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53 Cards in this Set

  • Front
  • Back
Exploration of supply chain components and expanded global sourcing options supporting production and delivery of finished products today, include:

• Design

• Product development

• Vendor compliance

• Materials and factory sourcing

• Manufacturing control

• Logistics

Role of Global Sourcing

One entity desires some material, product, or service (the customer), while the other provides it (the vendor)


Determining the most cost-efficient vendor(s) of services, materials, production, orfinished goods, or a combination of these, at a specified quality and service level for delivery within an identified time frame

Methods of sourcing include:

– Trade shows and trade fairs

– Joint ventures

– Licensing agreements

– Hiring of sourcing agents

Determining which sourcing option is best for a business is influenced by numerous factors and dependent on:
– Type and quantity of products needed

– Monetary costs of acquisition

– Time required to produce and deliver

– Customs requirements in different countries

– Manufacturing philosophies

– Manufacturing control

– Sourcing calendars

– Product development systems

Selecting a vendor for a production run considers:
– Conduct throughout production cycle

– Ability to meet contractual obligations

– Reliability in meeting contract deadlines

– Factory conditions

– Necessary equipment, capacity, trainedoperators, and expertise

Sourcing Agent

Locates factories for production, knows the factories' capabilities, and can recommend the best fit for a particular style

Sourcing Calendar

Based on the merchandising calendar that sets the classifications of merchandise and the retail selling periods and that provides atime line related to the sequences of merchandise development

Fast-Fashion Line Calendar

Shorten their calendars by focusing on utilizing available fabrics to cut the waiting time for fabric production

Traditional Apparel Line Calendar

Traditional schedule for production of textile fabrics begins almost a year ahead of decisions about fabric preferences

Country of Origin Labeling

• Today COO labeling rules are still sorely needed,because they continue to be used to helpestablish the tariff rate for duties charged onimported products

• Complexity of international sourcing increasesthe difficulty in determining the COO


Seeks to use trade barriers tominimize imports

Purpose of trade protection:

- Prevent domestic companies fromhaving to compete with foreigncompanies in their own domesticmarkets

- Make competition fairer ininternational markets

Nontariff Trade Barriers

Restrict trade by some means otherthan applying a tax on products

Exchange Rates

Determinethe ratio at which onecurrency can be traded foranother


Restrict quantities ofgoods for import or export

Voluntary Export Restraints

Restrict trade, but are notformalized into internationallaw

Tariffs have 2 purposes:

- Restrict trade

- Accumulate revenue for the government

General Agreement on Tariffs and Trade (GATT)
In 1947, provided an international framework ofground rules for worldwide trade among itsmembers, called contracting parties
World Trade Organization (1994–Present)
• In 1994, the WTO absorbed the GATT, and theMFA was replaced by the agreement on textilesand clothing (ATC)

• Operates on the same fundamental assumptions:

1. Trade protection weakens the global economy

2. Free trade strengthens the global economy

• Primarily concerned with multilateral tradeagreements

The purposes and activities of customs services in each country include:
- Protecting intellectual property rights

- Monitoring and documenting identities and quantities of imports and exports

Primary responsibilities of customs in each country are similar:

- Monitor imports and exports

- Assess and collect duties

- Report imports and exports againstquota

- Protect the country’s borders againstillegal entry

Customs Issues

• The duty levied by customs must be paid beforethe importer can take possession of the goods, soit is critical to know what the rate on theproducts will be prior to their arrival at port

• For novice importers, it is recommended that acustoms broker be selected

• Paperwork must be handled properly to avoidhaving merchandise held offshore

Nominal Tariff

Rates published in each country's tariffs schedule

- Specific tariffs

- Ad valorem tariffs

Specific Tariff

Fixed amount of tax per physical unit of imported product

Ad Valorem Tariff

A tax set as a fixed percent of value of an imported product

To clear customs, a shipper must provide threeforms of documentation:

– Bill of lading

– Commercial invoice

– Packing list

Bill of Lading

A document issued by a carrier which details a shipment of merchandise and gives title of that shipment to a specified party
Commercial Invoices
A document used in foreign trade. It is used as a customs declaration provided by the person or corporation that is exporting an item across international borders

Packing Lists

A document that includes details about the contents of a package. The packing list is intended to let transport agencies, government authorities, and customers know the contents of the package. These details help each of these parties handle the package accordingly.
Government activities, including production subsidies, exportsubsidies, and price support programs, are frequentlyregarded as...
unfair competition in the global market
When export subsidies are available,...
a firm receives the price of the goods exported, plus a payment from the government at whatever rate is specified for the product
Price support programs are commonly applied toagricultural products in developed countries to...

raise the commodity price paid to farmers


Selling a product in another country at less thanthe domestic sales price or less than the product costs toproduce
Countervailing Duties
Special type of tariff designed tocounteract subsidies and dumping; eliminates unfaircompetition of the subsidized low-price products’competing with nonsubsidized domestic products

Fair Trade

A trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South.


An imitation, usually using lower-cost fabricand production methods and sold at a lower price


Making or selling look-alike goods or services bearing fake trademarks
Of the 80 billion garments produced annually, up to 22percent of all branded apparel and footwear sold is...


Gray Market Goods

Original goods (not knockoffs) sold by unauthorized vendors
Legitimate businesses bear the cost of implementing...
anticounterfeiting measures

Established as the world's leading violator of Intellectual Property Rights during the past decade


Illegal Transshipment
• Occurs when goods are shipped through a third country or port to produce counterfeit documents that illegally change the COO

• Significant economic benefits and risks

- Some countries may have no quota limitations or duty due on the products

- If there is suspicion of transshipment or other violation, goods can be detained

1950's & 1960's

• Free trade spirit was strong in the U.S.

• Multilateral negotiations regarded as bestway to resolve international trade andfinancial problems

• Textile and apparel manufacturingindustries were close allies

• Retail landscape dominated bydepartment stores


• Protectionism was on the rise

• In 1974, the Multifiber Arrangement (MFA)established import quotas

• Political / Government Components of U.S.Textile and Apparel Industry

• Item 807 allowed garments cut in the U.S.to be exported, assembled off-shore andthen imported, with tariff based only onvalue added


- The MFA

- Caribbean Basin Access Initiative (CBI)

- Quick response business systems promoted as means of sustainingdomestic production

- Manufacturers and designers developed own name brands


• GATT morphed into the World Trade Organization(WTO) with focus on free trade

• Regionalization continued to develop asmanufacturers sought the benefits of free trade

• U.S. industry experienced continuous decline inemployment, although increased productivitylead to increases in quantity

• Retailers became huge through growth, mergers,and acquisitions


• American Apparel and Footwear Association (AAFA)formed

• Manufacturers known as brand managers

• MFA phased out, turmoil throughout the textile complex

• Dramatic decline in demand for domesticallyproduced products

• Although quota-type trade regulations were in place,antidumping and countervailing duty trade remediesrarely applied


• Chasing the lowest labor cost around the world resultedin long lead times, inconsistent quality, badmerchandise assortments, drastic markdowns, andexcess inventory

• The worldwide recession and high energy costsimpacted business operations

• Least-developed and newly developing countries havestruggled

• Trend toward faster turnover of inventory in the retailsetting

• Focus shifted from sourcing goods at the lowest cost toreducing sourcing risks


• Limited quantities of exports, forcing suppliers to upgrade value toincrease sales

• Apparel production migrated to other developing countries andmaterials supply became an issue

• Quota avoidance strategy included using fibers not covered inthe bilateral agreements

Multi-Fiber Arrangement (MFA)
A generalframework for determining the conditions under whichthe textile and apparel trade could be controlled

- Provided for unilateral trade restraints in the absence ofbilateral trade agreements

- Established the norms for the bilateral export-restraintagreements

Some of the illegal activities in global sourcing:

- Trademark infringement (most common)

- Patent infringement

- Knockoffs

- Counterfeiting

- Misrepresentation of country of origin

- Misclassification of goods

- Illegal transshipment

- Undocumented immigrant workers

Blamed for illegal activities associated with the exchange of goods between nations:

- Trade regulations

- Lack of trade regulations

- Lack of enforcement of trade regulations