Export-Import Theory, Practices, and Procedures Second Edition
Belay Seyoum, PhD
O Routledge jjj^
Taylor & Francis Croup
NEW YORK AND LONDON
CONTENTS About the Author Preface Strengths and Features of this Book Changes in the Second Edition Acknowledgments
xiii xv xv xv xvii
Introduction: A Brief History of International Trade
1
Ancient Period Colonial Period (1500-1900) 1900 toJhe Present
1 2 3
SECTION I: OVERVIEW OF INTERNATIONAL TRADE Chapter 1. Growth and Direction of International Trade
7
Importance of International Trade to the Global Economy Determinants of Trade Volume and Direction of Trade Important Developments in Trade Chapter Summary Review Questions Case 1.1. The Limitations of Export-Led Growth
7 9 9 10 14 15 15
Chapter 2. International and Regional Agreements Affecting Trade The GATT and WTO Regional Integration Agreements (RIAs) The North American Free Trade Agreement (NAFTA) The European Union Chapter Summary Review Questions Case 2.1. The Benefits and Costs of Free Trade
19 19 22 25 32 36 37 37
SECTION II: EXPORT MARKETING AND STRATEGY Chapter 3. Setting Up the Business Ownership Structure Business or Trade Name Bank Accounts, Permits, and Licenses Location and Use of Professional Services Organizing for Export: Industry Approach General Principles of Taxation Taxation of Export-Import Transactions International Transfer Pricing Chapter Summary Review Questions Case 3.1. Globalization and the Shrinking Tax Base Chapter 4. Planning and Preparations for Export
41 41 48 49 49 50 52 54 61 65 66 66 69
Assessing and Selecting the Product International Market Research International Market Assessment Developing an International Business Plan Export Counseling and Assistance Overseas Travel and Promotion Chapter S ummary Review Questions Case 4.1. Developing Export Markets
69 72 75 77 78 83 91 92 92
Chapter 5. Export Channels of Distribution
95
Indirect Channels Direct Channels Locating, Contacting, and Evaluating Agents and Distributors Contracts with Foreign Agents and Distributors (Representatives) Major Clauses in Representation Agreements Maintaining and Motivating Overseas Representatives Chapter Summary
99 105 108 110 110 115 115
Review Questions Case 5.1. Export Channel Decisions of Two U.S. Companies Case 5.2. The Internet and Exporting: A Focus on Developing Countries Chapter 6. International Logistics, Risk, and Insurance International Logistics External Influences on Logistics Decisions Typical Logistics Problems and Solutions The International Logistics Process Logistics Functions Risks in Foreign Trade Marine and Aviation Insurance Claims and Procedures Chapter Summary Review Questions Case 6.1. Marine Insurance Case 6.2. Marine Insurance: Inchmaree Clause
SECTION III: EXECUTING THE TRANSACTIONS Chapter 7. Pricing in International Trade
153
Determinants of Export Prices Pricing in Export Markets Terms of Sale Chapter Summary Review Questions Case 7.1. Incoterms (CIF) Case 7.2. Incoterms (C&F)
154 156 158 174 176 177 177
Chapter 8. Export Sales Contracts
179
Harmonization of Contract Law CISG: Essential Elements Pertinent Clauses in Export Contracts Chapter Summary
179 180 185 193
Review Questions 194 Case 8.1. CISG 195 Case 8.2. China National Products versus Apex Digital Inc. 195 Chapter 9. Trade Documents and Transportation Documentation in Export-Import Trade Transportation Air Transportation Ocean Freight The Role of Freight Forwarders in Transportation Chapter Summary Review Questions Case 9.1. What Constitutes a Package Under COGS A? Case 9.2. The Container Revolution
197 197 201 201 205 214 217 219 220 221
SECTION IV: PAYMENT TERMS AND PROCEDURES Chapter 10. Exchange Rates and International Trade Foreign Exchange Transactions Protection against Exchange Rate Risks Chapter Summary Review Questions Case 10.1. Will the U.S. Dollar Maintain Its Key Currency Status? Chapter 11. Methods of Payment Consignment Sales Open Account Documentary Collection (Documentary Draft) Documentary Letter of Credit Cash in Advance Other Letters of Credit Chapter Summary Review Questions Case 11.1. Dishonoring Letters of Credit Case 11.2. The Independent Principle in Letters of Credit
Chapter 12. Countertrade Origins of Countertrade Benefits of Countertrade Theories on Countertrade Forms of Countertrade Countertrade and the WTO Countertrade and the International Monetary Fund Governments' Attitudes Toward Countertrade Chapter Summary Review Questions Case 12.1. The Bofors-India Countertrade Deal Case 12.2. Offsets in U.S. Defense Trade
271 271 273 274 276 284 285 286 287 290 290 291
SECTION V: FINANCING TECHNIQUES AND VEHICLES Chapter 13. Capital Requirements and Private Sources of Financing Capital Sources for Export-Import Businesses Private Sources of Export Financing Chapter Summary Review Questions Case 13.1. Tadoo's Sales to Belgium
297 299 306 314 316 316
Chapter 14. Government Export Financing Programs
319
Export-Import Bank of the United States (Ex-Im Bank) Small Business Administration Overseas Private Investment Corporation (OPIC) Private Export Funding Corporation U.S. Department of Agriculture Chapter Summary Review Questions Case 14.1. Trade Finance for Small and Medium-Sized Enterprises in Transition Economies Case 14.2. Ex-Im Bank Financing: Selected Cases
320 332 334 337 337 338 340 341 342
SECTION VI: EXPORT REGULATIONS AND TAX INCENTIVES Chapter 15. Regulations and Policies Affecting Exports Export Licensing and Administration Antiboycott Regulations Foreign Corrupt Practices Antitrust Laws and Trade Regulation Incentives to Promote Exports Chapter Summary Review Questions Case 15.1. Export Trade Certificate of Review Case 15.2. Enforcement of Export Regulations
347 347 360 363 368 373 377 380 381 383
SECTION VII: IMPORT PROCEDURES AND TECHNIQUES Chapter 16. Import Regulations, Trade Intermediaries, and Services Import Restrictions in the United States U.S. Free Trade Agreements U.S. Trade Preferences Trade Intermediaries and Services Chapter Summary Review Questions Case 16.1. Tax Deduction for Processing in Maquilas: Mere Assembly or Fabrication
389 389 394 396 398 403 404
Chapter 17. Selecting Import Products and Suppliers
407
Types of Products for Importation Finding the Product What Determines Import Volume? Selecting the Supplier International Sourcing Pricing the Imported Product Import Marketing Channels
406
407 409 411 412 414 417 417
Financing Imports Chapter Summary Review Questions Case 17.1. The ATA Carnet: Unlocking Customs for Temporary Entry of Goods Case 17.2. Maytag's Triad Strategy Chapter 18. The Entry Process for Imports The Entry Process The Harmonized Tariff Schedule of the United States Customs Valuation Rules of Origin and Other Marking Requirements Chapter Summary Review Questions Case 18.1. Deemed Liquidation by Customs Case 18.2. Product Classification Chapter 19. Import Relief to Domestic Industry Antidumping and Countervailing Duties Antidumping and Countervailing Duty Proceedings Other Trade Remedies Chapter Summary Review Questions Case 19.1. Similar Products and Dumping Chapter 20. Intellectual Property Rights
What Are IPRs? IPRs and International Trade Protection of IPRs International/Regional Protection Chapter Summary Review Questions Case 20.1. Patents and Access to Lifesaving Drugs
465 468 469 473 476 476 477
Appendix A: Trading Opportunities in Selected Countries
479
Appendix B: Importing into the United States
521
Appendix C: Trade Profiles of Selected Nations (2004) (Million U.S. Dollars)
531
Appendix D: Average Tariff Rates of Selected Countries (2002-2004)
535
Appendix E: Ex-Im Bank Programs
537
Appendix F: Sample Export Business Plan: Donga Michael Export Company . Appendix G: Sample Import Business Plan: Otoro Import