EXPORTING

International Business II

BASIC TERMS

• Exports: – goods and services flowing out of a country

• Exporting: the sale and delivery of goods and services by a firm based in one country to customers residing in a different country– results in receipts from the customers– affords less control over the marketing function

WHY DO COMPANIESEXPORT?

REASONS FOR EXPORTINGProduction Surplus. (Expand Sales) Comparative advantages ($,Q,Quality,Avaliability). Product and Market Diversification

(Int Competence/Local MK situation)Competitiveness (New tech, Know How & Manag.

Performance) Int. Joint Ventures (Costs, Efficiency & Diversi). Less Risky than FDI. Reach Economies of ScaleEconomic Agreements – Get in Globalization

STRATEGIC ADVANTAGES OF EXPORTS • Increase revenues and profitability• Achieve economies of scale in production and

research• Alleviate excess capacity in domestic

operations• Minimize risk (as compared to licensing and

foreign direct investment)• Diversify markets

Exporting requires expertise in dealing with government institutions, particularly customs agencies, as well as the

documentation process.

EXPORT STRATEGY• Strategic factors affecting the choice of

exporting as a mode of entry include:– the ownership advantages of the firm

• The international experience of the firm• The firm’s ability to differentiate its products

– the location advantages of the market• Market potential

– the internalization advantages of specific assets• Specific skills or assets that are not licensed or sold

FOUR BIG QUESTIONS

What does the company want to gain from X?

Is X consistent with other company goals?

What demands will X place on its key resources?

Are the expected benefits worth the cost?

PHASES OF EXPORT DEVELOPMENT

WHICH ARE THEPROBLEMS OR

LIMITATIONS OFEXPORTING?

POTENTIAL PITFALLSLack of Q. Counseling & Master Int MK planLack of Commitment (Difficulties & Financial Req)Wrong Choice of Overseas Agents or DistributorsLack of ordery growth (Chasing worlwide orders)Wrong distributors treatment (Dom Counterpart)Unwillingness to adapt products (Regulat-Preferen)Languange Misuse (Service, Features &Warranties)Not using EMC´s when necessary. (Proper Staff)

ARANCEL

ARANCEL

Understood in 2 different ways:• As a Tariff• As a Custom Code

AS TARIFF

• Specific• Certain amount payment charged for each

imported good unit (volume, lenght or weight).• Ad Valorem

• Porcentage of good’s value. Mostly Used• Mixed

AS CUSTOM CODE

HARMONIZED SCHEDULE• System using a code for grouping and

classifying merchandise by cathegories for Int Trade.

HARMONIZED SYSTEM STRUCTURE

21 Sections

98 Chapters

1249 Custom Codes (Four Digits)

5018 Sub Custom Code (Six Digits)

Legal Notes

General Rules

MERCHANDISE GROUPING WITHIN THE NOMENCLATURE

By Nature Kingdom

• Animal (Section I)

• Vegetal (Section II)

• Mineral (Section III)

By two main chemistry branches

• Inorganic (Chapter 28)

• Organic (Chapter 29)

By Industrial Activity

• Pharmaceutic, Plastic, Rubber, Paper, Metal, Textile, Machinery and Electrical Material, Glass, etc.

NOMENCLATURE

• I. Animales vivos y productos del reino animal • II. Productos del reino vegetal • III. Grasas y aceites animal o vegetales... • IV. Productos de las industrias alimentarias... • V. Productos de las industrias químicas... • VI. Plásticos y sus manufacturas • VII. Caucho y sus manufacturas • VIII. Pieles, cueros, peletería y manufacturas de estas

materias...

NOMENCLATURE• IX. Madera, carbón vegetal y manufacturas de

madera... • X. Pastas de madera o de las demás fibras • XI. Materias textiles y sus manufacturas. • XII. Calzado; sombreros y demás tocados... • XIII. Manufacturas de piedra, yeso fraguable... • XIV. Perlas finas ( naturales) o cultivadas, piedras

preciosas o semipreciosas... • XV. Maquinas y aparatos, material eléctrico y sus

partes...

NOMENCLATURE

• XVII. Material de transporte

• XVIII. Instrumentos y aparatos de óptica, fotografía o cinematografía...

• XIX. Armas, municiones y sus partes y accesorios...

• XX. Mercancías y productos diversos.

• XXI. Objetos de arte o colección y antigüedades.

LEGAL NOTES

Including Excluding Defining Precisioning Complement

From Section From Chapter From Subcode

STEPS FOR DESIGNING AN X STRATEGY

1. Assess Export Potential2. Get Expert Counseling

(Export Assistance Center – Proexport)3. Select a Market or Markets

(Request-Trade shows-Publications-Census)4. Formulate & Implement an X Strategy

(Short &Long Term Objectives-Tactics-Schedules & Deadlines-Resources Allocation-Tasks Assignation)

EXPORT PLAN1.TARGET MARKET RESEARCHCOUNTRIES PRE-CHOICE • Current Dest. of Colombian X(Your Product)• Cultural & Comercial Affinity• Tariff Preferences• Competitor Countries• Transportation Availability

MARKET CHOICE • Economic, Geographic & Political Review• Freight Estimated Cost• Product Entry Demands & Comercial Legislation

GETTING MK INFO • Product • Prices • Trading• Competitors• Promotion

2.CIA’S SITUATION EVAL REFERRING THE CHOSEN MARKET• Structure• Production• Finance• Product • Marketing• Competitiveness

3.EXPORT PLANNING• Objectives• Strategies • Customers search • Checking List

4.X PLAN EXECUTION & FOLLOW UP • Int Quotation or valuation• X Logistics• X Paperwork• Exports Tax Legislation• Exports Incentives• Results Evaluation

EXPORTING PROCESS1. Get the Exporter National Register/RUT2. Market Research: Potential Buyers3. MINCOMEX Paperwork: National Producer Register-

Certificate of origin Aplication (2 Years)4. Get the required approvals (INVIMA –ICA)VUCE5. Get the product ready /Approvals/Costing (50%) & Pricing 6. Identify The tariff subsection7. Negotiation (Get in touch with a buyer) (INCOTERM)8. Insurance and Freight Contracting (If applicable)9. Send Pro-Forma Invoice acceptance and Stablishment of

Method of Payment (INCOTERMS)

Shipping Documents

• Shipping Authorization• DEX (Export Declaration)• Pro-Forma Invoice• Commercial Invoice• Export Packing List• Certificate of Origin• Bill of Lading, Airway Bill, Consignment Note,

Multimodal Transport Document• Licenses, Permissions or Approval

DIAN/SIA ERRANDS (DIAN is gonna Check out the following info):

There are two different types of inspection, Physical (Merchandise) and Documentary

• Export Mode• Tariff Subsector• Description of the Merchandise• Quantity• Weight• FOB Value in U$• Country of destination