Exam Flashcards
Define what non-tariffs barriers to trade are. Classify them. What is the MRA?
Non – tariff barriers to trade are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs. These can include; quantitative restrictions, barriers that cause an increase in costs, restrictions on market access, subsidies and other competition distorting practices.
Mutual Recognition Agreements implies the possibility to perform tests and certify products (in its own territory) based on the legal requirements of the country of destination.
Define the customs value and the methods to measure it. What is the document we use to declare the customs value?
Price (in Euro’s) that is estimated to be set for the goods, at the point in time when custom duties are due, as a result of a sale occurred in free competition. The methods used to measure the customs value include; Ad valorem (% of the customs value), Specific (fixed quantity per unit of weight), Mixed (Ad valorem + Specific) and Composed (Ad valorem + Max or min specific). Documents that prove the customs value are the invoice and the Document DV - 1.
The DUA and the INTRASTAT.
INTRASTAT is the need for new techniques and methods to obtain comprehensive and reliable information. It includes an exemption threshold which determines which firms are required to submit the Declaration and which are exempt, depending on their annual trade volume the previous natural year. The types of declaration include ; normal form, zero form, amendment form and void. The DUA (SAD) declares an import or export of goods, firms need to make declaration (CUSTOMS DECLARATION). Some of the documents needed to provide SAD include: an invoice, declaration of value, certificate of origin and a transport document.
Definition of INCOTERMS 2010. Explain EXW and FOB.
Set of neutral rules (11) created by the exporters (within the ICC) to interpret the commercial terms and conditions of an international transaction. EXW entails a sale in the establishment of the seller. Responsibilities of the seller are; to provide the goods conveniently packed and ready to be loaded. Minimum obligation for the exporter. Companies without experience tend to use this incoterm. FOB is used only when the main method of transport takes place in the sea. Exporter assumes the costs and risks of transport until the merchandise is on board. If problems occur during local transportation or when the loading the boat, the exporter assumes the responsibility.
Explain what are the following risks: cancelation of a contract, non-acceptance or collection of the goods and non-payment. Explain what are the political and unforeseeable risks. How can we to cover them?
The cancellation of a contract or order may occur since the exporter receives a firm order until the shipment of goods. In the case of a cancellation, there may be an increase in costs, related to the goods already produced or in the process of production. In the case of non – acceptance or collection it causes more harm to the exporter than order cancellation as all the costs have already been paid for and could as a result become sunk costs. When we speak about political risks, we are referring to certain economic circumstances that prevent the punctual completion of payments or the correct completion of contracts. These can be covered through; insurance policy, confirmed letter of credit or factoring. In regard to unforeseeable risks, these are based on catastrophic events such as; earthquakes, floods, etc. The consequences of which can limit the ability of the affected country to obtain the necessary foreign currency to pay for foreign orders.
Define what is the documentary credit or letter of credit. How can a firm increase the security of payment of a letter of credit?
The documentary credit is an agreement under which the importers bank (issuing bank) acting at the request and in accordance with the instructions of the applicant (importer) is committed to the beneficiary (exporter) to pay/accept/negotiate bills or commercial paper.
Subject to the reciprocal obligation for the exporter to provide the required documents within the valid period set for the use of the credit. It is generally used to coordinate the buyer interest, who wants to receive the good according to the conditions negotiated in the contract, and the seller interest, who does not want to send the good without receiving the agreed price. For the seller, once the terms of the contract are met, the claim for a payment can be made to a bank. In the buyers’ case a letter of credit provides security in the sense that the seller will not get the payment until the bank checks that the documents submitted by the seller are correct.
