Trade Considerations 19
trade bloc
An agreement between countries intended to reduce or remove barriers to trade within member countries. Frequently, but not always, those countries are geographically close. Examples [...] are the European Economic Community and the North American Free Trade Agreement (NAFTA). Syn: trading bloc.
foreign freight forwarder
An entity that picks up goods at the production site and coordinates transport to the foreign customer's location.
tariff
An official schedule of taxes and fees imposed by a country on imports or exports.
Which of the following documents would a banker consult for information about the value of export-import cargo in connection with a letter of credit?
Commercial invoice The commercial invoice is the document that states the value of commodities in a shipment. (It does not include other amounts, such as freight.) It may be required for the letter of credit and by other entities that need to know the value of the goods for insurance or assessment of duties.
Which statement about the World Trade Organization (WTO) is true?
The WTO helps less-developed nations get better access to world markets for their exportable products. The WTO pays special attention to providing less-developed nations with better access to world markets for their exportable products. Disputes and complaints by one member nation against another may be submitted for arbitration. Membership in the WTO also means that businesses headquartered in one member nation should be able to open branches in another member nation and be subject to the same rules applying to domestic businesses in that nation, thus gaining access to their markets directly rather than through imports.
global trade management
The management and optimization of shipments across international borders to improve operating efficiencies and cash flows; includes ensuring compliance with all international regulations and documentation and streamlining and accelerating the movement of goods.
Which of the following statements denotes a characteristic of Incoterms® trade terms (International Commercial Terms)?
The responsibilities of the buyer and the seller are defined in each term. Incoterms® trade terms are used to identify which party is responsible for costs and at which points those costs are incurred.
An organization that owns a popular brand and its tier 1 and 2 suppliers are all in compliance with every local and national labor law in their countries of operation. What risk can the organization still face from labor issues?
There may be reputation risk from a supplier's actions. A key point for supply chain managers is to gain enough familiarity with the country and local labor laws of their suppliers to know when they are in compliance. Organizations may have less legal liability in these cases, but they can face significant reputation damage and loss of customers if a supplier is operating in violation of laws or if even if it is in compliance with all laws but is violating international ethical standards. For example, it may be legal for a supplier to use child labor, but this choice can cause significant reputation damage to the brand.
Which of the following statements about free trade zones (FTZs), also known as foreign trade zones or export processing zones, are true?
They can help manufacturers with potentially noncompliant shipments avoid customs fines by repacking or remarking imports. An FTZ is a geographic area in a country where duties, tariffs, and quotas are delayed and/or avoided and bureaucratic requirements are lowered in hopes of attracting new business and foreign investments. One of the many advantages for importers and manufacturers is that imports can be processed, remarked, and repackaged in an FTZ before going through customs. Therefore, a shipment with potential compliance problems can be brought into compliance in the FTZ. No retail trade of any sort is allowed in a free trade zone.
Which of the following variables are typically monitored when shipping perishable products?
Transit times, temperature, and potential contamination or leaks from adjacent packages Perishable shipments include (but are not limited to) foodstuffs, floral products, plants, animals, and medical and chemical products. Numerous domestic and international safety regulations and packaging standards are in place to ensure that perishable shipments are properly insulated and cushioned to prevent leakage, spillage, and contamination from other cargo during transit. Temperature extremes and transit times are also monitored.
ATR certificate
A certificate that is required for trade between the EU and Turkey. It grants zero duty to "free circulating" goods in the EU, which are goods originating in the EU or imported to the EU with all import duties and taxes paid. Agricultural goods, minerals, and steel are excluded and must use form EUR1.
A key role for supply chain managers when dealing with risks related to security and regulatory requirements imposed by countries and trading blocs is to:
minimize the financial impact of compliance. The management challenge is to meet requirements imposed by countries and trading blocs as well as those mandated by tax revenue, environmental, and security agencies and to do so with the least possible financial impact.
Which of the following is the correct term for the situation in which a firm exports a product at a lower price than it sells for in the country in which the firm operates?
Dumping When a firm exports a product at a price lower than it normally sells for in the country in which the firm operates, it is called dumping.
Which has the potential to reduce customs clearance delays?
Joining national trade partnerships Security regulations are a customs role that has increased in importance as laws designed to combat terrorism have come into force. The impact on organizations is that this increases the potential for delays at borders as goods are checked. One way to improve the chances of getting goods through smoothly is to participate in a trade partnership with each government that offers such a program. A facilitating payment is another name for a bribe and is illegal.
incoterms
A series of pre-defined commercial terms published by the International Chamber of Commerce relating to international commercial law. These terms do not cover property rights.
When buying materials from various suppliers, whose responsibility is it to ensure that none of the suppliers is banned by national restrictions from such trade?
Buyer Since the question is written from the buyer's perspective, it is the buyer. If the question had been written from the seller's perspective, it would be the seller, since sellers are also responsible for sales they are making
How can an organization avoid paying inverted duties?
By manufacturing and assembling items in a free trade zone When the duty on imported components is higher than the duty on the finished product, it is called an "inverted duty." To avoid paying an inverted duty, a domestic manufacturer can bring low-priced production materials into a free trade zone and process them into the finished product for export. When going through customs, the manufacturer pays the duty on either the components or the finished goods, whichever is more advantageous.
Which of the following documents is used to bolster an importer's claims for favorable import duty rates granted by treaty to the exporter's country?
Certificate of origin A certificate of origin states that the cargo originated in the exporter's country and is therefore eligible for the favorable import duties granted to goods originating in that country.
What is true of labor laws?
Country and local labor laws can differ significantly. Country and local labor laws can differ significantly. Labor laws in centralized economies may look quite different from those in decentralized economies. Some governments are organized around religious law or have a dual system of civil and religious laws that needs to be navigated when working to comply with labor laws.
Which of the following types of firms generally acts as a shipper's long-term consulting partner, smoothing the way through foreign customs and politics but not buying or selling cargo?
Export management company (EMC) A common reason to hire an EMC is to acquire representation in a particular market where the EMC has special knowledge and connections. By working with an EMC as a consulting partner, the exporter gains access to current information about the preferences of consumers in that market and about local customs and government regulations.
Which of the following scenarios presents the mostrisk related to product documentation or labeling?
Goods passing through France do not have trade documentation in French. Documentation must comply with regulations. Such documentation may be required to be multilingual, not only for the country of import and export but for every country through which the goods pass. Product labeling and documentation regulations for imports and exports often require organizations to label goods in the import country's local language(s). As such, the scenario with the most risk is the goods passing through France, since the trade documentation is not available in French.
Corporate participants in the U.S. C-TPAT (Customs-Trade Partnership Against Terrorism) receive which of the following benefits?
Greater reliance on self-policing Corporate partners in C-TPAT benefit from a greater emphasis on self-policing rather than customs verification.
What is used in foreign trade contracts to identify which parties incur the costs and at what specific points the costs are incurred?
Incoterms® trade terms As defined in the APICS Dictionary, 16th edition, Incoterms® (International Commercial Terms) trade terms are "a set of rules established by the International Chamber of Commerce that provides internationally recognized rules for the interpretation of the most commonly used trade terms in foreign trade and are routinely incorporated in the contracts for the sale of goods worldwide to provide guidance to all parties involved in the transaction." This may include specific points at which costs are incurred and which party incurs them.
Which of the following entities is responsible for issuing and updating Incoterms®?
International Chamber of Commerce (ICC) Incoterms were first issued in 1936 by the International Chamber of Commerce, which has updated them several times since then to reflect the changing conditions of international trade. The ICC maintains a website that provides detailed information.
A renewable energy company based in the United States is planning to open a factory in the European Union to reduce the risk of damage during transportation for fragile components. What labor considerations should the company be aware of before staffing the factory?
More stringent protections for worker privacy, collective bargaining, and employee benefits Even in decentralized economies, there is a wide difference in labor laws. Unlike the U.S., most countries do not follow the employment at-will principle that allows for termination without cause. The European Union and Australia also have more stringent protections for worker privacy, collective bargaining, and employee benefits than the U.S. The other options refer to labor issues more common to other regions of the globe, such as Asia, Africa, or the Middle East.
A logistics manager might approach which of the following intermediaries to purchase cargo space that the intermediary purchased elsewhere and marked up for resale?
Non-vessel operating common carrier (NVOCC) An NVOCC buys cargo space on inland carriers to resell to shippers.
Which Chinese supplier would have the lowest customs risk?
One with an AA rating AA ratings are used for customs purposes in China, making that the best indicator of the level of customs risk for a Chinese supplier.
What is true of packaging for seaborne delivery to a foreign buyer?
Packaging should be as light as possible. While packaging must be secure due to the risk of damage caused by rough handling and rough seas, it should be as light as possible for sustainability and cost-savings reasons. In some countries, customs duties are based in part on the weight of the cargo, packaging included. Note that labels should include country of origin and any other special marks required, not just safety labels and instructions.
A dock receipt is issued by which of the following entities?
Ship agent The ship agent issues a dock certificate to signify that the steamship company has received cargo brought to port by the inland carrier.
Which of the following correctly identifies the membership of shipping associations?
Smaller export firms seeking discounted rates Smaller exporters band together in shipping associations in an effort to qualify for the rate discounts that carriers offer to larger shippers. Before deregulation, ocean liners were required to publish their rates. Smaller shippers, seeing the rate schedules, could ask for similar deals. Since deregulation, carriers and the larger shippers have been able to sign confidential rate agreements. In response, smaller shippers have formed shipping associations—usually nonprofit organizations—to negotiate with carriers on the same terms as larger shipping firms.
trading bloc
Syn: trade bloc.
Which is an industrial hardware manufacturer's fastest method of capitalizing on overseas markets and local expertise?
Technology licensing Technology licensing can be an advantage when expanding overseas. Rather than opening overseas facilities or starting a joint venture, in exchange for royalties, an organization can license its technology to a partner who is already established and knows how to operate in that country.
freight forwarder
The ""middle man"" between the carrier and the organization shipping the product. Often combines smaller shipments to take advantage of lower bulk costs.
What should an organization do if it wants to ensure that imports and exports make it through customs without unnecessary delays?
Use a customs house broker with proven expertise. The organization should use a customs house broker with proven expertise. Only a licensed broker can transact business with customs, which means that importers must use a broker to submit documents to customs to release their goods. Importers are responsible for providing the necessary documents and information to the broker according to customs time lines and regulations and arranging for the payment of duties found due. (A broker can pay on the importer's behalf.) Licensed brokers must have a power of attorney from the importer to act as its agent unless the broker is in house or works for the same company.
An organization is concerned about the quality of the materials it is importing. It wants to inspect all incoming materials prior to paying import duties. What should the organization do?
Use a free/foreign trade zone (FTZ). An importer can have cargo brought into an FTZ for inspection and testing before paying import duties, thus eliminating the possibility of having to reject a shipment after paying the duty on it. This protection would not exist outside of a trading bloc. Ordering an advance sample doesn't mean that subsequent shipments would be of the same quality as the sample. Using a different supplier does not necessarily alleviate quality concerns and would not necessarily enable inspection prior to paying duties.
Comparing the export-import business to domestic supply chains, which of the following is a more common practice with exporting and importing?
Using intermediary logistics specialists The use of specialized logistics intermediaries is even more common in the export-import business than in domestic supply chains. There are simply many more issues to contemplate when you send a product across borders into countries with different rules, a different currency, and a different language. And so it can be very cost-effective for a company sending, or receiving, an international shipment to pay out considerable sums in fees or commissions to acquire these services.
In what way can Incoterms® be made to create an obligation?
When written in to international contracts for carriage International contracts for carriage (contracts for transport and materials handling, as opposed to contracts for sale and transfer of title) often rely on Incoterms trade terms, which are voluntary. However, use of them in a contract for carriage creates an obligation. Since both parties need to agree to the contract, no single party can arbitrarily use them.
A great majority of international shippers use freight forwarders because they:
quote carrier rates and handle payments. Forwarders may perform quite a number of different functions in the course of shepherding goods across international borders: arranging charters or booking vessel space, handling payments, quoting carrier rates. They also prepare and present documents, obtain insurance, provide translation, trace and expedite shipments, and arrange inland transportation.
