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  1. 1. International Business II
  2. 2. 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
  3. 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. 4. 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.
  5. 5. 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
  6. 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?
  8. 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 EMC´s when necessary. (Proper Staff)
  9. 9. STEPS FOR DESIGNING AN X STRATEGY1. 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. 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. 11. MARKET CHOICE• Economic, Geographic & Political Review• Freight Estimated Cost• Product Entry Demands & Comercial LegislationGETTING MK INFO• Product• Prices• Trading• Competitors• Promotion
  12. 12. 2.FIRM’S SITUATION EVAL REFERRING THE CHOSEN MARKET• Structure• Production• Finance• Product• Marketing• Competitiveness3.EXPORT PLANNING• Objectives• Strategies• Customers search• Checking List
  13. 13. 4.X PLAN EXECUTION & FOLLOW UP• Int Quotation or valuation• X Logistics• X Paperwork• Exports Tax Legislation• Exports Incentives• Results Evaluation
  14. 14. ARANCEL
  15. 15. ARANCELUnderstood in 2 different ways:• As a Tariff• As a Custom Code
  16. 16. AS TARIFF• Specific • Certain amount payment charged for each imported good unit (volume, lenght or weight).• Ad Valorem • Percentage of good’s value. Mostly Used• Mixed
  17. 17. TARIFFSAct 370/1994: Andean Community Countries rates:• 5%• 10%• 15% Varies according to the level of process.• 20%• 35% (Vehicles)
  18. 18. AS CUSTOM CODEHARMONIZED SCHEDULE• System using a code for grouping and classifying merchandise by cathegories for Int Trade.
  19. 19. HARMONIZED SYSTEM STRUCTURE 21 Sections 96 Chapters 1249 Custom Codes (Four Digits) 5018 Sub Custom Code (Six Digits) Legal Notes General Rules
  20. 20. MERCHANDISE GROUPING WITHIN THE NOMENCLATUREBy Nature By two main By Industrial chemistry ActivityKingdom branches • 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. 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 químicas...• VI. Plásticos y sus manufacturas• VII. Caucho y sus manufacturas• VIII. Pieles, cueros, peletería y manufacturas de estas materias...
  22. 22. 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. Metales comunes y manufacturas de estos metales.
  23. 23. NOMENCLATURE• XVI. Maquinas y aparatos, material eléctrico y sus partes. Aparatos de grabación…• 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.
  24. 24. LEGAL NOTES Including Excluding  From Section Defining  From Chapter Precisioning  From Subcode Complement
  25. 25. Exercise• Using Arancel Legis look for the custom codes of the following elements:
  26. 26. Exercise9705.00.00.00 8517.12.00.00 8523.40.21.00
  27. 27. Look for these products
  28. 28. Look for these products7103.91.20.00 0106.19.90.00 4910.00.00
  29. 29. 040640 8212.10.20.007007.11.01 5001.00.00.00 0508.00
  30. 30. DECLEARERS
  31. 31. CUSTOM AGENTSIf X is more than U$10.000If M is more than U$1.000It is compulsory to contract the services of a CA (SIA)
  32. 32. CUSTOM INTERMEDIARYAGENCIES – Agentes Aduaneros ( Formerly SIA)• Do errands & Papework refering to X/M/In Transit• Act on behalf of the Importer or Exporter
  33. 33. HIGHLY EXPORTER USERS (ALTEX)• Req: (12 last months FOB US2 m)(X=60% Total Sales They can be through Electronic Trade Confirmation)Benefits:• No Physical Inspection (May Be Random)• Custom Insp at their facilities• May do M (Temporary Import for Ind Processing)
  34. 34. PERMANENT CUSTOM USERS• 12 last m X or M U$ 8m OR 8U$m as an average 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. 35. OTHER DECLEARERS Legal Entities & Common people doing X or M not higher than U$10.000 or U$1.000 Travelers (Baggage) Turists (Vehicles) National Post Office (Post Traffic & Urgent Deliveries) Urgent Delivery Consignees (Catastrophes) The State, Territorial Entites, Diplomats Transporting Companies. (Cabotage) San Andres Business Men
  36. 36. EXPORTING PROCESS1. Get the Exporter National Register/RUT2. Market Research: Potential Buyers3. MINCOMEX Paperwork: National Producer Register-Certificate of origin Aplication (2 Years)4. Get the required approvals (INVIMA – ICA)VUCE5. Get the product ready /Approvals/Costing & Pricing.
  37. 37. EXPORTING PROCESS6. Identify The tariff subsection7. Negotiation (Get in touch with a buyer) (INCOTERM)8. Insurance and Freight Contracting (If applicable)9. Send Pro-Forma Invoice acceptance and Stablishment of Method of Payment (INCOTERMS)
  38. 38. IDENTIFICATION OF THE TARIFF SUBSECTIONIt is the number of international identification of productsand it is divided in the following way:Claveles miniatura Capitulo 06 Plantas vivas y productos de floricultura Partida Arancelaria Flores y capullos, cortados para ramos o 0603 adornos, frescos, secos, blanqueados, teñidos, impregnados o preparados de otra forma. Subpartida Arancelaria Claveles 0603.12 Posición Arancelaria Miniatura 0603.12.10.00
  39. 39. 10. Shipping Documents• Shipping Authorization• DEX (Export Declaration)• Pro-Forma Invoice• Commercial Invoice• Export Packing List• Certificate of Origin• Bill of Lading, Airway Bill, Consignment Note, Multimodal Transport Document• Licenses, Permissions or Approval
  40. 40. 11. DIAN/SIA ERRANDS (DIAN is gonna Check out the following info):There are two different types of inspection, Physical (Merchandise) and Documentary• Export Mode• Tariff Subsector• Description of the Merchandise• Quantity• Weight• FOB Value in U$• Country of destination
  41. 41. 12. VAT payback Inquiry (If it applies)13. Exporter gets the currencies and Reintegrates them.(Exchange Declaration #2) (More than 12 months BR) U$10.000 (Advanced Draft - 4 Months- Ext Debt) Resident External Debt Info (6) B. Rep
  42. 42. FINANCIAL ISSUES OF EXPORTING• Product Price (Exchange Rts, Insurance, Transportation, Duties, Wholesale Channels, Banking, Antidumping)• Method of Payment (Cash In Advance, Letter of Credit, Draft or Bill of Exchange & Open Account)• Financing Recievables (Factoring & Forfeiting)• Insurance (Transportation Risk – Political, Comercial & Foreign Exchange Risk)
  44. 44. EXPORT MANAGEMENT COMPANIES• Export arm of the manufacturer (agent)• Deal with X and M• Take care of Documents• Make Transportation arrangements• Give advise• Commission or Take title
  45. 45. EXPORT TRADING COMPANIES• Register IND & COM (Duty free purchases)• Furnisher Certificate (6Mths/ 1year / 6M)• Work on Demand rather than Supply (Match)• Identify suppliers who can fill orders from abroad
  46. 46. FOREIGN FREIGHT FORWARDERS• Import or Export specialist dealing with movement of goods.• “Travel Agents of Cargo”• Provide best routing and means of transportation (Space availability, cost and speed) Close relation with carriers• % of the shipment value + charge/# of services
  48. 48. INDUSTRIAL GOOD & SERVICES FREE ZONE Promote & Develope the ind process of Goods & Services aiming foreign Mkts Special Regimen (Duties, Customs, Exchange & Loans) Goods & Services: Cartagena & La Candelaria/Palmaseca y Pacifico/Barran/S. Marta/ /Cucuta/Rionegro/Bogota- Quindio/Cuidadela de la Salud/Arauca Turistic & Technological Services: Baru, Tierra Caribe/Posos Colorados/Centro Turistico Int.
  49. 49. EXPORTING ECONOMIC SPECIAL ZONES (ZEEE)• Attract FDI & NI with X purposes, employment, Tech Transfer and Region Dev.• Buenavntura, Cucuta, Ipiales,Valledupar, Tumaco• Benefits in Labor & Tax matters.• Customs and Tax matters• Requirements: New Invst, 1U$ M, X 80%
  51. 51. EXPORT MODES
  52. 52. EXPORT MODES – DECREE 26851. DEFINITE EXPORT (Exportación Definitiva)2. TEMPORARY EXPORT FOR PASIVE COMPLETION (Exportación Temporal Para Perfeccionamiento Pasivo)3. TEMPORARY EXPORT FOR REIMPORTING IN THE SAME CONDITION (Exportación Temporal Para Reimportación En El Mismo Estado)4. RE-EXPORTING (Reexportación)5. RE-SHIPMENT (Reembarque)
  53. 53. 6. URGENT DELIVERIES & POST TRAFFIC EXPORTS (Exportación Por Tráfico Postal Y Envíos Urgentes)7. NON VALUED SAMPLES EXPORTS (Exportación De Muestras Sin Valor Comercial)8. TRAVELER’S TEMPORARY EXPORTS (Exportaciones Temporales Realizadas Por Viajeros)9. MENAGE EXPORT (Exportación De Menajes)10. SPECIAL EXPORT PROGRAMS (Programas Especiales De Exportación) PEXDOCUMENTS KEPT FOR 5 YEARS
  54. 54. TEMPORARY EXPORT FOR PASIVE COMPLETION• It is the export mode which regulates the temporary exit of national or nationalized merchandise from national custom territory, for transforming, manufacturing or repairing abroad or in a FTZ.• Key elements: – Permanence is determined by DIAN. – Documents need to be explicit.
  55. 55. TEMPORARY EXPORT FOR REIMPORTING IN THE SAME CONDITION• It is the export mode regulating the temporary exit of national or nationalized merchandise from national custom territory, to attend a specific purpose abroad, in a fixed term, during this term merchandise has to be reimported without undergoing any modification.• Key elements: – It follows the same process as a definitive export. – Normal deterioration is excluded
  56. 56. RE-EXPORTING• It is the mode regulating the definite exit from NCT of merchandise which were under a temporary import mode or a transforming and assembling mode.• Key factors: – Temporary import – Docs: DIM & mandate
  57. 57. RE-SHIPMENT• It is the mode regulating the exit from NCT of merchandise coming from abroad which are being stored and have not been legally abandoned nor undergone any import mode.• Key factors: – Chemical substances controlled by Consejo Nacional de Estuperfacientes are not authorized.
  58. 58. URGENT DELIVERIES & POST TRAFFIC EXPORTS• Postbags, Mail and Urgent Deliveries with no higher value of 1000 USD requiring urgent and fast delivery for their consignee can be included in this mode.• Key factors: – No value higher than 1.000 USD – Only DIAN authorized companies.
  59. 59. NON VALUED SAMPLES EXPORTS• Simplified DEX has to be presented.• Those merchandise declared as samples which total FOB Value does not surpass the limit established by DIAN.• Key factors: – Value no higher than 10000 USD yearly. – That limit does not apply for coffee and Proexport samples.
  60. 60. TRAVELER’S TEMPORARY EXPORTS• Export of National or nationalized merchandise which are taken by travelers going out of the country and want to be re-imported once they get back to the country, without payment of duties.• Key factors: – Support Documents: Simplified DEX, passport and ticket. – Personal Belongings taken by travelers going out of the NCT are not included in this mode.
  61. 61. MENAGE EXPORT• In this operation, the personal belongings of a household unit or family or individual, leaves the NCT with the intention of living for an indefinite time abroad.• Key factors: – Simplified DEX must be presented and subscribed by the menage owner or an authorized person. – Merchandise has to be presented before DIAN together with a detailed list indicating quantities and description.
  62. 62. SPECIAL EXPORT PROGRAMS• It is the operation in which a person living abroad buys raw material from a local producer in Colombia, demanding the merchandise delivery to another producer also living in Colombia who is contracted to manufacture and export the goods made out of the raw materials according the instructions 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.