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Entrepreneurship And Global Trade > Supply Chain Review Q’s > Flashcards

Supply Chain Review Q’s Flashcards

1
Q

Import duties are an example of?

A

Tariff barriers

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2
Q

Quotas are an example of?

A

Non-tariff barriers

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3
Q

The tariff applied to any product imported into the United States is determined by its?

A

Harmonized Tariff System number (HTS)

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4
Q

Why harmonized codes are needed?

A
  • Disagreements on products being shipped between nations can led to higher import duties on products
  • International harmonized codes provide a way for different nations to classify products the same way
  • This prevents disagreements between nations on the products that are being shipped. All countries “speak the same “ for international trade.
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5
Q

Importance of tariff classification:

A

Exporter:
- Compliance (export documentation, compliance with export laws)
- Proper application of trade agreement rules of origin

Importer
- Used by customs to establish regulations
- Application f proper duty rates
-Applicability of trade agreements
-Determine whether Other Government Agency(OGA) regulations,license and or permits apply

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6
Q

Tariff schedules:

A
  • In most cases (depending on the Incoterm) the importer pays the import tariff
  • However, exporters should be aware of the expected import tariff
  • Most tariff schedules are online (start with www.export.gov) *Also see Chp 4 p.49-50
  • Tariff engineering: Changing or reconfiguring what is imported to minimize import duties
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7
Q

How the harmonized system works:

A
  • All products are described by a ten-digit number that is broken down by chapter, heading, subheading, and commodity code
  • Subject to frequent changes as well as updates as in 2010
  • Overseen by the World Customs Organization (WCO)
  • There is a harmonized code for everything exported/traded globally
  • Numeruc based coding system is used instead of words and industry specific terminology to avoid confusion
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8
Q

The overall structure (harmonized codes):

A
  • The harmonized system consists of 22 sections divided into just under 100 chapters that correspond to the international system of numbering with each section and chapter being a general grouping of common products
  • For U.S. Companies
    - Harmonized tariff schedule of the United States is for IMPORTS (HTSUS)
    - Schedule B is for EXPORTS
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9
Q

Structure of a harmonized number

A
  • First 2 digits (chapter
    -Up to: 4 digit (heading)
    -6 digits (subheading)
  • 8 digits: tariff item
  • The final two digits in a 10 digit number: statistical suffix
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10
Q

Example of Each level:

A

Code Definition Example
03 Chapter in which a commodity is
classified
Fish and crustaceans, molluscs
and other aquatic invertebrates
0302 Represents the heading in that
chapter
Fish, fresh or chilled, excluding
fish fillets and other fish meat of
heading 0304
0302.12 Represents the harmonized
system code subheading
Pacific salmon, Atlantic salmon
and Danube salmon
0302.12.0012 Represents statistical
subdivisions
Commodity code for Chinook

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11
Q

For the next four questions assume the following harmonized code: 2120.92.3000

A
  1. 21 is the? Chapter
  2. 2120.92.3000 is the? Commodity number
  3. 2120 is the? Heading
  4. 2120.92 is the? Subheading
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12
Q

Harmonized Code Sections

A
  • Arranged in 21 Sections - Contains 99 Chapters

Sample Sections:
I Live Animals; Animal Products
IV Prepared Foodstuffs
VIII Hides and Skins
XI Textiles and Textile Articles
XVI Machines and Mechanical Appliances
XVIII Optical; Measuring; Medical or Surgical Instruments and Apparatus

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13
Q

Harmonized Code Chapters

A

Section I: Live Animals and Animal Products
Chapter 1 Live animals
Chapter 2 Meat and Edible Meat Offal
Chapter 3 Fish and Crustaceans, Molluscs and Other Aquatic Invertebrates
Chapter 4 Dairy Produce; Birds’ Eggs; Natural Honey; Edible Products of Animal
Origin, Not elsewhere Specified or Included
Chapter 5 Products of Animal Origin, Not Elsewhere Specified Or Included

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14
Q

Heading

A
  • Incorporates the first four digits of the ten-digit code
  • The initial job of classifying a product should focus on finding its heading, not its section or chapter
  • The heading will begin to identify if it is the correct area of the harmonized code
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15
Q

Subheading

A
  • Incorporated the first six digits of the ten-digit code
  • By this point, the descriptions are pretty complete
    Ex:
    03.02 - Fish, fresh or chilled, excluding fish fillets and other fish meat of heading 0304
    • Selected subheadings including
    − Ex: 0302.12 – Pacific Salmon, Atlantic Salmon, and Danube Salmon
    − 0302.13 - Pacific Salmon
    • Note the heading includes most fish, but subheading details specific types of fish
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16
Q

Six General Rules of Interpretation (GRIs)

A
  1. Read the notes: when you refer to the notes, they might send you somewhere else
  2. Treat incomplete/unfinished articles as if they were finished goods + treat unassembled/disassembled articles as if they were
  3. When two or more headings apply, use the most specific description
  4. If no appropriate heading, classify the goods as you would the most similar good in the tariff
    5.Containers:containers suitable for repetitive use, and presented with the good, are classified with the good. Packing materials:classified on their own when suitable for repetitive use
  5. Rules 1-5 are used to determine all parts (heading, subheading, etc)
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17
Q

Harmonized code Resources

A

Schedule B
- http://www.census.gov/foreign-trade/schedules/b/

HTSUS:
- www.usitc.gov

Binding Rulings:
- http://rulings.cbp.gov/

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18
Q

Assume a company is importing music boxes classified as
9208.10.0000. Also assume the music boxes fit inside a
specially designed plastic case suitable to store the music box.
Also assume there is a classification for plastic cases of
3919.20.2000. When importing these music boxes with the
plastic cases, which harmonized code(s) would you use for the products?

A

9208.10.0000

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19
Q

Following on from the preceding question, if later the company
realized it needed more plastic cases without the music box as
replacements for customers that have lost their plastic case,
which harmonized code would you use when importing the cases?

A

3919.20.2000

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20
Q

Assume a company is importing music boxes classified as
9208.10.0000. Also assume there is a harmonized code
9208.05.0000 listed as “music boxes for educational purposes”.
If the company decides both codes are equally description for
their product, which code would be used when importing?

A

9208.10.0000

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21
Q

Assume a company is importing music boxes classified as
9208.10.0000? Also assume there is a harmonized code
9208.10.5000 listed as “parts of music boxes”. The company is
importing the music boxes complete with everything EXCEPT
there are ornate legs the company adds which is manufacturers
in the U.S. and glues to the imported music boxes. When
importing the music boxes without legs, which code would be used?

A

9208.10.0000

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22
Q

Following on from the previous question. The company
decides to begin manufacturing the music box legs in Brazil.
When importing 1000 of the music box legs, which code would be used?

A

9208.10.5000

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23
Q

When exporting from the U.S., which harmonized code is used?

A

Schedule B

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24
Q

When importing from the U.S., which harmonized code is used?

A

HTSUS

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25
US Companies
For U.S. Companies: - Harmonized Tariff Schedule of the United States is for IMPORTS (HTSUS) - Schedule B is for EXPORTS
26
In the Harmonized Code, Chapter 7 is titles “Edible Vegetables and Certain Roots and Tubers”. When classifying a vegetable, one thing is for sure is that:
It may or may not be classified in Chapter 7 depending on the section or chapter notes
27
When comparing the harmonized codes across many countries, they will be similar up to?
First 6 digits
28
International Trade Documents often share common information
Key information in these documents: - Description of goods - Modes of transport - Terms of sale - Value of the goods - Country of origin - Identity of seller/shipper - Indentity of buyer - Terms of payment - Shipping instructions - Evidence of shipment - Compliance with related trade controls — Each shipment has certain number of minimum documents such as a commercial invoice, truck, rail, or ocean bill of landing, or airway bill, and usually a packing list
29
Documentation Issues
- Through some documents don’t have a specific format (e.g. quotations, invoices) the required information is critical and must be accurate - Documents may repeat some of the same information but they each have their own purpose - Consistency and accuracy is essential
30
International Documentation Essential Documents
- Quotation - Pro Forma Invoice - Commercial invoice - Packing List - Electronic Export Information (EEI) — formerly Shipper’s Export Declaration - Certificate of Origin, NAFTA Certifctate original -Insurance Certificate Ocean Bill of Lading, Air waybill -Drafts -Shipper’s Letter of Instruction
31
Quotation
- Details a price proposal from a seller to a buyer - Confirms the selling price of the goods - Confirms what costs are expected of the buyer - A quotation may or may not include freight to the buyer’s country, but any freight items should be clarified - No specific format — often sent as an email or fax
32
International Documentation
In most cases has no specific format, but accuracy is critical
33
A primary purpose of an international quotation is to:
Confirm the selling price of the goods
34
When creating a pro forma invoice:
The format should roughly follow the commercial invoice but marked ‘pro forma’
35
A commercial invoice used when exporting:
Has no specific format
36
In general, an EEI filing via the Automate Export System (AES) within the Automated Commercial Environment (ACE) is required if the total value of any single Schedule B number is greater than:
2500 usd
37
EEI filing through AES Direct/ ACE
- Previously known as the Shipper’s Export Declaration - Used to track exports, but linked to Export Controls - AESDirect is the website through which the EEI is filed. It is accessed through the ACE managed by U.S. Customs and Border Protection -AES Record not required if the total value of any single Schedule B number is less than $2500 (invoice value plus inland freight)
38
International Commercial Terms (Incoterms 2020)
-International rules for the interpretation of trade terms in foreign trade -Developed by the International Chamber of Commerce (ICC) - Mitigate costly misunderstanding between sellers and buyers -Determine who is responsible for what between parties -Used by exporters, insurers,bankers, and lawyers -Establish: The geographic location at which the buyer becomes responsible for the goods. Who arranges for shipping, handling, insurance, and inland freight costs.
39
Incoterms part 2
Obligations: what seller and buyer has to do (who organizes carriage, insurance, clearances, etc.) Risks: where and when the risk transfers from seller to buyer Costs: which party is responsible for which costs
40
Incoterm Groups — from least to most responsibility from the seller
Group E/Departure: ExW (named place) Group F/Main carriage unpaid: FCA (named place), FAS (named port of shipment), FOB (named port of shipment) Group C/ Main carriage paid: CFR (named port destination), CIF (named of port destination), CPT (named place of destination), CIP (named place of destination Group D/Arrival: DPU (named place of destination), DAP (named destination), DDP (named place of destination)destination
41
If shipper in Quincy, IL is to make an ocean container destined for Hong Kong available at Quincy warehouse and clear the goods for export, which Incoterm is most appropriate
FCA Quincy
42
A Korean customer has requested a US shipper take responsibility and pay the freight and insurance a ro-ro order from Quincy to be loaded on board a ship in Long Beach. Which Incoterm would be appropriate?
FOB Long Beach
43
A company in Beijing, China purchases machines from a manufacturer in Chicago, IL. The terms of sale are that any repair parts while a machines is under warranty, are to be replaced by the Chicago company at no cost. The Chicago company pays all freight, insurance, and taxes associated with shipping parts to China. For such parts shipments, which Incoterm would be appropriate
DDP Beijing
44
Which Incoterm has the LEAST transportation responsibility for the Buyer:
DDP
45
Which of the following Incoterms would mean the main carriage and insurance is paid by the seller?
CIF
46
A company in the UK sells their products to a company in Kenya. The Kenyan buyer to receive the products at the port of Mombasa will pay and arrange for ALL transportation from origin to destination. The UK company has their manufacturing facility in London, where it will ship from. Which Incoterm should be used?
ExW London
47
What is the growing concern about the use of ExW as an Incoterm?
The exporter is technically not responsible to clear the goods for exports, yet it may still have legal obligations related to export documents.
48
Avoid ExW and DDP
ExW assigns the role of export clearance to the buyer, and to load the goods on the carrier. **Yet this has to happen in the seller’s country** DDP assigned the role clearing the goods for import **Yet this has to happen in the buyer’s country**
49
Which entity publishes the Incoterms?
International Chamber of Commerce
50
The most standard ocean container is how many feet long?
40 ft
51
Containerized Cargo and Intermodalism
Container Dimensions: 20ft or 40 ft (40 is typical), slightly more than 7 1/2 ft wide and tall, weight limit of 60,350 lb, specialized containers include: refrigerated containers, bulky commodity containers, open top containers, ventilated containers, insulated containers, flat rack containers with two or more sided missing. Door-to-Door versus less than Container Load - Typically, if a shipment will fill half a container, a full container may be used because costs will be similar. - If not enough volume for half a container, then use Less than a Container Load
52
Containerized Cargo and Intermodalism Part 2
Air Cargo Containerization - Two types of containers: lower deck containers that fit easily in the lower deck of a wide body jet, air cargo pallet are items that are attached to a pallet and then transported in a smaller jet; not as secure as lower deck containers Noncontainerized Cargo (break bulk Cargo) - some cargo must be sent breakbulk (corn, wheat) or as individual shipments (large truck), no containerized cargo is called or-ro freight (roll on, roll off freight)
53
Breakbulk cargo is?
Cargo is too large, or not suitable for a container.
54
Containerized Cargo and Intermodalism Part 3
Containerized: moving freight in standard containers Intermodalism: moving containerized freight between different modes of transport - Combining these two practices has increased efficiency and lowered shipping costs globally - Additional containerized benefits: Reduced shipping costs Reduced damage to products Reduced shipping risk and theft Faster movement of goods
55
In an international shipment, what is the role of a freight forwarder?
To handle the primary logistics including freight and insurance for a shipment.
56
When is the EEI required?
- If a shipment contains multiple products with harmonized codes, some of which over $2500 and others less than or equal to that, only those items over $2500 require EEI - If an export license is required for shipment, so is EEI
57
The Four Required Fields for Each EEI/AES Direct Filing
1. Shipment information: includes a variety of required fields including - Origin state, country of destination, departure date, and conveyance name (vessel/carrier name) 2. USPPI -- U.S. Principle Party in Interest: the person in the U.S. that receives the primary benefit, monetary or otherwise, of the export transaction 3. Ultimate consignee - The company receiving the shipment in the foreign country 4. Commodity line: the Schedule B (or in most cases HTS U.S. is also allowed) - for complete details of EEI see the AES User guide
58
On the EEI, what is the principle party in Interest?
The party in the U.S. that receives the primary benefit of the export transaction.
59
The Role of Freight Forwarders
- Travel agent for freight - Can become important trade partners - Specialize in logistics -Reliance on freight forwarders: extremely important for small business or beginning exporters, they work with the containerization and booking of freight, some will specialize in different areas, so many freight forwarders may be needed - choosing a freight forwarder: ask for company details and references, nurture strong communication, and make sure both parties understand their responsibilities thoroughly
60
What to look for in your freight forwarder
-forwarder background, history, ownership - customer references - specific areas of expertise and service offered - foreign market strengths - surface, air, ocean strengths - import services - technology support - Third Party Logistics (3PL)
61
International Logistics Solutions -3PLS
Third-party logistics (3PL) - Allows firms to outsource logistics needs to another company - Provide complete global solutions - Solves international logistics problems without further investment in warehousing, etc. - Using a 3PL can be turned into a competitive advantage

Entrepreneurship And Global Trade (7 decks)

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