1	Exporting An Overview
2	Welcome Introductions & Expectations
3	Agenda Day 1 Introduction & Overview The Global Supply Chain The Players in the Export Process Incoterms Classification – Schedule B Export Controls Export Compliance Day 2 Documentation Shipping Insurance Payment Strategies Foreign Corrupt Practices Act Free Trade Agreements Drawbacks Exporting Resources
4	Introduction and Overview Operational Longer Supply Chain Loss Damage Delay Financial Currency fluctuations Collection exposure Expensive and burdensome remedies See operational and administrative issues Administrative Customer Service Language Currency Convenience Time Zones Sales Distance to market Distance to client Language Culture
5	Introduction and Overview New markets Increased sales Broader exposure New business partnerships Customers Suppliers
6	Introduction and Overview Logistics Transportation Weather Customs Cultural Language The way business is done Financial Payment considerations Terms of sale Foreign currency exposure
7	Introduction and Overview Stick around for the next two days and we’ll see what we can come up with.
8	Corporate Integration A Complex Organization
9	Corporate Integration A Simple Organization
10	Corporate Integration The all too often organization
11	Global Supply Chain What does that mean?
12	The Global Supply Chain Starting with unprocessed raw materials and ending with the final customer using the finished goods, the supply chain links many companies together. The material and informational interchanges in the logistical process stretching from acquisition of raw materials to delivery of finished products to the end user. All vendors, service providers and customers are links in the supply chain. Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.
13	Supply Chain vs. Logistics
14	Logistics Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements. The management of inventory, at rest or in motion.
15	Some other related terms… Demand Chain – Another name for the supply chain, with emphasis on customer or end-user demand pulling materials and product through the chain. Value Chain – A series of activities, which combined, define a business process; the series of activities from manufacturers to the retail stores that define the industry supply chain.
16	Exports drive the global supply chain
17	Shipping Terminology http://www.cscmp.org/Downloads/Resources/glossary03.pdf http://www.insurancetranslation.com/Glossary_Agent/shipping.htm
18	The Players
19	Government Agencies Bureau of Industry and Security (BIS) The mission of the Bureau of Industry and Security (BIS) is to advance U.S. national security, foreign policy, and economic interests. BIS's activities include regulating the export of sensitive goods and technologies in an effective and efficient manner; enforcing export control, anti-boycott, and public safety laws; cooperating with and assisting other countries on export control and strategic trade issues; assisting U.S. industry to comply with international arms control agreements; and monitoring the viability of the U.S. defense industrial base and seeking to ensure that it is capable of satisfying U.S. national and homeland security needs.
20	Government Agencies (cont’d.) Directorate of Defense Trade Controls (DDTC) Advance national strategic objectives and U.S. foreign policy goals through timely enforcement of defense trade controls and the formulation of defense trade policy. The Directorate of Defense Trade Controls (DDTC), Bureau of Political-Military Affairs is charged with controlling the export and temporary import of defense articles and defense services covered by the United States Munitions List (USML). It has among its primary missions (a) taking final action on license applications for defense trade exports and (b) handling matters related to defense trade compliance, enforcement, and reporting.
21	Government Agencies (cont’d.) Office of Foreign Assets Control (OFAC) The Office of Foreign Assets Control administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction. OFAC acts under Presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze foreign assets under US jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments.
22	Government Agencies (cont’d.) Nuclear Regulatory Commission (NRC) The NRC's mission is to regulate the Nation's civilian use of byproduct, source, and special nuclear materials to ensure adequate protection of public health and safety, to promote the common defense and security, and to protect the environment.
23	Government Agencies (cont’d.) Drug Enforcement Administration (DEA) The mission of the Drug Enforcement Administration (DEA) is to enforce the controlled substances laws and regulations of the United States and bring to the criminal and civil justice system of the United States, or any other competent jurisdiction, those organizations and principal members of organizations, involved in the growing, manufacture, or distribution of controlled substances appearing in or destined for illicit traffic in the United States; and to recommend and support non-enforcement programs aimed at reducing the availability of illicit controlled substances on the domestic and international markets.
24	Incoterms International Terms of Sale
25	What are Incoterms? The word Incoterms stands for international commercial terms. The chosen Incoterm is a term of the contract of sale. Their purpose is to: Standardize the trade terms used in international contracts of sale. Develop the rules of interpretation for these terms. Explain the division of costs and risks between the various parties to an international sale.
26	Where do Incoterms come from? Developed and published by the International Chamber of Commerce First edition published in 1936 Revised every ten years or so Preceding revision dating back to 1990 Current version released in 2000 improved consistency of application updated to reflect current commercial practice
27	The 13 Incoterms EXW – Ex Works FCA – Free Carrier FAS – Free Alongside Ship FOB – Free On Board CFR – Cost and Freight CIF – Cost, Insurance & Freight CPT – Carriage Paid to CIP – Carriage & Insurance Paid to DAF – Delivered at Frontier DES – Delivered Ex Ship DEQ – Delivered Ex Quay DDU – Delivered Duty Unpaid DDP – Delivered Duty Paid
28
29
30	Incoterms - An Illustration
31	Tariff Classification Schedule B
32	Tariff Classification – Schedule B What is Schedule B or the Harmonized System? Uniform numbering system to identify commodities in international trade Integrated the TSUSA with the CCCN Implemented in the late-1980’s through the General Agreement on Tariffs and Trade (GATT) Divided into 22 sections, and sections into 98 chapters 1200 four-digit general headings 5200 six-digit international subheadings U.S. application further expanded this to 10 digits
33	Tariff Classification – Schedule B Census Bureau Schedule B Export Code Book
34	Tariff Classification – Schedule B Criteria for classification General Rules of Interpretation (GRI) Six (6) basic principles for applying the tariff in the classification of your product. U.S. Rules of Interpretation There is one (1) additional U.S. rule.
35	Tariff Classification - Schedule B
36	Export Controls International Traffic in Arms Regulations (ITAR) Export Administration Regulations (EAR)
37	International Traffic in Arms Regulations ITAR
38	ITAR Application Firearms Explosives Aircraft and parts Protective equipment (pressure suits, helmets, gas masks, etc.) Electronics (including communications or navigation equipment) Some software Many chemicals
39
40	Designation of defense articles and services Specifically designed, developed, configured, adapted, or modified for a military application, and Do not have predominant civil applications, and Do not have performance equivalent to those of an article or service used for civil applications, or Specifically designed, developed, configured, adapted, or modified for a military application, and has significant military or intelligence applicability such that control under (these regulations) is necessary.
41
42	U.S. Munitions List - General Categories I – Non-automatic and semi-automatic firearms to a caliber .50 inclusive II – Guns and armament III – Ammunition/ordinance IV – Launch vehicles, guided missiles, ballistic missiles, rockets, torpedoes, bombs and mines V – Explosives and energetic materials, propellants, incendiary agents and their constituents VI – Vessels of war and special naval equipment VII – Tanks and military vehicles VIII – Aircraft and associated equipment IX – Military training equipment X – Protective personnel equipment XI – Military electronics XII – Fire control, range finder, optical and guidance and control equipment XIII – Auxiliary military equipment XIV – Toxicological agents, including chemical agents, biological agents, and associated equipment XV – Spacecraft systems and associated equipment XVI – Nuclear weapons, design and testing related items XVII – Classified articles, technical data and defense services not otherwise enumerated XVIII – Directed energy weapons XIX – [Reserved] XX – Submersible vessels, oceanographic and associated equipment XXI – Miscellaneous articles
43	State Department license application process All manufacturers, exporters, and brokers of defense article, defense services, or related technical data, as defined on the United States Munitions List, are required to register with the Directorate of Defense Trade Controls (DDTC). License applications can be filed by traditional methods or electronically via the Electronic Licensing Entry System (ELLIE).
44	Export Administration Regulations (EAR)
45	Export Administration Regulations (EAR) Check the Export Administration Regulations (EAR) Export Administration is part of the U.S. Dept. of Commerce
46	Is your product subject to the EAR?
47	Do you need an export license?
48	Do you need an export license? Key steps to follow Is your item subject to the EAR? Get your Export Control Classification Number (ECCN) from the Commerce Control List (CCL) if applicable Check for license exceptions Check the Commerce Country Chart Check the various restricted entity lists
49	Export Administration Regulations (EAR) Interpretation Does your commodity have an Export Control Classification Number?
50	Commerce Control List (CCL) Items in the Commerce Control List are identified with Export Control Classification Numbers (ECCN’s) ECCN’s are comprised of digits and letters with significance to each character position. The first character represents the general category. The second represents the group. The third signifies the reason for control.
51	Commerce Control List (CCL) The CCL is divided into 10 categories. 0. Nuclear Materials, Facilities and Equipment and Miscellaneous 1. Materials, Chemicals, “Microorganisms,” and Toxins 2. Materials Processing 3. Electronics 4. Computers 5. Telecommunications and Information Security 6. Lasers and Sensors 7. Navigation and Avionics 8. Marine 9. Propulsion Systems, Space Vehicles and Related Equipment
52	Commerce Control List (cont’d.) Each category is further divided into five groups. A. Equipment, Assemblies and Components B. Test, Inspection and Production Equipment C. Materials D. Software E. Technology
53	Commerce Control List (cont’d.) The types of reasons for control are: 0. National Security reasons 1. Missile Technology reasons 2. Nuclear Nonproliferation reasons 3. Chemical & Biological Weapons reasons 9. Anti-terrorism, Crime Control, Regional Stability, Short Supply, UN Sanctions, etc.
54	Export Control Classification Numbers (ECCN’s) A typical ECCN number can look like the following. Please note the significance of the digits. 3 A 9 80 Electronics; Equipment; Anti-Terrorism; Position on the CCL
55	License Exceptions NLR – No License Required LVS - Limited Value Shipments. GBS - Group B Shipments. CIV - Civilian End Use. TSR - Technology and Software under Restriction. TMP - Temporary Export or Import or Re-export. RPL - Replacements. GOV - Governments and International Organizations. GFT - Gift Parcels and Humanitarian Donations. AVS – Aircraft and Vessels. BAG – Baggage. TSU – Technology and Software Unrestricted. APR – Additional Permissive Re-Exports. ENC – Encryption Commodities and Software. AGR – Agricultural Commodities.
56	Commerce Country Chart
57	Various Restricted Entity Lists Entity List Specially Designated Nationals and Blocked Persons List Unverified List Denied Persons List Debarred List
58	Denied Persons List
59	Commerce Department Export Licenses The good news is that most items do not require a license.
60	Commerce Department License Application Process Form BIS-748P Multipurpose Application Form by fax 202.482.3617 by phone 202.482.3617 by mail: U.S. Dept. of Commerce Office of Exporter Services, P.O. Box 273, Washington, D.C. 20044 Online through the Simplified Network Application Process (SNAP)
61	Export Compliance
62	Export Compliance Compliance Overview Know Your Customer
63	Export Compliance Export Management Systems (EMS)
64	Export Management Systems (EMS)
65	Export Compliance Transshipment Country Export Control Initiative (TECI)
66	Best Practices – Guiding Principles Guiding Principles of Best Practices Industry and government should work together to foster secure trade that reduces the risk of diversion of items subject to export controls. Secure trade will reduce the diversion of dual-use items to prohibited end-uses, end- users, and destinations. Secure trade will encourage the more expeditious movement of legitimate trade through borders and ports. Industry can achieve secure trade objectives through appropriate export management practices.
67	Best Practices After discussions with private industry, BIS put forward the following 12 best practices for Transit, Transshipment, and Re-export of Dual-Use Items Subject to the Export Administration Regulations.
68	Best Practices Best Practice #1. Each Company should develop a written policy against allowing its exports or services to contribute to terrorism or programs of proliferation concern. Best Practice #2. Each Company should identify one person, who reports to the Company’s Chief Executive Officer, General Counsel, or other senior management official, as the ultimate party responsible for oversight of the Company’s export control compliance program. Best Practice #3. Each Company should create an export control compliance program. A Company should integrate this compliance program into its overall regulatory compliance, security, and ethics programs.
69	Best Practices Best Practice #4. Each Company should ensure that relevant Company personnel receive regular training in export control compliance responsibilities. Best Practice #5. An Exporter/Re-exporter should seek to utilize only those Trade Facilitators/Freight Forwarders that also observe these best practices. Best Practice #6. An Exporter/Re-exporter should communicate the appropriate Export Control Classification Number (ECCN) or other classification information for each export/re-export to the end-user and, where relevant, to the ultimate consignee. An Exporter/Re-exporter should also make such ECCN available to the Trade Facilitator/Freight Forwarder, if it is not otherwise accessible by the Trade Facilitator/Freight Forwarder.
70	Best Practices Best Practice #7. A Company should screen all parties to proposed transactions for the presence of parties who are: are subject to an order denying export privileges; on the Unverified List; on the Entity List; or on any list of U.S. Government sanctioned parties, and should maintain a record of such screening. Best Practice #8. A Company should screen all exports/re-exports against a list of embargoed destinations, and should maintain a record that such screening was performed. Best Practice #9. With respect to transactions to, from, or through transshipment hubs, Exporters/Re-exporters should take appropriate steps to know who the end-user is and to determine whether the item will be re-exported or incorporated in an item to be re-exported.
71	Best Practices Best Practice #10. With respect to transactions to, from, or through transshipment hubs, Companies should have in place compliance and/or business procedures to be immediately responsive to theft or unauthorized delivery. This include procedures to ensure that the item exported has reached the proper end-user, such as documented confirmation. Best Practice #11. With respect to transactions to, from, or through transshipment hubs, Companies should pay heightened attention to the Red Flag Indicators on the BIS Website and in the “Know Your Customer Guidance” set forth in Supplement 3 to Part 732 of the EAR. Best Practice #12. When a Company encounters a suspicious transaction, such as those outlined in the “Know Your Customer” Guidance and Red Flags, it should inquire further and attempt to resolve any questions raised by the transaction. If the circumstances can be explained or justified, then it may proceed with the transaction. If there continue to be reasons for concern after the inquiry, the Company should refrain from the transaction. If the transaction is determined to involve a potential or actual violation of the EAR, the Company should contact BIS or another U.S. law enforcement agency immediately and maintain all relevant records.
72	Export Documentation Where the rubber meets the road.
73	Commercial Invoice Every country requires a commercial invoice of some sort. This is the primary document used in international trade. This document contains, at minimum, the name and address of the shipper, the name and address of the consignee, a description of the goods and the price at which they are being sold.
74
75	Packing List Another common document is called a packing list. This document specifies what you are shipping, how it is marked and packaged, and the weights and dimensions of the goods. It is important for the consignee from a handling and receiving perspective.
76
77	Certificate of Origin For most countries, a standard certificate of origin is usable. This form attests to the country of manufacture of the goods you are shipping. It should be considered a standard document to use for all exports, regardless of the country of destination.
78
79	NAFTA Certificate of Origin Used to validate that the item shipped is a product of one of the NAFTA countries, viz. Canada Mexico United States
80
81	Shipper’s Export Declaration The U.S. Government, for most exports, requires only one document - the Shipper’s Export Declaration. This is commonly referred to as an export dec or SED. The government uses the data collected from this document to assess what, how much and to where we export.
82
83	Automated Export System (AES) AESDirect is the U.S. Census Bureau's free, Internet based system for filing Shipper's Export Declaration (SED) information to the Automated Export System (AES). It is the electronic alternative to filing a paper SED, and can be used by U.S. Principal Parties in Interest (USPPIs), forwarders, or anyone else responsible for export reporting.
84	Why use AESDirect? Streamlines the export reporting process by reducing the paperwork burden on the trade community Reduces costly document handling and storage, and ensures that export information is filed in a timely manner. Improves the quality of the export trade statistics, helping the Census Bureau provide the Government and the public more accurate information. By the end of 2005, you probably will have to.
85	Proforma Invoice Thee primary uses Quotation Information to obtain an import license In lieu of a commercial invoice at time of importation into the United States. A bond is given for production of the required invoice not later than 120 days from the date of entry.
86
87	Shipping Getting from here to there
88	International Freight Forwarders and Carriers An Overview
89	International Freight Forwarders Transportation and logistics intermediaries typically offering the following services Freight consolidation Document preparation Banking services Cargo insurance Door-to-door capability Shipment visibility Customs brokerage Warehousing Export packing
90	International Freight Forwarders Round up the usual suspects BAX Global DHL Danzas EGL Exel Expeditors GeoLogistics Kuehne & Nagel Menlo Forwarding (UPS SCS) Panalpina Schenker
91	Ocean Freight Container Ships Bulk Carriers Ro-Ro Vessels Break-Bulk
92	Ocean Carriers APL COSCO Evergreen Hapag-Lloyd Maersk Sealand P&O Nedlloyd OOCL Zim Container
93	Ocean Freight Pricing Pre-carriage – Trucking to port Terminal Handling (THC) – movement at pier Loading Ocean Freight (line haul) Bunker Adjustment Factor (BAF) Currency Adjustment Factor (CAF) Peak Season Surcharges (PSS) Terminal Handling (THC) – movement at pier Unloading On-Carriage – Trucking to destination Assorted other minor charges
94	Ocean Freight Pricing The basis for the line haul Full containers (FCL) are priced at a flat fee per box. LCL (less than container load) is priced by the weight or the measure (W/M) of the shipment, whichever produces the greater revenue for the carrier. Weight or measure (W/M) represents 1,000 kgs. or 1 m³. $30 W/M would mean you would pay $30 per 1,000 kgs. or per cubic meter, whichever produces the greater revenue for the carrier.
95	Airfreight Carriers All major commercial airlines FedEx UPS BAX Global DHL Polar Air Atlas Air
96	Airfreight Pricing The line haul rate (airport to airport) is generally priced on a cost per kilo basis. Typically, the higher the weight, the lower the cost per kilo. The most common weight breaks are: Minimum,<100kg, >100kg, >300 kg, >500kg, >1,000kg, >1,500kg.
97	International Freight Rate Negotiation Contender selection RFQ (Request for Quote) Bid analysis Supplier interviews Supplier selection Implementation Follow-up
98	Hazardous Materials Transportation Hazardous materials transportation is a complex, highly regulated process that requires formalized training and strict compliance with the applicable regulations. Before you ship any hazardous materials, you must be formally trained. If you ship hazmat, and you are not formally trained, stop what you are doing and get trained immediately. There is both corporate and personal liability involved here if it is discovered that you are not complying with the law.
99	Hazardous Materials Transportation There are nine major classes of hazardous materials: Class 1 - Explosives Class 2 - Gases Class 3 - Flammable Liquids Class 4 - Flammable Solids/Spontaneously Combustible/Dangerous When Wet Class 5 - Oxidizers/Organic Peroxides Class 6 - Poisons/Infectious Substances Class 7 - Radioactives Class 8 - Corrosives Class 9 - Miscellaneous
100	Hazardous Materials Transportation Package marking and labeling
101	Hazardous Materials Transportation Shipping Papers
102	Cargo Insurance Don’t leave home without it…
103	Cargo Insurance - Overview If it is their responsibility, the exporter should either obtain its own policy or insure the cargo under a freight forwarder's policy for a fee. Shipments by sea are covered by marine cargo insurance. Air shipments may also be covered by marine cargo insurance or insurance may be purchased from the air carrier. Export shipments are usually insured against loss, damage, and delay in transit by cargo insurance. Carrier liability is frequently limited by international agreements. The coverage is substantially different from domestic coverage. Arrangements for insurance may be made by either the buyer or the seller, in accordance with the terms of sale. Coverage is usually placed at 110 percent of the CIF (cost, insurance, freight) or CIP (carriage and insurance paid to) value.
104	Cargo Insurance - Terminology Average A verified loss. General Average A legal requirement that all parties in a voyage contribute proportionately to cover expenses incurred as a result of damage to a ship and/or its cargo. Particular Average Partial or total loss or damage to a single shipment, caused by a peril that does not cause a loss to other cargo in general or to the vessel. The opposite of general average. Peril A specific kind of risk.
105	Cargo Insurance - Coverage Free of Particular Average (FPA) Minimum coverage. Limited to general average and risks that affect the vessel and multiple shipments, e.g. fire, boiler burst, vessel structural defects, explosion, stranding, sinking, and navigational errors. Only losses directly caused by these few types of perils are covered.
106	Cargo Insurance - Coverage With Particular Average (WA) Adds partial losses for heavy weather, lightning, sea water, and jettison to the perils covered by FPA. All Risk Broadest coverage Adds water damage, ship’s sweat, steam, condensation, damage by hook, improper stowage, theft, pilferage, mud & grease, non-delivery, breakage, and leakage to the with particular average perils. War Risk Strikes, Riots & Civil Commotion
107	Payment Strategies Toto, I have a feeling we’re not in Kansas anymore…
108	Methods of payment Payment before shipping Payment with order Cash in Advance Never use the CIA abbreviation Strongly favors the seller Open Account Same as in U.S., but with far greater risk Strongly favors the buyer
109	Methods of payment (cont’d.) Letter of Credit Normally referred to as an L/C The most common method of reducing payment risk in international sales transactions. A conditional undertaking by a bank, issued in accordance with the instructions of the account party, addressed to or in favor of the beneficiary. The bank promises to pay, accept, or negotiate the beneficiary’s draft up to a certain sum of money, in the stated currency, within the prescribed time limit, upon the presentation of stipulated documents. Any errors in the execution of the L/C are called discrepancies.
110	Methods of payment (cont’d.) Types of Letters of Credit Documentary letter of credit Guarantee from a financial institution that permits beneficiaries to draw payment(s) when producing documentation conforming to the detailed requirements contained therein. Standby letter of credit Guarantee from a financial institution that permits beneficiaries to draw payment(s) without the need of providing documentary evidence that certain tasks have been accomplished.
111
112
113	Methods of payment (cont’d.) Factoring Selling short-term accounts receivable at a discount. Forfaiting Selling longer-term accounts receivable or promissory notes at a discount. Usually applies to large export transactions. Bill of Exchange/Direct Collection Mechanically similar to L/C without the bank guarantee.
114	Methods of payment (cont’d.) Export Credit Insurance Commercial and country risk insurance on export receivables. Coface North America – www.coface.com Euler ACI – www.eulergroup.com FCIA – www.fcia.com Electronic Transactions Web-based communities where members can settle payment. TradeCard Bolero
115	Foreign Corrupt Practices Act The FCPA makes it unlawful to bribe foreign government officials to obtain or retain business. With respect to the basic prohibition, there are five elements which must be met to constitute a violation of the Act: The FCPA potentially applies to any individual, firm, officer, director, employee, or agent of a firm and any stockholder acting on behalf of a firm. The person making or authorizing the payment must have a corrupt intent, and the payment must be intended to induce the recipient to misuse his official position to direct business wrongfully to the payer or to any other person. The FCPA prohibits paying, offering, promising to pay (or authorizing to pay or offer) money or anything of value. The prohibition extends only to corrupt payments to a foreign official, a foreign political party or party official, or any candidate for foreign political office. A "foreign official" means any officer or employee of a foreign government, a public international organization, or any department or agency thereof, or any person acting in an official capacity. The FCPA prohibits payments made in order to assist the firm in obtaining or retaining business for or with, or directing business to, any person. The FCPA contains an explicit exception to the bribery prohibition for "facilitating payments" for "routine governmental action“.
116	Free Trade Agreements North American Free Trade Agreement (NAFTA) Trade between U.S., Canada, Mexico Effective 1994 Goal is totally free trade in NAFTA-eligible goods among the three countries by 2008 U.S. - Israel Free Trade Agreement Effective 1985 As of January 1, 1995, all eligible reduced rate imports from Israel were accorded duty-free treatment U.S. - Jordan Free Trade Agreement Signed December 2001 Free Trade area by 2011
117	Free Trade Agreements (cont’d.) U.S. - Singapore Free Trade Agreement Effective January 15, 2003 Singapore guarantees zero tariffs immediately on all U.S. goods, and the FTA ensures that Singapore cannot increase its duties on any U.S. product. For Singapore products entering the U.S. market, duties are phased-out at different stages, with the least sensitive products entering duty-free upon entry into force of the FTA and tariffs on the most sensitive products phased-out over a ten-year period.
118	Free Trade Agreements (cont’d.) U.S. – Chile Free Trade Agreement Effective January 1, 2004 On that date, tariffs on 90% of U.S. exports to Chile and 95% of Chilean exports to the United States were eliminated. Chile is currently ranked as the 36th largest export market for the United States. U.S. – Australia FTA Signed May 18, 2004 Will eliminate more than 99 percent of manufactured goods tariffs between the two countries from day one, open services and agricultural markets, and further deepen their already strong economic ties.
119	Free Trade Agreements (cont’d.) U.S. - Central America Free Trade Agreement (CAFTA) Signed May 28, 2004 More than 80 percent of U.S. exports of consumer and industrial goods will become duty-free in Central America (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) immediately, with remaining tariffs phased out over 10 years. Key U.S. export sectors will benefit, such as information technology products, agricultural and construction equipment, paper products, chemicals, and medical and scientific equipment. Most Central American goods already enter the U.S. duty-free. Under the Caribbean Basin Initiative (CBI), other U.S. preference programs, and MFN duty-free trade, nearly 77% of regional imports entered the U.S. duty-free in 2003. A free trade agreement would be reciprocal, giving U.S. goods duty-free treatment in Central America. Dominican Republic to be added.
120	Free Trade Agreements (cont’d.) U.S. – Bahrain FTA Signed September 14, 2004 100% of bilateral trade in consumer and industrial products will become duty-free immediately upon entry into force of the Agreement. Bahrain will provide immediate duty-free access for U.S. agricultural exports in 98% of agricultural tariff lines. Bahrain will phase out tariffs on the remaining products within ten years. The U.S. will provide immediate duty-free access on 100% of Bahrain’s current exports of consumer, industrial, and agricultural products to the United States. The United States will phase out remaining tariffs under the Agreement within ten years.
121	Duty Drawback Drawback is a refund of the duty paid (less 1% retained by U.S. Customs as a processing fee) which may be claimed if the imported merchandise is subsequently exported from the United States. The most common types of duty drawback are: Manufacturing – Drawback may be claimed on an exported article that has been manufactured from imported merchandise. You can also substitute domestically produced merchandise of the same kind and quality (fungible) as the imported duty-paid merchandise in the process of manufacture of and exported product being claimed for drawback. Unused – Drawback may be claimed on duty-paid merchandise that is exported from the U.S. without having been used in a process of manufacturing. Rejected merchandise – Drawback may be claimed on merchandise which does not conform to sample or specification, if it is exported under Customs supervision.
122	Duty Drawback (cont’d.) Benefits Manufacturers and exporters who take advantage of drawback are able to compete more effectively in foreign markets. How? Cash flow and profits are substantially improved because drawback reduces the cost of imported materials by the amount duty paid.
123	Exporting Resources Bureau of Industry and Security - http://www.bis.doc.gov/index.htm Export Administration Regulations - http://www.access.gpo.gov/bis/ear/ear_data.html Export Basics - http://www.export.gov/exportbasics/index.html Basic Guide to Exporting - http://www.unzco.com/basicguide/index.html Export Control Basics - http://www.bis.doc.gov/Licensing/ExportingBasics.htm Export.gov - http://www.export.gov/ Schedule B Search Engine - http://www.census.gov/foreign-trade/schedules/b/index.html Trade Information Center – Tariff & Tax Information - http://www.trade.gov/td/tic/tariff/index.html BIS Export Management Systems - http://www.bis.doc.gov/exportmanagementsystems/default.htm CLM Logistics Glossary - http://www.cscmp.org/Downloads/Resources/glossary03.pdf Export Info – http://www.xport.info/ AESDirect – http://www.aesdirect.gov/
124	That’s all folks… Summary Questions Review
125	Thank you!