1. International Trade Thursday, September 16, 2010 James Van Eenenaam

2. Agenda – Importing and Exporting 1. International Trade Introduction 2. International Trade Policy, Regulations and Requirements – a. WTO b. Tariff Classification and Customs Duties, Quotas and Other Import Requirements c. US Export Controls Requirements 3. International Trade Resources

3. International Trade Introduction Pres. Obamas Trade Policy Priorities Free and Fair Trade Support a rules-based trading system Advance social accountability Achieve progress on energy and environmental goals Make sure trade agreements address major unresolved issues (e.g., IPR, consumer product safety, trade security, trade facilitation/reduce trade barriers) Build on existing Free Trade Agreements Uphold commitment to developing countries – especially the poorest developing countries

4. International Trade Introduction National Export Initiative The Administration has determined that fundamental reform of the U.S. export control system is needed in each of its four component areas, with transformation to a: Single Control List Single Primary Enforcement Coordination Agency Single Information Technology System Single Licensing Agency New Cabinet-level focus on U.S. exports, expanding export financing, prioritizing government advocacy on behalf of U.S. exporters, new resources to U.S. businesses seeking to export, and ensuring a level playing field for U.S. exporters in global markets. Double exports and create 2 million new jobs within 5 years

5. International Trade Introduction International trade is subject to legislative, regulatory, political and market transformation International trade requires identifying opportunities and an understanding of trade compliance requirements, trade security, trade facilitation and safety In 2009, US Customs and Border Protection facilitated approximately $1.7 trillion in total import value (25% decrease from 2008 and equal to 2004 levels) In 2009, US Customs and Border Protection collected over $30 billion in duties Approximately 71% of all import value is duty free

6. International Trade Introduction China (21% of all shipments and 40% of all US duties) is the top trading partner of the US, followed by Canada, Mexico, Japan and Germany Chapters 27 (fuel and oil), 84 (machinery, parts), 85 (electrical articles, parts) and 87 (vehicles, parts), comprised 52% of total import value The US currently has Free Trade Agreements with 17 countries FTAs Pending Congressional Approval with Colombia, Korea and Panama. Estimated $1.34 billion in tariffs imposed on US exports to Colombia Currently under negotiation: Trans-Pacific Partnership Agreement Recently approved FTAs with Oman (1/1/2009) and Peru (2/1/2009) http://www.export.gov/fta/index.asp http://www.ustr.gov/trade-agreements

7. International Trade Policy, Regulations and Requirements World Trade Organization http://www.wto.org/ Imports: Department of Homeland Security - Customs and Border Protection (Enforces 400 trade laws for 50 US Government Agencies) http://www.cbp.gov/ Exports: Department of Commerce – Bureau of Industry and Security http://www.bis.doc.gov/ Exports: Department of State – Directorate of Defense Trade Controls http://www.pmddtc.state.gov/

8. World Trade Organization A global organization dealing with the rules of trade between nations A forum for governments to liberalize trade, negotiate trade agreements and settle trade disputes The goal is to help producers of goods and services, exporters, and importers conduct their business 153 member countries

9. U.S. Tariffs, Quotas and Other Import Regulations and Requirements Customs and Border Protection (CBP) administers imports into the United States 19 Code of Federal Regulations Parts 1-199, Customs Duties Harmonized Tariff Schedule of the United States Import = merchandise entered into the territory of the United States (50 states, D.C., and Puerto Rico) Licensed Customs Brokers – typically used by importers to enter/clear goods through CBP upon arrival

10. Importing – Things to Consider Your wholesale cost isn't what you pay for an item. Your wholesale cost is the cumulative total for getting that item to your warehouse, ready to be shipped to your customers. You may be paying fifty cents a vase, but after you pay a Customs broker, import duties, various fees, freight, consolidation, and insurance expenses, your actual cost of goods may be $2.25 each. Look at all your costs before you jump at a deal - anything you forget will come directly out of your profit margin. You'll have to allow significant lead time when placing an overseas order. It can sometimes take two or three months, or even longer, from the time you place your order to the time you receive the goods. Problems with Customs can delay your orders even further. The costs of air freight are probably ten times higher than the costs of ocean shipping, but it's a lot faster and less risky. You must understand when you need to receive your wares, in order to determine whether the benefits of air shipping will offset the additional expense. You need look at the legal aspects. There are numerous government forms to fill out and a great many regulations regarding your imports. You are responsible for ensuring that what you bring into this country complies with safety codes and all other applicable laws. Start with the Customs Broker Source: Article by Chris Malta & Robin Cowie of Worldwide Brands

11. U.S. Export Regulations Bureau of Industry and Security (Commerce) and Directorate of Defense Trade Controls (State) 15 Code of Federal Regulations Parts 730-774, Export Administration Regulations, covers commercial and dual-use commodities, software and technology Items are covered by a specific Export Control Classification Number (ECCN) found on the Commerce Control List (15 CFR 774.1) or a catch-all category (EAR 99) 22 Code of Federal Regulations Part 120-130, International Traffic in Arms Regulations (ITAR), covers items specially designed for military use The ITAR applies to items listed on the United States Munitions List (22 CFR Part 121.1), and the technology for the design, development, production or use of those items

12. International Trade Pro form invoice Represents the details of an international sale to the Customs authorities. Presented in the place of a commercial invoice when there is no sale between the sender and the importer, or if the terms of the sale between the seller and the buyer are such that a commercial invoice is not yet available at the time of the international shipmentcommercial invoice Letter of Credit Issued by a financial institution Used as payment to the exporter in an international transaction for deals between a supplier in one country and the customer in another country

13. Incoterms® 2010 Updated in 2010 Incoterms - short for "International Commercial Terms" Standard trade definitions most commonly used in international sales contracts Incoterms make international trade easier and help traders in different countries to understand one another Covers tasks, costs and risks involved in the delivery of goods Incoterms do not deal with transfer of title The risk of loss or damage of the goods is generally transferred when the seller has fulfilled its delivery obligation Include reference to a location of delivery Incoterm should be clearly stated in the contract Among the best known Incoterms are EXW (Ex works), FOB (Free on Board), CIF (Cost, Insurance and Freight), DDP (Delivered Duty Paid) Below is an example of the correct use of Incoterms® rules: FCA 123 Example Street, Paris, France Incoterms® 2010

14. International Trade Resources – Identifying Trading Partners and Shipping Costs US Department of Commerce, International Trade Administration, US Commercial Service http://trade.gov/index.asp http://export.gov/ http://www.buyusa.gov/home/fuse.html International Chamber of Commerce http://www.iccwbo.org/ http://www.iccwbo.org/incoterms/id3042/index.html World Trade Center Association http://world.wtca.org/portal/site/wtcaonline FITA http://www.fita.org/http://www.fita.org/

15. US Commercial Service Export.gov brings together resources from across the U.S. Government to assist American businesses in planning their international sales strategies and succeed in todays global marketplace. From market research and trade leads from the U.S. Department of Commerces Commercial Service to export finance information from Export-Import Bank and the Small Business Administration to agricultural export assistance from USDA, Export.gov helps American exporters navigate the international sales process and avoid pitfalls such as non-payment and intellectual property misappropriation.market researchtrade leadsU.S. Department of Commerces Commercial ServiceExport-Import Bank Small Business AdministrationUSDA

16. Why Countries Engage in International Trade? Countries engage in international trade for two basic reasons, each of which contributes to their gain from trade. First, countries trade because they are different from each other. Nations, like individuals, can benefit from their differences by reaching an arrangement in which each does the things it does relatively well. Second, countries trade to achieve economies of scale in production. That is, if each country produces only a limited range of goods, it can produce each of these goods at a larger scale and hence more efficiently than if it tried to produce everything. In the real world, patterns of international trade reflect the interaction of both these motives. Paul Krugman, International Economics

17. Any nation which leaves all her ports open to the World on equal terms will have commodities cheaper, sell its own production dearer, and be on the whole most prosperous - Benjamin Franklin