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Information about ImportTeleSeminarPP

Published on March 27, 2008

Author: Elodie


Purchasing Management For Importers APPMA May 2, 2006:  Purchasing Management For Importers APPMA May 2, 2006 Ben Norris American River International U.S. Imports and the Global Economy:  U.S. Imports and the Global Economy US is the world's top import market. Technological Advancements Improving Global Trade Air Travel Telecommunications Internet Trade Agreements – NAFTA, GSP Imports – Vitalize Foreign Economies, Increase Demand for U.S. Products Consumers Benefit Is Importing the Best Option?:  Is Importing the Best Option? Is the product available domestically? Have you discovered a lucrative and untapped domestic market for an imported product? Does importing a product increase your competitiveness in your respective market?  “Landed Cost” Comparison – Import vs. Domestic Import vs. Domestic Landed Cost:  Import vs. Domestic Landed Cost Landed Cost Model (Imports):  Landed Cost Model (Imports) Research How the U.S. Government Can Affect Costs of Importing:  Research How the U.S. Government Can Affect Costs of Importing U.S. Customs and Border Protection Determine HTS (Harmonized Schedule Number) and respective duty rate Are there quota restrictions? Are there restrictions because the product may be harmful to human, animal or plant health? (FDA, USDA, etc.) Finding Suppliers:  Finding Suppliers Research and Analyze the Competition Which Strategies Failed? Which Strategies Were Successful? Professional Consulting Firms Trade Shows Foreign Travel Researching Trade Data:  Researching Trade Data PIERS (Port Import Export Reporting Service) – Find new suppliers, new markets and new business opportunities Benchmark performance against the competition Defend intellectual property against infringement and counterfeiting Support strategic decision-making Arbitrate trade disputes Understand international trade trends and forecasts Researching Trade Data II:  Researching Trade Data II PIERS maintains a comprehensive database of timely, accurate, import and export information on the cargoes moving through ports in the U.S., Mexico, Latin America, and Asia. PIERS collects data from over 25,000 bills of lading daily and then translates the raw data into a retrievable database. E-Commerce Sourcing Tools:  E-Commerce Sourcing Tools - Importers looking to find and trade with sellers in China and other major manufacturing countries. Primarily serves Small and Medium-Sized Enterprises (SME's) in the international trade community, with nearly two million registered users from over 200 countries and territories, 300,000 visitors per day Alibaba – How it Works:  Alibaba – How it Works For example, I am a pet accessories importer in the U.S. (called “Cats and Dogs, Inc.”) and I am looking to import creative clothing accessories for small dogs. I begin my search by researching potential far east resources I type in “Pet Products” into the search field on the home page and then select the country or region to buy from which is “Far East” The 13th search result gives me an interesting lead – “Dog and Cat bikinis” from a company called Ebeta Company Ltd. located in Bangkok, Thailand. Wa-La! Dogs in Bikinis!!!!:  Wa-La! Dogs in Bikinis!!!! Decision Criteria For Foreign Sources:  Decision Criteria For Foreign Sources If I am “Cats and Dogs, Inc.” and after contacting Ebeta in Bangkok am interested in exploring the opportunity, I will want to do the following: Ask for Ebeta’s banking references Obtain business references Evaluate company’s web site (shown on Alibaba) and research the company’s infrastructure Be wary of those exporters who do not have any tangible evidence that they have a record of success. Utilizing Trade Agreements? (GSP, NAFTA) (Possibly, Thailand is on the GSP list) Relationships With Suppliers:  Relationships With Suppliers See eye to eye on each other’s expectations Must be “win-win” Testing – Are they willing to send some samples to try on my dogs and cats? Visit their offices and facilities Bring their management to the USA Manage value vs. price Build technology needs into relationship Supplier Contracts and Legal Arrangements:  Supplier Contracts and Legal Arrangements Control of proprietary rights (In the event I create an original design for pet accessory clothing for Ebeta to manufacture) Utilize quality expertise with local knowledge Thailand example – SCM Int’l Law Firm specializing in protecting Thailand IPR Develop with dispute resolution…arbitration clause Define all receivables and expectations Key Forms of Intellectual Property :  Key Forms of Intellectual Property Copyrights - Economic rights given to creators of literary and artistic works Patents - Inventor is given the exclusive right to prevent others from making, using, and/or selling a patented invention for up to 20 years Trade Secrets - Information used in the operation of a business sufficiently instrumental in actual or potential economic advantage Trademarks - Words, names, or symbols used in commerce to identify and differentiate goods. Also used to indicate the source of the goods Why Protect Intellectual Property?:  Why Protect Intellectual Property? Safeguarding intellectual property rights fosters economic growth Provides incentives for technological innovation Attracts investment that will create new jobs and business opportunities "The violation of intellectual property rights costs U.S. businesses $250 billion a year, and costs our economy about 750,000 jobs lost” – Sec. Commerce Carlos Gutierrez China Has High Rate of Intellectual Property Infringement :  China Has High Rate of Intellectual Property Infringement The United States has placed China on its priority “watch list" of countries failing to give adequate protection to intellectual property rights (IPR) such as trademarks and patents. The U.S. has warned of possible action against China in the World Trade Organization (WTO). Tremendous black market Copyright infringement is a major problem China IPR Development March 10, 2006:  China IPR Development March 10, 2006 China has created a special court to prosecute product piracy cases amid demands for Beijing to step up action against rampant illegal copying of movies, music, software and other goods. China's supreme court has named a "Judicial Court of Intellectual Property for the court specially engaging in intellectual property cases nationwide” - Court spokesman Sun Huapu Bush on China and IPR April 17, 2006:  Bush on China and IPR April 17, 2006 "America values China as a trading partner, but we expect China to live up to its commitments. China needs to enforce intellectual property rights. China needs to take additional steps to address the trade imbalance between our countries. And China needs to move to a flexible market-based currency” Financial Arrangements for Overseas Transfers :  Financial Arrangements for Overseas Transfers Consignment Purchase Cash-in-Advance (Pre-Payment) Down Payment Open Account Documentary Collections Letters of Credit Why Would Importer Enter Into High Risk Arrangement?:  Why Would Importer Enter Into High Risk Arrangement? The Importer has not been long established. The Importer's credit status is doubtful, unsatisfactory and/or the country political and economic risks are very high. The product is in heavy demand and the seller does not have to accommodate an Importer's financing request in order to sell the merchandise. Consignment Purchase & Cash In Advance:  Consignment Purchase & Cash In Advance Consignment - Importer/distributor makes payment to the overseas supplier only after sales to end user is made and payment received. Low Risk for Importer, High Risk for Exporter Cash In Advance - Importer sends payment to the supplier prior to shipment of goods. The importer must trust that the supplier will ship the product on time and that the goods will be as advertised. Low Risk for Exporter, High Risk for Importer Down Payment & Open Account:  Down Payment & Open Account Down Payment - The Buyer pays the Seller a portion of the cost of the goods "in advance" when the contract is signed or shortly thereafter. Low Risk for Exporter, High Risk for Importer Open Account - Allows the importer to make payments at some specific date in the future and without the buyer issuing any negotiable instrument evidencing his legal commitment to pay at the appointed time. Low Risk for Importer, High Risk for Exporter Documentary Collections:  Documentary Collections The sale transaction is settled by the bank through an exchange of documents, thus enabling simultaneous payment and transfer of title. The importer is not obliged to pay for goods prior to shipment and the exporter retains title to the goods until the importer either pays for the value of the draft upon presentation (sight draft) or accept to pay at a later date and time (term draft). Risk for Importer and Exporter Is More Equally Distributed When to Use Documentary Collection Option:  When to Use Documentary Collection Option When the exporter and importer have a well established relationship When there is little or no threat of a total loss resulting from the buyer's inability or refusal to pay When the foreign political and economic situation is stable When a letter of credit is too expensive or not allowed Letter of Credit :  Letter of Credit What is a Letter of Credit (L/C)? The most widely used trade finance instrument in the world. It has been used for the last several hundred years and is considered a highly effective way for banks to transact and finance export and import trade. The bank plays an intermediary role to help complete the trade transaction. The bank deals only in documents and does not inspect the goods. Therefore a letter of credit cannot prevent an importer from being taken in by an unscrupulous exporter. Risk for Importer and Exporter Is More Equally Distributed Parties to a Letter of Credit:  Parties to a Letter of Credit Issuing Bank / Opening Bank - Buyer’s Bank Buyer / Importer / Applicant Seller / Exporter / Beneficiary Advising Bank (selected by issuing bank) Confirming Bank (if a confirmed LC, replaces issuing bank. Nominated Bank, beneficiary presents documents for payment to the nominated bank, aka negotiating bank. Reimbursing Bank, bank holding the local currency Importer/Buyer:  Key Issues: Not a Guarantee Requires Good Faith Relationship Exporter/Seller Beneficiary Bank Importer/Buyer Opening/Issuing Bank How a Letter of Credit Works:  How a Letter of Credit Works A letter of credit is used to reduce the risk in international trade. It is a contract in letter form, written by a bank (issuing bank) on behalf of the buyer (applicant). The advising bank has no contact with the buyer, but takes the instructions from the issuing bank. Therefore, the seller (beneficiary) must examine the letter of credit carefully to ensure that it is consistent with the terms of sale which were agreed upon and that the seller can comply with the conditions of the letter of credit. In documentary collections all parties concerned are dealing in documents and not in the goods. Banks are subject to the UCP (Uniform Customs & Practice for Documentary Credit. Letter of Credit:  Letter of Credit Irrevocable letters of credit cannot be modified or canceled without the consent of all parties concerned. If a change is required, an amendment must be requested by the buyer. The amendment must be accepted by the seller. The amendment then becomes part of the letter of credit. Benefits to Using a Letter of Credit:  Benefits to Using a Letter of Credit Benefits to Exporter Assurance of payment by third party. Certainty of performance requirements in order to obtain payment. Some certainty as to the timing of receipt of payment. Protection from political risk in buyer’s country if LC is confirmed. Benefits to Importer Demonstrates creditworthiness. Assures buyer will receive specific documents as represented in the LC. Payment terms. In some countries, LC required in order to import. Costs of a Letter of Credit:  Costs of a Letter of Credit Costs to the Importer Issuing Fee Amendment Fee Payment Fee Document Review / Negotiation Fee Discrepancy Fee Reimbursing Bank Fee Note: Unless otherwise stipulated ALL bank charges are for the account of the applicant Costs to the Exporter Advising Fee Amendment Fees Document Review Fee/Negotiation Fee Discrepancy Fee Fee to credit account with the payment. Confirmation Fee Reimbursing Bank’s Fee (if stated in LC) Letter of Credit… Key Points:  Letter of Credit… Key Points Use your own Bank Utilize your own Forwarder Work with Professionals Develop your own expertise INCO Terms:  INCO Terms What Are INCO Terms? INCO Terms (International Commercial Terms) created by ICC (International Chamber of Commerce) over 70 years ago. Recognized by all United Nations countries Assist traders in different countries understand one another by lifting language and cultural barriers Assign responsibility and liability Most Used INCO Terms:  Most Used INCO Terms There are 13 INCO terms, but there are 4 that are most commonly used which are - Ex-Works (EXW) – Buyer bears all costs and risks in taking good’s from seller’s door Free On Board (FOB) – Seller bears all costs and risks until the goods have passed over the ship’s rail at the port of export. (Most misused INCO Term) FOB to be replaced by FCA – (Why?) Common INCO Terms:  Common INCO Terms Cost Insurance Freight (CIF) – Seller bears all costs and risks until the goods pass over the ship’s rail at the port of shipment CIF to be replaced by CIP (Why?) Delivery Duty Paid (DDP) – Seller bears all costs and risks for goods up to the buyer’s door. Favorable INCO Terms For Importers:  Favorable INCO Terms For Importers EXW or FOB are the most favorable terms for importers Allow the importer to have the highest level of control FOB may be better that EXW depending on the country of export (Geography to the port, foreign customs, etc.) Ex-Works With Ebeta:  Ex-Works With Ebeta Ebeta Bangkok L.A. US Co. With EXW, control of the shipment transfers to the buyer at seller’s door where goods are staged for loading FOB With Ebeta:  FOB With Ebeta Ebeta Bangkok L.A. US Co. With FOB, control of the shipment transfers to the buyer at foreign port after the good’s have crossed over the ship’s rail CIF With Ebeta:  CIF With Ebeta Ebeta Bangkok L.A. US Co. With CIF, control of the shipment transfers to the buyer at U.S. port after the good’s have crossed over the ship’s rail DDP With Ebeta:  DDP With Ebeta Ebeta Bangkok L.A. US Co. With DDP, control of the shipment does not transfer to the buyer until the goods are delivered to the buyer’s door Cost-Effective Logistics:  Cost-Effective Logistics Identify Your Company’s Logistics Needs Ocean? Air? Trucking? Warehousing? Does your selected mode of transportation warrant the costs and needs? (Air vs. Ocean) RFP (Request for Proposal) Meeting with service providers, visiting their offices indicate how important your business is to them Negotiate Rates Consolidating operations may provide discounts and logistics continuity (Forwarding/Brokerage/Trucking) Compliance and Security:  Compliance and Security Know the issues and how they interface in the supply chain Building in costs Point person within the organization Creating standard operating procedures CSI – Container Security Initiative 24 hour manifest rule Importers must insist that foreign exporters adhere to US Department of Homeland Security regulations. Customs Trade Partnership Against Terrorism :  Customs Trade Partnership Against Terrorism Voluntary program between U.S. Importers and Customs Importers submit supply chain profile Profile identifies security and compliance processes, procedures, and practices of the foreign vendors and logistics service providers What are the benefits? Benefits of C-TPAT for Importers:  Benefits of C-TPAT for Importers Faster clearances, less examinations Eligibility for Customs Importer’s Self Assessment (ISA) program Immediate mitigation to Customs fines and penalties In the event another terrorist attack causing ports to close, C-TPAT importers will be first to enter U.S. after ports re-open Internet Resources:  Internet Resources – Customs & Border Protection – General importer resource - U.S. Patent & Trademark - Strategy Targeting Organized Piracy (STOP!) – Journal of Commerce – Trade Data, Research – E-Commerce Tool (click on preambles) - Inco Terms Summary Do Your Homework :  Summary Do Your Homework  Who are my foreign suppliers? Is importing the answer? How will Customs and other government agencies react to my product? Are there restrictions? Duties? What is the best financial arrangement? What are my INCO Terms going to be? Which freight option is best? Questions?:  Questions? Ben Norris (631) 396-6829

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