International Trade Thursday, September 16, 2010 James Van Eenenaam.

International TradeThursday, September 16, 2010

James Van Eenenaam

Agenda – Importing and Exporting1. International Trade Introduction2. International Trade Policy, Regulations and

Requirements – a. WTOb. Tariff Classification and Customs Duties,

Quotas and Other Import Requirementsc. US Export Controls Requirements

3. International Trade Resources

International Trade IntroductionPres. Obama’s Trade Policy Priorities

Free and Fair TradeSupport a rules-based trading systemAdvance social accountabilityAchieve progress on energy and environmental

goalsMake sure trade agreements address major

unresolved issues (e.g., IPR, consumer product safety, trade security, trade facilitation/reduce trade barriers)

Build on existing Free Trade AgreementsUphold commitment to developing countries –

especially the poorest developing countries

International Trade Introduction National Export InitiativeThe Administration has determined that fundamental

reform of the U.S. export control system is needed in each of its four component areas, with transformation to a:Single Control ListSingle Primary Enforcement Coordination AgencySingle Information Technology SystemSingle Licensing Agency

New Cabinet-level focus on U.S. exports, expanding export financing, prioritizing government advocacy on behalf of U.S. exporters, new resources to U.S. businesses seeking to export, and ensuring a level playing field for U.S. exporters in global markets. Double exports and create 2 million new jobs within 5

years

International Trade IntroductionInternational trade is subject to legislative,

regulatory, political and market transformationInternational trade requires identifying opportunities

and an understanding of trade compliance requirements, trade security, trade facilitation and safety

In 2009, US Customs and Border Protection facilitated approximately $1.7 trillion in total import value (25% decrease from 2008 and equal to 2004 levels)

In 2009, US Customs and Border Protection collected over $30 billion in duties

Approximately 71% of all import value is duty free

International Trade IntroductionChina (21% of all shipments and 40% of all US duties) is the top

trading partner of the US, followed by Canada, Mexico, Japan and Germany

Chapters 27 (fuel and oil), 84 (machinery, parts), 85 (electrical articles, parts) and 87 (vehicles, parts), comprised 52% of total import value

The US currently has Free Trade Agreements with 17 countriesFTA’s Pending Congressional Approval with Colombia, Korea and

Panama. Estimated $1.34 billion in tariffs imposed on US exports to

Colombia Currently under negotiation: Trans-Pacific Partnership Agreement

Recently approved FTA’s with Oman (1/1/2009) and Peru (2/1/2009)

http://www.export.gov/fta/index.asphttp://www.ustr.gov/trade-agreements

International Trade Policy, Regulations and Requirements World Trade Organization

http://www.wto.org/ Imports: Department of Homeland Security -

Customs and Border Protection (Enforces 400 trade laws for 50 US Government Agencies)

http://www.cbp.gov/ Exports: Department of Commerce – Bureau

of Industry and Securityhttp://www.bis.doc.gov/ Exports: Department of State – Directorate of

Defense Trade Controlshttp://www.pmddtc.state.gov/

World Trade Organization

A global organization dealing with the rules of trade between nations

A forum for governments to liberalize trade, negotiate trade agreements and settle trade disputes

The goal is to help producers of goods and services, exporters, and importers conduct their business

153 member countries

U.S. Tariffs, Quotas and Other Import Regulations and Requirements

Customs and Border Protection (“CBP”) administers imports into the United States

19 Code of Federal Regulations Parts 1-199, Customs Duties

Harmonized Tariff Schedule of the United StatesImport = merchandise entered into the territory

of the United States (50 states, D.C., and Puerto Rico)

Licensed Customs Brokers – typically used by importers to enter/clear goods through CBP upon arrival

Importing – Things to Consider Your wholesale cost isn't what you pay for an item.

Your wholesale cost is the cumulative total for getting that item to your warehouse, ready to be shipped to your customers. You may be paying fifty cents a vase, but after you pay a Customs broker, import duties, various fees, freight, consolidation, and insurance expenses, your actual cost of goods may be $2.25 each. Look at all your costs before you jump at a deal - anything you forget will come directly out of your profit margin.

You'll have to allow significant lead time when placing an overseas order.It can sometimes take two or three months, or even longer, from the time you place your order to the time you receive the goods. Problems with Customs can delay your orders even further. The costs of air freight are probably ten times higher than the costs of ocean shipping, but it's a lot faster and less risky. You must understand when you need to receive your wares, in order to determine whether the benefits of air shipping will offset the additional expense.

You need look at the legal aspects.There are numerous government forms to fill out and a great many regulations regarding your imports. You are responsible for ensuring that what you bring into this country complies with safety codes and all other applicable laws.

Start with the Customs Broker

Source: Article by Chris Malta & Robin Cowie of Worldwide Brands

U.S. Export RegulationsBureau of Industry and Security (Commerce) and

Directorate of Defense Trade Controls (State)15 Code of Federal Regulations Parts 730-774, Export

Administration Regulations, covers commercial and “dual-use” commodities, software and technology

Items are covered by a specific Export Control Classification Number (ECCN) found on the Commerce Control List (15 CFR 774.1) or a “catch-all” category (EAR 99)

22 Code of Federal Regulations Part 120-130, International Traffic in Arms Regulations (“ITAR”), covers items specially designed for military use

The ITAR applies to items listed on the United States Munitions List (22 CFR Part 121.1), and the technology for the design, development, production or use of those items

International TradePro form invoice

Represents the details of an international sale to the Customs authorities.

Presented in the place of a commercial invoice when there is no sale between the sender and the importer, or if the terms of the sale between the seller and the buyer are such that a commercial invoice is not yet available at the time of the international shipment

Letter of CreditIssued by a financial institutionUsed as payment to the exporter in an international

transaction for deals between a supplier in one country and the customer in another country

Incoterms® 2010 Updated in 2010 Incoterms - short for "International Commercial Terms" Standard trade definitions most commonly used in international

sales contracts Incoterms make international trade easier and help traders in

different countries to understand one another Covers tasks, costs and risks involved in the delivery of goods Incoterms do not deal with transfer of title The risk of loss or damage of the goods is generally transferred

when the seller has fulfilled its delivery obligation Include reference to a location of delivery Incoterm should be clearly stated in the contract Among the best known Incoterms are EXW (Ex works), FOB (Free

on Board), CIF (Cost, Insurance and Freight), DDP (Delivered Duty Paid)

Below is an example of the correct use of Incoterms® rules: “FCA 123 Example Street, Paris, France Incoterms® 2010”

International Trade Resources – Identifying Trading Partners and Shipping Costs US Department of Commerce, International

Trade Administration, US Commercial Servicehttp://trade.gov/index.asphttp://export.gov/http://www.buyusa.gov/home/fuse.html International Chamber of Commerce http://www.iccwbo.org/http://www.iccwbo.org/incoterms/id3042/

index.html World Trade Center Association http://world.wtca.org/portal/site/wtcaonline FITA http://www.fita.org/

US Commercial ServiceExport.gov brings together resources from across

the U.S. Government to assist American businesses in planning their international sales strategies and succeed in today’s global marketplace.

From market research and trade leads from the U.S. Department of Commerce’s Commercial Service to export finance information from Export-Import Bank and the Small Business Administration to agricultural export assistance from USDA, Export.gov helps American exporters navigate the international sales process and avoid pitfalls such as non-payment and intellectual property misappropriation.

Why Countries Engage in International Trade?

“Countries engage in international trade for two basic reasons, each of which contributes to their gain from trade. First, countries trade because they are different from each other. Nations, like individuals, can benefit from their differences by reaching an arrangement in which each does the things it does relatively well. Second, countries trade to achieve economies of scale in production. That is, if each country produces only a limited range of goods, it can produce each of these goods at a larger scale and hence more efficiently than if it tried to produce everything. In the real world, patterns of international trade reflect the interaction of both these motives.”

Paul Krugman, International Economics

“Any nation which leaves all her ports open to the World on equal terms will have commodities cheaper, sell its own production dearer, and be on the whole most prosperous” - Benjamin Franklin