International Business

1. International Business • The Business Of International Business

2. Topics We will Cover • Government Agencies • The BIS • Customs • Freight Forwarders • Customs Brokers • Powers of Attorney • Getting Paid • Quality and Liability • Deals/Agreements • Financial Impacts • Planning Your Business

3. First Things First • Currencies These are important to any international trading business

4. Currencies

5. Currencies

6. What does this mean? January 2002 134.06JPY to USD I buy products from Japan. When I pay the invoice, I take my dollar down to the bank and they exchange it for 134 JPY So if I owe my supplier 13,406 JPY, I must have $100 to pay them

7. What does this mean? Fast forward to Jan. 2010 Now I must have $145 (not a hundred bucks) in USD to pay my supplier. My costs just went up thus my prices must go up. 92.55 JPY to US Dollar

8. Currency and the GDP

9. Government Agencies Top Two Prime Agencies You Should Know • Bureau of Industry and Security (BIS) • US Customs and Border Protection (CBP)

10. http://www.bis.doc.gov/ Resources Note the publications like “don’t let this happen to You!”

11. The BIS Website offers various seminars, webinars, FAQs, and “contact a counselor”

12. The Fed. BIS Resources

13. BIS Activities • Company in PA was fined $40,000 for falsifying information to make illegal exports of graphite products that can be used in nuclear reactors and nose cones of ballistics missiles. • A company was fined $264,000 for exporting pumps and valves to Taiwan, China and Israel. Items could be used in chemical and biological weapons and required a license. Many violations involve falsification of information; disregard of licensing requirements; misrepresentation of material facts and documentation Illegal Export of aircraft parts to Iran Joint Investigation with Customs

14. BIS More Examples Example of chips that are capable of being used to construct IEDs (Improvised Explosive Devices) These triggered spark gap can be used for nuclear detonators

15. The Fed BIS • The Bureau of Industry and Security’s paramount concern is security of the USA  They provide: • US Export control • Commercial AND military applications • Enforcement of Anti Boycott laws • require U.S. firms to refuse to participate in foreign boycotts that the United States does not sanction. • International Treaties Compliance • Chemical Weapons Convention (example) Dual use

16. The Fed. The BIS • How is it Enforced? • Voluntary compliance of trading community to Export Administration Regulations (EAR) • Export Licensing Determination • What are you exporting • Where are you exporting • Who will receive the item • What will it be used for Note: They have a law enforcement agency The product is researched for applicability

17. The Fed. Export Licensing • The ECCN (electronic control classification system) • An ECCN is an alpha-numeric classification used in the Commerce Control List to identify items for export control purposes • Determine yourself by using the Commerce Control List • Go to the source; ask the manufacturer • Request an official classification from BIS (949 660-0144 ) • Hints and tips • Most items do not require a license (EAR99 or NLR) • Start the process early • Denied countries; denied parties may apply even if NLR

18. The Fed. The ECCN Commerce Control List Categories 0 = Nuclear materials, facilities and equipment (and miscellaneous items)1 = Materials, Chemicals, Microorganisms and Toxins2 = Materials Processing3 = Electronics4 = Computers5 = Telecommunications and Information Security6 = Sensors and Lasers7 = Navigation and Avionics8 = Marine9 = Propulsion Systems, Space Vehicles, and Related Equipment

19. The Fed. Customs • Customs and Border Protection (CBP) • Part of Homeland Security • Keep terrorists and weapons out of USA • Secure and facilitate trade • Process $2 trillion in legitimate trade collecting more than $32 billion* in duties and taxes {It is estimated that more than 40% comes from textiles}

20. Customs and Border Protection

21. Technical Customs • The CBP Website offers: • Compliance publications • Importing into the USA • Internet Purchases • Export Documents and Requirements • Importing or exporting a vehicle • Locate a port and broker that you may use • Medications and drugs (prohibited) • Becoming a customs officer/customs broker And an excellent FAQ section… Don’t miss it!!!

22. Technical Customs Basic importing and exporting information is offered by the Customs website

23. Technical Locate a Port It can be important to contact the port that will handle your transaction Click on a state and look for a port that you would use

24. Customs FAQ • Search by • Keyword • Topic or • Category • A series of questions with answers appears

25. Customs • Customs Officers Duties • Collect import duties, taxes and fees • Protect US Businesses from theft of Intellectual Property • Regulate trade practices to collect the appropriate revenue • Maintain export controls • Provide agricultural inspection activities at the ports of entry Not customs brokers!

26. Customs • A Typical Day in Customs • 1.1 million passengers and pedestrians, including 680,000 aliens • 70,900 truck, rail and sea containers • 240,737 incoming international air passengers • 71,151 passengers/crew arriving by ship • 327,042 incoming privately owned vehicles • 85,300 shipments of goods approved for entry • $84,400,000 in fees, duties and tariffs • And of course the illegal • 3-tons of Narcotics seized • $160,000 in illegal currencies • $650,000 of fraudulent merchandise • 4500 prohibited meats, plants and animal products

27. Customs Brokers • Customs brokers (Not Officers) • Private Individuals • Partners, Corporations, Associations • Licensed, regulated and empowered by U.S. Customs • Assist in Meeting Federal Requirements • Getting merchandise through customs inspection. • Submit necessary Information and Payments to CBP • Charge a fee for this service. NOTE: Examination is required to become a customs broker

28. Power of Attorney • Customs Brokers will also • Validate the Power of AttorneyAllows theCustoms Broker to authorize the movement of merchandise into the United States, it is critical that the POA be examined carefully to verify the identity and legal authority of the party. • Who is it? Is the business/person real? • Tax ID number or Corporation Number • Are they restricted persons as determined by the US Government

29. Customs Broker Role (POA)

30. Customs Broker Role (POA)

31. Shipping Costs Shipping Cost Factors • mode of transport- • distance/destination – • weight and volume • value NOTE: Hazardous materials, oversized goods, animals, other irregularities may add costs • airfreight , road, rail or ship • Full Container, partial container, cubic feet of space • Distance and unusual destinations • charges are usually based on the weight of goods, but calculation switches to volume above a certain threshold • in some instances, such as woolen textiles, charges are calculated on the basis of goods' value per ton

32. Containers 20 ft. 40 Ft. TEU = 20ft. Equivalent unit. Practical limit of a 20ft. Container is approx. 1000 cu. Ft.

33. Technical Shipping Costs

34. Surety Bonds • A CBP bond insures the performance of an obligation like duties and taxes • Continuous • Approx. $500 per year • Bases on 10% of $50,000 minimum • Single Entry • Total Amount estimated to be due • Advantages • Take possession before all paperwork is completed • Move goods from one location to another before duties and taxes are paid

35. Technical Example • At the time the product was purchased, a flooring distributor was selling a certain type of marble tile for US$1.73 per sq ft, so that was a target price. • A Chinese supplier was pricing an identical marble tile for $0.63/sq ft. An order was placed for 7,500 sq ft. which was a 40 ft. container *Excludes cost of Letter of credit if required

36. Duty and Tariffs The US International Trade Commision (USITC) • provides the Harmonized Tariff System (HTS) which identifies tariff rates for all merchandise imported into the United States; There is a similar Global System • However, the CBP is the only agency that can provide legally binding advice or rulings on classification of imports. • NOTE: General “Helpline”, publications and opinions are not binding.

37. Non normal trade relations Specific Description Special Rates Most favored Nations Basic Tariff Identifier Number http://www.usitc.gov/tata/index.htm

38. Quotas Authority derived from specific legislation • Absolute-no more than a certain amount during quota period • Tariff Rate Quota-Reduced duty until quantity reached then the duty increases • Textile Visa-endorsement in the form of a stamp on an invoice or export control license that is executed by a foreign government.

39. Shipping Terms You Should Know • Freight Forwarder • Google Listing of Freight Forwarders • One Stop Shopping • Book Cargo • Accurately Prepare Documentation • Plan Route • Get Goods to Destination on Time • Be Advisor and Agent for the Shipper • Customs Brokerage Services

40. Google Freight Forwarder Directories and specific forwarders

41. Sources to Consider Familiar Faces • UPS • Fedex • DHL Services offered: • Consolidation services • Air and ocean cargo transportation • Customs Clearance • Legalization of documents - keep up to date on the rules and regulations for every country we ship to and from • Web-based tracking • “My Account” access

42. Example of FedEx website. Note the topics Online completion of documentation

43. UPS Ocean Freight Freight Forwarding Features Benefits

44. UPS Service Matrix What They Do

45. Marketing Before You Start Where does your opportunity come from? • Product Knowledge and Industry Experience • People You Know in an Industry • Friends, Family, Acquaintances

46. Marketing Your opportunity You may have sales and marketing experience but not in the particular industry You have general business experience but not in the international area • You “own” the product and are having it manufactured in another country • You found the product in your travels and think you can sell it in the USA • You have a friend or relative that manufacturers a product in another country and they want you to sell it in the USA

47. Marketing • Sliding Scale of Success • Product & Market Knowledge • Demonstrated Capability • Good Business Instincts • Sales and Marketing Ability • Financial Resources The more you add to your “resume” of experiences the higher the probability is to succeed

48. Marketing Some Terms • FOB (Free on Board) port of exit price (on vessel) • CIF (Cost Insurance Freight) US port of entry price • Insurance may not be adequate • LDP (Landed Duty Paid) price at US port of entry and cleared through US Customs; • DDP (Delivered Duty Paid) price delivered to the customer (ex. retailers distribution center.) NOTE!!!

49. Marketing Export Marketing • US Commercial Service and Export Assistance Center (export.gov) • Alibaba.com(both import and export) • International Business Directory • Newport Beach DOC (US Commercial Service)

50. Marketing Alibaba Note GOLD SUPPLIER Check out the forums and community