Export-Import Theory, Practices, and Procedures Export-Import Theory, Practices, and Procedures is the first book on the topic aimed squarely at the academic audience. Discussing theoretical issues in depth, this innovative textbook of- fers a comprehensive exploration of import procedures and export regulations, incorporat- ing the most relevant and current research information in these areas. The new edition includes: Updates on major developments in bilateral and regional trade agreements and on regulatory changes in export controls Changes to taxation laws in the United States and internationally that impact import/ export Changes to INCOTERMS 2000 and to letters of credit New developments in countertrade The new role of the Export-Import Bank This book combines an innovative conceptual and theoretical approach, a comprehensive analytical treatment, and an engaging and accessible presentation style to offer one of the most useful textbooks on the market for students and practitioners alike. More information can be found at www.com Belay Seyoum is Professor of International Business Studies at Nova Southeastern University in Fort Lauderdale, Florida, where he teaches a variety of courses in international business and economics.
Prior to coming to Nova Southeastern, Dr. Seyoum taught international business at Concordia University and at McGill University, in Montreal, Canada. Seyoum has published two books, as well as numerous articles in the area of international trade in several prestigious academic journals, such as the International Business Review, Journal of World Trade, the International Trade Journal, the Journal of World Business, and the Journal of Global Business. This page intentionally left blank Export-Import Theory, Practices, and Procedures 3rd Edition BELAY SEYOUM First published 2014 by Routledge 711 Third Avenue, New York, NY 10017 and by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Routledge is an imprint of the Taylor & Francis Group, an informa business © 2014 Taylor & Francis The right of Belay Seyoum to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. First edition, authored by Erdener Kaynak and Belay Seyoum, published by Routledge 2000 Second edition, authored by Belay Seyoum, published by Routledge 2008 Library of Congress Cataloging-in-Publication Data Seyoum, Belay, 1953– Export-import theory, practices, and procedures / Belay Seyoum.
pages cm Includes bibliographical references and index.S49 2013 382—dc23 2013022782 ISBN: 978-0-415-81837-7 (hbk) ISBN: 978-0-415-81838-4 (pbk) ISBN: 978-0-203-58150-6 (ebk) Typeset in Minion by Apex CoVantage, LLC Contents Introduction—A Brief History of International Trade. 2 1900 to the Present. 3 SECTION I—Overview of International Trade. 5 Chapter 1—Growth and Direction of International Trade.
7 Importance of International Trade to the Global Economy. 8 Determinants of Trade. 9 Volume and Direction of Trade. 10 Important Developments in Trade .1 The Limitations of Export-Led Growth .2 The Impact of the Financial Crisis on Exports.
17 Chapter 2—International and Regional Agreements Affecting Trade. 19 The GATT and the WTO. 19 Regional Integration Agreements (RIAs). 22 The North American Free Trade Agreement (NAFTA).
23 The European Union .1 The Euro Crisis and Implications. 35 vi Contents SECTION II—Export Marketing and Strategy. 37 Chapter 3—Setting Up the Business. 40 Business or Trade Name.
44 Bank Accounts, Permits, and Licenses. 46 Location and Use of Professional Services. 46 Organization for Export: Industry Approach. 47 General Principles of Taxation.
48 Taxation of Export-Import Transactions .1 Globalization and the Shrinking Tax Base. 61 Chapter 4—Planning and Preparations for Export. 63 Assessing and Selecting the Product. 63 International Market Research.
66 International Market Assessment. 67 Developing an International Business Plan. 70 Export Counseling and Assistance. 70 Overseas Travel and Promotion .1 Developing Export Markets .2 Strategies for Entering New Markets.
83 Chapter 5—Export Channels of Distribution. 94 Locating, Contacting, and Evaluating Agents and Distributors. 97 Contracts with Foreign Agents and Distributors (Representatives). 98 Major Clauses in Representation Agreements.
100 Maintaining and Motivating Overseas Representatives .1 Export Channel Decisions of Two U.2 The Internet and Exporting: A Focus on Developing Countries. 107 Chapter 6—International Logistics, Risk, and Insurance. 109 External Influences on Logistics Functions. 111 Typical Logistics Problems and Solutions.
112 The International Logistics Process. 115 Risks in Foreign Trade. 117 Marine and Aviation Insurance. 120 Claims and Procedures.
127 Contents vii Chapter Summary .2 Marine Insurance: Inchmaree Clause. 134 SECTION III—Executing the Transactions. 135 Chapter 7—Pricing in International Trade. 137 Determinants of Export Prices.
138 Pricing in Export Markets. 141 Calculating the Export Price. 161 Chapter 8—Export Sales Contracts. 163 Harmonization of Contract Law.
163 CISG: Essential Elements. 165 Pertinent Clauses in Export Contracts .2 China National Products versus Apex Digital, Inc. 177 Chapter 9—Trade Documents and Transportation. 179 Documentation in Export-Import Trade.1 What Constitutes a Package Under COGSA? .2 The Container Revolution.
210 SECTION IV—Payment Terms and Procedures. 213 Chapter 10—Exchange Rates and International Trade. 215 Foreign Exchange Transactions. 215 Protection Against Exchange Rate Risks.
223 viii Contents Review Questions. Dollar Maintain Its Key Currency Status?. 226 Chapter 11—Methods of Payment. 231 Documentary Letter of Credit.
236 Cash in Advance. 244 New Payment and Financing Alternatives. 244 Fraud in Documentary Credits. 246 Other Letters of Credit.
253 Letters of Credit .1 Dishonoring Letters of Credit .2 The Independent Principle in Letters of Credit .3 Deferred Payment in Letters of Credit (L/C). 259 Origins of Countertrade. 259 Benefits of Countertrade. 260 Theories on Countertrade.
261 Forms of Countertrade. 263 Countertrade and the WTO. 269 Countertrade and the International Monetary Fund. 270 Governments’ Attitudes Toward Countertrade.1 The Bofors-India Countertrade Deal.
276 SECTION V—Financing Techniques and Vehicles. 279 Chapter 13—Capital Requirements and Private Sources of Financing. 281 Capital Sources for Export-Import Businesses. 282 Private Sources of Export Financing .1 Tadoo’s Sales to Belgium.
297 Chapter 14—Government Export Financing Programs. 299 Export Credit Agencies (ECAs) in Various Countries. 300 Export-Import Bank of the United States (Eximbank). 302 Small Business Administration.
311 Overseas Private Investment Corporation (OPIC). 312 Contents ix Private Export Funding Corporation. Department of Agriculture .1 Trade Finance for Small and Medium-Size Enterprises in Transition Economies .2 Eximbank Financing: Selected Cases. 318 SECTION VI—Export Regulations and Tax Incentives.
321 Chapter 15—Regulations and Policies Affecting Exports. 323 Export Licensing and Administration. 335 Foreign Corrupt Practices. 338 Antitrust Laws and Trade Regulation.
344 Incentives to Promote Exports .1 Export Trade Certificate of Review .2 Selected Cases in Enforcement of FCPA. 360 SECTION VII—Import Procedures and Techniques. 363 Chapter 16—Import Regulations, Trade Intermediaries, and Services. 365 Import Restrictions in the United States.
Free-Trade Agreements (FTAs). 371 Trade Intermediaries and Services.1 Tax Deduction for Processing in Maquilas: Mere Assembly or Fabrication.2 Import Penetration Rates in U. High-Value Industries: Focus on China. 381 Chapter 17—Selecting Import Products and Suppliers.
383 Selecting Products for Importation. 383 Determining Import Volume. 388 Selecting the Supplier. 389 Pricing the Imported Product.
393 Import Marketing Channels .1 The ATA Carnet: Unlocking Customs for Temporary Entry of Goods .2 Maytag’s Triad Strategy. 400 x Contents Chapter 18—The Entry Process for Imports. 401 The Entry Process. 402 The Harmonized Code (HS Code).
409 Rules of Origin and Other Marking Requirements .1 Deemed Liquidation by Customs. 419 Chapter 19—Import Relief to Domestic Industry. 420 Import Relief under the WTO. 420 Unfairly Traded Imports.
421 Fairly Traded Imports. Import Relief to Domestic Industries. 422 Antidumping and Countervailing Duties. 422 Antidumping and Countervailing Duty Proceedings.
425 Other Trade Remedies .1 Similar Products and Dumping .2 Dominican Republic: Safeguard Measures on Imports of Polypropylene Bags and Tubular Fabric. 434 Chapter 20—Intellectual Property Rights. 436 What Are Intellectual Property Rights?. 436 Intellectual Property Rights and International Trade.
438 Protection of Intellectual Property Rights. 439 International and Regional Protection. 443 Global E-Commerce: Selling in a Networked Economy. 447 International Regulation of Electronic Commerce.1 Patents and Access to Lifesaving Drugs .2 Intellectual Property Rights and International Trade.
455 Appendix A—Trading Opportunities in Selected Countries. 457 Appendix B—Importing into the United States. 505 Appendix C—Trade Profiles of Selected Countries. 513 Appendix D—Average Tariff Rates of Selected Countries.
516 Contents xi Appendix E—Doing Business with China. 526 Appendix G—Export Credit Agencies in Selected Countries. 541 Appendix H—A Brief Comparison of Cargo Conventions. 556 Appendix I—Countries That Are Members of Cargo Conventions.
562 Appendix J—Rotterdam Rules. 563 Appendix K—Freight Calculations. 578 Appendix L—Sample Export Business Plan: Donga Michael Export Company. 580 Appendix M—Sample Import Business Plan: Otoro Import Company.
585 Appendix N—Export Sales Contract (Basic Clauses). 590 Appendix O—Sample Distributorship Agreement. 599 Appendix P—Sample Sales Representative Agreement. 605 Appendix Q—North American Free Trade Agreement.
611 Appendix R—Trade Documents. 633 This page intentionally left blank Introduction A Brief History of International Trade Ancient Period International trade based on the free exchange of goods started as early as 2500 BC. Archae- ological discoveries indicate that the Sumerians of Northern Mesopotamia enjoyed great prosperity based on trade by sea in textiles and metals. The Greeks profited by the exchange of olive oil and wine for grain and metal somewhere before 2000 BC.
By around 340 BC, many devices of modern commerce had made their appearance in Greece and its distant settlements: banking and credit, insurance, trade treaties, and special diplomatic and other privileges. With the decline of Greece, Rome became powerful and began to expand to the East. In the first century AD, the Romans traded with the Chinese along the Silk Road and developed many trade routes and complex trading patterns by sea. However, the absence of peace made traveling unsafe and discouraged the movement of goods, resulting in the loss of distant markets.
By the time of the breakup of the Roman Empire in the fifth century, the papacy (papal supremacy) had emerged as a strong institution in a new and unstable world. The Church’s support (sponsorship) for the crusades (eleventh century) revived international trade in the West through the latter’s discovery and introduction of new ideas, customs, and products from the East. New products such as carpets, furniture, sugar, and spices brought from Egypt, Syria, India, and China stimulated the markets and the growing commercial life of the West. This helped Italian cities such as Venice and Genoa to prosper and to replace Constantinople as the leading center of international commerce.
Letters of credit and bills of exchange and insurance of goods in transit were extensively used to accommodate the growing commercial and financial needs of merchants and travelers. By the end of the fifteenth century, the center of international commerce had moved from the Mediterranean to Western Europe. Spain, Portugal, and, later, Holland became the focal points of international commercial activity. The more developed areas of Europe were 2 Introduction changing from a subsistence economy to one relying heavily on imports paid by money or letters of credit.