International Trade + Import & Export Management Lesson 2 PDF

Cross Border Supply Chains International Trade + Import & Export Management Last week 2 Last week 3 Agenda for today International Trade Import & Export Management Workshop Update your MRR and add to your MRR Portfolio 4 International trade 5 International trade and developments...

Cross Border Supply Chains International Trade + Import & Export Management Last week 2 Last week 3 Agenda for today International Trade Import & Export Management Workshop Update your MRR and add to your MRR Portfolio 4 International trade 5 International trade and developments International Trade: All exchange in goods and services crossing national borders Developments: Different production costs between different countries, thus shift of production overseas: Textile industry and Ship building 6 Internationalisation phases (F.Root) 1. Export and increase of sales 2. Production overseas 3. Establish own sales- and production facilities outside home market / overseas 4. Company becomes multinational 5. International acquisitions or joint ventures 8 Motives for internationalization (1) Company targets  continuity (spread of risks), improve profits and seek growth through market development and diversification Revenue growth  home market too small, R&D intensively used, over capacity Human Resources  find good quality staff overseas 9 Motives for internationalization (2) Follow your customers Situational motives (macro/micro motives)  attractive arrangements Competition  Competitor is establishing business in your home country 10 Trade policies and the European Union Free trade Advantages: Efficient competition & technological innovation It does not provoke counter measures: no trade war International stabilization of prices International rules Drawbacks: Comparitive costs Discriminate developing countries (but these can be overcome by different measures...) 12 International Trade Organizations The purpose of the GATT was to make international trade easier IMF Fosters international financial stability 191 countries The WTO pays a lot of attention to resolving international trade disputes GATT distinguishes different forms of dumping Strategic dumping: to eliminate competition Social price cutting: wages and fringe benefits below actual Subsidized dumping: government subsidies for export Discrimination dumping: charging different prices in various markets 14 Trade Protectionism Not permitted arguments: - Pauper-labor-argument: to protect own industry against import - Employment arguments - Balance of payment argument - Reconstruction argument for building up own industry Permitted arguments: - Infant-industry-argument: protect young up-coming industries - Anti-dumping argument Check out https://www.britannica.com/topic/protectionism 15 Forms of protectionism – Import Duties Specific: a fixed amount per volume of imported product Ad valorem: a fixed amount of the value of the product Sliding or variable: the rate of the product depends on the product price Prohibitive: tariff so high that import is virtually impossible Implicit: structure of tariffs - raw materials under low tariff and finished products under high tariff 16 Forms of protectionism – Quotas Quantity quota: maximum quantity allowed Tariff quota: import duties are levied when maximum allowed are reached Bilateral: Between 2 countries Multilateral: Between different countries Global: For all countries 17 Forms of protectionism – Trade agreements Bilateral or Multilateral agreements with the following type of countries: Developing countries Countries not associated with the WTO 18 Forms of protectionism – Non-tariff barriers Rules: allowable axle weight for trucks Regulations: health- and safety regulations Formalities: customs formalities (Administrative) procedures: test specifications 19 Forms of protectionism – Managed trades Government trade: China and Cuba: government is still an important trade partner Managed Trade: Trade that is influenced by factors other than market forces, such as government intervention (Airbus versus Boeing for Saudi-Arabia) 20 New forms of protectionism Gentle protection: Agreements to divide markets, Subsidies from government to specific sectors, Organization for Economic Cooperation and Development (OECD): reorganizing ship building and steel industry, Measures taken by European Community with respect to agriculture, Direct subsidies: credit arrangements, financial support. 21 Regional formation of ‘blocks’ Check: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/australia/eu- australia-agreement_en https://unece.org/fileadmin/DAM/trade/Publications/ECE-TRADE-411.pdf https://apexdrop.freshdesk.com/support/solutions/articles/43000020256-what-exactly-is-trade-collaboration- 22 Very actual 23 Source: https://www.nu.nl/economie/6337985/eu-sluit-grootste-handelsdeal-ooit-tot-ergernis-van-nederland- en-frankrijk.html  Very actual After decades of negotiations, the European Union and four South American countries have reached an agreement on mutual trade. The agreement is not welcomed in all countries. The Netherlands and France, among others, are very critical. The Netherlands and France fear unfair competition for home-grown farmers and believe that the treaty will also cause additional environmental damage. This concerns an agreement with Brazil, Argentina, Paraguay and Uruguay, united in the Mercosur organization. The deal should make trade between European and South American countries easier. For example, it contains provisions on the abolition of import duties and access to each other's markets. According to Von der Leyen, the agreement will save European companies around 4 billion euros in levies per year. Furthermore, the agreement should ensure that the EU has access to more critical raw materials needed for the energy transition. Biggest EU deal ever The countries that signed the agreement have a combined population of 780 million. It is the largest trade deal the EU has ever concluded. French farmers are strongly opposed. They have demonstrated several times against the treaty, because they fear unfair competition from farms on the other side of the Atlantic Ocean. According to the French, they could produce cheaper because they are subject to less strict environmental regulations. Wage costs are also lower. The fear is that they will flood the European market with cheap agricultural goods. 24 26 Import & Export Management 27 Import and export Exchange of capital, goods, and services across international borders or territories, due to market needs. Exporting is the sale of products and services in foreign countries that are sourced or made in the home country. Importing refers to buying goods and services from foreign sources and bringing them into the home country. 28 Dutch import/export introduction Netherlands is predominantly an exporting country 54% of GDP and production for export Distribution function Economic position of the Netherlands related to world trade. Exporters focus on (new) specific markets e.g. Knowledge about agricultural technology, high- end lifting, dredging, water treatment, farming. 29 Different forms of import and export Exportation: the export of products manufactured in the country Re-importation: exportation of imports with little added value Transit: shipping on of goods though our country with none added value (containers, coals to Germany, flowers) Import: goods which physically come to the Netherlands and are introduced into free trade 31 Types of import and export Import: B2B, B2C goods & intermedia products and services Export: Physical export & Deemed export (e.g. Releases of controlled technology to foreign countries) And many more... (direct, indirect, one-time, recurring etc...) 32 Import Advantages: Disadvantages: - International sourcing, reduce - Increase risk and uncertainty (production) cost (legal, political) - Benefit from international - Increase dependency economy - Higher communication cost - Extend sales volumes - Vulnerable of foreign exchange rate 33 Export Advantages: Disadvantages: - Increase sales and market - Extra logistic costs potential - Financial risk - Higher profit - Obtain export licenses and - Risks spreading other documentations - Sell excess productivities - Difficulties of collect foreign - Gain new information and market information technologies 34 Payment methods Cash in advance: Payment is received before ownership of goods is transferred. Letter of credit: contractual agreement whereby the importer’s bank, acting on behalf of the buyer promises to make payment to the exporter on receipt of the documents. Documentary collections (D/C): Importer’s bank passes documents to the buyer and ask permission to pay the seller (which he can refuse!). Open account: on account, paid within 30, 60 or 90 days. Consignment: goods are paid by agent once he sold the goods. 35 Import and export duties (1) Import duty is a tax collected on imports and some exports by a country's customs authority. A good's value will usually dictate the import duty. Depending on the context, import duty may also be known as a customs duty, tariff, import tax or import tariff. When importing goods into the Netherlands from outside the European Union (EU), you will usually have to pay import duties. You will also have to pay VAT and in some cases excise duty, consumption tax or other levies. 36 Import and export duties (2) All EU member states apply the same Common Customs Tariff (CCT). Protection against low prices, adding extra duties VAT and reverse charging (“BTW-verlegd”) Excise duty (“accijns”) and consumption tax (“verbruiksbelasting”) (e.g. liquors, tobacco, and mineral oil products) Anti-dumping duty (industry products, agricultural levies) *Between brackets is Dutch translation 37 Incoterms Founded in 1919, The Incoterms® rules are the world’s essential terms of trade for the sale of goods. The Incoterms or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law. They are widely used in international commerce. 3 letter trade terms. 38 Motives for leaving home market Proactive motives - Tax benefits - Opportunities in foreign markets Reactive motives - Competition - Home market too small or saturated - Overproduction 41 Structural Import/Export approach More and more companies focus on overseas activities. For that you need a structural export approach by setting up an export plan giving you insight in possibilities of certain countries as well as market objectives. 43 Transport modalities Each modality has its own advantages and disadvantages Combinations of modalities (inter-/multimodal) Corporate strategic challenges/targets + Sustainability (ESGs) decisive for design of SC’s 45 Channels of Distribution 46 Distribution Strategies 1.Intensive Distribution: As many outlets as possible. The goal of intensive distribution is to penetrate as much of the market as possible. 2.Selective Distribution: Select outlets in specific locations. This is often based on a particular good and its fit within a store. Doing this allows manufacturers to pick a price point that targets a specific market of consumer, therefore providing a more customized shopping experience. Selective distribution caps the number of locations in a particular area. 3.Exclusive Distribution: Limited outlets. This can mean anything from luxury brands that are exclusive to special collections available only in particular locations or stores. This method helps maintain a brand’s image and product exclusivity. Some examples of companies that enact exclusive distribution would be high-end designers like Chanel or even an automotive company like Ferrari. 47 Distribution Profiles 48 Perlmutter theory (Howard V. Perlmutter) Perlmutter-theory (EPRG model): 4 types of enterprises with their own international culture: E- Ethnocentric company P- Polycentric company R- Regionally centred company G- Geocentric company 50 Etnocentric company National company focussing on home country Mainly national trade Foreign markets by coincidence National approach is superior 1 head office 51 Polycentric company Cultural differences in the different markets Approach different in each country Independend companies Minimize risks Mainly local leaders / managers 52 Regional company Differences between regions EU, North America, South America, Asia Pacific Experiences Same approach in the region 53 Geocentric company Differences as well as similarities No country is superior Target: Mondial approach World-wide integrated company Nationality is irrelevant for appointing top managers According to Perlmutter the most ideal organisation structure 54 69 Next Workshop Event: “International Trade – Import & Export" Update your MRR and add to your MRR Portfolio 70