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111 Cards in this Set
- Front
- Back
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4 types of pricing power levels
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1. Perfect competition
2. Differentied competition 3. Oligopoly 4 . Monopoly. |
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price >
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Marginal + Fixed Cost
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Dumping
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When a company in one country exports at a cost lower than their marginal cost.
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Counterveiling Duty
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When a country catches another country dumping, so they give them a reallly high duty rate so they dont allow anything in now.
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Skimming
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Sliding down the demand curve. Common entry method for an export product. Charge the highest price possible then reduce it as demand starts to spread.
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When your skimming, as demand increases...
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Cost goes down.
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Penetration and preemptive pricing doesnt make sense unless
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your the lowest cost provider.
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Penetration pricing
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The lowest cost producer can afford to lower prices. Need a decreasing cost curve.
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Extinction pricing.
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Similar to predatory pricing.
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Why is the Export Price higher than Domestic
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Higher purchasing power of the international market. Repositioning brand image. Pabst Blue Ribbon Beer in china, Rolling Rock is Pennsylvania but perceived good here..
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Export Price=Lower than Domestic Price
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Pharmacuticals are sold at a lower price outside than in the US. Price control. Socialized Healtcare in other countries. different demand curves, elasticity of demand is different.
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If you have market share what can you do with the price
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You can control the price.
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Pricing Policies Factors
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Profit Maximization
Market Share Survival Return on investment Competitive policies. |
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Profit Maximazation
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Where Marginal Revenue= Marginal Cost.
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Market Share
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Very important over the long run because you can control the price of the market. Alot of companies want market share so their pricing is to obtain that goal. Lower price but not the most profit.
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If it is a growing market what pricing policy would you like
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Market share
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If your in a declining market what pricing policy would you like
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Profit Maximization
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Cost Plus =
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Domestic selling price plus+ Transaction costs
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Domestic selling price consists of
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Direct Materials
Direct Labor Manufacturing Overhead. |
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Overhead costs include
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Selling
Admin R/D Acct. lawyers Travel |
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Cost Plus method
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Allocates domestic and foriegn costs to the product.
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Marginal Cost model
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Net out the domestic Manufacturing overhead costs and you look at international cost components. For us to sell additional units (internationally) we examine what its going to cost minus domestic overhead.
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Marginal cost method consideres direct costs of...
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producing and selling exports as floor (lowest) price.
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Market Differientiated pricing
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-Based on the dynamics of the marketplace
-Changes in competition, exchange rates, etc. |
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Which is more expensive? Cost Plus vs. Marginal Cost
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Cost Plus
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Export related costs
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Cost of modifying a product for a foreign market.
Operational costs of exporting Cost incurred in entering the foreign market. |
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Price escalation for exports results from
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Clear cut and hidden costs
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What are 4 ways for combating price escalation
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Reorganize the channel of distribution
Product adaptation Change tariff or tax classifications Overseas assembly or production |
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IncoTerms
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International Commercial Terms
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Exworks
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point of origin The Sellers responsiblility and costs end at this point in his home country.
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FCA
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Free carrier used for rail or air transport. the sellers resonsibility and cost end in most cases when the good are loaded on the appropriate carrier and a clean bill of lading has been issued.
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FAS
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Freight along side ship. The seller must provide for dilivery goods free alongside, but not on board, the transportation carrier (usually an ocean vessel) at the port of shipmenat and export.
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How does FAS and FOB differ
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THe time and cost of loading are not included in the FAS term.
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Cost and Freight (C&F)
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delivery costs are extended beyond the country of export. Although the seller's liability when the goods are loaded on board a carrier or are in the custody of the carrier at the port of exportation, they have to pay for transportation. Buyer must provide the necessary insurance.
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CIF
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Cost insurance and freight. The seller must provide insurance. The seller has to also pay for transportation. The sellers liability ends when the goods are loaded on board a carrier.
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ExDoc
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Goes one step beyond CIF and requires the seller to be responsible for the cost of goods and other cost necessary to place the goods on the doc at the named overseas port, with appropriate duty paid.
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4 types of risk
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Commercial Risk
Political Risk |
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Commericial risk
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The likelihood someone will pay you.
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Political Risk
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The risk that the governement will interfere in your risk. If a company was moving into california it could increase its taxes on companys in the state. Franchise tax. Regulations a state can enact like a environmental regulations.
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Economic Risk
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Interest rate,
Unemployment rate Economic Growth rate The degree to how this will change. |
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Cash In Advance
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Not Widely used except for first time transactions Buyer pays prior to shipment. and recieves goods after th payment. No risk to seller Full risk to buyer.
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Letter of Credit
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Makes the buyer put up capital with a (intermediary) bank in advance. Seller provides evidence that they have performed a shipment (intermediary). When its clear on both sides the money and goods change hands.
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Documentary Collection
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Very much like Cash on Delivery. Seller will send merchandise to buyer, there is an intermediary(fedex) who collects cash at the front door.
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Open Account
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How most businesses do their transactions. Payments can be made for multiple transactions at one time. The top 200 company conduct 80% of the business in the world and they have good credit ratings so its easier and trustworthy.
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Forfeiting
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When somebody promises to pay you in 60 days and you take that account recievable and selling it for immediate cash. Like a Payday Loan.
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documents against payment
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Ensures the importer cannot obtain the shipment until payment is actually made.
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documents against acceptance
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Ensures the importer cannot obtain the shipment until he/she agrees to pay by a certain time or until payment is actually made by the importer.
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Who handles the documents in documentary collection of letter of credit
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The Banks or Intermediary, they have rules and procedures to follow
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Original Ocean BIlls of lading
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TItle documents. Bearer Bond whoever is holding the bond is the one holding it. You can Call the shipping company and have them deliver your goods. Title document.
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Airway Bill of Lading
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Airway is non Negotiable, the air shipment is quick there is a change that the airway doesn't have significance.
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Draft
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Type of check drawn on the importer by the exporter specifying that a sum of money is to be paid to the exporter. When used with a letter of credit the draft is drawn on a bank.
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Documents against acceptance
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Credit is extended to the buyer on the basis of his accptance of the draft calling for a payment withing a specified time and place. It could be a certain number of days after sight.
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Time draft
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Documents against acceptance.
The specified time is a certain number of days after sight. |
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Date draft
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the specified time may be expressed as a certain number of days after date.
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Documents against payment
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the buyer must make payment for the face value of the draft before receiving the documents conveying title to merchandise. This occurs when the buyer first sees the draft. Until this happens the merchandise remains in the hands of the collecting agency (bank)
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Letter of credit (L/C) Documentary Credit
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Buyer establishes a commerical credit with bank and specifies the condition under which payment may be made to the named seller. When the credit arrives , the exporters bank notifies the exporter that its available and the exporter sends documents proving that he has shipped.
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What is attached to letter of credit
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Draft drawn on a bankand this draft can be a sight, time or date draft. If the documents are in order and they have presented on or before the expiry date, they are accepted by the bank and exporter receives payment.
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1993 Modernization Act
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Customs will communicate with the trade communicate and give regular updates. Any big Action by governments, they will put a notice out in the federal register.
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1993 Modernization requirement
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We will provide information. The importer has to be updated on processes. They use reaonable care checklists to process tranactions.
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Customs Export Clearance
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If you send something to an Embargoed country the export clearance will open it up. even a birthday card.
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Reasonable Care Checklists
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1. Having somebody of expertise in the firrm (UPS, Custom House Broker, outsource to 3rdparty logistics)
2.Somebody has to take proper steps to classify Harmonized Tariff schedual number. 3. Valuation |
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3 Independent Variables when determining dutys that are payable
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What is the product?
Where is it coming from? Whats its Value? |
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Reasonable Care Check lists
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Access to or possession of expertise in firm
Steps to ensure proper merchandise classification Steps to ensure proper Valuation Steps to ensure proper marking Special conditions for textile and apparel importers |
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Import Process 3 steps
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1. Get ready to import
2. Customs Clearance 3. Release |
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Special requirements for Automobiles
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THere are Automobiles emissions requriements and must be paid for
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Special Requirements for Ag Commodities
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You cannot have fruit with flies or pest. Live animals need to have a vet inspection.
Cosmetics might have illegal animal products. |
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Who are the only people who can import goods?
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The owner of the good or a licensed custom house broker.
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Reasonable Care Check lists
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Access to or possession of expertise in firm
Steps to ensure proper merchandise classification Steps to ensure proper Valuation Steps to ensure proper marking Special conditions for textile and apparel importers |
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Import Process 3 steps
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1. Get ready to import
2. Customs Clearance 3. Release |
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Special requirements for Automobiles
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THere are Automobiles emissions requriements and must be paid for
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Special Requirements for Ag Commodities
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You cannot have fruit with flies or pest. Live animals need to have a vet inspection.
Cosmetics might have illegal animal products. |
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Who are the only people who can import goods?
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The owner of the good or a licensed custom house broker.
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Why would people would want to warehouse products or co mingle.
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Instead of importing something and paying a high duty you can separate them and benefit from a smaller duty.
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Comingling
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When two or more different articles are combined together in packaging, but carry a different rate of duty
Highest rate of duty applies. Importer can segregate merchandise for a lower rate but must be done under supervision. |
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Country of Origin Marking
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"Made in China" Must be
Conspicous In English at the most noticable level of packaging |
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What is the fine if there is no Marking?
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A 10% Fine
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What Items are exempt from marking?
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Some items exempt, such as: buttons, eggs, ball bearings, nails, staples, ……..obvious things that are difficult to mark, or sold in bulk quantities
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Why does Examination Occur?
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Areas of Non compliance like when Sony is spelled Soni. Value of Goods & dutiable status
Whether the goods must be marked with country of origin marks Shipment Contains Prohibited Articles Goods incorrectly Invoiced Goods are in Excess of Invoice Shipment Contains Illegal Narcotics |
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Release
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Carrier provides port authority with proper documentation to claim merchandise.
Carrier delivers to consignee door |
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Duty Drawback
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Refund of duties payed if
Goods are imported (not consumed in the united states) and reexported. rejected items that was imported then exported or destroyed due to Non-Conformity Defective Shipped without consent (we diddnt order it) |
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Foreign Trade Zone
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FTZ is a secure area that it legally outside of the U.S. Customs area, which allows for deferral of payment of duties, change in duty rates, or entirely avoid duties through re-export.
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Advantage of Foreign Trade Zone
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Help Facilitate and make more efficient the customs entry process.
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When do you pay duty in a Foreign Trade Zone?
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Goods pass through customs and enter the zone without paying duty until product is released for consumption
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What can products do once it enters a Foreign Trade Zone?
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Products can be stored, sold, exhibited, tested, assembled….etc. then withdrawn for consumption or re-exported.
FTZ operator can change nature of merchandise within FTZ and, through re-classification qualify for lower duty rate prior to withdrawl for consumptio |
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Time VS. Cost
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Minimizing overall logistics costs by identifying activity based costs that impact after-tax profits.
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Why does XARA very profitable due to a high cost structure?
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Keeping low inventory because in the fashion industry things are not hot for that long, so they ship low quantities.
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How much are Logistics costs
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10-30% of the total landed cost of an international order.
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Factors necessary for the use of logistics as a competitive tool
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Close collaboration with Suppliers.
Technologically advanced information processing and communication exchange capabilities Integrated business infrastructure. |
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Order Cycle Time
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The difference between the time the order is placed and recieved by the customer.
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How do you alter cycle times
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Change transportation methods
Change inventory locations Change ordering process |
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Logistics
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The integration of goods services and information
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Whats Transported by People?
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1. Tahitian Pearls
2. Original Documents |
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Logistic issues
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Problems that can reduce security or slow down logistics, such as when a country has weather problems it can lead to road problems.
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International Packaging Issues
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1. Domestic packaging might not be adequate internationally.
2. Good must arrive safely. 3. Package should minimize the stress of movement and storage. 4. It should be protected from Climatic conditions (moisture) 5. Weight based on delivery mode. 6. Follow Customer instructions for labeling packaging and routing. |
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Freight Forwarder
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Usually Custom house Broker
Arrange identify procedures you need to follow, what documents you need, (certificate of origin). They come and pick up the products and deliver it. One Cost. |
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Shipper Letters of Instructions
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instructs Freight Forwarder how where when and whom
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What is the one document that is always required to ship internationally?
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A commercial invoice.
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Whats on the Commercial Invoice?
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Date
Your Name & Address Ship to and Sold to Customer info REF: Purchase Order or Proforma Invoice # INCOTERMS, Payment terms What is being sold (qty, item, cost, ext), country of origin Subtotal, +shipping costs Invoice Total (specify currency) Destination Control Statement Authentication (Signature) |
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Bill of Lading.
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A document that is the contract of carriage betwen the shipper and the trasportation carrier, a receipt for the goods issued by the carrier and/or evidence of title to the goods.
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Whats on the Packing List.
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Your Name & Address
Ship to and Sold to Customer info INCOTERMS, Payment terms Item Desc. Qty, # of packages and type (container & seal for ocean) Weight & measure (in kgs. & CBMXX Invoice Number & Date XX Carrier |
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Certificate of Origin
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Designed to get an affidavit from the exporter and is notarized by the Chamber of commerce to confirm that the goods were produced in this country.
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Country Specific Certificate of Orgin
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NAFTA countries
Isreal Jordan Documents that qualify items for duty free treament |
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NAFTA
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Created in 1994 as a preferential trading area between U.S., Cananda and Mexico.
Duty Free Movement 51% has to be Nafta Content. |
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Criterion B Regional Value Content via Transaction Value Method
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RVC have to comprise more then 60%
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Criterion B Net Cost Method
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RVC Via NC must comprise more than 50%
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How they calculate Freight Costs in Air
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LengthxWeightxHeight/166 =Dimention in inches.
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How they calculate Freight Costs in Ocean
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Cubic Meters (CBM)
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Who Governs Arms and Munitions
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Dept of State, Office of Defense Trade Controls. Export licenses are based on relationships with other countries. They have to know more about the party.
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Embargoes
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Controlled by Office of Foreign Assets Control. OFAC.
What countries you can and cant do buisness with and how you can apply for permission. |
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CCL Controlled Commodities.
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0-Nuclear Materials (weapons
1-Chemicals, Micro organisms 2-Materials Processing 3-Electronics 4-Computers 5-Telecommunications, information security 6-Sensors & Lasers 7-Navigation & Avionics 8-Marine 9-Propulsion systems, space vehicles |
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Denial orders
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You cant sell anything to this person. E.G. Osama Bin Laden
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