Podcast
Questions and Answers
What is foreign direct investment (FDI)?
What is foreign direct investment (FDI)?
Which of the following best describes the cross-border supply of services?
Which of the following best describes the cross-border supply of services?
What is not a mode of services export according to the General Agreement on Trade in Services?
What is not a mode of services export according to the General Agreement on Trade in Services?
Which of the following examples illustrates commercial presence?
Which of the following examples illustrates commercial presence?
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What is a key characteristic of services that distinguishes them from goods?
What is a key characteristic of services that distinguishes them from goods?
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Which foreign trade promotion program specifically targets exporters with tax refunds?
Which foreign trade promotion program specifically targets exporters with tax refunds?
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What type of entry mode is NOT mentioned as an option for investing in Mexico?
What type of entry mode is NOT mentioned as an option for investing in Mexico?
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Which foreign trade regime allows goods to be temporarily imported with the possibility of refunds on taxes?
Which foreign trade regime allows goods to be temporarily imported with the possibility of refunds on taxes?
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What should be defined to ensure effective international supplier relationships?
What should be defined to ensure effective international supplier relationships?
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Which program is NOT applicable to new companies seeking trade incentives in Mexico?
Which program is NOT applicable to new companies seeking trade incentives in Mexico?
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What is the role of the Originator in the context of Documentary Credits?
What is the role of the Originator in the context of Documentary Credits?
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Which entity is responsible for notifying and overseeing the payment to the seller?
Which entity is responsible for notifying and overseeing the payment to the seller?
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What does the Issuing Bank do in a Documentary Credit transaction?
What does the Issuing Bank do in a Documentary Credit transaction?
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In a Documentary Credit, who is the Beneficiary?
In a Documentary Credit, who is the Beneficiary?
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Which payment method allows for the payment obligation to be carried out in a convertible currency?
Which payment method allows for the payment obligation to be carried out in a convertible currency?
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What do Documentary Credits primarily serve as?
What do Documentary Credits primarily serve as?
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Which of the following is NOT an element or entity of Documentary Credits?
Which of the following is NOT an element or entity of Documentary Credits?
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What is the primary objective of an International Payment Order?
What is the primary objective of an International Payment Order?
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What type of contract outlines the measurement of supplier performance through KRAs and KPIs?
What type of contract outlines the measurement of supplier performance through KRAs and KPIs?
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What are BRMs defined to include regarding the supplier's performance?
What are BRMs defined to include regarding the supplier's performance?
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Which of the following describes a consequence scheme related to supplier performance?
Which of the following describes a consequence scheme related to supplier performance?
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In the context of customs regimes in Mexico, what is a major requirement for temporary imports?
In the context of customs regimes in Mexico, what is a major requirement for temporary imports?
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What distinction does a 'Fiscal Deposit' refer to within Mexican customs law?
What distinction does a 'Fiscal Deposit' refer to within Mexican customs law?
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Which of these is not a characteristic of the recognition and awards scheme for suppliers?
Which of these is not a characteristic of the recognition and awards scheme for suppliers?
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What is the primary purpose of the KRA’s chart in the context of supplier management?
What is the primary purpose of the KRA’s chart in the context of supplier management?
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What is a mandatory component of BRMs in the performance measurement scheme?
What is a mandatory component of BRMs in the performance measurement scheme?
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Which of the following is a mandatory clause in international contracts?
Which of the following is a mandatory clause in international contracts?
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What is the main purpose of Incoterms® 2020?
What is the main purpose of Incoterms® 2020?
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Which organization is responsible for the publication of Incoterms?
Which organization is responsible for the publication of Incoterms?
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Which clause is considered optional in international contracts?
Which clause is considered optional in international contracts?
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What is one of the legal frameworks governing international contracts?
What is one of the legal frameworks governing international contracts?
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Which clause relates to the transfer of risks in international contracts?
Which clause relates to the transfer of risks in international contracts?
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What does the 'Choice of Law' clause in an international contract signify?
What does the 'Choice of Law' clause in an international contract signify?
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What type of obligations does the clause concerning 'Specific Other duties' refer to?
What type of obligations does the clause concerning 'Specific Other duties' refer to?
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Study Notes
International Trade of Services
- The WTO defines international trade of services as the supply of a service provided by a resident of one country to a non-resident in another country.
- Services are considered an intangible and perishable economic activity that requires direct interaction between the supplier and the client/consumer.
Services Export Modalities
- The General Agreement on Trade in Services (GATS) outlines four main modalities for services export:
- Cross-border supply: The service itself travels across borders, for example, telemedicine.
- Consumption abroad: A foreign individual consumes the service in another country, for example, tourism.
- Physical movement of people: A resident from one country travels to another to provide the service, for example, a doctor traveling to a foreign country for surgical procedures.
- Commercial presence: A resident from one country establishes a business in another country to provide the service, for example, a bank opening a branch in a foreign country.
Commercial Presence
- A service provider establishes a physical presence in a foreign country to provide the service.
- Examples include banks, commercial companies, production companies, and subsidiaries.
Foreign Direct Investment (FDI)
- FDI is a cross-border investment where an investor establishes a lasting interest and significant influence over an enterprise in another country.
International Contracts
-
Mandatory (Boilerplate) clauses: These clauses are essential and typically include:
- Subject of the contract
- Price
- Payment terms
- Delivery terms
- Warranty
- Acceptance
- Effective period or expiration
-
Optional clauses: These clauses are not always required but may be beneficial to include, examples include:
- Extensions
- Transfer of risks
- Notifications
- Non-disclosure
-
Specific clauses: These clauses address specific aspects of the contract such as:
- Other duties and obligations
- Service levels
- Any other obligation
-
Exhaust clauses: These clauses deal with potential issues such as:
- Advanced termination
- Penalties and fines
- Default
-
Legal clauses: These clauses outline the legal framework of the agreement and typically include:
- Choice of law
- Entire agreement
- Indemnity
- Representation
Legal Framework for International Contracts
-
UNCITRAL (United Nations Commission on International Trade Law):
- CISG (Convention for the International Sale of Goods): Provides a unified legal framework for international sales contracts.
- UNIDROIT (International Institute for the Unification of Private Law): Focuses on harmonizing private law across different jurisdictions.
- WTO (World Trade Organization): Provides rules and regulations for international trade, including services.
- ICC (International Chamber of Commerce): Offers guidance and tools for international business practices, including contract drafting.
Incoterms® 2020
- Incoterms® are rules published by the International Chamber of Commerce that define the rights and obligations of parties involved in international transactions, specifically regarding risks and costs associated with each logistic stage.
International Payment Methods
- Counter trade: An exchange of goods or services for other goods or services instead of payment in cash.
- Open Account: The buyer receives goods and services and agrees to pay at a later date.
- Consignment: The seller sends goods to the buyer, who only pays for the goods once they are sold.
- Documentary Credits (L/C): A payment instrument where a bank guarantees payment to the seller if they meet the requirements outlined in the contract.
- International payment order: A payment instruction issued by a bank to another bank to make a payment to a beneficiary.
- International remittance: Transferring money across borders.
- Bank draft: A negotiable instrument that acts as a payment order for a bank to pay a specified sum of money.
- Check: A written order instructing a bank to pay a specific amount of money.
International Documentary Credits (L/C)
- An L/C is a payment instrument where a bank undertakes to pay a beneficiary (seller) when they meet the requirements outlined in the contract.
- The bank acts as the guarantor at the request of the buyer.
Elements of L/Cs
- Originator: The buyer who assumes the payment obligation.
- Issuing bank: The buyer's bank that supports the payment obligation.
- Correspondent bank: A bank in the seller's country that processes the payment.
- Beneficiary: The seller who receives the payment according to the contract's terms.
Service Level Agreements (SLAs)
- SLAs are agreements outlining the service delivery expectations and performance indicators between a service provider and their customer .
- Key elements include:
- Description of the contract and related main contract (MSA)
- Control strategy, defined by Key Result Areas (KRAs) and Key Performance Indicators (KPIs)
- Consequences scheme, including penalties, fines, awards and volume increases
- Legal clauses aligned with the main contract
- Signatures of parties involved
- Annexes (KRAs and KPIs charts)
Customs Regimes in Mexico
- Permanent regimes: Standard import and export customs processes.
-
Temporary regimes:
- Import: For goods returned to the origin country in the same condition or used for manufacturing, transformation or repair.
- Export: Goods temporarily exported and returned in the same condition after processing, transformation, or repair.
- Fiscal Deposit: A designated area where imported goods are temporarily stored before payment of customs duties.
-
In-bond goods:
- Domestic: Goods transported within Mexico under customs control.
- International: Goods transported under customs control across Mexican borders.
- Production, transformation, or repair in a bonded warehouse: Goods processed within a designated warehouse.
Customs Regimes in Mexico for FDI
- The same customs regimes applicable to domestic companies also apply to foreign direct investments in Mexico, enabling businesses to benefit from these options.
Current Foreign Trade Promotion Programs in Mexico
- Drawback: A program that refunds import taxes to exporters.
- ALTEX: A program for highly exporting companies (only for current, not new companies).
- ECEX: A program for foreign trade merchant companies (only for current, not new companies).
- PROSEC: A sectoral promotion program for industrial companies.
- IMMEX: A program for export manufacturing and maquiladora companies.
Key Considerations for Investment in Mexico
- Entry mode: Determining the appropriate entry mode for your business, such as FDI, partnership, or other strategies.
- Foreign trade regimes: Selecting the most suitable foreign trade regime for your operation, including permanent, temporary, and special regimes.
- Foreign trade promotion programs: Identifying and applying relevant programs like Drawback, PROSEC, and IMMEX.
- Contracts: Negotiating and signing contracts with suppliers and strategic partners.
- Delivery and payment terms: Establishing clear delivery and payment terms.
- Relationship management: Defining a strategy for managing relationships with local and international partners.
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Description
Test your knowledge on the concepts of international trade in services as defined by the WTO. Explore different modalities of service exports, including cross-border supply and consumption abroad. This quiz will assess your understanding of the General Agreement on Trade in Services (GATS).
