Import Process for BMW tires from Perú Presented by: Juan Sebastián Betancur Juan David Cálad Laura Victoria Díaz Juan Pablo Henao Presented to: Juan Alejandro Vásquez Ruiz Catholic University of PereiraFaculty of Administration and Economics Sciences International Business Program International Logistics Administration 2011- 02
IntroductionThe financial crisis seems don’t affect the automobile sector, on the contrary every time wefind many models with different features in the market. According to the Colombianmagazine Dinero 2001, the growing supply of vehicles in Colombia, is due to the financingand business strategies of different brands and it suggests that 2011 will be one of thebest years for the sector. This market is characterized by dynamism, not only for the entryof new competitors into the market but for the increase of the demand of automobiles andthe different prices. At the same time this means that every year more cars aredepreciated having a lower price and this fact is decisive for possible Colombian buyers.Both Colombia and Chile are the largest buyers’ countries of vehicles in South America,after Argentina and Brazil.BMW is one of brands already established in Colombia with a good position in the market.The representative of BMW in Argentina, Alejandro Echagaray declares that the results ofthe company in Latin America are very positive, so much that today the brand is a leaderin the region. He also affirmed that the BMW Groups success is based on a long-termvision and a responsible action. So much that for the seventh consecutive year BMWGroup is the most sustainable automobile company all around the world, and has beendesignated as a leader of industry classification for SAM Group in Dow JonesSustainability Indexes (DJSI). (BMW Colombia, 2011)The official site of BMW Group for Colombia states that the brand has a wide range ofproducts and this will make this year the company sold 1.6 million automobiles in thecountry. So that if Colombian people have BMW automobiles they are probably going toneed tires for them after a determined time and they will want definitively to buy their tiresdesigned by BMW automobiles and not another type of tires. Is why today there are manyenterprises and distribution centres that buy tires from a different country and them theysold them in Colombia, directly to automobiles’ owners as well as the import enterprises ofvehicles.Audi and Mercedes-Benz are the two mainly competitors of BMW because both of themmake sport and luxury as make BMW. So the clients are clearly part of high class peopleand the challenge is to convince them with elegance, sophistication and quality. In 2010,directives from this tree brands agreed with the positive result and success of the sales ofautomobiles of high game. In this year, Audi sold 1.244 units, Mercedes-Benz 1.078 and
BMW 1.899. Despite the important growth of Audi in the Colombian market, BMWmaintains its leadership with the largest among of units sold. (Revista Summa, 2011)Our objective consists of importing tires from Goodyear Perú for BMW serie 3 to our owndistribution centre called Distribuciones Chika, which has a warehouse in Bogotá FreeTrade Zone and from there every product is distributed to the rest of Colombia. We buymainly tires for BMW serie 3 because in Colombia this is the reference more common. Wewill import 4 containers 20’ each one with 480 tires, it means a total of 1920 of tires of aspecific reference of BMW per month and then we distribute to the authorized importer ofBMW in Colombia, Autogermana, which has presence in differents cities of the country:Barranquilla, Cúcuta, Bogotá, Bucaramanga, Pereira, Medellín and Cali. In this case weare going to develop the import process of tires from Perú and the distribution of 100 tiresfor BMW serie 318 i to Autogermana in the city of Pereira.The tire’s name is Eagle F1 Asymmetric, which is unique in the Colombian market and isused for luxury cars. We chose to import the tires from the Peruvian market because afterdoing an analysis of the market of tires we conclude that the cost of this good in Perú isinferior to the domestic market and the import makes positive profits.The importance of the Peruvian market to Colombia is paramounth because the twocountries are part of the free trade agreement CAN (Comunidad Andina de Naciones),Andean Community in english, which the products can be exchanged with great facilities,free of taxes and a wider market area. In the other hand, geographically Perú is close toColombia, so this is an advantage for the logistics process because the route is shortercompared to other countries that are not adjacent to Colombia. Therefore, the import timeis shorter, because orders can arrive in less than a week, in case of a customer to placeorders before the import process the merchandise will be delivered in less than a week.CAN was signed in 1969 between Ecuador, Bolivia, Perú and Colombia and the mainobjectives are the cooperation, development and economic growth to the members. Itintends to move forward in the deepening of integration that effectively contribute tosustainable human development and equitable to live well.The Decision 414 of the CAN, where Peru took a tariff elimination for imports and exportsfrom the members countries of Comunidad Andina de Naciones, where the process wasobtained as required 8 different tariff reductions, which refers to a shielded number of
products, which means a reduction of tariffs. Today is a 100% tariff reduction for the CANmembers.Our product specifically is made with rubber material so the costs of tariffs and taxes arezero, which is quite positive in terms of utility for us and also if we want to offer a goodprice for our clients.The following table shows the competitiveness of Peru according to La Cámara deComercio de Bogotá: COMPETITIVENESS Economic Performance competitiveness • 1st place in Latin America • 2nd place in Latin America • 14 global position • 35 position globally Business Efficiency Government Efficiency • 3rd place in Latin America • 2nd place in Latin America • 30 global position • 32 position globallyIn the other hand, the important index of the World Bank, Doing Business by 2011 showsthat Peru is the second best country in Latin America to do business, and is the third onein the Latin Business Index. "Peru is in third place because it has the best macroeconomicenvironment in Latin America, besides being the fourth best in the corporate environment
and technological level. It is also one of only two countries improved their index scorecompared to 2008”. (GESTIÓN, Diario de Economía y Negocios del Perú, 2011)Also it’s relevant to add the the main destinations for Peruvian exports tires are Colombiaand Ecuador, which together account for 55 percent of the total in 2010, reported LaAsociación de Exportadores del Perú, ADEX.The main exporting companies of Perú are Goodyear del Peru, Laminates, Megacaucho yTDerivados, Michellin and Perú, among others. (Exportaciones del Perú, 2011) Thesupplier company of tires for BMW automobiles is Goodyear del Perú. It is ubicated in thecity of Callao in Perú. Logistic Process Size of the tire: 225/45R17 94Y XL - 2007 Weight: 23 lbs Total weight for each container: 11040 lbs.The 480 tires will compiled in packs of four tires. Pack 52” = 4.3 feet 28” = 2.3 feetWeight of the pack: 6 lbsTotal weight: 11046 lbsContainer 20” (19’4”long x 7’9” width x 7’10” height)The tires will be packed like shown in the picture above, with the size of thecontainer being 19’4” long we can accommodate 4 “packs” long and 3 up, giving usa total of 48 tires in a single row. The width of the container let us accommodate up
to 10 rows of tires (width of tire 8.9” and with of container is 93”). So in a containerof 20’ we can have 480 tires. Location of the company in Colombia: Distribuidora Chika and is installed in ZONA FRANCA BOGOTÁ, S.A. Cra 106 No. 15A-25 Casillero 3 Fontibon Bogotá D.C., Colombia Location of the company in Colombia in Perú: Goodyear Av. Argentina 6037, Carmen de la Leyva, Callao, Perú. Route: -Puerto del Callao (city of Callao - Perú) – Puerto de Buenaventura (city of Buenaventura –Colombia) -Puerto de Buenaventura (city of Buenaventura – Colombia) – Distribuciones Chika (Zona Franca Bogota Cra 106 No. 15A-25 Casillero 3 Fontibon) - Distribuciones Chika (Zona Franca Bogota Cra 106 No. 15A-25 Casillero 3 Fontibon) – AutoGermana (city of Pereira; Avenida Circunvalar # 13-40 Centro comercial Uniplex L. 10) Total Amount of Imported Tires : 1920 units INCOTERM: DDU (Delivered Duty Unpaid) This incoterm refers that Goodyear del Perú hire the logistics and insurance company to transport the tires from Perú to Colombia’s Port more specifically to Buenaventura’s customs. After the merchandise arrives and cross the border Distribuciones Chika has the responsibility. International Logistics Company: MAERKS S.AThe Transport from the Callo’s Port to Buenaventura’s Port is going to be maritime and thetrajectory is going to be direct. For that MAERKS S.A was the company chosen betweenthe export and us for transporting the tires. It’s a serious company that is consistentlyrecognized as one the most reliable container shipping company in the world.
From Buenaventura to our distribution centre in Bogotá and from Bogotá to Pereira thetransport of the tires is going to be by ground.It is necessary to say that the added values that the transport enterprises have are theweather. Colombia has different kind of weather and it directly affects the movement of themerchandise. In the other hand, most of the drivers of the trucks normally stop in the roadto take a feed, we are taking it into account because of the time required and some costs. COSTS Cost USD Total GoodYear Factory to Callao’s Port: 4 4 USD Transport (Gasoline 8km)From Callao’s Port To Buenaventura’s 1.200 1200 USD Port From Buenaventura’s Port to 250 250 USD Distribuciones Chika Bogotá: Transport (Gasoline 533km) Distribuciones Chika Bogota to 140 140 USD Pereira: Transport (Gasoline 290km) Unpackers Bogota and Pereira 10 40 USD Total: 1634 USD Prices Price of purchase from Perú for each tire: 189 USD Total sum (1920 tires): 362.880 USD Price of sale in Colombia for each tire: 436,17 USD Total sum (1920 tires): 837446,4 USD Profit: 474566,4 USD
Estimated time From the factory Goodyear Argentina Avenue 6037 to the port of Callao is 8.6 Km away and the average of time is 18 minutes. Then, the merchandise is discharged in the port and the average of this operation is one day. The next step is the Port of Callao, Perú - Port of Buenaventura, Colombia Distance: 1.126 Nautic Miles (2.083 km). There is two days to the time of the transport.
After that, the merchandise applies the customs requirements as the DIAN form (importdeclaration) and the legal paper form to legalize and nationalize the merchandise inColombia. After that the tires will be collected to the Free Trade Zone of Bogotá in a truck.The merchandise will be transported in two trucks each one with 2 containers toDistribuciones Chika (Zona Franca Bogota Cra 106 No. 15A-25 Casillero 3 Fontibon)(Buenaventura – Buga – Tulua – La Tebaida – Calarca – Ibague – Girardot – La Mesa –Bogotá)533 Kilometres: 11 hours and 30 minutesThen when the truck arrives to Bogota it goes to Distribuciones Chika which is our owndistribution enterprise with a warehouse in Zona Franca Bogota Cra 106 No. 15A-25Casillero 3 Fontibon.The tires will be unloaded in the warehouse (45minutes) two people helping to unload.payment for each one is US $10. And merchandise is ready to be sold.Finally, the 100 tires are sent to AutoGermana Pereira located in Avenida Circunvalar #13-40 Centro comercial Uniplex L. 10, using the Hyundai HD 78.
This is the route used from Bogota – PereiraBogota – La Mesa – Girardot – Ibagué – Calarcá – Cruces – Pereira290 Kilometres: 8 hours.
Route Km. Estimated time Factory GoodYear to Callao’s Port 8.6 18 mts From Callao’s Port To Buenaventura’s Port 2.083 1 one in the port of Callao + 2 days of way = 3 days From Buenaventura’s Port to Distribuciones 11 hours and 30 minutes of Chika (Zona Franca Bogota Cra 106 No. 15A- way + 45 minutes = 12 hours 25 Casillero 3 Fontibon) 533 and 15 minutes From Distribuciones Chika (Zona Franca 8 hours BogotaCra 106 No. 15A-25 Casillero 3 Fontibon) to AutoGermana-Pereira 290 Total estimated time: 5 daysDOCUMENTARY REQUIREMENTS:FOR CUSTOMS AGENT OF PERU Copy of ID of legal representative of the company. Copy of deed of incorporation with social equity of not less $ 50,000.00 dollars. Affidavit of legal representative indicating his home and not have been convicted with final judgments. Bank letter of guarantee or surety policy with a value of $ 150,000.00 dollars. A copy of the municipal operating license.FOR CUSTOMS AGENT OF COLOMBIA Import Declaration Bill of lading Origin Certificate
ConclusionsIt is viable to import the product based on the logistic costs because we are already usersof Free Trade Zone Bogotá and this is very important because of the costs of taxes. In aFree Trade Zone, we only have to paid 15% of IVA, not 33%. For customs costs we paidanything for importing. Additionally CAN agreement for tires has 0 taxes to import them.In addition this agreement for our business creates an investment and trust incentivebetween importers and exporters. Not only in the tire market also with other products ofthe agreement.The business relationship creates an excellent connection between both countries. In ahypothetical case it is viable that the peruvian tires market in the future have a greaterconfidence in our business and can export more merchandise to Colombia with loans andfinancing issues without problems.
Bibliography BMW. Una vez más BMW Group es la empresa automotriz más sustentable del mundo. Extraido el 11 de octubre del 2011 de: http://www.bmw.com.co/co/es/insights/news/content.html Revista DINERO. 300.000 unidades en 2011. Extraido el 10 de octubre del 2011 de: http://www.dinero.com/edicion-impresa/especial-comercial/articulo/300000- unidades-2011/135144 BERNALES, E. (2009). Oportunidades de negocios en el Perú. Available on: http://camara.ccb.org.co/documentos/5223_colperu_como_hacer_negocios_con_p eru_1_de_septiembre.pdf. Consulted on October 3nd of 2011 GESTION EL DIARIO DE ECONOMIA Y NEGOCIOS DEL PERU official web page, available on: http://gestion.pe/noticia/283455/peru-tercer-mejor-pais-hacer- negocios-region Banco Mundial. Doing Business 2011. Extraido el 12 de octubre de: http://www.doingbusiness.org/reports/global-reports/doing-business-2011 Revista Summa. Audi, Mercedes-Benz y BMW crecieron más de 19% en 2010 en Colombia. Extraido el 26 de octubre del 2011 de: http://www.revistasumma.com/negocios/8499-audi-mercedes-benz-y-bmw- crecieron-mas-de-19-en-2010-en-colombia.html