Overview of International Trade Monday, September 17, 2012 James Van Eenenaam.

Overview of International TradeMonday, September 17, 2012

James Van Eenenaam

Agenda – Importing and Exporting1. International Trade Introduction2. Benefits of International Trade3. International Trade Policy, Regulations and

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

Quotas and Other Import Requirementsc. US Export Controls Requirements

4. International Trade Resources and Careers in International Trade

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

Benefits of International Trade The U.S. is the world's largest trading nation, with exports of goods and services

of over $2.1 trillion in 2011. U.S. goods and services exports supported an estimated 9.7 million jobs in 2011. Every billion dollars of goods and services exports supported more than an

estimated 5,000 jobs in 2011. U.S. manufacturing exports supported an estimated 2.4 million manufacturing

jobs in 2009 (latest data available), 20 percent of all jobs in the manufacturing sector.

U.S. agricultural exports supported 907 thousand jobs on and off the farm in 2010 (latest data available).

Every billion dollars of U.S. agricultural exports in 2010 required 7,800 American jobs throughout the economy

US jobs supported by goods exports pay 13-18 percent more than the US national average

Exports at 13.8 percent of U.S. GDP in 2011 – its highest share ever. Trade expansion benefits families and businesses by: Supporting more productive, higher paying jobs in our export sectors Expanding the variety of products for purchase by consumers and business Encouraging investment and more rapid economic growth Trade keeps our economy open, dynamic, and competitive, and helps ensure that

America continues to be the best place in the world to do business.

International Trade Introduction National Export Initiative

The 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 global economic/market transformation

International trade requires identifying opportunities and an understanding of trade compliance requirements, trade security, trade facilitation and safety

In 2011, US Customs and Border Protection facilitated approximately $2.3 trillion in total import value (14% increase over 2010)

In 2011, US Customs and Border Protection collected over $32 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 19 countriesFTA with Korea was finalized on March 15, 2012FTA’s Pending Congressional Approval with Colombia and

Panama. For example, estimated $1.34 billion in tariffs imposed on US

exports to ColombiaOther 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

Trade Policy: United Nationshttp://www.un.org/en/ Trade Policy: World Trade Organizationhttp://www.wto.org/ Trade Policy: United States Trade Representativehttp://www.ustr.gov/ 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/ 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

United States Trade Representative

USTR provides trade policy leadership and negotiating expertise in its major areas of responsibility, including:

Bilateral, regional and multilateral trade and investment issues Expansion of market access for American goods and services International commodity agreements Negotiations affecting U.S. import policies Oversight of the Generalized System of Preferences (GSP) and Section

301 complaints against foreign unfair trade practices, as well as Section 1377, Section 337 and import relief cases under Section 201

Trade, commodity, and direct investment matters managed by international institutions such as the Organization for Economic Cooperation and Development (OECD) and the United Nations Conference on Trade and Development (UNCTAD)

Trade-related intellectual property protection issues World Trade Organization (WTO) issues

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 Regulations

Bureau 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 Service

http://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/ Online international marketplace - www.etsy.com or

www.alibaba.com TradePort - a repository of free information and resources for

businesses involved in all aspects of global trade - www.tradeport.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.

International Trade CareersA business degree is helpful, but not requiredA good working knowledge of the products to be

imported/exported and soldAbility to discern and choose a good product and a good

marketAbility to work under pressure and under hectic conditionsYou will have international clients/customers across

various time zones – 24 hour work day!Openness to international travelYou cannot be afraid of “selling” or “sales”Choose a team of international trade consultantsFind a supplier and a buyerSeal the deal - the transaction and delivering the product

International Trade CareersCustoms BrokerFreight ForwarderInternational Trade SpecialistImport SpecialistImport Compliance SpecialistExport Compliance SpecialistInternational Trade Compliance AdministratorForeign Service OfficerForeign Commercial Service OfficerInternational SalesInternational Trade Consultant

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