Exporting International Business II

1. International Business II

3. Workshop
In Google Drive, in teams of four define in your
own words:
1. Exports
2. Exporting
3. Tariff
4. Custom Code
Share the resulting document with the teacher
with edit privileges.

4. 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

6. 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

7. 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.

8. 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

9. FOUR BIG QUESTIONS
What 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?

10. PHASES OF EXPORT DEVELOPMENT
Preengagement
• Companies selling
godos solely in the
domestic market.
• Those companies
considering but not
currently
exporting.
Initial Exporting
• Companies that do
sporadic, marginal
exporting.
• Companies that
see lots of
potential in exports
markets.
• Companies unable
to cope with
exporting
demands.
Advanced
• Companies
become regular
exporters.
• Companies gain
extensive overseas
experience.
• Companies may
use other
strategies for
entering markets.

12. POTENTIAL PITFALLS
Lack of Q. Counseling & Master Int MK plan
Lack of Commitment
Wrong Choice of Overseas Agents or Distributors
Lack of ordery growth (Chasing worlwide orders)

13. POTENTIAL PITFALLS
Wrong distributor treatment
Unwillingness to adapt products
Languange Misuse
Not using EMC´s when necessary.

14. STEPS FOR DESIGNING AN X
STRATEGY
1. Assess
Export
Potential
2. Get Expert
Counseling
3. Select a
Market or
Markets.
4. Formulate
& Implement
an X Strategy

15. EXPORT PLAN
1.TARGET MARKET RESEARCH
COUNTRIES PRE-CHOICE
• Current Dest. of Colombian X(Your Product)
• Cultural & Comercial Affinity
• Tariff Preferences
• Competitor Countries
• Transportation Availability

16. MARKET CHOICE
• Economic, Geographic & Political Review
• Freight Estimated Cost
• Product Entry Demands & Comercial
Legislation
GETTING MK INFO
• Product
• Prices
• Trading
• Competitors
• Promotion

17. 2.FIRM’S SITUATION EVAL REFERRING THE CHOSEN MARKET
• Structure
• Production
• Finance
• Product
• Marketing
• Competitiveness
3.EXPORT PLANNING
• Objectives
• Strategies
• Customers search
• Checking List

18. 4.X PLAN EXECUTION & FOLLOW UP
• Int Quotation or valuation
• X Logistics
• X Paperwork
• Exports Tax Legislation
• Exports Incentives
• Results Evaluation

19. ARANCEL

20. ARANCEL
Understood in 2 different ways:
• As a Tariff
• As a Custom Code or Tariff Heading.

21. 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

22. TARIFFS
Act 370/1994: Andean Community Countries rates:
• 5%
• 10%
• 15%
• 20%
• 35% (Vehicles)
Varies according to the
level of process.

23. AS CUSTOM CODE
HARMONIZED SCHEDULE
• System using a code for grouping and
classifying merchandise by cathegories for Int
Trade.

24. HARMONIZED SYSTEM STRUCTURE
 21 Sections
 96 Chapters
 1249 Custom Codes (Four Digits)
 5018 Sub Custom Code (Six Digits)
 Legal Notes
 General Rules

25. MERCHANDISE GROUPING WITHIN THE
NOMENCLATURE
By Kingdom of
Nature
• Animal
(Section I)
• Vegetal
(Section II)
• Mineral
(Section III)
By two main
chemistry
branches
• Inorganic
(Chapter 28)
• Organic
(Chapter 29)
By Industrial
Activity
• Pharmaceutic,
Plastic,
Rubber,
Paper, Metal,
Textile,
Machinery
and Electrical
Material,
Glass, etc.

26. 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...

27. 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. Maquinas y aparatos, material eléctrico y sus
partes...

28. NOMENCLATURE
• 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.

29. LEGAL NOTES
 Including
 Excluding
 Defining
 Precisioning
 Complement
 From Section
 From Chapter
 From Subcode

30. DECLARERS
Are those who respond before the national custom authority
(DIAN) for foreign trade operations.
Custom
Agents
ALTEX
Permanent
Custom
Users
Others

31. CUSTOM AGENTS
If X is more than U$10.000
If M is more than U$1.000
It is compulsory to
contract the services of a
CA (SIA)

32. CUSTOM INTERMEDIARY
AGENCIES – Agentes Aduaneros
( Formerly SIA)
• Do errands & Papework refering to X/M/In
Transit
• Act on behalf of the Importer or Exporter

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. 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. 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. EXPORTING PROCESS
1. Get the Exporter National Register/RUT
2. Market Research: Potential Buyers
3. MINCOMEX Paperwork: National Producer
Register-Certificate of origin Aplication (2
Years)
4. Get the required approvals (INVIMA –
ICA)VUCE
5. Get the product ready /Approvals/Costing &
Pricing.

37. EXPORTING PROCESS
6. Identify The tariff subsection
7. 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. IDENTIFICATION OF THE TARIFF SUBSECTION
It is the number of international identification of products
and it is divided in the following way:
Capitulo 06 Plantas vivas y productos de floricultura
Partida Arancelaria
0603
Flores y capullos, cortados para ramos o
adornos, frescos, secos, blanqueados,
teñidos, impregnados o preparados de otra
forma.
Subpartida Arancelaria
0603.12
Claveles
Posición Arancelaria
0603.12.10.00
Miniatura
Claveles miniatura

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. 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. 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. 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)

43. INTERMEDIARIES
• DIRECT EXPORTING
• INDIRECT EXPORTING

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. 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. 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