1. International Business II

2. BASIC TERMS Exports: goods and services flowing out of a country Exporting: the sale and delivery of goods andservices by a firm based in one country tocustomers residing in a different country results in receipts from the customers affords less control over the marketing function 3. REASONS FOR EXPORTING Production 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 Scale Economic Agreements Get in Globalization 4. STRATEGIC ADVANTAGES OF EXPORTS Increase revenues and profitability Achieve economies of scale in productionand research Alleviate excess capacity in domesticoperations Minimize risk (as compared to licensingand foreign direct investment) Diversify markets Exporting requires expertise in dealing with government institutions, particularly customs agencies, as well as the documentation process. 5. EXPORT STRATEGY Strategic factors affecting the choice ofexporting as a mode of entry include: the ownership advantages of the firm The international experience of the firm The firms 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 6. FOUR BIG QUESTIONSWhat 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? 7. PHASES OF EXPORT DEVELOPMENT 8. POTENTIAL PITFALLS Lack of Q. Counseling & Master Int MK plan Lack of Commitment (Difficulties & Financial Req) Wrong Choice of Overseas Agents or Distributors Lack of ordery growth (Chasing worlwide orders) Wrong distributors treatment (Dom Counterpart) Unwillingness to adapt products (Regulat-Preferen) Languange Misuse (Service, Features &Warranties) Not using EMCs when necessary. (Proper Staff) 9. STEPS FOR DESIGNING AN XSTRATEGY1. 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) 10. EXPORT PLAN1.TARGET MARKET RESEARCHCOUNTRIES PRE-CHOICE Current Dest. of Colombian X(Your Product) Cultural & Comercial Affinity Tariff Preferences Competitor Countries Transportation Availability 11. MARKET CHOICE Economic, Geographic & Political Review Freight Estimated Cost Product Entry Demands & ComercialLegislationGETTING MK INFO Product Prices Trading Competitors Promotion 12. 2.FIRMS SITUATION EVAL REFERRING THE CHOSEN MARKET Structure Production Finance Product Marketing Competitiveness3.EXPORT PLANNING Objectives Strategies Customers search Checking List 13. 4.X PLAN EXECUTION & FOLLOW UP Int Quotation or valuation X Logistics X Paperwork Exports Tax Legislation Exports Incentives Results Evaluation 14. ARANCEL 15. ARANCELUnderstood in 2 different ways: As a Tariff As a Custom Code 16. AS TARIFF Specific Certain amount payment charged for eachimported good unit (volume, lenght or weight). Ad Valorem Percentage of goods value. Mostly Used Mixed 17. TARIFFSAct 370/1994: Andean Community Countries rates: 5% 10% 15% Varies according to the level of process. 20% 35% (Vehicles) 18. AS CUSTOM CODEHARMONIZED SCHEDULE System using a code for grouping andclassifying merchandise by cathegories for IntTrade. 19. HARMONIZED SYSTEM STRUCTURE 21 Sections 96 Chapters 1249 Custom Codes (Four Digits) 5018 Sub Custom Code (Six Digits) Legal Notes General Rules 20. MERCHANDISE GROUPING WITHIN THENOMENCLATUREBy NatureBy two main By Industrial chemistry ActivityKingdombranches Animal Pharmaceutic, Inorganic (Section I) Plastic,(Chapter 28) Vegetal Rubber, Organic (Section II)Paper, Metal,(Chapter 29) Mineral Textile, (Section III) Machinery and Electrical Material, Glass, etc. 21. 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 qumicas... VI. Plsticos y sus manufacturas VII. Caucho y sus manufacturas VIII. Pieles, cueros, peletera y manufacturas de estasmaterias... 22. NOMENCLATURE IX. Madera, carbn vegetal y manufacturas demadera... X. Pastas de madera o de las dems fibras XI. Materias textiles y sus manufacturas. XII. Calzado; sombreros y dems tocados... XIII. Manufacturas de piedra, yeso fraguable... XIV. Perlas finas ( naturales) o cultivadas, piedraspreciosas o semipreciosas... XV. Metales comunes y manufacturas de estosmetales. 23. NOMENCLATURE XVI. Maquinas y aparatos, material elctrico y suspartes. Aparatos de grabacin XVII. Material de transporte XVIII. Instrumentos y aparatos de ptica, fotografa ocinematografa... XIX. Armas, municiones y sus partes y accesorios... XX. Mercancas y productos diversos. XXI. Objetos de arte o coleccin y antigedades. 24. LEGAL NOTES Including Excluding From Section Defining From Chapter Precisioning From Subcode Complement 25. Exercise Using Arancel Legis look for the custom codesof the following elements: 26. Exercise9705.00.00.00 8517.12.00.00 8523.40.21.00 27. Look for these products 28. Look for these products7103.91.20.00 0106.19.90.00 4910.00.00 29. 0406408212.10.20.007007.11.01 5001.00.00.00 0508.00 30. DECLEARERS 31. CUSTOM AGENTSIf X is more than U$10.000If M is more than U$1.000It is compulsory to contract the services of a CA (SIA) 32. CUSTOM INTERMEDIARYAGENCIES Agentes Aduaneros ( Formerly SIA) Do errands & Papework refering to X/M/InTransit Act on behalf of the Importer or Exporter 33. HIGHLY EXPORTER USERS (ALTEX) Req: (12 last months FOB US2 m)(X=60% Total SalesThey can be through Electronic Trade Confirmation)Benefits: No Physical Inspection (May Be Random) Custom Insp at their facilities May do M (Temporary Import for Ind Processing) 34. PERMANENT CUSTOM USERS 12 last m X or M U$ 8m OR 8U$m as anaverage during last 3 years If not, 2000 M or X Declarations last 12m.Benefits: Global Shipping Authorization (Partial Shipments) No Physical Inspection (May Be Random) Custom Inspection at their facilities May do M (Temporary Import for Ind Processing) 35. OTHER DECLEARERS Legal Entities & Common people doing X or Mnot higher than U$10.000 or U$1.000 Travelers (Baggage) Turists (Vehicles) National Post Office (Post Traffic & UrgentDeliveries) Urgent Delivery Consignees (Catastrophes) The State, Territorial Entites, Diplomats Transporting Companies. (Cabotage) San Andres Business Men 36. EXPORTING PROCESS1. Get the Exporter National Register/RUT2. Market Research: Potential Buyers3. MINCOMEX Paperwork: National Producer Register-Certificate of origin Aplication (2 Years)4. Get the required approvals (INVIMA ICA)VUCE5. Get the product ready /Approvals/Costing & Pricing. 37. EXPORTING PROCESS6. Identify The tariff subsection7. Negotiation (Get in touch with a buyer) (INCOTERM)8. Insurance and Freight Contracting (If applicable)9. Send Pro-Forma Invoice acceptance and Stablishment of Method of Payment (INCOTERMS) 38. IDENTIFICATION OF THE TARIFF SUBSECTIONIt is the number of international identification of productsand it is divided in the following way:Claveles miniaturaCapitulo 06Plantas vivas y productos de floriculturaPartida ArancelariaFlores y capullos, cortados para ramos o0603 adornos, frescos, secos, blanqueados, teidos, impregnados o preparados de otra forma.Subpartida Arancelaria Claveles0603.12Posicin Arancelaria Miniatura0603.12.10.00 39. 10. Shipping Documents Shipping Authorization DEX (Export Declaration) Pro-Forma Invoice Commercial Invoice Export Packing List Certificate of Origin Bill of Lading, Airway Bill, Consignment Note,Multimodal Transport Document Licenses, Permissions or Approval 40. 11. DIAN/SIA ERRANDS (DIAN is gonna Check out the following info):There are two different types of inspection,Physical (Merchandise) and Documentary Export Mode Tariff Subsector Description of the Merchandise Quantity Weight FOB Value in U$ Country of destination 41. 12. VAT payback Inquiry (If it applies)13. Exporter gets the currencies andReintegrates them.(Exchange Declaration#2) (More than 12 months BR) U$10.000 (Advanced Draft - 4 Months- Ext Debt)Resident External Debt Info (6) B. Rep 42. FINANCIAL ISSUES OF EXPORTING Product Price (Exchange Rts, Insurance,Transportation, Duties, Wholesale Channels,Banking, Antidumping) Method of Payment (Cash In Advance, Letter ofCredit, Draft or Bill of Exchange & Open Account) Financing Recievables (Factoring & Forfeiting) Insurance (Transportation Risk Political,Comercial & Foreign Exchange Risk) 43. INTERMEDIARIES DIRECT EXPORTING INDIRECT EXPORTING 44. EXPORT MANAGEMENT COMPANIES Export arm of the manufacturer (agent) Deal with X and M Take care of Documents Make Transportation arrangements Give advise Commission or Take title 45. EXPORT TRADING COMPANIES Register IND & COM (Duty free purchases) Furnisher Certificate (6Mths/ 1year / 6M) Work on Demand rather than Supply (Match) Identify suppliers who can fill orders fromabroad 46. FOREIGN FREIGHT FORWARDERS Import or Export specialist dealing withmovement of goods. Travel Agents of Cargo Provide best routing and means oftransportation (Space availability, cost andspeed) Close relation with carriers % of the shipment value + charge/# ofservices 47. EXPORT INCENTIVE TOOLS 48. INDUSTRIAL GOOD & SERVICES FREE ZONE Promote & Develope the ind process of Goods &Services aiming foreign Mkts Special Regimen (Duties, Customs, Exchange & Loans) Goods & Services: Cartagena & LaCandelaria/Palmaseca y Pacifico/Barran/S. Marta//Cucuta/Rionegro/Bogota- Quindio/Cuidadela de laSalud/Arauca Turistic & Technological Services: Baru, TierraCaribe/Posos Colorados/Centro Turistico Int. 49. EXPORTING ECONOMIC SPECIALZONES (ZEEE) Attract FDI & NI with X purposes,employment, Tech Transfer and Region Dev. Buenavntura, Cucuta, Ipiales,Valledupar,Tumaco Benefits in Labor & Tax matters. Customs and Tax matters Requirements: New Invst, 1U$ M, X 80% 50. OTHER INCENTIVE TOOLS CARCE VALLEJO PLAN 51. EXPORT MODES 52. EXPORT MODES DECREE 26851. DEFINITE EXPORT (Exportacin Definitiva)2. TEMPORARY EXPORT FOR PASIVE COMPLETION (Exportacin Temporal Para Perfeccionamiento Pasivo)3. TEMPORARY EXPORT FOR REIMPORTING IN THE SAME CONDITION (Exportacin Temporal Para Reimportacin En El Mismo Estado)4. RE-EXPORTING (Reexportacin)5. RE-SHIPMENT (Reembarque) 53. 6. URGENT DELIVERIES & POST TRAFFICEXPORTS (Exportacin Por Trfico Postal YEnvos Urgentes)7. NON VALUED SAMPLES EXPORTS(Exportacin De Muestras Sin ValorComercial)8. TRAVELERS TEMPORARY EXPORTS(Exportaciones Temporales Realizadas PorViajeros)9. MENAGE EXPORT (Exportacin De Menajes)10. SPECIAL EXPORT PROGRAMS (ProgramasEspeciales De Exportacin) PEXDOCUMENTS KEPT FOR 5 YEARS 54. TEMPORARY EXPORT FOR PASIVECOMPLETION It is the export mode which regulates thetemporary exit of national or nationalizedmerchandise from national custom territory,for transforming, manufacturing or repairingabroad or in a FTZ. Key elements: Permanence is determined by DIAN. Documents need to be explicit. 55. TEMPORARY EXPORT FOR REIMPORTING IN THE SAME CONDITION It is the export mode regulating the temporaryexit of national or nationalized merchandise fromnational custom territory, to attend a specificpurpose abroad, in a fixed term, during this termmerchandise has to be reimported withoutundergoing any modification. Key elements: It follows the same process as a definitive export. Normal deterioration is excluded 56. RE-EXPORTING It is the mode regulating the definite exit fromNCT of merchandise which were under atemporary import mode or a transforming andassembling mode. Key factors: Temporary import Docs: DIM & mandate 57. RE-SHIPMENT It is the mode regulating the exit from NCT ofmerchandise coming from abroad which arebeing stored and have not been legallyabandoned nor undergone any import mode. Key factors: Chemical substances controlled by ConsejoNacional de Estuperfacientes are not authorized. 58. URGENT DELIVERIES & POST TRAFFIC EXPORTS Postbags, Mail and Urgent Deliveries with nohigher value of 1000 USD requiring urgent andfast delivery for their consignee can beincluded in this mode. Key factors: No value higher than 1.000 USD Only DIAN authorized companies. 59. NON VALUED SAMPLES EXPORTS Simplified DEX has to be presented. Those merchandise declared as samples whichtotal FOB Value does not surpass the limitestablished by DIAN. Key factors: Value no higher than 10000 USD yearly. That limit does not apply for coffee and Proexportsamples. 60. TRAVELERS TEMPORARY EXPORTS Export of National or nationalized merchandisewhich are taken by travelers going out of thecountry and want to be re-imported once theyget back to the country, without payment ofduties. Key factors: Support Documents: Simplified DEX, passport andticket. Personal Belongings taken by travelers going out ofthe NCT are not included in this mode. 61. MENAGE EXPORT In this operation, the personal belongings of ahousehold unit or family or individual, leavesthe NCT with the intention of living for anindefinite time abroad. Key factors: Simplified DEX must be presented and subscribed by themenage owner or an authorized person. Merchandise has to be presented before DIAN togetherwith a detailed list indicating quantities and description. 62. SPECIAL EXPORT PROGRAMS It is the operation in which a person living abroad buys rawmaterial from a local producer in Colombia, demanding themerchandise delivery to another producer also living inColombia who is contracted to manufacture and export thegoods made out of the raw materials according theinstructions given by the foreign buyer. Key factors: The raw material or inputs delivery to the final good manufacturer is considered an Export. Final good manufacturer receives the raw material or inputs as a temporary import. The limit term to export the final good is 6 months. It can be renewed by DIAN just once for maximum 3 months, with a justification from the interested.