Import and Export in International Trade Process Report

Introduction

To begin with, there is a strong necessity to mention that Import and Export activity requires the observation of numerous rules and principles of customs procedures. The fact is that international trade is not the innovative approach towards the trade process in general, nevertheless in order to better control the flow of goods, countries and international trading corporations initiate the incorporation of the international regulation rules and norms of the international trade. This paper aims to research the trading process of the company, engaged in the international trade process, and describe such aspects of this process as products appropriateness, the relevance of destination, the issues of customs, and possible obstacles associated with quarantine, including tariffs and taxes. The matters of finances, financial institutions, which control the trade process, logistics, and transportation will be regarded. Then, the legislative background of the international trade will be regarded, such as the international agreements, consents, and the mechanisms of solving the conflicts, presupposed by these agreements and the internationally accepted practice.

Company Name and Product

The name of the company, selected for the analysis is Skipper Electronics, engaged in the vending of electronic household appliances (ACN – 390 653 851, ABN – 67 369 589 432). The product which is exported is the electronic appliances, and ICT components aimed for the household use, their spare parts and all the necessary components to the countries of Western Europe.

• Supplier: the companies, which are engaged in the production of household technical appliances (Whirlpool, Samsung, Asus and Dell).
• Manufacturer: these are the industrial forces of the suppliers, which cooperate with Skipper Electronics. Originally, the company acts as the international retailer of the listed companies, consequently, there are no direct manufacturers of Skipper Electronics.
• Distributor: the distribution of the electronics is the direct assignment of Skipper Electronics; nevertheless, there are licensed distributors in Western Europe, which are engaged in the distribution of appliances retailed by Skippers Electronics company.

Taking into consideration the fact that Whirlpool, Samsung, Asus and Dell companies are located not in Australia, it should be emphasized that Skipper Electronics aims to lower the prices as much as possible by direct supply of the product to the distributors, avoiding the importing of the appliances to Australia. Surely, everything depends on the quantity of the transported appliances. The minimal quantity which is subjected to direct delivery is 50 components to a country. The more components are delivered – the lesser the final price is. Taking into consideration the specification of abroad delivery, it should be emphasized that delivery is mainly performed within the first 20 days of each month, otherwise, the consignment may be late, and problems with customs declaration appear. (Styles and Ambler, 2008)

As for the issues of intellectual property, it should be emphasized that Skipper Electronics is not responsible for the intellectual property of the retailed companies, nevertheless, these are the principal electronic schemes, and algorithms of data processing for logical elements of the retailed electronics.

Products Appropriateness

The general statistics of the countries, where the goods are imported generally influence the volumes of the sales. Nevertheless, dealing with the licensed distributors, Skipper Electronics may afford not to care about advertisement and promotion in remote regions.

The average statistical data of the Western European market is the following:

• Population. Nearly 183 million people
• GDP. Up to $ 18 billion
• Strata of age. The largest age sector is the people aged 38-60. Thus, electronic appliances and ICT are among the most popular products within the European population.
• Demographic of the product entails both the youth and adult target audience, as electronic household appliances and Informational Communication technologies are regarded to be the most universal goods from the point of view of the
• Currency exchange rate. 0.61 EUR for 1 AUD
• Current political orientation. The political orientation of the European Union does not influence on the economic preferences of the European population, consequently, Skipper Electronics is free to sell electronic equipment to the countries of Western Europe
• As for the factors, which influence the economic integration of the product, it should be emphasized that the only serious factor is the personal preferences of the customers, especially the older segment, who experience the feeling of depressed pride for buying the production of American (Whirlpool and Dell) Taiwanese (Asus) and Korean (Samsung) products, as they appear to be of a higher quality than the European production.
• Research and locate at least one competitor who sells your product. The Skipper’s competitor on the Western European Market is the ECTACO company, which is engaged in retailing Dell components and spare parts in this geographical region.
• As for the ratification of CISG internationally, Skipper Electronics are currently negotiating for adopting the provisions to the realities of Australian retail procedures.
• TRIPS agreement was ratified by most of the countries of Western Europe, as European politicians are particularly concerned with the matters of electronic piracy and intellectual property.
• Membership in WTO is the principal factor of the economic relations and development for Western Europe, thus, all the countries are members of this organization.

The marketing research, provided for the Spanish segment of the retail structure includes the data associated with the projected extension of sales. The fact is that the Spanish market is the least developed, as Skipper Electronics entered it only a year ago. Thus, the sales volumes are rather low (up to $500,000), while the niche is comparatively free of competitors, and ICT technologies are mainly represented with Finnish and German production. Thus, there is a strong necessity to create, or find the company, which will perform the retailing of Dell and Asus production in Spain, nevertheless, thee properly elaborated and Spanish audience-oriented advertisement campaign will be required for the initiation of marketing activity.

Customs and Quarantine

Originally, quarantine is the isolation of foods, animals, people or any other items for preventing the spread of infection, which are transported by the isolated objects. The quarantine rules and practices may be regulated by either medical services or customs institutions. (Tombazos, 2003)

It should be emphasized that the production, which is retailed by Skipper Electronics cannot be subjected to quarantine. In accordance with the customs regulation of the Australian Quarantine and Inspection Service the following products may be subjected to quarantine:

• Meat
• Fish and fish products
• Eggs and egg products
• Organic and bio-dynamic products
• Live animals
• Plants, grains and horticulture
• Wood packaging (Tombazos, 2003)

Electronic appliances and ICT do not enter any of these categories; consequently, quarantine is impossible. The reasons, why the enlisted items or products may be quarantined are associated with the dangers of infections and diseases, or the dangers of flora and fauna disappearing, Thus, kangaroos, pandas, and eucalypts cannot be exported from Australia, thus, these cargoes will be quarantined. (De Brouwer and Gilbert, 2005)

Declaration

• Import Declaration S71A
• Owner – Skipper Electronics Company
• Owner ID: ACN – 390 653 851, ABN – 67 369 589 432
• Owner Reference – Skipper Electronics retail department
• AQIS – not required
• Destination Port – Sydney (AUSYD)
• Invoice – CIF
• Valuation Date – Sept 15, 2009
• Invoice Total – 1,600,000 AUD
• Invoice total currency – 1,440,000 USD
• Freight – 342,000 USD per day
• Insurance – 1,500,000 USD (price of the polis – 75,000 USD)
• Some of the points are not relevant for this type of goods
• Transportation – 5,000 AUD
• Free on Board – 1,515,000 USD
• Paid under protest – no

Declaration – James Kowalski

• Transport Details (Sea)
• Vessel Name: Bananam
• Voyage no – 34-78B
• Loading port – Corpus Christi, Texas, USA
• Arrival, Discharge – Sydney (AUSYD)
• Gross Weight – 12, 654 tons
• Cargo Type – FCL
• Container – TYRU5672897
• Ocean bill – BA 678-290-Y
• Packages – 1,432 pts
• Important information: Address – 90 Ocean Street Woollahra, 2529 Oak Flats. Tel.: +61 2 83568355

Tariff

• Line No. – Line 1
• Supplier Name – Dell Inc.
• Tariff Classification No. – 87621098
• Related Transaction – no
• Valuation Basis Type – FB
• GST Exemption Code – 418A
• Goods Description – laptops and communicators by Dell Inc
• Quantity – 980 laptops, 230 communicators
• Unit – BX

Valuation Elements

• Transport and Insurance Amount – 675,000 USD
• Override Duty Amount – 150,000 AUD
• Transport and Insurance Currency – USD
• Origin Country – US
• 1st Treatment Instrument Type – AusIndustry Determination
• Tariff Classification Instrument Type – 99 99 38

Websites

The USA – www.cbp.gov

Australia – www.customs.gov.au

Declaration Process

The declaration process entails all the information, required for defining the origins and routes of the goods, their manufacturer, sender and receiver, and all the details of the shipping process.

Customs broking is the profession, aimed at inspecting the imported and exported goods by the means of customs rules and regulations in order to avoid smuggling. Thus, the customs broker checked the accuracy and correctness of declaration filling in, and inspected the imported goods. (Gilbert and Dickens, 2009)

Tariffs

A tariff is a duty (payment) imposed for importing or exporting any goods. The purpose of the tariffs is to regulate and restrict the importing or exporting of the goods in order to stimulate particular economic processes, or gain profits.

The tariff concession advice should not be applied for, as ICT and electronic appliances are not the goods, which cause difficulties in the customs processes. In spite of the fact of obvious advantages of simplifying the declaration of the imported goods, it requires the application of additional standard norms towards the imported electronics. (Suzuki, 2004)

Tariff Concession Order is the custom regulation norm that provides access to the duty-free concession under the TCS.

In accordance with the WTO page of the tariff database, ICT appliances are not subjected to tariff imposing.

Non-Tariff Barriers are the measures aimed at restricting free trade, or the spread of some particular goods by means, differing from the tariff imposing. As for the importing/exporting laptops and communicators, the only non-tariff barrier is the anti-monopoly agreements and measures, which restrict the maximal amount of imported goods by one retailer (Quotas) (Styles and Ambler, 2005)

Duty and Tax

Taxation is imposed by the country, where the goods are imported. Originally, taxes are aimed to cover the expenses for the customs inspection of the goods and achieve the profits for the imported goods from the importer.

• GST – Goods and Service Tax. Calculated in accordance with the taxation of the country where the goods are imported, and regulated by Tax System Act 1999
• VOTI – a value of taxable importation. This is the amount of the imported goods, subject to taxation. Every country states its own VOTI.
• CV – custom value. The value of imported products, which is counted as the basis for imposing taxes and tariffs.
• T&I – taxes and insurance. Depending on the amount of the imported goods, and the total insurance sum, the T&I are counted.
• WET – Wine Equalization Tax. This is the tax imposed on alcohol production in order to restrict the import of alcohol in large volumes, or low-quality alcohol. (Baker, 2006)

Every duty (except WET) described here will be applied to the imported ICT goods, as these are the general practice of customs regulation in accordance with Form B174. (Baker, 2006)

The determent of the duty is the character and the amount of the goods, as only in accordance with these data the duties and taxes may be calculated.

• Line Amber Reason Type – the general information on the cargo – Classification, Countervailing, Origin, Preference, Quantity, Treatment Code and Valuation.
• Cargo Type – the type of the vessel, which is used – container (full or not full), bulk or tanker. (Javalgi and Reisenwitz, 2007)
• Preference Rule Type – is the type of cargo accumulation and taxation of the imported products.
• Preference Scheme Type – the scheme of providing the customs inspection, performed on the basis of a bilateral or multilateral agreement with some other country or countries. (Javalgi and Reisenwitz, 2007)
• GST Exemptions – If the goods are exempt from Goods and Services Tax, the exemption code should be provided. Goods and Services Taxes are imposed on the basis of the product characterization and generally accepted norms. (Javalgi and Reisenwitz, 2007)

Finances

Letter credit is generally regarded as the source of payment or transaction, and, it is often used for calling Transport Documents, Insurance Certificate and others. The purpose of this letter is to assure the performance of the financial operation or operation which requires financial inflow. The only source of the LC is the financial institution – bank. The requirements of obtaining the LC incorporate a positive reputation based on previous performances of financial operations and the economic stability of the organization. The movements of the LCs are presupposed by the principle of strict compliance, where the organization, receiving the LC complies with the requirements for achieving the LC and with the provisions of the financial operation contract or plan. (King, 2004).

Credits

• Revocable LC is composed for it could be amended in the future. Some modifications, cancellations of the terms at any time and without the consent of the exporter or beneficiary are allowed. (Baker and Hawke, 2008)
• Irrevocable LC requires the consent of the issuing bank, the beneficiary, and the applicant before providing any amendments or changes. Nevertheless, the original terms may be modified or canceled. (Tracy, 2003)
• Transferrable LC presupposes that the exporter is able to transfer all or part of the rights, granted by the LC to another party. (Baker and Hawke, 2008)
• Back to Back LCs are the two individual letters for both parts of the credit agreement that jointly offer an alternative to a transferable LC. (Tracy, 2003)

Revolving credit is the credit, where there are no fixed amount of payments.

Taking into consideration the volumes and dynamic characters of international transactions, the letters of credit appear to be the things of vital importance. Thus, the companies gain the perfect opportunity for non-cash business performance and accounting. The example of LC is in Appendix.

Institutions that can provide the LC are the following: Reserve Bank of Australia And National Bank of Korea –

• EXW – means that the seller performs his obligations on making the goods available to the buyer, while the buyer bears all costs and risks during transportation
• FCA – seller fulfills his obligations to deliver the goods
• FAS – seller fulfills the obligation of shipping the goods, while buyer bears all costs and risks of the delivery.
• FOB ‑ the seller has fulfilled his obligation to deliver when the goods have physically passed over the ship’s rail at the named port of shipment.
• Freight Prepared – the freight is paid by the sender of the cargo
• Freight Payable – the fright is paid after the arrival to the destination point
• Freight Collect – fright is paid by the receiver of the cargo. (Grimwade, 2000)

In order to minimize the risks of shipment and financial operation, greater volumes of electronics should be imported. The fact is that ICTs and electronics are not subjected to particular taxation rules, thus, it is difficult to give some particular recommendations from the point of view of financial practices. (Burckhardt, Elhence and Rooijen, 2008)

Transportation and Logistics

• Chicago Convention – is the convention for regulation the air transportation issues, touching upon the matters of navigation, custom inspection and transitions.
• Hague-Visby Rules (HVR) – these are the general rules of transportations, and generally accepted terms in the sphere of transportation and shipping. (Burckhardt, Elhence and Rooijen, 2008)
• Hamburg Rules – Convention on the Carriage of Goods by Sea

The chain of delivery will entail the following companies:

• Courier Quotes in Sydney – will be engaged in delivering the cargo from the seaport to the storehouse Pitt St, Sydney – +61 1300 668 858
• European Seaways’ ship will be freighted for delivering from the USA to Australia. 111, Machis Analatou St. 11745 Athens Greece. Tel: +30 210 9329050

A Charter party is an agreement between a shipowner and the owner of the cargo for the freight of the ship. (Leighton and Coakley, 2008)

• Demise or Bareboat Charterparty – The charterer freights the vessel for a certain amount of time or for a rout, thus, providing the charter entering into force.
• Voyage Charterparty – is the type of carter party, where the agreement is concluded only for a certain point-to-point voyage.
• Time Charterparty – the charter party is concluded for a certain period of time.
• Slot Charterparty – the main point of the agreement is the place in the shipping hold.

Consignment is the process of shipping a particular amount of certain cargo to a clearly defined destination point.

The features of consignment are the following:

1. The relation between the two parties is that of consignor and consignee and not that of buyer and seller
2. The consignor is entitled to receive all the expenses in connection with the consignment
3. The consignee is not responsible for damage of goods during transport or any other procedure.
4. Goods are sold at the risk of the consignor. The profit or loss belongs to the consignor only. (Leinbach and Capineri, 2007, p. 429)

International Contract for Sale of Goods

The 6 basic elements of Australian Contract laws are the following:

• Agreement
• Consideration
• Intention
• Certainty
• Terms
• Illegality (Leinbach and Capineri, 2007)

General Obligations of Sellers

Provide high-quality production, with the percentage of defected goods within the previously agreed amounts:

• Observe the contract obligations
• General Obligations of Buyers
• Observe the credit regulations and agreements
• Pay the production within the agreed timeframes
• Observe the contract obligations (King, 2004)
• Features of the Contract of Sale
• Agreement, timeframes, required sum and the provisions of delivery

INCO terms are the terms of sales and standardized trade definitions. The origin of the INCO terms is the international trade and delivery contracts, which required unification and standardization. The terms, which should be selected are the following CPT, DES and DDP. (Maggio and Maze, 2005)

Freight and Maritime Insurance company is DIMERCO. The estimated price of insurance for the goods will total $95,000, nevertheless, the insurance points cover all the possible consequences of improper handling and storage.

Bill of lading is the document issued by the cargo carrier to the shipowner, specifying that the cargo has been received.

• Forwarders Bill – receipt for the goods issued by a freight forwarder
• House or Received Bill – the party, which receives the bill with specific agreements
• Shipped or Ocean Bill – the bill of lading on ocean transport
• Charterparty Bill of Lading – bill issued by the hirer of a ship
• Through Bills (several carriers or modes) – the bills, stating the rights and obligations of both parties after delivering the cargo
• EDI (Electronic Data Interchange Bills) – the bill, issued in electronic form, allowing parties to exchange the necessary data instantly, without losing time.

Sample

Dispute Resolution

WTO may be used as the basis for solving the disputes, nevertheless, this organization does not act as the arbitrator. (Narlikar, 2007)

Canadian International Trade Tribunal. Arbitration is provided only if one of the participants of the tribunal is complained (by another participant or non-participant). The cost of the arbitration depends on the scales of the violation. ($100,000 min) (Ondeck, 2007)

International Trade Forum acts in the advice regime.

Critical Reflection

The labor and manufacture process of the imported product is fully automatized, as the assembling of laptops, communicators, and electronic appliances requires high precision and control which may be provided only by robots. The economic advantages of ICT trade are beyond any discussion, as reliable and durable technologies are highly valued, and can not be manufactured by every producer.

As for the sociological effect, it is closely associated with the appearance of new gadgets on the market and people obtain an opportunity to simplify their life with electronic appliances.

The economic effect is the only – profits from retailing the technologies.

Environmental effect is minor, as Dell Inc. is using ecologically safe materials which do not harm either environment or human health.

Reference

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Baker, R. W. & Hawke, G. R. (Eds.). (2008). Anzus Economics: Economic Trends and Relations among Australia, New Zealand, and the United States. Westport, CT: Praeger Publishers.

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Burckhardt, P. C., Elhence, S., & Rooijen, M. C. (2008). European Freight Forwarders: Which Way to Turn?. The McKinsey Quarterly, (2), 84

De Brouwer, G., & Gilbert, J. (2005). Monetary Policy Reaction Functions in Australia. Economic Record, 81(253), 124

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Hakim, S., Seidenstat, P., & Bowman, G. W. (Eds.). (2006). Privatizing Transportation Systems. Westport, CT: Praeger Publishers.

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Appendices

Letter of Credit

This Document is to certify that the Skipper Electronics Company has the necessary authority to execute the 1,000,000 irrevocable bank letter no 12345, issued 12,12,2007 on Behalf of Sydney Agricultural bank, and for the account of James Kowaslki, the person, responsible for achieving the cargos from Dell Inc.