Chapter 3 Flashcards
Remember, always refer to CIPS CoC when actioning RfP process
What is the definition of Cartel?
A group of companies working together to prevent competition. i.e., control price swings and supply to the market.
What regulation dictates product safety in the UK?
The consumer rights act 2015 which states products must be ‘fit for purpose’. A European Conformity (CE) marking states that a product is fit for purpose across Europe.
What UK and EU regulations are public sector organisations subject to?
The Freedom of Information Act 2000 – where any member of the public can request information for a public company. The company has 21 days to respond. Whether they release the information is subject to a public intertest test (a test used to ascertain if the info should be release based on how beneficial it is perceived to be t the public)
UK Public Contract Regulations 2015 – these implement the Eu 2014 directive 2014/24/EU and dictates what the procurement process of tender should look like
Which UK regulation dictate public sector procurement process?
UK Public Contract Regulations 2015 – these implement the Eu 2014 directive 2014/24/EU
The directive calls out the need for companies to advertise a call for competition. This is where they must advertise their tender via the Official Journal of the European Union (OJEU) OJEU is now replaced with “Find a Tender in UK” since Brexit.
If a company is not yet ready to make a call for competition, they may submit a prior information notice via the OJEU where supplier can view this and get ready in anticipated.
UK Public Contract Regulations 2015 this can also dictate the amount of time allowed for submission deadlines. i.e., give supplier a fair chance. Private companies don’t need to worry
It also encourages buyers to disregard bids which seem too good to be true i.e., very cheap bid because they are like to be too good to be true!
There is not as much focus on costs. Equal focus is on delivery the right produce fit for purpose and also vet suppliers for ethical and legal standards
What is the definition of Nongovernmental organisation (NGO)?
Nongovernmental organisation (NGO) – a non-profit organisation that operates independently of government i.e., charities, professional bodies i.e., CIPS and pressure group i.e., green peace
Although NGO are not for profit, they still push to make as much as possible to give back to the community. It simply states not for profit because they don’t have shareholders to pay. The biggest challenge faced by NGOs is cash flow yes, they save money by not paying staff due to volunteers however, donations are few and far between so cash flow is sporadic. Thus, procurement need to penny pitch.
What is the definition of Trade Bloc?
Group of countries agreeing to preferential trade conditions
What is the definition of Tariff?
Rules and import duties applied to individual set of goods i.e., class of products using ID codes which have set tariffs
What is the definition of Import Duties?
Payment made to local customs agency to allow entry into a country
How many economic sectors are there and what are they?
Primary sector – extraction of raw material
Secondary – manufacture
Tertiary – high street retailers or service providers i.e., law firms
Quaternary – companies concerned with research and development and intellectual advancement
What is the definition of T1 Document?
A document which must accompany goods whilst in transit through the EU. This document enables duty free tariff whilst it travels through the EU.
What should the buyer do if if origin documents for transport are lost/ unable to access?
The buyer can apply for a Binding origin Information (BOI) in the EU only.
What “Origins” exist in EU transport?
Non preferential – goods that are subject to tariffs quotas and other customs regs
Preferential – goods that are not subject to tariff quotas or other customer regs as agreed between nations. i.e., preferential treatment
What documents are used to facilitate international trade of goods?
Purchase order – provide line entry and product bought
Bill of lading document outline who is responsible for transport up to place of delivery. This is needed to cross borders
Insurance certification
Certificate of origin – this gives customs confidence of which country the goods were produced in
Carnet – a document that allows temporary free movement of goods through countries i.e., cars from point A to B. i.e., a band on tours not actually selling the equipment just simply moving it around.
CIPS suggest the most important document for successful import/ export if the contract. Expressly stating all factors relating to trade, tariffs etc i.e., incoterms.
What is the definition of Ad Valorem?
An estimated value of goods being imported. This include cost of goods from supplier and any insurance & freight costs.
What is the definition of Relief Duty?
Certain class of product will have a relief duty applied whereby duties are reduced or FOC
Relief duties are:
Customs warehousing
Inward processing
Outward processing - when items are sent to other country for repair only and are due to be returned
End use - goods which must be used in a give time. i.e. fresh food
Who publishes Incoterms?
International Chamber of Commerce (ICC)
What Incoterms exist?
(EXW) Ex Works – goods are considered delivered at supplier premises. Supplier is not responsible for loading or transporting
(FCA) Free Carrier – the supplier is responsible for placing the goods in the hand of the carrier. At this point the buyer takes on the risk
(CPT) Carriage paid to – supplier is responsible for deliver goods to the carrier or an agreed intermediate
(CIP) Carriage and Insurance Paid To – Same as CPT but with insurance to that point
(DAT) Delivered at Terminal – Supplier delivers to a terminal of choice as well as unloading them. Risk is then passed to buyer.
(DAP) Delivered at Place – The supplier is responsible for all stages up to delivery at the buyers’ premises. Supplier bares all risk up to this point
(DDP) Delivery Duty Paid – same as DAP but organise all customs clearances
(FAS) Free Alongside Ship – Supplier is responsible for delivering goods along side ship at dock. Buyer bares all risk at this point.
(FOB) Free on Board – Supplier is responsible for arranging good to be delivered onto the ship. Buyer then bares risk
(CFR) Cost and Freight – same as FOB but supplier bares cost of the transport
(CIF) Cost, Insurance and Freight – same as CFR but supplier bares cost of insurances
What methods of payment exist for international trade?
Payment mechanism spectrum ranges starts more beneficial to buyer and goes towards more benefit to supplier.
Open account – Supplier delivers goods before receiving payment based on agreed credit terms
Term/ time draft – a guarantee of payment from the buyers’ banks payable on receipt of goods. There is a delay to payment here which gives buyer time to inspects goods and raise any concerns before monies are transferred
Sight draft - Same as above but there is no delay in payment. No time for buyer to inspect goods before payment is made
Letter of credit – guarantee given by buyer’s bank stating that supplier will receive money when condition set out in letter are met
Cash in advance – Buyer pays the supplier before goods are received. Risk is that supplier never supplies goods
How can a buyer mitigate currency fluctuations adversely affecting their buying power?
Set a fixed cost of the buyer’s currency. i.e., £1 regardless of fluctuations in the Chinese yen.
Currency hedging whereby a buying organisation can use forward contracts (an agreement to buy a good/ commodity in future for an agreed price)
Currency option (an agreement to buy a currency in future at an agreed rate, however, there is not an obligation to buy it. Due to there not being an obligation the commercial bank will charge a setup fee)
Which organisation operates the Corruption Perception Index and what is it?
Transparency International is a not-for-profit organisation who run a Corruption Perception Index to show level of corruption in each of 180 countries. 0 being highly corrupt and 100 being nearly 0 corruption.
What is the definition of Cultural Relativism
Perception of bad behaviour in one culture is not the same in another as they apply their belief differently. Therefore, care needs to be taken when applying the same marking scheme for what is corruption and what is not.
What is the definition of Facilitation Payment/ Grease Payment?
Type of bribe where a payment is made to hurry something up
