-To seek opportunities for growth through market diversification -To earn higher margins and profits -To gain new ideas about products, services, and business methods -To better serve key customers that have relocated abroad -To be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products -To gain access to lower-cost or better-value factors of production -To develop economies of scale in sourcing, production, marketing, and R&D -To confront international competitors more effectively or to thwart the growth of competition in the home market -To invest in a potentially rewarding relationship with a foreign partner
foreign exchange risk Phase 2:
-Tolerant approach international sales are significant
Four categories of sources for international competitive information
-Trade statistics -Company information -Public information -Interviews - direct contact
intellectual property rights - trademarks
-Trademarks - protecting brands, designs, symbols --U.S. trademarks do not receive international protection -must be filed individually --U.S. - "first to use" --Other countries - "first to file" --Trademark bandits or squatters: foreign companies that file for a trademark owned in another country and then hold that mark 'ransom' when the foreign company enters that market --Madrid agreement: offers one application to file trademark in multiple member countries
freight forwarder
-Travel agent for freight -Can become important trade partners -Specialize in logistics
should you travel to a country you might do business in
-Travel is better than no travel -Easier to evaluate distributors if you meet them -Visiting market gives you ability to meet many distributors -Once you appoint local representation, others you may have met with become competitors while they are still prospects. Thus giving you knowledge of future competitors
how to obtain duty drawback
-Two restrictive requirements that legitimate claims must meet --Prior to exporting products, the exporter needs to file a drawback proposal with regional commissioner of customs --Exporter must maintain documentation to ensure compliance with drawback procedure
Door-to-door vs less than container load
-Typically, if a shipment will fill half a container, a full container may be used because costs will be similar -If not enough volume for half a container, then use Less than a Container Load
Trade Statistics
-U.S. Trade Online - usatrade.census.gov• --When looking at a report, analyze ---Ranking ---Growth ---Complementary Products ---Statistically significant ---Transshipments -UN commodity Trade Statistics Database (UN Comtrade) - comtrade.un.org -Piers & Datamyne -(www.piers.com) , (www.datamyne.com
Duty Drawback
-U.S. companies may claim for a refund of import duties on products exported -Customs will retain a handling fee - generally 1%• Refund available even if a supplier imported the components -Documentation is critical -Does not apply to components used in manufacturing for exports to Canada or Mexico
Financing Overseas Assets (DFC)
-US International Development Finance Corporation (US Government Agency) -Provides medium- to long-term funding through direct loans and loan guaranties to eligible investment projects in developing countries and emerging markets
trade.gov
-US based resource that is free -provides info on selecting markets and researching data to support potential markets -Country commercial guide contains reports on country's economic, political, marketing, trade regulation, investment, financing and travel conditions
Export controls key concerns
-US government wants to limit/approve shipments: --For specific products (dual use products, weapons, possible articles for terrorism) --To specific countries (eg. Cuba) --To specific individuals or parties (barred, denied, unverified individuals) ---Concerned with who imports, what is exported, and where exports are going
Drafts
-Unconditional order in writing from one party to another -In an export, seller orders the buyer to pay a fixed amount of money as specified in draft.
drafts
-Unconditional order in writing from one party to another -In an export, seller orders the buyer to pay a fixed amount of money as specified in draft.
How to use market selection model
-Use model as tool and starting point for market selection. Be wary of data errors. -Determine how sensitive the outcome of the country ranking is to indicators that may be inaccurate or inappropriate for your company -Only include indicators that will impact your company's potential and market decision -When analyzing results, look for patterns that may guide your planning -Useful for evaluating potential of existing products to be exported into existing markets
Foreign Market Selection Must also Be Proactive
-Use other indicators for a global assessment of your international potential -Use secondary data for first scan --Use primary data for final selection when possible
air waybill (air bill of lading)
-Used as the 'bill of lading' for air shipments and is issued by the air carrier -All air waybills are nonnegotiable - as such, it is not a document of ownership for the goods -Unless the goods are consigned to a third party like the issuing bank, the importer can obtain the goods from the carrier at destination without paying the seller
Importance of Tariff Classification - Importer
-Used by customs to establish regulations -Application of proper duty rates -Applicability of trade agreements -Determine whether Other Government Agency (OGA) regulations, licenses and or permits apply
intellectual property rights - trade secrets
-Used to protect important processes, procedures, techniques, or recipes -Not filed with government
Foreign Customers and Distributors
-Very reliable because they deal with competitors on daily basis -Time and investment must be made to receive info.
Customs Trade Partnership against Terrorism (C-TPAT)
-Voluntary program available to U.S. manufacturers to certify their commitment to best practices in supply chain security -Main benefit is a lower number of cargo inspections, which increases the speed of shipments and reduces inventory costs
Best foreign sales prospects Questions
-Who initiates purchasing? -Who uses the product or service? -Why do people buy the product or service? -Where do people purchase the product or service? -What economic, cultural geographic, and other factors in the target market may limit sales?
Foreign Market Selection: Key Questions
-Who uses the product? -Why is the product used -Would use vary by market? -What triggers the purchase? -What infrastructure is needed? -Is a particular market growing? -How competitive is a particular market? -How dependent on environmental issues
good export credit management
-Work with your accounting/financial staff to develop an effective export credit management policy -Obtain credit reports on foreign buyers: --International Company Profile (ICP) - US Dept. of Commerce, US & Foreign Commercial Service --Private Sources: Coface, Dun & Bradstreet --Costs: between $100 and $400 -Establish credit limits based on credit reports, payment history, financials, sales volume, etc.
Global Money Flows
-a global company not only moves products around the world, but money -cross subsidization: using cash flows internationally to fight your competitor battles -Strategy: establish a global network before your competitors
Attributes creating distance: Administrative Distance
-absence of colonial ties -absence of shared monetary or political association -political hostility -government policies -institutional weakness
discussion with industry experts
-always ask how other feel about your product -develop connections and always exchange advice
Blocked Suez Canal
-artificial sea-level waterway in Egypt connecting mediterranean sea and red sea -120 miles long rather than alternative 7k-8k miles -10% of global trade traffic -400 ships waiting on stuck cargo ship (for 5 days) -80-90 vessels a day $90
Timeline Comparisons
-assumption is that known market will have same consumption as unknown market in timeline comparison
exporting advantages
-avoids cost of establishing manufacturing operations -may help achieve experience curve and location economies
joint ventures advantages
-benefit from local partner's knowledge -shared costs/risks with partner -reduced political risk
international business plan
-builds consensus, adds a variety of perspectives and ensures company-wide commitment and support -written document, easier to communicate -avoids missing critical steps as the company grows internationally -identifies responsibilities -provides a basis for evaluation and future improvement
Reference USA
-business and consumer market data
canadian solutions
-canadian payments - USD and CAD -cash management -cash letters/collections
Payment risk for the buyer: high to low
-cash in advance -letter of credit -collections -open account
Payment risk for the seller: Low to high
-cash in advance -letter of credit -collections -open account
Management Commitment
-commitment of top management -allocation of talent -financial resources
five types of legal systems
-common law -civil law -religious law -socialist law -mixed systems
1) sales to other markets
-common needs in foreign markets / more customers -improved economies of scale
Global Information System
-companies that have cash all around the world, need to know global cash position. Pulls all account balances and shows CFO. Information is moving not money
distributor contracts - termination
-conditions that allow for termination and the rights of each party upon termination
harmonized system
-consists of 22 sections divided into just under 100 chapters that correspond to the international system of numbering with each section and chapter being a general grouping of common products -for US companies: --Harmonized Tariff Schedule of the United States is for IMPORTS (HTSUS) --Schedule B is for EXPORTS
Comparing hedging tools: forward contract
-cost: low -suitability for transactions <$1 mil: yes -suitability for transactions >$1 mil: yes -suitability for phase 1: yes -suitability for phase 2: yes -suitability for phase 3: yes
Comparing hedging tools: netting
-cost: low -suitability for transactions <$1 mil: yes -suitability for transactions >$1 mil: yes -suitability for phase 1: yes -suitability for phase 2: yes -suitability for phase 3: yes
Comparing hedging tools: futures contract
-cost: low to moderate -suitability for transactions <$1 mil: no -suitability for transactions >$1 mil: yes -suitability for phase 1: no -suitability for phase 2: yes -suitability for phase 3: yes
Comparing hedging tools: currency options
-cost: moderate to high -suitability for transactions <$1 mil: no -suitability for transactions >$1 mil: yes -suitability for phase 1: no -suitability for phase 2: yes -suitability for phase 3: yes
instruments to safeguard political, financial & commercial risks
-credit risk -political risk -foreign exchange -commercial
cross-cultural risk
-cultural differences -negotiation patterns -decisions making styles -ethical practices
different approaches to understand culture
-culture as a learned behavior (do's and Don'ts) -culture as shared core values (more in depth) -heterogeneity within culture -culture in coontext
BIS Lists of parties of concerns
-denied persons list -unverified list -entity list -specially designated nationals list -debarred list -nonproliferation sanctions
distributor contracts - choice of forum
-determines in the case of a dispute, where the complaint must be files
Attributes creating distance: Economic Distance
-differences in consumer incomes -differences in costs and quality of: --natural resources --financial resources --human resources --infrastructure --intermediate inputs --information or knowledge
Pressures to adapt products or services
-differences in technical standards: including testing -variations in consumer behavior, needs, and ability to buy -government standards and restrictions
Pressures to Standardize Products or Services
-economies of scale in R&D -Product usage dictates standardization -Company size forces standardization -Country of origin effect -Converging international consumer tastes
Industries or products affected by distance: Administrative Distance
-government involvement is high in industries that are: --producers of staple goods --producers of other "entitlements" --large employers --large suppliers to government --national champions --vital to national security --exploiters of natural resources --subject to high sunk costs
international trade shows
-held domestically or internationally -some are ongoing -attendance --exhibitor --visitor -vertical -horizontal
where to find the ECCN
-http://www.access.gpo. gov/bis/ear/ear_data.html -Start with the "Alphabetical Index to the Commerce Control List (CCL) " -Then click on the specific category as determined by the first number such as Category 0 if '0' is in the first place (as in the prior slide for ECCN 0A982)
Sources For Country and Market Data
-https://www.trade.gov/export-solutions -CIA World Factbook -www.cia.gov -World Bank Development Indicators - data.worldbank.org -OECD.StatExtracts - stats.oecd.org -Trade assistance organization -globalEDGEfrom Mich. St. - globaledge.msu.edu -Private Resources eg. Euromonitor International - www.euromonitor.com
collections - bank's role is limited
-in documentary collection, banks are not making a commitment to pay the seller - only that they will act in a 'good faith' capacity and make every effort that payment is received. They are only liable for the correct execution of the collection instructions. -This is a very different role than a confirming bank and a Letter of Credit
distributor contracts - technical information
-include strong emphasis on protection of technical information than may be in a company's domestic distributor contract
international commercial terms
-incoterms -international rules for the interpretation of trade terms in foreign trade -made by international chamber of commerce (ICC) -mitigate costly misunderstanding between sellers and buyers -determine who is responsible for what between parties -used by exporters, insurers, bankers, and lawyers -establishes: the geographic location at which the buyer becomes responsible for the goods & who arranges for shipping, handling, insurance and inland freight costs
Product usage dictates standardization
-industrial goods tend to be more standardized
interviews and direct contact
-industry contacts -government contacts -foreign customers and distributors -employees from competitors
marketline
-industry profiles -deep, sector-specific intelligence, real-time news, powerful analytics, and time-saving workflow and collaboration tools, fully-integrated into our world-class Intelligence Center.
Global Directors: Companies
-kompass -avention -alibaba -global edge
Licensing Disadvantages
-lack of control -creating a competitor
3) Access to Lower Structures
-lower labor, material or other resource costs -> leads to higher profits
usatrade.census.gov
-maintained by US census and is official site for US export and import data -historical and current data that is collected monthly on most of US exports and imports -10 digit harmonized code
cia.gov
-managed by CIA -more detail on country geography, resources, population demographics, government, infrastructure, military and economic indicators
data.worldbank.org
-managed by world bank -large database of up to date, comparable data for more than 200 countries on various indicators -analyze countries by regional groupings, income and more
four essential conditions
-management commitment -in-depth experience with product or service -adequate cash flow -capacity and capability to produce international products
Exporting disadvantages
-may compete with low-cost location manufacturers -possible high transportation costs -tariff barriers -possible lack of control over marketing reps
franchising disadvantages
-may prohibit movement of profits from one country to support operations in another country -quality control
Industries or products affected by distance: Economic Distance
-nature of demand varies with income level -economies of standardization or scale are important -labor and other factors cost differences are salient -distribution or business systems are different -companies need to be responsive and agile
FX hedging tools
-netting -futures contract -options
trade mission: participate
-new market entry -support existing activities -networking -just entering international business
Is indirect/direct exporting all or nothing
-no -This decision should be made on a market-by-market basis -A company should consider both direct and indirect entry modes in order to maximize its international potential. -However, a change from indirect to direct can be difficult.
wholly owned subsidiary advantage
-no risk of losing technical competence to a competitor -tight control of operations
global treasury solutions
-outbound USD payments -inbound USD payments -multicurrency accounts - G10 currencies -global information report -Swift gpi
Attributes creating distance: Geographic Distance
-physical remoteness -lack of a common border -lack of sea or river access -size of country -weak transportation or communication links -differences in climates
Trade show tips
-plan ahead -pavilions -language issues -visual aids (V Import) -marketing materials -potential buyer databases -business cards -pricing -follow up data -ATA Camets --passport for display items
4P's
-product -place -promotion -price
Ex: GRI 3(b)
-product: metal base plate of a clothes iron -Issue: classified as a misc. metal part or as an iron for pressing clothes =should be classified as an iron for pressing clothes since it is its essential function: 8516.40.000
Industries or products affected by distance: Cultural Distance
-products have high linguistic content (TV) -products affect cultural or national identity of consumers (food) -product features vary in terms of: --size --standards --packaging -products carry country specific quality associations
intellectual property rights - copyrights
-protecting artistic or literary work -U.S. copyrights generally do receive international protection
Stats.oecd.org
-provides data for variety of indicators -can fill data gaps on world bank info -more up to dat information
franchising advantages
-reduces costs and risk of establishing enterprise
documentary collections
-requires buyer to pay invoice prior to receiving documents (shipment) --Risk to seller: potentially high if seller likely to back out of sale, or foreign bank is unreliable --Risk to buyer: similar to L/C --Buyer Receives Goods: after fulfilling payment terms --Cost: low, not related to value of transaction
joint ventures disadvantages
-risk giving control of technology to partner -shared ownership can lead to conflict
FX risk to global scale: Phase 1
-risk tolerance approach: --adverse --small percentage of total business -Pricing: dollar-based pricing -payment terms: prepayment, letters of credit, credit insurance -international resources for FX management: heavy reliance on banks and consultants
FX risk to global scale: Phase 3
-risk tolerance approach: --strategists --fully global, integrated company with overseas investments and operations -Pricing: dollar and foreign currency pricing as determined by competitive needs and opportunities -payment terms: full range of payment terms including open account -international resources for FX management: risk management division developed using specialized staff
FX risk to global scale: Phase 2
-risk tolerance approach: --tolerant --significant percentage of total business -Pricing: dollar and foreign currency pricing as determined by competitive needs and opportunities -payment terms: full range of payment terms including open account -international resources for FX management: growing independence and internal capability
spot transactions in over 100 currencies
-settlement usually in 2 days, if more than two days becomes forwards -- Driven by rate, rate is not fixed
comtrade.un.org
-similar to US Trade online -provides export and import data for all countries on an annual and monthly basis -six digit code -insights of trading activities of non US countries
foreign exchange
-spot transactions in over 100 currencies -FX hedges -- forwards, options, NDFs -cross currency swaps -multicurrency loan - market research & commentary
euromonitor
-strategic market research on consumers -create data and analysis on thousands of products and services around the world
Country of origin effect
-the impact of a consumers perception on purchase behavior --Ex: Swiss made watches or U.S. tobacco
Bureau of Industry and Security (part of Department of Commerce)
-this agency has responsibility for controlling goods and technology that could threaten US security if improperly exported -BIS also maintains directories of individuals and companies (parties) which have been identified by BIS as having engaged in activities that threaten U.S. national security, or for which BIS has been unable to verify their status.
personality traits for cross cultural proficiency
-tolerance for ambiguity -perceptiveness -valuing personal relationships -flexibility and adaptability
how political systems influence economic systems
-totalitarianism is associated with command economies -democracy with market economies -socialism with mixed economies
Visual compliance
-trade compliance
GRI 2(a)
-treat incomplete/unfinished articles as if they were finished goods --as long the article has the essential character of the finished good --Ex: bike without wheels -treat unassembled / disassembled articles as if they were assembled goods --Ex: Unassembled TV cart
distributor contracts - dispute resolution provision
-use of arbitration is increasing for international contract disputes
Stages in the Firm's Value Chain
1) Research and Development 2) Procurement (Sourcing) 3) Manufacturing 4) Marketing 5) Distribution 6) Sales and Service
The Four Key US Agencies
1) U.S. Department of Commerce - Bureau of Industry and Security (BIS) --Controls exports of products/technology & Lists to Check 2) U.S. Department of the Treasury - Office of Foreign Assets Control (OFAC) --Enforce trade sanctions to countries and individuals 3) U.S. Department of State - The Directorate of Defense Trade Controls (DDTC) --Controls defense / military articles through the TheInternational Traffic in Arms Regulations (ITAR) 4) U.S. Customs and Border Protection (CBP) --Imports (border security) --Exports (AES Direct)
Fundamental Reasons to go Global
1) sales to other markets 2) diversification of customers and risk 3) access to lower cost structures
The Four Required Fields for Each EEI / AES Direct Filing
1)Shipment Information: includes a variety of required fields including: • Origin State • Country of Destination • Departure Date • Conveyance Name (vessel or carrier name) 2)USPPI - U.S. Principal Party in Interest: the person in the U.S. that receives the primary benefit, monetary or otherwise, of the export transaction. 3)Ultimate Consignee • The company receiving the shipment in the foreign country 4)Commodity line: the Schedule B (or in most cases HTS U.S. is also allowed)
Bills of LadingIssued by the Carrier (ocean or air) to:
1)serve as a receipt for the cargo 2)act as a contract for the transportation of the goods 3)act as a document of possession (title) --negotiable bill of lading --nonnegotiable bill of lading
global market assessment
1. Analyzing organizational readiness 2. Assessing the suitability of products 3. Screening to identify target markets 4. Assessing industry market potential 5. Choosing foreign business partners 6. Estimating company sales potential
3 Risks in International Transactions & Techniques to LOWER Risks
1. Credit risk: Credit insurance from EXIM bank or private companies 2. Political Risk: Foreign Receivables Insurance from EXIM, DFC (OPIC), MIGA 3. Foreign Exchange: Hedging techniques
sight draft
A draft payable upon presentation to the drawee. A sight draft is used when the seller wishes to retain control of the shipment, either for credit reasons or for the purpose of title retention. Money will be payable at sight of the completed documents.
Risk management banking
5 parts -foreign exchange -global trade solutions -trade finance -global treasury solution -Canadian solutions
time raft
A financial instrument that is payable at a future fixed or determinable date. See also bill of exchange.
advising bank
A bank, operating in the exporter's country, which handles letter of credit for a foreign bank by notifying the export firm that the credit has been opened in its favor. The advising bank fully informs the exporter of the conditions of the letter of credit without necessarily bearing the responsibility of payment.
futures contract
A contract for the future delivery of a specified commodity, currency or security on a specific date at a rate determined in the present.
hard currency
A currency expected to remain at stable value or to increase in relation to other currencies; also, a freely convertible currency may be called "hard."
confirmed letter of credit
A letter of credit issued by a foreign bank with payment confirmed by a U.S. bank. An exporter who requires a confirmed letter of credit from the buyer is assured payment from the U.S. bank in case the foreign buyer or bank defaults (see letter of credit).
transferable letter of credit
A letter of credit where the beneficiary specified in the credit as the option of instructing his bank to transfer the credit fully or in part to another beneficiary.
revolving letter of credit
A letter of credit which is automatically restored to its full amount after the completion of each documentary exchange.
irrevocable letter of credit
A letter of credit which obligates the issuing bank to pay the exporter provided all the terms and conditions of the letter of credit have been met. None of the terms and conditions may be changed without the consent of all parties to the letter of credit
debarred list
A list compiled by the State Department of parties who are barred the International Traffic in Arms Regulations (ITAR) from participating directly or indirectly in the export of defense articles
unverified list
A list of parties where BIS has been unable to verify the end-user in prior transactions.
entity list
A list of parties whose presence in a transaction can trigger a license requirement under the Export Administration Regulations.
Advance against document
A loan secured by turning over shipment documents of title to the creditor; an alternative to acceptance financing.
RoHS Directive
Acronym for Reduction of the use of Hazardous Substances. The RoHS Directive is a European Union ban on the placing on the EU market of new electrical and electronic equipment containing more than agreed levels of six hazardous materials: lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyl (PBB), and polybromatined biphenyl ether (PBDE) flame retardants
SWIFT
Acronym for Society for Worldwide Interbank Financial Telecommunication. A co-operative organization founded in Brussels in 1973 that promotes the standardization of global communications links for data processing and a common language for international financial transactions. Specifically, the society operates secure standardized messaging services and interface software to 8,300 financial institutions in 208 countries for financial messages related to letters of credit and various other form of international payments.
UCP
Acronym for the Uniform Customs and Practice for Documentary (Letters of) Credit. The universally accepted set of rules governing documentary (letters of) credit transactions in more than 160 countries around the world. Developed by the International Chamber of Commerce (ICC)
promotion
Advertising & promotion: whether/how to promote and media to use.
collection papers
All documents, including bills of lading, invoices and other papers, submitted to a buyer to receive payments for a shipment.
bill of exchange
Also a draft. A written unconditional order for payment from a drawer to a drawee, directing the drawee to pay a specified amount of money in a given currency to the drawer or a named payee at a fixed or determinable future date.
AmChams
American chamber of commerce in foreign countries. As affiliates of the U.S. Chamber of Commerce, 84 AmChams, located in 59 countries, collect and disseminate extensive information of foreign markets. While membership fees are usually required, the small investment can be worth it for the information received
acceptance
An agreement to purchase goods at a stated price and under stated terms.
bank guarantee
An assurance, obtained from a bank by a foreign purchaser, that the bank will pay an exporter up to a given amount for goods shipped if the foreign purchaser defaults.
mixed system
An economic system characterized by the private ownership of some resources and the public ownership of other resources; some markets are regulated by government
collection
An exporter draws a bill of exchange on a customer abroad and gives the bill to his/her bank to collect funds. The importer must be willing to pay. The bank charges a fee to collect payment, but is not liable should the importer refuse to release the funds.
Multilateral agreement
An international compact involving three or more parties. for example, the World Trade Organization (WTO), has been seeking to promote trade liberalization though multilateral negotiations
Harmonized code sections
Arranged in 21 Sections -Contains 99 Chapters --I: Live Animals; Animal Products --IV: Prepared Foodstuffs --VIII: Hides and Skins --XI: Textiles and Textile Articles --XVI: Machines and Mechanical Appliances --XVIII: Optical; Measuring; Medical or SurgicalInstruments and Apparatus
Converging international consumer tastes
As markets gain exposure to foreign goods, consumer tastes become more globalized
Country Commercial Guide
CCGs are prepared annually by US embassies with the assistance of several US government agencies. These reports present a comprehensive look at countries' commercial environments, using economic, political and market analysis
GRI 5(a)
Containers: Specifically shaped containers suitable for repetitive use, and presented with the good, are classified with the good. Otherwise, they are classified on their own. Example: camera case
CFR
Cost and Freight (named port destination) -The seller delivers the goods on board the vessel. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
Company size forces standardization
Cost of adaptation may be too high
Four Risks of International Business
Cross-Cultural Risk, Country Risk, Currency Risk, Commercial Risk
four risks in international business
Cross-Cultural Risk, Country Risk, Currency Risk, Commercial Risk
The CAGE - Distance framework
Cultural Administrative and political Geographic Economic distance framework helps identify and assess the impact of distance on various industries. The upper portion of the table lists the key attributes underlying the four dimensions of distance. The lower portion shows how they affect different products and industries
DAP
Delivered at place (named place of destination) -The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the destination. The seller bears all risks involved in bringing the goods to the named place
DDP
Delivered duty paid (named place of destination) -The seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on arrival and ready for unloading at destination. The seller bears all costs and risks involved in bringing the goods to destination and is obligated to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
place
Distribution: whether to sell direct to buyer or use local rep, sales office, etc.
Harmonized Code Sections
EX: Sect 1: Live Animals and Animal Products --Ch 1: Live animals --Ch 2: Meat and Edible Meat Offal --Ch 3: Fish and Crustaceans, Molluscs and Other Aquatic Invertebrates --Ch 4: Dairy Produce; Birds' Eggs; Natural Honey; Edible Products of Animal Origin, Not elsewhereSpecified or Included --Ch 5: Products of Animal Origin, Not Elsewhere Specified Or Included
Government Contacts
Helpful in gaining aggregate competitive info.
documents against acceptance (D/A)
Instructions by a shipper to a bank indicating that documents transferring title to the goods should be given to the buyer only after the buyer's signing a time draft. Thus the exporter extends credit to the importer and agrees to accept payment at a named future date.
credit risk insurance
Insurance which protects the seller against loss due default on the part of the buyer.
IC-DISC
Interest Charge Domestic International Sales Corporation (IC-DISC) provides a 20% tax savings for qualifying US exporters. Then IC-DISC is an entity which serves as a vehicle for export tax savings
Religious Law System
Laws are derived from religious beliefs and address an individual's religious responsibilities; commonly used in Muslim countries or regions.
mixed political economy
Many countries, including Australia, Canada, the United States, and those in Europe, are best described as having a mixed political system -characterized by a strong private sector and a strong public sector (with considerable government regulation and control).
GRI 4
Most Akin: If no appropriate heading, classify the good as you would the most similar good in the tariff.
nonnegotiable bill of lading
Nonnegotiable bill of lading (carrier can only deliver the goods to the consignee/buyer) a.k.a. a "straight bill of lading"
bank acceptance
Occurs when a draft is drawn on and accepted by the importer's bank. Depending o the bank's creditworthiness, the acceptance becomes a financial instrument which can be discounted.
floating currency
One whose value is terms of foreign currency is not kept stable (on basis of the par value or a fixed relationship to some other currency) but instead is allowed, without a multiplicity of exchange rates, to be determined (entirely or to some degree) by market forces.
GRI 5(b)
Packing material: Packing material and containers are classified with the good if normally used for packing the good and not suitable for repetitive use. Otherwise, they are classified on their own. Example: bag of pretzels vs. mug with pretzels inside
documents against payment (D/P)
Payment for goods without a guaranteed form of payment in which the documents transferring title to the goods are not given to the buyer until he/she has signed a sight draft. Document of title evidence f entitlement or ownership, such as a carrier's negotiable bill of lading, which allows a party to claim title to the goods in question.
international business
Performance of trade and investment activities by firms across national borders
Price
Product pricing: base price and whether/how much to discount
4 P's of Marketing
Product, Price, Place, Promotion - marketing mix
forward contract
Purchase or sale of a specific quantity of a commodity, security, currency or other financial instrument at a predetermined rate with delivery and settlement at a specified future date.
product strategies: standardization vs Adaptation Questions
Questions to address: - Should a company always adapt products and services? - Instances when adaptation isn't the right strategy? - How far should a company adapt?
Trade mission: Horizontal
Region Specific
heading
Represents the heading in that chapter -Incorporates the first four digits of the ten-digit code -The initial job of classifying a product should focus on finding its heading, not its section or chapter. -The heading will begin to identify if it is the correct area of the harmonized code -EX: Fish, fresh or chilled, excluding fish fillets and other fish meat of heading 0304
Socialist Law Systems
Rights of society outweigh individual rights, and that the state owns means of production and property (Cuba, North Korea)
GRI 6
Rules 1 - 5 are used to determine the heading. Repeat the process to determine subheading and so on.
nonproliferation sanctions
Several lists compiled by the State Department of parties that have been sanctioned under various statutes
L/C Terminology - Foreign Bank
bank which opens the L/C (could be a U.S. bank's foreign branch)
WEEE
The Waste Electrical and Electronic Equipment Directive is the European Community directive 2002/96/EC on waste electrical and electronic equipment which together with the RoHS Directive 2002/95/EC, became European Law in February 2003, setting collection, recycling and recovery targets for all types of electrical goods
issuing bank
The buyer's bank which establishes a letter of credit at the request of the buyer, in favor of the beneficiary (seller/exporter). Also called the buyer's bank or the opening bank.
arbitrage
The practice of buying currency, stocks and bonds and other commodities in one country or a number of countries and selling them in another market at a higher price to gain an advantage from the differences in exchange rates.
spot exchange rate
The price of one currency expressed in terms of another currency at a given moment in time.
secondary data
based on information that already exists from third parties
competitive behavior
Time and money can possibly be saved by following competitors
air cargo containerization
Two types of containers: -Lower deck containers: fit easily in the lower deck of a wide body jet -Air cargo pallet: items are attached to a pallet and then transported in a smaller jet; not as secure as lower deck containers
factoring houses
Types of companies which purchase international accounts receivable at a discount price, usually about two or four percent less than their face value. The fee charged the exporter is offset by the immediate availability of payment, plus the reduction in risk for the exporter.
EXIM Bank
U.S.) A public corporation created by executive order of president in 1934 and given a statutory basis in 1945. The Bank makes guarantees and insure loans to help finance U.S. exports, particularly for equipment to be used in capital improvement projects. The Bank also provides short-term insurance for both commercial and political risks, either directly or in cooperation with U.S. commercial banks.
Delegated authority US export finance working capital loan program
US encourage exports, you as exporter need working capital they gov't will subsidize
Preference Criteria
Under NAFTA, these are classified as A-F and determined how preference is justified
UNCISG
United Nations Convention on Contracts for the International Sale of Goods. The UNCISG governs sales contracts, especially in providing interpretation and gap filling measures, between parties in countries that are signatories of the convention
Global Assessment - Using Research for Initial Market Selection
Use global indicators to develop initial list: -Demographic - population, literacy, education, per capita, language -Macroeconomic - GDP, growth, inflation -Government - tariffs, non-tariff barriers, IPR, political stability, investment issues -Environmental - infrastructure, climate, geography -Import / export data -Industry specific
Direct market entry
When a company deals directly with an entity in the foreign market rather than through another domestic company
National statistics
When data not available for a specific product, demographic and consumption statistics are often suitable substitutions
Risks and rewards of indirect and direct exporting
X: Financial and resource commitment Y: Market control and feedback Low X, Low Y: Indirect exporters Low X, High Y: good position, but difficult to achieve High X, Low Y: bod position- mistakes being made High X, High X: Direct exporters
If a U.S. company obtains a U.S. trademark, will it be protected overseas? a)No - only if they obtain a trademark in the foreign country b)No - and one would never be available. c)Yes - a U.S. trademark is recognized overseas. d)Yes - protection is granted, but only for one year.
a
In the process of selecting your overseas partners, it is recommended that you travel to the market to meet your future competitors while they are still prospects. a)True b)False
a
Nationmaster is a website that provides a)Lots of various indicators comparable across countries b)In depth marketing reports c)In depth political analysis of various countries d)Cultural guide to 'mastering' the culture in a country
a
Piggyback arrangement is effective when the 2 companies sell complementary products a) TRUE b) FALSE
a
The stage of the product life cycle that focuses on expanding market and creating product awareness and trial is the: a)Decline stage b)Introduction stage c)Growth Stage d)Maturity stage
a
What business resources are available to U.S. companies at U.S. Department of Commerce Commercial Service offices overseas? a)Market data, translators, and meeting facilities b)Transportation and customs clearance c)Marine-cargo and political-risk services d)Trade-finance and banking services
a
What is the Foreign Corrupt Practices Act? (FCPA) a)Prohibits U.S. companies or individuals from making corrupt payments to foreign officials for the purpose of obtaining or keeping business. b)Prohibits U.S. companies or individuals from making corrupt payments to foreign officials for the purpose of obtaining or keeping business. However, their overseas employees may do so. c)Prohibits U.S. companies or individuals from making corrupt payments to anyone for the purpose of obtaining or keeping business. However, their subsidiaries may do so. d)Prohibits U.S. companies or individuals from making corrupt payments to anyone for the purpose of obtaining or keeping business. However, their overseas employees may do so
a
What would be an example of reactive market selection? a)Selling where your competitors sell b)Selling where your vendors sell c)Using a foreign market selection matrix d)Using the US Dept of Commerce
a
Which of the following contains the Country Commercial Guide? a) www.trade.gov/export-solutions b) www.usatradeonline.gov c) www.kompass.com d) www.uncomtrade.com e) www.piers.com
a
Which of the following is the main portal for most US government trade resources and reports? a) www.trade.gov/export-solutions b) www.usatradeonline.gov c) www.kompass.com d) www.uncomtrade.com e) www.piers.com
a
futures contract
a 'forward contract' that can be sold and bought - a 'tradable forward'
Export Trading Company (ETC)
a business that acts as a complete export service house and, in addition, takes title to company's exported goods
Export Management Company (EMC)
a firm that acts as a complete export arm for a company's exporting needs. Usually an EMC will pay all expenses and receive compensation in the form of a discount off the US price of the product. An organization which, for a commission, acts as a purchasing agent for either a buyer or seller
Distributor
a foreign agent who sells directly in the foreign market for a US supplier and maintains an inventory of the supplier's products
Bilateral trade agreement
a formal or informal agreement involving commerce between two countries. Such agreements sometimes list the quantities of specific goods that may be exchanged between participating countries within a given period
Geocentric Orientation
a global mind-set in which the manager is able to understand a business or market without regard to country boundaries
consul
a government official residing in a foreign country charged with representing the interests of his country and its nationals
patent
a grant by law to an inventor of a device or the right to exclude other persons from making, using, or selling the device
Kompass
a leading provider of company information from around the world
joint venture
a legal entity formed between two or more parties to undertake an economic activity together
common law legal system
a legal system where legislative bodies generally enact less specific legal rules giving judges or courts considerable authority in interpreting these rules based on precedent and other factors
Distribution license
a license given to an export to replace numerous individual validated licenses when there is continuous shipping of authorized products
specially designated nationals list
a list compiled by the treasury department, office of foreign asset control
denied persons list
a list of individuals and entities that have been denied export privileges
CE Mark
a mandatory conformity on many products placed on the single market in the European Economic Area. The CE marking certifies that a product has met EU consumer safety, health or environmental requirements. CE stands for Conformité Européenne, "European conformity" in French
Vertical Selling
a manufacturer or wholesaler marketing policy of soliciting only one segment of the trade
critical incident method
a method for analyzing awkward situations in cross-cultural interactions by developing empathy for other points of view 1. identify situations where you need to be culturally aware to interact effectively with people from another culture 2. when confronted with "strange" or awkward behavior, discipline yourself to not make judgments 3. develop your best interpretation of the foreigner's behavior and formulate your response 4. Learn from this process and continuously improve
Polycentric Orientation
a mindset in which the manager develops a greater affinity for the country in which he or she works than for the home country
PIERS
a private company that provides port-level import/export statistics
variable costing
a product costing method where the only costs allocated to the products are those which are directly related to the production or sales of the product
pull strategy
a production and distribution strategy based on specific customer demand. In a pure pull strategy only goods and services actually ordered by customers are produced and shopped; there is no inventory of completed products. The term is used in many other fields to describe decision making by demand of the marketplace rather than by a central authority
push strategy
a production and distribution strategy based upon forecasts rather than on specific customer demand. The term is used in many other fields to describe centralized decision making authority without the immediate input of data from the marketplace
International Finance Corporation (IFC)
a separately organized member of the World Bank group, receiving its funds through stock subscriptions from member countries, revolving loans, and earnings. The IFC encourages the flow of capital into private investment in developing countries. it makes loans at commercial interest rates, usually as a lender of last resort when sufficient capital cannot be obtained from other sources on reasonable terms
GRI 3
a) When two or more headings apply, use the most specific description --Can't use if no heading covers entire good, go to 3(b) b)Use the heading of the component which gives the good its essential character --Can't use if no essential character, go to 3(c) c)When faced with two still equally valid headings, choose the one which occurs last in numeric order
An air waybill is: a) a bill of lading used for air shipments. b) an insurance certificate for air shipments. c) the EEI filing for air shipments. d) the export control document for air shipments.
a) a bill of lading used for air shipments.
Which of the following is subject to importing and exporting? a) both finished products and intermediate goods b) finished products but not intermediate goods c) intermediate goods but not raw materials d) raw materials and components, but not finished products
a) both finished products and intermediate goods
All of the following are examples of managerial tasks in which cross-cultural proficiency is essential except________. a) communicating with business facilitators in one's own country b) preparing promotional materials for emerging markets c) structuring international business deals d) selecting foreign distributors
a) communicating with business facilitators in one's own country
A negotiable bill of lading is also a(n): a) order bill of lading. b) ocean bill of lading. c) straight bill of lading. d) air waybill.
a) order bill of lading.
Country risk is also referred to as which of the following? a) political risk b) multilateral risk c) government risk d) legal factor risk
a) political risk
The Middle East is an example of a region primarily ruled by which of the following legal systems? a) religious b) socialist c) civil d) common
a) religious
The three major types of current political systems are ________. a) totalitarianism, socialism, and democracy b) socialism, democracy, and monarchy c) totalitarianism, liberalism, and fascism d) democracy, republicanism, and oligarchy
a) totalitarianism, socialism, and democracy
Assume a company is importing music boxes classified as 9208.10.0000. Also assume the music boxes fit inside a specially designed plastic case suitable to store the music box. Also assume there is a classification for plastic cases of 3919.20.2000. When importing these music boxes with the plastic cases, which harmonized code(s) would you use for the products? a)9208.10.0000 b)9208.10.0000 & 3919.20.2000 c)3919.20.2000 d)Neither - you simply list "multiple harmonized codes enclosed"
a)9208.10.0000
Assume a company is importing music boxes classified as 9208.10.0000. Also assume there is a harmonized code 9208.05.0000 listed as "music boxes for educational purposes". If the company decides both codes are equally description for their product, which code would be used when importing? a)9208.10.0000 b)9208.05.0000 c)9208.10.0000 & 9208.05.0000 d)Neither since there is a conflict
a)9208.10.0000
Assume a company is importing music boxes classified as 9208.10.0000? Also assume there is a harmonized code 9208.10.5000 listed as "parts of music boxes". The company is importing the music boxes complete with everything EXCEPT there are ornate legs the company adds which is manufacturers in the U.S. and glues to the imported music boxes. When importing the music boxes without legs, which code would be used? a)9208.10.0000 b)9208.10.5000 c)9208.10.0000 & 9208.10.5000 d)Neither since there is a conflict
a)9208.10.0000
To be able to utilize netting to hedge currency a company must have________ a)A subsidiary in the other country b)Currency that is tradable c)A common currency d)All of the above
a)A subsidiary in the other country
To be able to utilize netting to hedge currency a company must have________ a)A subsidiary in the other country b)Currency that is tradable c)A common currency d)All ofthe above
a)A subsidiary in the other country
An irrevocable letter of credit can be changed by the: a)Agreement of all parties. b) Beneficiary only. c) Applicant only. d) Advising only
a)Agreement of all parties.
A company in Beijing, China purchases machines from a manufacturer in Chicago, IL. The terms of sale are that any repair parts while a machines is under warranty, are to be replaced by the Chicago company at no cost. The Chicago company pays all freight, insurance, and taxes associated with shipping the parts to China. For such parts shipments, which Incoterm would be appropriate? a)DDP Beijing, China. b)DDP Chicago, IL c)EXW Beijing China d)EXW Chicago, IL
a)DDP Beijing, China.
Black & Decker produces tools at a plant in North Carolina and ships tools to retailers in England. This is an example of? a)Exporting b)Importing c)Merchandising d)Transporting
a)Exporting
assume a company has been highly successful exporting a product from the U.S. to Europe and uses the Euro as the currency for all its invoices. Also assume it maintains a warehouse of product in France. risk Assume at the end of the company's fiscal year it does its U.S. tax return, and in converting the value of its inventory in France it shows a significant loss. This would be an example of: a)Foreign exchange translational risk b) Foreign exchange transactional risk c) Foreign exchange economic risk d) Commercial risk
a)Foreign exchange translational risk
assume a company has been highly successful exporting a product from the U.S. to Europe and uses the Euro as the currency for all its invoices. Also assume it maintains a warehouse of product in France. risk At the end of the company's fiscal year it does its U.S. tax return, and in converting the value of its inventory in France it shows a significant profit. This would be an example of: a)Foreign exchange translational risk b) Foreign exchange transactional risk c) Foreign exchange economic risk d) Commercial risk
a)Foreign exchange translational risk
Which of the following is not a necessary condition for a company to be ready to go global? a)Foreign language ability b)Funding c)Management commitment d)Capability to produce enough product
a)Foreign language ability
What are additional benefits for companies to expand internationally beyond the fundamentals? a)Global branding, worldwide distribution, economies of scale and learning beyond just the U.S., and global cash flows b)Lower taxes, worldwide distribution, economies of scale and learning beyond just the U.S., and global cash flows c)Lower taxes, worldwide distribution, economies of scale and learning beyond just the U.S., and better public relations d)Lower taxes, better public relations, global brand, and worldwide distribution
a)Global branding, worldwide distribution, economies of scale and learning beyond just the U.S., and global cash flows
When importing from the U.S., which harmonized code is used? a)HTSUS b)WCO HTS c)Schedule B d)Schedule B or HTSUS when allowed
a)HTSUS
The following is NOT a characteristic of a letter of credit. a)High risk b) Lack of flexibility c) Being cumbersome d) Complexity
a)High risk
What is a key issue companies must consider as they select their foreign market entry mode? a)How much control and feedback is needed. b)Whether to use an agent or distributor. c)The cost of finding suitable partners. d)Whether transfer pricing rules will apply.
a)How much control and feedback is needed.
Which type of letter of credit would be best if the exporter does not trust the foreign bank? a)Irrevocable and confirmed letter of credit b) Revocable and confirmed letter of credit c) Irrevocable and advised letter of credit d) Revocable and advised letter of credit
a)Irrevocable and confirmed letter of credit
Which of the following payment terms presents the LEAST risk to the exporter? a)Irrevocable letter of credit confirmed by a U.S. bank b) Irrevocable letter of credit advised by a bank in the buyer's country c) Bank guarantee advised by a bank in the buyer's country d) Documentary collection
a)Irrevocable letter of credit confirmed by a U.S. bank
A potential benefit to an importer of the CTPAT program is: a)Less frequent US Custom inspections b)Lower import duties c)Facilitate containerization d)Facilitate insurance claims in case of loss
a)Less frequent US Custom inspections
What is the growing concern about the use of EXW as an Incoterm? a)That the exporter is technically not responsible to clear the goods for exports, yet it may still have legal obligations related to export documents. b)That it can be very difficult to accurately calculate foreign duties. c)That it is primarily suited for non-containerized freight. d)It is simply too expensive for the seller.
a)That the exporter is technically not responsible to clear the goods for exports, yet it may still have legal obligations related to export documents.
What is EAR99? a)The export control classification for goods not specifically listed as controlled goods. b)The directory of all controlled goods subject to the EAR. c)The platform used to file for export licenses. d)The rules governing the sale of military goods.
a)The export control classification for goods not specifically listed as controlled goods.
In an international shipment, what is the role of a freight forwarder? a)To handle the primary logistics including the freight and insurance for a shipment b)To forward freight from rail to ocean. c)To collect payment for the sale from the foreign buyer d)To forward all freight damage claims
a)To handle the primary logistics including the freight and insurance for a shipment
Which of the above agencies uses the EAR -Export Administration Regulations? a)U.S. Department of Commerce b)U.S. Department of the Treasury c)U.S. Department of State d)U.S. Customs and Border Protection
a)U.S. Department of Commerce
A company wants to insure against the risk associated with the non-payment of a foreign receivable. Which agency would be the most appropriate? a)US ExImBank b) US International Development Finance Corporation (DFC) (Formerly OPIC) c) SBA d) IMF
a)US ExImBank
Which method is considered the most risky strategy of entering a Foreign Market? a)Wholly owned subsidiary b)Sales Agent c)Franchising d)Joint Venture
a)Wholly owned subsidiary
Under the free trade zone program: a)a company can delay, eliminate, or reduce payment of duties b)a company can have 99% of its duties refunded should the product be exported c)a company can have a small portion of its duties refunded should the product be exported d)a company can have duties delayed or eliminated, but not reduced.
a)a company can delay, eliminate, or reduce payment of duties
tolerance for ambiguity
ability to tolerate uncertainty and lack of clarity in the thinking and actions of others
All air waybills are: a) clean. b) non-negotiable. c) negotiable. d) order.
b) non-negotiable.
Which of the following of Hofstede's dimensions measures the degree to which people are accepting of inequality and hierarchy in a society? a.Power Distance b.Individualism/Collectivism c.Masculinity/Femininity d.Uncertainty Avoidance e.Long-term Orientation
a.Power Distance
Cultural intelligence is defined as which of the following? a.a person's ability to function effectively in culturally diverse situations b.a person's knowledge about a variety of cultures and their rituals c.the measurement of a manager's skill for dealing with foreign customers d.the information gathered by focal firms who are entering foreign markets
a.a person's ability to function effectively in culturally diverse situations
Firms that would rate high on power-distance would most likely be characterized by which of the following? a.concentrated power among executives and little autonomy for subordinates b.equalized power among executives, managers, and subordinates c.minimal power among executives and concentrated power among mid-level managers d.total autonomy for executives, managers, and subordinates
a.concentrated power among executives and little autonomy for subordinates
Which of the following refers to the extent to which people can tolerate risk in their lives? a.uncertainty avoidance b.short-term orientation c.power distance d.individualism
a.uncertainty avoidance
valuing personal relationships
ability to appreciate personal relationships; which are often more important than achieving one-time goals or "winning" arguments
Flexibility and Adaptability
ability to be creative in devising innovative solutions, be open-minded about outcomes, and show "grace under pressure"
perceptiveness
ability to closely observe and comprehend subtle information in the speech and behavior of others
local libraries and colleges
access to full text retrieval of newspapers and periodicals (such as Dow Jones Factiva, or LexisNexis)
CCC Mark
acronym for China Compulsory Certification mark. A symbol printed on a product or product label by its manufacturer or importer declaring compliance with the requirements of various Chinese government laws for manufactured products related to human life and health, animals, plants, environment protection and national security
B2B
acronym for business to business. commerce in goods, services or information that takes place between business enterprises
B2C
acronym for business to consumer. commerce in goods, services or information that takes place between business enterprises and private individuals
Statement of Owner's Equity
also known as statement of RE or Equity Statement. Reports the way to net income and distribution of dividends affect the financial position of the company during the accounting period
Free Trade Agreement (FTA)
an FTA is an arrangement which establishes unimpeded exchange and flow of goods and services between trading partners regardless of national borders
piggyback arrangement
an arrangement whereby one company - sometimes a smaller one - uses the already established distribution channels of another company, which is effective when the two companies wish to sell complementary products
Sanctions
an embargo imposed against an individual country by the United Nations or a group of nations in an effort to influence its conduct or its policies.
agent / distributor
an individual or firm serving as the foreign representative of US suppliers, locating buyers for them in the foreign market
copyright
an intangible right granted by law to the creator of a literary, musical or artistic production to prevent any other person from copying, publishing and selling those works
International Monetary Fund (IMF)
an international financial institution proposed at the 1944 Bretton Woods Conference and established in 1946 that seeks to stabilize the international trade. specifically, among other things, the Fund monitors exchange rate policies of member countries, lends them foreign exchange resources to support their adjustment policies when they experience balance of payments difficulties and provides them financial assistance through a special "compensatory financing facility" when they experience temporary shortfalls in commodity export earnings
Gold Key
an international trade administration, US Department of Commerce service that provides customized information for US firms visiting a country - market orientation briefing, market research, introductions to potential business partners, and interpreter for meeting, assistance in developing a market strategy, and help is putting together a follow-up plan. Trade specialists design an agenda of meetings, screen and select the right companies, arrange meetings with key people, and go with US representatives to ensure that no unforeseen difficulties occur
Trade barriers
any one of group of tariff or non-tariff barriers to trade often classified into eight general categories: 1. import policies (tariffs and other import charges, quantitative restrictions, import licensing and customs barriers) 2. standards, testing, labeling, and certification 3. governmental procurement 4. export subsidies 5. lack of intellectual property protection 6. service barriers 7. investment barriers 8. other barriers
A company had a marketing firm in France test consumer attitude to various colors of their products by holding a focus group meeting in Paris. This would result in: a)Primary research for quantitative data b)Primary research for qualitative data c)Secondary research for quantitative data d)Secondary research for qualitative data
b
Assume you are developing a foreign market selection matrix: Assuming the company exports refrigerators. Of the following indicators, which would likely be used for sure: a) Cultural attitudes toward frozen food versus fresh food b) Imports of refrigerators c) Import tariffs d) VAT
b
In the selection process of a foreign partner, the following is NOT a way you can assess a candidate's capability. a)Company's strength b)Knowledge of your home country's language c)Market access d)Marketing ability e)Sales projections
b
Sales by the exporter to the buyer through an intermediary in the domestic market is called ______________. a) Direct Exporting b) Indirect Exporting c) Direct Sales d) Indirect Sales
b
The Hannover Trade Fair offers a chance for companies across a wide variety of industries to exhibit. This type of event is a(n): a)Vertical trade show b)Horizontal trade show c)Horizontal trade mission d)Vertical trade mission
b
The World Bank provides various databases. In particular their website is good for: a) Country risk ratings from Euler b) Indicators such as GDP c) Company credit reports d) Competitor information
b
What is a trend internationally as regards to resolving contractual disputes between parties to a contract? a)Litigation remains the preferred option. b)There is a growing use of arbitration clauses in contracts. c)There is a decreasing use of arbitration clauses in contracts. d)Choice of law clauses are selecting the local law of the distributor.
b
Which legal system is most frequently found in the United States and the U.K.'s former colonies? a)Civil b)Common c)Theocratic d)Communist
b
Which of the following is the best resource for US imports and exports trade statistics? a) www.trade.gov/export-solutions b) www.usatrade.census.gov c) www.kompass.com d) www.uncomtrade.com e) www.piers.com
b
Why would a company employ market segmentation when developing a marketing plan for entry in a particular country? a)It more likely means the company hires local employees rather than employees from its home market. b)It allows the company to identify top sales opportunities. c)It provides more comparable sales data. d)Actually market segmentation is a US marketing technique not recommended for foreign markets.
b
Which of the following would be an example of a suitable export control statement to the be used on a commercial invoice? a) "These items are controlled by the U.S. government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items. b) "These items are controlled by the U.S. government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations." c) "This shipment has been duly exported within the control of U.S. export regulations." d) "This shipment has not been duly exported within the control of U.S. export regulations. As such any re-routing must receive DDTC permission."
b) "These items are controlled by the U.S. government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations."
A draft is essentially a) The same as a check - a request to pay someone. b) A reverse check - a request to be paid. c) A shipping document. d) An insurance document.
b) A reverse check - a request to be paid.
An increase in the dollar price of a foreign currency usually: a)Benefits U.S. importers. b) Benefits U.S. exporters. c) Benefits both U.S. importers and exporters. d) Harms both U.S. importers and exporters.
b) Benefits U.S. exporters.
Which of the following factors do companies find the most difficult to assess when initially trying to penetrate a foreign market? a) The need to obtain legal advice on the country in question b) Evaluating the socio-cultural and socio-economic factors of the foreign environment and the need to visit and assess the foreign environment without being dependent only on information provided c) The basic need for the product or potential for foreign trade or investment d) The evaluation of country risk and exposure
b) Evaluating the socio-cultural and socio-economic factors of the foreign environment and the need to visit and assess the foreign environment without being dependent only on information provided
What is the name of the U.S. central bank? a) Ameribank b) Federal Reserve c) First National Bank of America d) U. S. Central Bank
b) Federal Reserve
assume a company has been highly successful exporting a product from the U.S. to Europe and uses the Euro as the currency for all its invoices. Also assume it maintains a warehouse of product in France. risk 60 days after invoicing a customer in Germany, the exchange rate has changed such that when the Euros received are converted to U.S. dollars the company takes a loss. This an example of: a)Foreign exchange translational risk b) Foreign exchange transactional risk c) Foreign exchange economic risk d) Commercial risk
b) Foreign exchange transactional risk
assume a company has been highly successful exporting a product from the U.S. to Europe and uses the Euro as the currency for all its invoices. Also assume it maintains a warehouse of product in France. risk Years later, the company is no longer competitive because the exchange rate of the U.S. dollar to the Euro has made its products too expensive in Europe. This would be an example of: a)Foreign exchange translational risk b) Foreign exchange transactional risk c) Foreign exchange economic risk d) Commercial risk
b) Foreign exchange transactional risk
In a documentary collection, the foreign bank a) Ensures payment will be made once shipment is made. b) Holds documents until payment is made by buyer. c) Acts as foreign receivable insurance. d) Is the applicant bank for a letter of credit.
b) Holds documents until payment is made by buyer.
As a company considers whether to enter a particular country, the level of enforcement (or lack thereof) intellectual property rights within a specific country would be classified as: a) Economic risk b) Political risk c) Commercial risk d) Financial risk
b) Political risk
A written statement by the exporter ordering the importer to pay a specific amount of money upon presentation to drawee to whom it is addressed is known as a ____. a) Bill of lading b) Sight draft c) Time draft d) Letter of credit
b) Sight draft
The contractual obligation between the issuing bank and the beneficiary comes into existence through the assistance of _______. a)The issuing bank b) The advising bank c) The confirming bank d) The beneficiary
b) The advising bank
A company is seeking financing for assets to be purchased for an overseas subsidiary. Which agency would be the most appropriate? a)US ExImBank b) US International Development Finance Corporation (DFC) (Formerly OPIC) c) SBA d) IMF
b) US International Development Finance Corporation (DFC) (Formerly OPIC)
A company is seeking financing for assets to be purchased for an overseas subsidiary. Which agency would be the most appropriate?a)US ExImBank b) US International Development Finance Corporation (DFC) (Formerly OPIC) c) SBA d) IMF
b) US International Development Finance Corporation (DFC) (Formerly OPIC)
Imported products become more expensive to U.S. importers when the: a)Interest rates rise in the foreign exporter's country. b) US dollar weakens in relation to the foreign exporter's currency. c) US dollar strengthens in relation to the foreign exporter's currency. d) US reduces tariffs on imports.
b) US dollar weakens in relation to the foreign exporter's currency.
What is the purpose of the Shipper's Letter of Instruction? a) To inform a freight forwarder a shipment is ready to export. b) to provide all the essential information regarding an export so the forwarder can correctly execute the shipment and if required, complete the necessary documents. c) To establish the Incoterm to be used with the shipment so the carrier is aware of its responsibilities. d) To provide background information on the shipper so the forwarder can classify the exporter as a 'known exporter' and then file for an export license.
b) o provide all the essential information regarding an export so the forwarder can correctly execute the shipment and if required, complete the necessary documents.
Globalization has helped increase all of the following except________. a) the variety of capital flows across national borders b) the economic isolation of developing countries c) the rate at which products are diffused worldwide d) the volume of cross-border transactions
b) the economic isolation of developing countries
If the German supplier had hedged the potential forward sales agreement at a cost of 200 Thousand Euro, how much would the German company have made? a)4.8 Million $ b)4.8 Million Euro c)5 Million Euro d)5 Million $
b)4.8 Million Euro
If the German supplier had hedged the potential forward sales agreement at a cost of 200 Thousand Euro, how much would the German company have made?a)4.8 Million $ b)4.8 Million Euro c)5 Million Euro d)5 Million $
b)4.8 Million Euro
Following on from the previous question. The company decides to begin manufacturing the music box legs in Brazil. When importing 1000 of the music box legs, which code would be used. a)9208.10.0000 b)9208.10.5000 c)9208.10.0000 & 9208.10.5000 d)When importing parts of more than 1000, U.S. Customs will classify.
b)9208.10.5000
Which of the following would be an example of violation of U.S. export controls? a)A U.S. company ships goods by ocean to China using a Mexican ocean carrier. b)A U.S. company ships goods to a distributor in Mexico and the distributor then ships the goods to Cuba. c)A. U.S. company ships goods to a distributor in Mexico and the distributor then ships the goods to China. d)A. U.S. company ships goods by air to South Africa using a Chinese airlines.
b)A U.S. company ships goods to a distributor in Mexico and the distributor then ships the goods to Cuba
Under the duty drawback program: a)A company can delay, eliminate, or reduce payment of duties b)A company can have 99% of its duties refunded should the product be exported c)A company can have a small portion of its duties refunded should the product be exported d)A company can have duties delayed or eliminated, but not reduced.
b)A company can have 99% of its duties refunded should the product be exported
A candle company based in Mexico City is approached by a customer in Japan who is interested in distributing candles in Japan. The candle company is relatively new, with sales of 10 million pesos (approximately $1million). It currently has no international experience but is interested in expanding globally. Which of the following would be the best option for the candle company's first international sales effort? a)A joint venture with the Japanese company b)A distribution agreement with the Japanese company c)Establishing a manufacturing facility in Japan d)A licensing agreement with the Japanese company
b)A distribution agreement with the Japanese company
Custom Trade Partnership Against Terrorism (CTPAT) is: a)Mandatory for all U.S. exporters b)A voluntary program which certifies the security of a company's Supply Chain to the Customs and Border Protection c)Mandatory for all U. S. importers d)Only applies to Over The Road Truck shipments
b)A voluntary program which certifies the security of a company's Supply Chain to the Customs and Border Protection
During an ocean voyage the ship's captain determines that for the ship's safety, twenty five (25) containers must be thrown overboard to save the ship from imminent danger. For most international shipments, which statement is true? a) Only shippers with containers that were thrown overboard share equally the loss of the value of the overboard containers b)All shippers with containers remaining on board share equally the cost of the value of the containers thrown overboard to save the ship. General Average Insurance would protect them from such financial risk. c) Each shipper with a lost container will be liable for the value of their own container d)Since it was a decision specifically declared by the ship's captain, no Shippers face potential loss as they revert to the ship transporting the containers
b)All shippers with containers remaining on board share equally the cost of the value of the containers thrown overboard to save the ship. General Average Insurance would protect them from such financial risk.
Breakbulk cargo is: a)Cargo broken down into pallets b)Cargo is too large, or not suitable for a container c)Any cargo shipping by air d)Cargo requiring specialized care as it is easily damaged
b)Cargo is too large, or not suitable for a container
Sam's Club purchases kalamata olives from Greece for sale in its stores. Which international business activity does this represent? a)Exporting b)Importing c)Merchandising d)Trading
b)Importing
The practice of moving freight between rail, train, truck, etc. is a)Containerization b)Intermodalism c)Increasing freight costs d)Lowering import duties
b)Intermodalism
A product manufactured in the US using foreign materials a)Will not qualify for USMCA duty free treatment b)May qualify for USMCA duty free treatment c)Will qualify for USMCA duty free treatment d)Will qualify for USMCA duty free treatment to Canada but not Mexico.
b)May qualify for USMCA duty free treatment
Which of the following would be issues included with an international business plan?a)SWOT, product selection, entry mode, but not sales and expense forecast. b)SWOT, product selection, entry modes, sales and expense forecast. c)Product selection, entry modes, sales and expense forecast, but not SWOT. d)SWOT, entry mode, sales and expense forecast, but not product selection.
b)SWOT, product selection, entry modes, sales and expense forecast.
Import duties are an example of a)Quantitative trade barriers b)Tariff barriers c)Qualitative trade barriers d)Non-tariff barriers
b)Tariff barriers
Which of the following is a true statement regarding import duty and VAT? a)They are both taxes applied to imports b)They are both taxes, but import duty applies to imports and VAT is generally applied to all products c)They are essentially the same thing d)Import duty is applied to imports, VAT is applied to exports
b)They are both taxes, but import duty applies to imports and VAT is generally applied to all products
Developing a firm's mission statement is usually the responsibility of: a)Middle management b)Top management c)Rank and file workers d)Frontline supervisors
b)Top management
When would a US company be liable to collect/charge for VAT? a)When it is the exporter of record b)When it is the importer of record c)When it invoices above $1200 d)Never - it is an overseas function only
b)When it is the importer of record
The multinational organization that was created to help promote global trade is a)International Monetary Fund b)World Trade Organization c)World Bank d)United Nations
b)World Trade Organization
The primary purpose of U.S. export control regulations is to a)ban the exports of military goods, ban the exports of products related to crime, and ban exports of products related to the nuclear industry. b)control the exports of particular goods, control who can be sold to, and control where exports can be sent. c)protect the confidentiality of the exporter. d)ensure exports comply with U.S. embargoes.
b)control the exports of particular goods, control who can be sold to, and control where exports can be sent.
Which of the following is a form of foreign direct investment?a)foreign bond ownership b)participation in a joint venture c)mutual fund ownership d)none of the above
b)participation in a joint venture
The Code: 2120.92.3000, 2120.92 is the? a)commodity number b)subheading c)chapter d)heading
b)subheading
International business is defined as the performance of ________ activities by firms across national borders. a) marketing and fiduciary b) trade and investment c) finance and operational d) manufacturing and sales
b. Trade and investment
The FCPA draws a distinction between bribery and facilitation or "grease payments." Which of the following would be considered a "grease payment"? a.A payment to a foreign official to do something he/she isn't supposed to do. b.A payment to a foreign official to do something he/she is supposed to do, but to do it faster. c.A payment to a foreign official to bend the rules a little, so you can gain access to your potential customers. d.None of the above would be considered a "grease payment."
b.A payment to a foreign official to do something he/she is supposed to do, but to do it faster.
import documentary collections
between buyer or seller there may be no credit established, more risk
HIS Markit piers
bill of landing data for US Trade -provider of import and export data at the detailed bill of landing level
A primary function of _________________ is/are to anticipate the possibility of default or delay in payments by foreign borrowers. a)Market size and trend analysis b) Competitive analysis c) Country risk assessment d) Supply chain and logistics models
c) Country risk assessment
Which of the following forms of assistance is available to US exporters from the Export-Import Bank in connection with export contracts? a) Confirmation of letter of credit b) Forward exchange c) Credit insurance d) Protesting bills of exchange
c) Credit insurance
A company used the internet to research the per capita income in various countries. This is an example of: a) Primary research for quantitative data b) Primary research for qualitative data c) Secondary research for quantitative data d) Secondary research for qualitative data
c
Assume you are developing a foreign market selection matrix: The first step is to narrow your search from all countries to a more limited list, say 30 countries. You would do this based on: a) Where competitors are already selling b) Where competitors are not already selling c) Some initial indicator such as GDP that would be a strong initial way to separate strong countries from those with weak demand. d) The level of import duties for your product
c
GlobalEdge at Michigan State University is a powerful: a)Lobby organization to support US exports b)School that offers international MBA programs c)Website for trade information d)Website similar to Skype
c
The following are characteristics of piggyback arrangement except________. a) Piggyback partner provides customer support b) Piggyback partner provides industry and technical knowledge c) Piggyback partner markets your company d) Piggyback partner uses its own existing international distribution channel for your product
c
The following are characteristics of sales agent except________. a)Represent your products in the foreign market b)Receive commission c)Work like an overseas office of the manufacturer d)Never take legal title of the product
c
The gold key service offered by the U.S. Commerce Department is useful for: a)Providing booth space at overseas trade shows b)Using the services of the U.S. Commerce Department to clear goods through customs faster c)Identifying and setting appointment with potential foreign partners d)Conducting credit analysis of potential foreign partners.
c
What could be the impact of antitrust laws on a company's international strategy? a)No effect as antitrust laws are not extraterritorially applied. b)Primarily on export activities as governments restrict trade with other countries based on antitrust laws. c)They can impact potential joint ventures and acquisitions that may be seen as reducing competition. d)It has a significant impact on global pricing strategies to avoid anti-dumping duties.
c
Which Legal system is based on religious precepts? a)Civil b)Common c)Theocratic d)Communist
c
Which of the following would help find importers, distributors, and agents in France? a) www.trade.gov/export-solutions b) www.usatrade.census.gov c) www.kompass.com d) www.uncomtrade.com e) www.piers.com
c
Which type of foreign partner provides the most control over pricing?________. a)EMCs b)Piggyback c)Agents d)Distributor
c
The most standard ocean container is how many feet long? a) 10 b) 25 c) 40 d) 50
c) 40
What is the difference between Documents Against Payment (D/P) and Documents Against Acceptance (D/A) in terms of getting payment? a) D/P means payment must be made to get the goods,D/A just says you agree to pay. b) D/P means payment must be made at some time after getting the goods, D/A just says you agree to pay. c) D/P means payment must be made to get the goods, D/A means buyer agrees to pay, and payment will be based on the terms (for example to 60 to 120 days). d) They are both known as collection and there is no difference between them.
c) D/P means payment must be made to get the goods, D/A means buyer agrees to pay, and payment will be based on the terms (for example to 60 to 120 days).
The Gold Key Service offered by the US Commerce Department is useful for: a) Providing booth space at overseas trade shows b) Using the services of the US Department of Commerce to clear goods through customs faster c) Identifying and setting appointment with potential foreign partners d) Conducting credit analysis of potential foreign partners
c) Identifying and setting appointment with potential foreign partners
Which type of letter of credit would be best if the exporter trusts the foreign bank? a)Irrevocable and confirmed letter of credit b) Revocable and confirmed letter of credit c) Irrevocable and advised letter of credit d) Revocable and advised letter of credit
c) Irrevocable and advised letter of credit
The payment method ___________ is generally more secure for the seller/exporter than ___________. a) Open account, documentary collection b) Open account, letter of credit c) Letter of credit, documentary collection d) Documentary collection, cash in advance
c) Letter of credit, documentary collection
Hard currency is___________. a) Gold or silver bullion b) Petrodollars c) Money with a fixed exchange rate d) Backed by a gold standard
c) Money with a fixed exchange rate
If a letter of credit has a discrepancy, then a)Shipment may proceed, by may be delayed. b) Shipment may proceed, but insurance will not be in effect. c) Payment may be delayed until the discrepancy is fixed. d) Shipment may be delayed until the discrepancy is fixed.
c) Payment may be delayed until the discrepancy is fixed.
Which of the following helps explain why India was once characterized by high country risk? a) Taxes and financial incentives benefit Indian businesses over foreign firms. b) Indian business leaders distrust most European corporations. c) Political leaders enacted laws targeted against foreign firms. d) Indian leaders fear the modern influences of American firms.
c) Political leaders enacted laws targeted against foreign firms.
Payment against a letter of credit is essentially done once: a)The bank inspects and approves the shipment. b) The bank inspects and approves the shipment, but it must be prior to shipment. c) The bank checks the paperwork and approves the paperwork. d) The goods are shipped.
c) The bank checks the paperwork and approves the paperwork.
A written statement by the exporter ordering the importer to pay a specific amount of money at a specific future date is known as a ____. a) Bill of lading b) Sight draft c) Time draft d) Letter of credit
c) Time draft
A primary purpose of an international quotation is to: a) confirm the freight costs to the foreign country. b) confirm the freight and insurance costs to the foreign country. c) confirm the selling price of the goods. d) confirm US eligibility to sell the goods.
c) confirm the selling price of the goods.
Which of the following is another term for importing? a) capital investment b) supply side development c) global sourcing d) unilateral procurement
c) global sourcing
Socialization is defined as which of the following? a) understanding the individual differences within a society b) adjusting and adapting to a culture other than one's own c) learning the behavioral patterns and rules of another society d) learning the meaning of gender roles in one's own country
c) learning the behavioral patterns and rules of another society
All of the following are ways that firms can benefit from a foreign market's political and legal systems except________. a) tax holidays b) subsidies c) legal protection d) cash incentives
c) legal protection
United States laws limit foreign investments that might affect which of the following areas? a) immigration reform b) labor negotiations c) national security d) rate of inflation
c) national security
A non-negotiable bill of lading is also a(n): a) order bill of lading. b) ocean bill of lading. c) straight bill of lading. d) air waybill.
c) straight bill of lading.
When creating a pro forma invoice: a) the format should look exactly like the quotation. b) the format should look essentially like the packing list. c) the format should roughly follow the commercial invoice but marked 'pro forma'. d) all pricing should be in the currency of the exporting country.
c) the format should roughly follow the commercial invoice but marked 'pro forma'.
A bill of lading acts as a title document meaning: a) Which party takes the risk. b) what is the country of origin. c) which party can take possession of the goods. d) who owns the goods when shipment begins.
c) which party can take possession of the goods.
When the equipment arrives 1 year later, the customer gives him $10MM, and the exchange rate is 1 Dollar = .83 Euros. How much actual profit does the German company make? a)5 Million $ b)5 Million Euros c)1.3 Million Euros d)2.6 Million $
c)1.3 Million Euros
Following on from the preceding question, if later the company realized it needed more plastic cases without the music box as replacements for customers that have lost their plastic case, which harmonized code would you use when importing the cases? a)9208.10.0000 b)9208.10.0000 & 3919.20.2000 c)3919.20.2000 d)Neither - harmonized codes not needed for packing cases
c)3919.20.2000
How many forms of Economic Integration are there? a)27 b)2 c)5 d)50
c)5
A German company sells a piece of equipment for $10MM to a US customer. His cost is 7 MM Euro. The exchange rate is 1 Dollar = 1.20 Euro. The customer will pay upon delivery (1 year). How much does the Germany company believe they will profit? a)3 Million Euro b)3 Million Dollars c)5 Million Euro d)5 Million Dollars
c)5 Million Euro
According to US marking rules: a)Packing boxes must identify the consignee and the country of export b)Packing boxes must identify the consignee and country of origin c)All products not exempted by law are required to have the origin of the product on the product itself d)Ocean containers must identify port of embarkation
c)All products not exempted by law are required to have the origin of the product on the product itself
US duty drawback is: a)Applied equally for all countries of import / export. b)Applied equally for all countries of import / export other than European Union. c)Applied equally for all countries of import / export other than Canada and Mexico. d)Only available within members of the United Nations Convention for the International Sales of Goods
c)Applied equally for all countries of import / export other than Canada and Mexico.
A company in U. K. sells their products to a company in Kenya, East Africa. The Kenyan Buyer to receive the products at the port of Mombasa will pay for and arrange ALL transportation from origin to destination. The U.K. company has their manufacturing facility in London, where it will ship from. Which Incoterm should be used? a)EXW Mombasa b)FCA Mombasa c)EXW London d)CIF London
c)EXW London
A Korean customer has requested a U.S. shipper take responsibility and pay the freight and insurance for a ro-ro order from Quincy to be loaded on board a ship in Long Beach. Which Incoterm would be appropriate? a)EXW Long Beach, CA b)FAS Long Beach, CA c)FOB Long Beach, CA d)FCA Long Beach, CA
c)FOB Long Beach, CA
When comparing the harmonized codes across many countries, they will be similar up to a)First two digits b)First four digits c)First six digits d)First eight digits e)All ten digits as they are 'harmonized"
c)First six digits
_____ are investments made for the purpose of actively controlling property, assets, or companies located in host countries. a)Financial assets b)Portfolio investments c)Foreign direct investments d)International bonds e)Indirect investments
c)Foreign direct investments
McDonald's has licensed its brand name, operational systems, and trademarks to individual restaurant owners in Europe. This is called _____. a)Leasing b)Renting c)Franchising d)Contracting e)expanding
c)Franchising
USMCA (formerly NAFTA) agreement is what form of Regional Economic Integration? a)Common Market b)Customs Union c)Free Trade Area d)None of the above
c)Free Trade Area
The tariff applied to any product imported into the United States is determined by its: a)NAICS designation b)Export Control Classification Number (ECCN) c)Harmonized Tariff System Number (HTS) d)Electronic Export Information Filing
c)Harmonized Tariff System Number (HTS)
The following are some of the improvements in the new USMCA agreement from NAFTA EXCEPT: a)To Qualify for zero tariffs, products must have 75% domestic contents b)US farmers will get more access to Canadian dairy markets c)Intellectual property and digital trade - terms of copyright are at 40 years. d)Agreement expires or sunsets after 16 years.
c)Intellectual property and digital trade - terms of copyright are at 40 years.
What is the role of the IC-DISC program for U.S. exporters? a)It can defer federal taxes. b)It can reduce federal taxes. c)It can reduce or defer federal taxes. d)It provides legal protection in cases of accounting fraud.
c)It can reduce or defer federal taxes.
In the Harmonized Code, Chapter 7 is titles "Edible Vegetables and Certain Roots and Tubers". When classifying a vegetable, one thing for sure is that: a)It will be classified somewhere in Chapter 7 since 'vegetable' is in the title b)It will be classified in Chapter 7 as long as the proper noun for the vegetable is found in Chapter 7 c)It may or may not be classified in Chapter 7 depending on the section or chapter notes. d)It may or may not be classified in Chapter 7 depending on the General Rules of Interpretation.
c)It may or may not be classified in Chapter 7 depending on the section or chapter notes.
What are the fundamental reasons for a company to expand internationally? a)More sales, diversification, and employee retention b)Better accounting, diversification, and employee retention c)More sales, diversification, and lower costs d)More sales, employee retention, and lower costs
c)More sales, diversification, and lower costs
The US governmental agency responsible for negotiating and implementing free trade agreements is the: a)Commercial Service b)International Trade Administration c)Office of US Trade Representative d)Customs and Border Protection
c)Office of US Trade Representative
An Ad Valorem Duty is a duty applied based on a)Product weight b)Product size c)Product value d)Product quota
c)Product value
VAT in most countries is a: a)Value added tax -applied to all imports b)Value added tax -applied to all services c)Tax essentially acting as a national sales tax d)Tax essentially acting as a manufacturing tax
c)Tax essentially acting as a national sales tax
The Code: 2120.92.3000, 21 is the? a)commodity number b)subheading c)chapter d)heading
c)chapter
Once a firm selects its foreign entry mode in a particular country, it: a)will likely use that same entry mode in all future countries b)will likely not use that same entry mode in all future countries c)may or may not use the same entry mode in a future country. d)will use the same entry mode for any country located nearby.
c)may or may not use the same entry mode in a future country.
In China the concept of "Guanxi" stands for: a.Interpersonal Harmony b.Thrift c.Personal connections d.Holistic thinking
c.Personal connections
domestic trade shows
can be used in many ways to investigate international sales potential -participation profile -talk to participants -US commercial service international buyer program
board bill of lading
cargo placed aboard vessel and is signed by master of vessel
The following is NOT an advantage of countertrade: a) Market access b) Foreign exchange c) Pricing alternative d) Efficiency
d) Efficiency
Firms that are likely to benefit from countertrade are: a) Small firms b) high-tech firms c) Firms that are not vertically integrated d) Firms that have extensive trade operations
d) Firms that have extensive trade operations
CIP
carriage and insurance paid to (named place of destination) -The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place. The seller must pay the costs of carriage to bring the goods to the destination. In addition, the seller is required to obtain minimum insurance coverage. Should the buyer wish to have more insurance protection, it will need either to agree with the seller or to make its own extra insurance arrangements.
CPT
carriage paid to (named place of destination) -The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place. The seller must pay the costs of carriage necessary to bring the goods to the destination.
secondary research
collection of data for analysis that is based on the research of other - i.e. where information about a cohort or market trend is derived from second hand sources such as third part research or magazine articles
commercial attaché
commerce expert of diplomatic stand of their country's embassy or large consulate
economic union
common market policy + members more fully integrate their economies by coordinating their economic policies
High-contect culture
communication in a high-contest culture expresses much information either in the physical context of the situation or is already internalized in the person
US embargoes and trade sanctions
complete or partial limitation on the exports of goods and services to countries or regimes
mercosur
comprised on Argentina, Brail, Paraguay, and Uruguay. Modeled similarly to the European Community's Treaty of Rome, it will establish a common external tariff and eliminate barriers to trade in services
distributor contracts - terns
contracts with automatic extensions should be avoided -put decision in hands of manufacturer -1-yr term most common
High Context vs. Low Context
contrasts how much information is carried in the context (high) and how much in the code or message (low) ranked highest to lowest: chinese, korean, japanese, vietnamese, arab, spanish, italian, english, N. american, scandinavian, swiss, german
low-contest culture
conveys most information as explicit statements and little is conveyed by relationships or internalization
CIF
cost, insurance, and freight (named port of destination -The seller delivers the goods on board the vessel. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. The seller also contracts for insurance cover against the buyer's risk of loss of or damage to the goods during the carriage. The seller is only required to obtain minimum insurance coverage. However, should the buyer wish to have more insurance protection, it will need either to agree with the seller or to make its own extra insurance arrangements.
common market
customs union policy + members also eliminate barriers that restrict movement of factors of production among themselves
Assume you are developing a foreign market selection matrix: Once the indicators have been identified and researched, they are entered into an excel spreadsheet. They then need to be converted into a comparable scale. What would be a suitable method? a) Sort each indicator in order from highest to lowest and then assign rankings to each indicator. b) Assume there are 50 countries. Sort each indicator and assign a 10 to the top 5, 9 to the next top 5, 8 to the next top 5 and so forth. c) Assume there are 50 countries. Sort each indicator and assign a 5 to the top 5, 3 to the next top 5, 8 to the next top 5 and so forth. d) Identify the top indicator. Then divide that number into all the numbers for that indicator for each country and multiple by 10.
d
During the selection process of your foreign partner, you need to avoid the following: _______________. a)"Line Collector" and "Block-your-Product" Buyer b)A partner whose company's strategy fits your product c)the "First is Best" Temptation d)Choices "a" and "c" are true
d
If another company purchases the report created from the Paris focus group meeting say a year later, this would result in: a)Primary research for quantitative data b)Primary research for qualitative data c)Secondary research for quantitative data d)Secondary research for qualitative data
d
The following represent the characteristics of an Export Management Company (EMC) except________. a) A firm acting as a complete export arm for your company's export needs. b) It pays all expenses and receives compensation in the form of discount of the US pricing of the product. c) Receives payments in the form of commission. d) takes title to a company's exported goods.
d
What are the benefits of reactive market selection? a)Low costs, easy, fast, and you for sure get the right markets. b)Low costs, easy, but not fast. c)Easy, fast, you for sure get the right markets, not low costs. d)Low costs, easy, fast, but you don't necessarily get the best markets.
d
What is meant by "market segmentation"? a)Defining a market opportunity by focusing on a specific geographic area. b)Defining a market opportunity by utilizing one partner for the whole country. c)Defining a market opportunity by utilizing only one type of entry mode. d)Defining a market opportunity by focusing on a subset of prospects that share a common need or similar characteristic.
d
Which of the following is the best resource for France imports and exports trade statistics? a) www.trade.gov/export-solutions b) www.usatrade.census.gov c) www.kompass.com d) www.uncomtrade.com e) www.piers.com
d
The _________________ is the bank that verifies the letter of credit is authentic. a)Confirming b) Beneficiary c) Applicant d) Advising
d) Advising
Which of the following is primarily responsible for regulating the export of non-military US goods and technologies? a) Customs and Border Protection b) Department of Defense c) Department of State d) Bureau of Industry and Security
d) Bureau of Industry and Security
assume a company has been highly successful exporting a product from the U.S. to Europe and uses the Euro as the currency for all its invoices. Also assume it maintains a warehouse of product in France. risk Assume a company in a foreign market goes bankrupt and is unable to pay an invoice due to the U.S. company. This would be an example of: a)Foreign exchange translational risk b) Foreign exchange transactional risk c) Foreign exchange economic risk d) Commercial risk
d) Commercial risk
A unilateral move to reduce the value of one's own currency by changing a fixed or official exchange rate is known as: a) Restructuring b) Reduction c) Revaluation d) Devaluation
d) Devaluation
For an exporter considering open account terms with a foreign buyer, which of the following is an appropriate source of financial information on the buyer? a)International Monetary Fund. b) www.export.gov. c) World Trade Organization. d) Dun & Bradstreet.
d) Dun & Bradstreet.
A US company seeking to protect its technology from being copied internationally would: a) Obtain a US patent which would then offer international protection. b) Obtain a US trademark which would then offer international protection. c) Obtain a US patent and then apply for a global patent. d) Obtain a US patent and then apply for a patent in each of specific country of concern.
d) Obtain a US patent and then apply for a patent in each of specific country of concern.
Assume an importer arrives at a port to collect goods shipped to them and the bill of lading is currently consigned to a bank. What will happen when the importer requests the goods? a) Assuming they say they have paid for the goods, they will be able to take possession. b) As long as they have a copy of the commercial invoice, they can take possession. c) As long as they have a copy of the pro forma invoice, they can take possession. d) They will not be able to take possession until the banks endorses the bill of lading to them.
d) They will not be able to take possession until the banks endorses the bill of lading to them.
A jurisdictional clause is a used to determine: a) Country of origin for a product. b) Which laws of a country are to used in case of a transfer pricing dispute. c) Country of origin for taxation of foreign income. d) Which laws of a country are to be used in case of a contractual dispute.
d) Which laws of a country are to be used in case of a contractual dispute.
Each of the following is one of the four major risks in international business except________. a) country risk b) commercial risk c) cross-cultural risk d) communication risk
d) communication risk
A multinational can centralize cash management and attempt to reduce exchange rate risk exposure through the use of________________. a) A reinvoicing center b) A bill of lading c) Time draft d) countertrade
d) countertrade
A company's potential loss of profitability caused by a nation's political or legal setting is known by which of the following terms?a)commercial risk b) currency risk c) cross-cultural risk d) country risk
d) country risk
A commercial invoice used when exporting: a) should follow the UNCISG format. b) should follow the NAFTA format when applicable. c) has no specific format, but the UNCISG is preferred. d) has no specific format.
d) has no specific format.
International documentation a) has very specific formats that must be followed. b) always must be translated into the language of the importing country. c) is far more simple than domestic documentation. d) in most cases has no specific format, but accuracy is critical.
d) in most cases has no specific format, but accuracy is critical.
A political system includes each of the following except ________. a)lobbying groups b) trade unions c) legislative bodies d) investment banks
d) investment banks
A bill of lading can act as both a _______________, and a __________________. a) proof of insurance, contract for the transportation of the goods b) packing list, contract for the transportation of the goods c) receipt for cargo, proof of insurance d) receipt for cargo, contract for the transportation of the goods
d) receipt for cargo, contract for the transportation of the goods
This kind of letter of credit is a performance bond that guarantees a seller's obligation under a contract or agreement. a)back-to -back b) transferable c) irrevocable d) standby
d) standby
In general, an Electronic Export Information (EEI) filing via the Automated Export System (AES) within the Automated Commercial Environment (ACE) is required if the total value of any single Schedule B number is greater than a)$500 b)$1000 c)$1200 d)$2500
d)$2500
In a bonded warehouse: a)A company can delay, eliminate, or reduce payment of duties b)A company can have 99% of its duties refunded should the product be exported c)A company can have a small portion of its duties refunded should the product be exported d)A company can have duties delayed or eliminated, but not reduced.
d)A company can have duties delayed or eliminated, but not reduced.
What is CSI? a)The incoterm for ocean containers b)The incoterm for air containers c)A program designed to lower the risk score of importers d)A program designed to make ocean containers safe, and less likely to have dangerous goods placed in them
d)A program designed to make ocean containers safe, and less likely to have dangerous goods placed in them
To determine if goods are subject to the EAR you must first refer to the: a)Commerce Country Chart. b)EAR99. c)Schedule B listing. d)Commerce Control List.
d)Commerce Control List.
Which incoterm has the LEAST transportation responsibility for the BUYER: a)FOB b)CFR c)EXW d)DDP
d)DDP
Assume a product is under U.S. export controls. What does this mean? a)The product cannot be exported .b)The product can be exported. The export simply needs to be documented. c)The product may be exported, but permission from the U.S. government will be required. d)Depending on the country of import, the product may be exported. Whether U.S. government permission is required depends on the country of import.
d)Depending on the country of import, the product may be exported. Whether U.S. government permission is required depends on the country of import.
If a firm has an overseas sales and marketing office, it is an example of which foreign market entry mode? a)Indirect with no foreign direct investment b)Indirect with foreign direct investment c)Direct with no foreign direct investment d)Direct with foreign direct investment
d)Direct with foreign direct investment
The CE mark is a: a)Product quality standard b)Product safety standard c)Proceduresstandard d)Document required to EU customs clearance
d)Document required to EU customs clearance
Fluctuations of exchange rates causing price to plummet and causing the seller to renegotiate pricing before shipment would be considered: a)Commercial risk b)Country risk c)Political risk d)Economic/currency risk
d)Economic/currency risk
If your product being exported, is under export controls, you will consult Bureau of Industry and Security (BIS) to obtain the a)Schedule B number b)Harmonized Tariff System Number c)NAFTA Preference Criterion d)Export Control Classification Number
d)Export Control Classification Number
If a shipper in Quincy, IL is to make an ocean container destined for Hong Kong available at a Quincy warehouse and clear the goods for export, which Incoterm is most appropriate? a)FOB Quincy, IL b)EXW Hong Kong c)EXW Quincy, IL d)FCA Quincy, IL
d)FCA Quincy, IL
Which of the following is NOT considered one of the world's major currencies? a)American Dollar b)Japanese yen c)British Pound Sterling d)German Deutschmark
d)German Deutschmark
Quotas are example of a)Quantitative trade barriers b)Tariff barriers c)Qualitative trade barriers d)Non-tariff barriers
d)Non-tariff barriers
A typical global business plan would include which of the following? a)Equity analysis b)Stock price projections c)Cash flow analysis d)SWOT analysis
d)SWOT analysis
When exporting from the U.S., which harmonized code is used? a)HTSUS b)WCO HTS c)Schedule B d)Schedule B or HTSUS when allowed
d)Schedule B or HTSUS when allowed
The Code: 2120.92.3000, 2120 is the? a)commodity number b)subheading c)chapter d)heading
d)heading
What is the most likely reason that northern Europe and North America are low-context cultures? a.People from both regions learn the value of slow negotiations based on trust. b.People from both regions are raised to show concern and respect for others. c.Both regions have historically placed value on developing personal relationships. d.Both regions have a history of relying on rhetoric to convey ideas and opinions.
d.Both regions have a history of relying on rhetoric to convey ideas and opinions.
In which of the following countries are the opinions of group members and group harmony highly regarded? a.Ireland b.Canada c.Australia d.China
d.China
distributor contracts - definitions
define the parties, the common terms and description of products
DPU
delivered at place unloaded (named place of destination) -The seller delivers when the goods are unloaded and are placed at the disposal of the buyer at a named terminal at the named port or place of destination. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.
Low vs High Power Distance
describes how a society deals with inequalities in power that exist among people
long term vs short term
describes the degree to which people and organizations defer gratification to achieve long term success
Indulgence vs restraint
describes the degree to which people in a society attempt to control their impulses and desires
distributor contracts - duties of manufacturer/ service providers
detail duties of the manufacturer or service company. avoid issues such as which party is to pay for training or brochures
The distributors of your products in the foreign markets are more likely to ________________. a)Inventory the goods locally in the foreign market b)Be more aggressive in marketing activities c)Conduct customer support activities d)Better knowledge of the local practices e)All of the above
e
The following are some of the methods of finding overseas agents or distributors. a)US Department of Commerce b)Networking with industry contacts and trade associations c)Current customers d)Trade shows e)All of the above
e
When negotiating with indirect partners for exporting, you should consider the following: ___________. a)Pricing b)Exclusive contracts Vs. nonexclusive contracts c)Territory covered by the contract d)Grandfather clause e)All of the above
e
Which of the following would help indicate how much international shipping is done by Apple? a) www.trade.gov/export-solutions b) www.usatrade.census.gov c) www.kompass.com d) www.uncomtrade.com e) www.piers.com
e
Compared to Asian negotiators, American negotiators are more likely: a.To be comfortable negotiating alone. b.To be comfortable with silence. c.To deal with issues sequentially. d.To consider the context in which something is said. e.Both a and c are true.
e.Both a and c are true.
Which of the following statements is/are true about the deal-making styles of Americans and Asians?a.Americans see the signed contract as "the deal" b.Eastern/Asian cultures see the relationship as "the deal" c.Americans are more comfortable with ambiguity than those from Asia d.All the above are true e.Only a and b are true
e.Only a and b are true
Which of the following statements is true of the Foreign Corrupt Practices Act? a.It covers only U.S. corporations b.It draws a distinction between bribery and facilitation (grease payments) c.It prohibits payments to government officials for the purpose of influencing any act of that official to secure any improper advantage to obtain or retain business d.All of the above e.Only b and c are true
e.Only b and c are true
International Chamber of Commerce (ICC)
established in Paris in 1919, this is a non-governmental organization serving world business. The ICC has members in 110 countries that include companies, industrial associations, banking bodies and chamber of commerce. The ICC international court of arbitration was founded in 1923 to settle international business disputes; it is the leading international arbitration institution (INCOTERMS, UCP for letters of credit)
ExW
ex works (named place) -The seller delivers when it places the goods at the disposal of the buyer at the seller's location or at another specified place. The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export.
variable costs
expenses that change in proportion to the activity of a business
distributor contracts - duties of distributors
expressly state what is expected of the distributor, including issues as translation, training, installation, and customer support
STAT-USA
federal government source for economic statistics, international market research and trade leads
Income statement
financial statement showing a company's sales, expense and net income of loss for a specific period of time.
Harmonized Code - Binding Rulings
http://rulings.cbp.gov/ useful and often underutilized tool that enables importers and other interested parties to get merchandise classification decisions from CBP that are binding on all future shipments of the products ... importers use the code to determine the duties due on imported products
Harmonized Code - Sch B
http://www.census.gov/foreign-trade/schedules/b/ -10 digit number used in the US to classify physical goods for export to another country. Sch B is based on the international harmonized system (HS) of 6 digit commodity classification codes
distributor contracts - exclusive vs nonexclusive
if exclusive: make sure to have performance targets or the exclusivity is offered with no condition of performance
chapter
in which a commodity is classified -EX: Fish and crustaceans, molluscs and other aquatic invertebrates
differences in technical standards: including testing
issues that most often come to mind are metric vs. nonmetric standard and differences in electrical voltage
Trade mission: Vertical
industry specific
direct foreign investment (DFI)
investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor
cultural receptivity to foreign market entry is most influenced by
language, religion and negotiating methods/styles
kompass
large global databases listing companies by agent, distributor, manufacturer
Alibaba
largest IPO in US stock history, growing resource
Global Edge
list numerous links
descates datamyne
market research and regulations -largest searchable trade database -bill of landing each day 24 hrs after receipts
Market Segmentation
market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations sharing one or more characteristics that cause them to demand similar product and/or servicesbased on qualities of those products such as price or function
Horizontal selling
marketing policy encompassing multiple or varied industries
non-tariff barriers
measures other than high import duties (tariff) employed to restrict imports
free trade area
members remove tariffs and other barriers to international trade among themselves; however, each member may establish its own trade policies with nonmember countries
intermodalism
moving containerized freight between different modes of transport
containerization
moving freight in standard containers
Standby letter of credit
no cash exchange until gone wrong
clean bill of lading
no indication of damage or shortages
trade finance
no one country can produce all its needs, they often specialize in one thing. Trade is happening
culture is ....
not right or wrong --it is relative. there is no cultural absolute. different nationalities simply perceive the world differently not about individual behavior --it is about groups. it is a collective phenomenon of shared values and meanings not inherited --it derives from the social environment. we are not born with a shared set of values and beliefs; we acquire them as we grow up
GATT (General Agreement on Tariffs and Trade)
now renamed the World Trade Organization. A multilateral treaty adhered to by over 124 nations which provides a set of rules for trade policies and a means for settling disputes among member nations. After eight years of negotiations, the Uruguay Round Agreement of the GATT nations, creating a global trade accord, was voted on by the US congress in Dec 1994 and approved for American participation. The pact is expected to lower world tariffs by 40%, cut subsidies globally, expand protection for intellectual property and set rules for investment and trade in services
netting
offsetting a foreign liability with a foreign asset (a bill to pay with an expected payment on account)
competitor websites
often list distributor lists, offices
globalization of markets
ongoing economic integration and growing interdependency of countries worldwide
primary data
original information collected specifically for a particular requirement -more accurate, relevant, and timely than secondary -more costly, especially for foreign markets
Bureau of Industry and Security
part of the US Dept of Commerce. Responsible for control of exports for reasons of national security, foreign policy and short supply. Licenses on controlled exports are issued and seminars on US export regulations are held domestically and overseas
international portfolio investment
passive ownership of foreign securities such as stocks and bonds for the purpose of generating financial returns
L/C Terminology - Discrepancies
problems with the paperwork submitted for payment which leads to payment delays and extra costs
Importing or global sourcing
procurement of products or services from suppliers located abroad for consumption in the home country or a third country
trade magazines / journal
provide interviews and corporate profiles
Masculinity vs. Femininity
refers to a society's orientation based on traditional male and female values
Foreign Direct Investment
refers to long term participation by country A into country B. It usually involves participation in management, joint-venture, transfer of technology and expertise
export controls
regulations that govern the exports of goods that if improperly exported, threat U.S. national security
commercial risk
risk carried by the exporter (unless insurance is secured) that the foreign buyer may not be able to pay for goods delivered on an open account basis -weak partner -operational problems -timing of entry -competitive intensity -poor execution of strategy
Currency Risk (Financial Risk)
risk of adverse fluctuations in exchange rates -currency exposure -asset valuation -foreign taxation -inflationary and transfer pricing
political risk
risk resulting decisions of sovereign governments as well as political and social events in a country. Risks includes confiscation, expropriation, nationalization, currency inconvertibility, contract frustration, war, civil unrest, revolution annexation. Can lead to the inability of a debtor to comply with a contract or to the loss, confiscation or damage to goods belonging to an exporter. An exporter maybe be able to cover this risk by utilizing a confirmed letter of credit or by applying for cover from export credit agencies
direct exporting
sale by an exporter directly to a buyer located in a foreign country
indirect exporting
sale by the exporter to the buyer through an intermediary in the domestic market
exporting
sale of products or services to customers located abroad, from a base in the home country or a third country
distributor contracts - choice of law
should establish what law governs the contract in case of dispute
statement of cash flows
summarizes sources and uses of cash; indicates whether enough cash is available to carry on routine operations
legal system
system for interpreting and enforcing laws. The laws, regulations and rules establish norms for conduct
RoHS
the Directive on the restriction of the use of certain hazardous substances in electrical and electron equipment 2002/95/EC (commonly referred to as the Restriction of Hazardous Substances Directive or RoHS) was adopted in February 2003 by the European Union
Foreign Corrupt Practices Act (FCPA)
the FCPA makes it unlawful for any US citizen or firm (or any person who acts on behalf of a US citizen or firm) to offer, pay, transfer, or promise to pay or transfer or authorize payment, transfer, or promise of money or anything of value to any foreign appointed or elected government official, foreign political party, or candidate for a foreign political office for a corrupt purpose, (that is, to influence a discretionary act of decision of the official) and for the purpose of obtaining or retaining business
forward rate
the FX rate quoted between two currencies for delivery in the futures (30, 90, 120 days, etc.)
spot rate
the FX rate quoted between two currencies for transactions to be delivered within two business days.
inter-americas development bank (IDB0
the Inter-American Development Bank provides resources to finance Latin American development. The IDB also serves as administrator for special funds provided by several member and nonmember countries. The largest of these funds is the US Social Progress Trust Fund
NAFTA
the North American Free Trade Agreement, the largest free trade area in the world, 340 million people and $6 trillion in GDP, encompassing Canada, the US and Mexico. The free trade pact was passed by the US Congress in November 1993 and began implementation in January 1994. NAFTA follows the model of the US Canada Free Trade Agreement and will lower trade barriers among the three countries over the next 15 years to zero in most categories of goods and services
World bank
the World Bank assists the development of member nations by making loans when private capital is not available at reasonable terms to finance productive investments
L/C Terminology - confirming bank
the bank (generally U.S.) that adds its own guarantee to pay
L/C Terminology - advising bank
the bank (generally U.S.) that verifies that the L/C is authentic
uncertainty avoidance
the degree to which societies are willing to tolerate uncertainty and risk
subjectivism
the doctrine that knowledge and value are dependent on and limited by your subjective experience
power distance
the extent to which the less powerful members of organizations within a country expect and accept that power is distributed unevenly
country risk
the financial risks of a transaction which relate to the political, economic or social instability of a country -government intervention, protectionism and barriers to trade and investment -bureaucracy, red tape, administrative delays and corruption -lack of legal safeguards for intellectual property rights -legislation unfavorable to foreign firms -economic failures and mismanagement -social and political unrest and instability
L/C Terminology - applicant
the foreign buyer
Marginal Cost
the increase in the total cost of production that results from manufacturing one more unit output
transfer pricing
the overpricing of imports and/or underpricing of exports between affiliated companies in different countries for the purpose of transferring profits, revenues or monies out of a country in order to evade taxes
embargo
the partial of complete prohibition of commerce and trade with a particular country, in order to isolate it
intellectual property
the patents, trademarks, service marks, copyrights and trade secrets of a business are considered intellectual property
socialization
the process by which individuals internalize the values, beliefs, and norms of a given society and learn to function as members of that society
acculturation
the process of adjusting and adapting to a culture other than one's own; commonly experienced by expatriate workers
hedging
the process of protecting against the potential of FX loss
Net Income
the remains from earnings after all costs, expenses and allowances for depreciation and probable loss have been deducted
options
the right but not the obligation to exchange a specific amount of currency as a specific rate
legal risk
the risk that business will be affected by changes in laws and regulations, or by existing laws and regulations which it had not properly taken into account
Market risk
the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. the four standard market risk factors are stock prices, interest rates, foreign exchange rates and commodity prices
L/C Terminology - Beneficiary
the seller
Import letter of credit
the seller wants guarantee that they will get paid once, Bank - leveraging its balance sheet to pay. Buyer is usually in US
due diligence
the systematic investigation, verification and evaluation of information in order to facilitate a decision regarding a proposed transaction. Performing a due diligence investigation is a standard operating procedure prior to: purchasing a venture capital, loaning money or offering securities. Due diligence can include checking financial references, background checks of key individuals, interviewing current and past clients, checking the legal status of company and on-site evaluations
self-reference criterion
the tendency to view other cultures through the lens of one's own culture - understanding this is the first step
landed cost
the total cost of shipment delivered to a named location. Specifically, the cost of the goods plus the cost of transportation
gray market
the trade of a commodity through distribution channels which while legal, are unofficial, unauthorized or unintended by the original manufacturer
US Commercial Service
the trade proportion arm of the International Trade Administration within the US department of commerce. The mission of the USCS is to promote the export of goods and services from the US
wassenaar arrangement
the understanding between 40 nations promoting voluntary export control guidelines as well as transparency and greater responsibility in the transfer of conventional arms and dual-use goods and technology
Individualism vs. Collectivism
the worth of an individual versus the worth of a group
World Trade Organization (WTO)
this organization was the former general agreement on tariffs and trade (GATT) and was created and named by the Uruguay Round in 1994