International trade

EXAM: 14.05.2024
NOTES
Topic 1: The global economy and international trade
1. International trade – exchange of goods and services between countries, facilitated
by international financial transaction and by international trade agreements
2. Globalization process – trade and globalization influence our economic cycles, impact
our labor markets, and broaden the spectrum of customer choice. International
trade is a central driving force behind globalization, a process of integration among
countries and people.
a. According to economic theory, as technological development drives down
transaction cost, cross border trade and investment will increase
b. Factors
i. Political factors
ii. Financial factors
iii. Economic factors
iv. Technological factors
v. Social factors
3. Organization of contemporary international trades
a. Landscapes
i. Trade regulators – international (WTO), Regional (EU, APEC, NAFTA, SACU,
etc.)
ii. National regulations – formal and informal institutions
iii. Industry specification – the business field
iv. Company specifications – core competence, resources
b. Business environment
i. Cultural – national cultures, languages, religions, values, multicultural
societies
ii. Social – social classes, population, migration, labor relations, education,
families
iii. Political
iv. Legal – legal system, international agreements, crime corruption, human
rights
v. Technological
vi. Financial
c. Internationalization of the business: why do companies internationalize?
i. Growth opportunities through market diversification
ii. Higher margins and profits
iii. New ideas (products, services, business methods)
iv. Following key customers
 v. Access to resources
vi. Production factors
vii. Confront competition
viii. Economies of scale (sourcing, production, marketing, R&D)
Topic 2: Global supply chains management – challenges and solutions
1. Logistics challenges
a. Sea cargo delays
b. Increased transport costs
c. Divertion restrictions
d. Lack of equipment
2. Product challenges
a. Lack and cost increase for labor
b. Packaging cost increase
c. “Green” markets
d. Production cost increase
3. Market challenges
a. Disappearing of the “happy markets”
b. High dynamics in the consumer behaviour
c. “Quality volatility”
4. Relationship crisis
a. Loyalty crisis
b. Propriety crisis
c. Informational dissonance
Topic 2.1: International sales contracts and incoterms
1. International sales contract – agreement between a buyer and a seller that identifies
the parties in the transaction, the goods or services being sold, the terms and
conditions of the sale, and the price to be paid
2. Types of sales contracts
a. According to the form
i. Verbal
ii. Documentary
iii. Formal
b. According to the scope – all are international
i. Sale contract
ii. Distribution contract
iii. Agency contract
iv. Sales representative contract
v. Supply contract
vi. Manufacturing contract
vii. Services contract
viii. Strategic alliance contract
ix. Franchise contract
3. Sales contract elements
a. Buyer and seller identification
b. Description of the goods
c. Delivery terms
d. Price
e. Payment terms
f. Duration and termination
g. Disputes
4. Incoterms

Topic 3: Trade regulations and trade agreements in the European Union

1. What is trade agreement? - contractual arrangement between two or more nations
that outlines the rules for trade between them
2. Types of trade agreements
a. According to the scope
i. Framework agreements
ii. Comprehensive economic partnership agreements
iii. Free trade agreements
iv. Preferential trade agreement
b. According to the parties involved
i. Unilateral – one sided trade agreement that benefit only one county
ii. Bilateral – involves two countries and often targets key protected or
government- subsidized domestic industries
 iii. Multilateral – trade agreement between 3 or more countries (NAFTA,
CAFTA-DR, APEC, EU)
3. Who/ What is WTO (World trade organization) and what is its role? – international
organization that regulates and facilitates international trade between nations
Topic 4: The export in International Trade
1. Trade enquiry and export quotation
a. Trade enquiry – written request by an importer to an exporter,
i. Seeking information about the price of goods
ii. Quality
iii. Quantity terms and conditions for supply of goods
b. Export quotation - Written andwer by an exporter to an importer that contains
complete information about the
i. Price
ii. Quality
iii. Quantity
iv. Terms of delivery based on the importer equity
2. International transport: Marine Transport
a. Why?
i. Large capacity
ii. Versatile transport
iii. Low costs
b. Types of vessels
i. Container ships
ii. General cargo vessel
iii. Bulk carrier
iv. Reefer vessel
v. Heavy lift cargo
vi. Roll-on Roll off Vessels
3. International transport: Air Transport
a. Why air transport?
i. Fast
ii. Safe
b. Types air cargo
i. General
ii. Special
c. Package
i. Freighter
ii. Belly hold
iii. Heavy
4. Land transport
a. Why land?
i. Cheap
ii. Fast
 iii. Door to door
iv. Flexible on volume
v. Flexible on schedule
vi. Maximum traceability
5. Cargo export preparation: Packing and labeling
a. Individual and export packaging
b. Individual and export labeling
c. International standards
Topic 5: Customs controls
1. Customs related documents and registrations
a. Customs declarations
i. Official document that lists and gives details of goods that are being
imported or exported
ii. Lodged by the owner of the goods
iii. Several simplified procedures
iv. Simplify the process companies appoint customs brokers who arrange the
declaration on their behalf as well as the whole customs clearance
b. EORI – economic operators’ resignation and identification number
i. Country code of issuing member county
ii. Unique code or numbers for specific member state
iii. Ensures traceability and security of import and export from the cunty state
iv. Unified system that gives wide statistical information
c. Import permit/ license
d. Export permit
2. Import procedures and customs regimes
a. Importation vs import of goods
i. Importation of goods – refers to the act of bringing the goods into the
customs territory
ii. Import of goods – refers to the set of procedures related to the entry of
goods originating from one county into the territory of another
b. Import procedures
i. Goods entry – secures the legal border crossing of the goods/ physical
procedure
ii. Presentation of the goods – after the entry of the goods, they must be
transported via customs determined routes and means to the customs
office where the custom clearance process shall be maintained
iii. Temporary storage – up to 90 days
c. Free circulation – confers on non-Union goods the status of union good after
the compliance of import formalities and the payment of the import duty and
all due taxes of which the imported goods are liable
d. Temporary admission (specific use) – allows goods to be brought in
temporarily with total or partial relief from import duty/ specific requirements
must be met in order this regime to be used
 e. End use (specific use) – custom procedure whereby goods may be released for
free circulation in the EU at a reduced or zero rate of duty on account of their
specific use such as construction of ships, aircrafts to be used for civil aviation
or drilling platform
f. Inward processing – non-union goods are imported in order to be used in the
customs territory of the union in one or more processing operations
g. Customs warehousing – non-Union goods can be stored in any premises
authorize by customs authorities – unlimited duration
h. Free zone – enclosed areas within the customs territory of the Union where
non- Union goods can be introduced free of import duty, other changes and
commercial policy measures
i. Transit
i. Between two points of a customs territory via another customs territory
ii. Between two or more different customs territories
j. ATA temporary admission – function as transit document so that goods can be
moved within the customs territory of the EU from the point where they enter
to the point where are used under temporary admission
k. TIR (Transports internationaux routiers, international road transport) – enable
goods to be moved under customs control across international borders
without payment of the duties and taxes
l. Re- export – form of international trade in which a country exports goods
which it previously imported without altering them
3. Import documentation
a. Customs declaration – standardized
b. Transport document – CMR, CIM, BL, AWB
c. Invoice – exporter/ importer/ buyer/ number date….
d. Contract
e. Preference document – connected to the goods origin: EUR1, EUR-MED, A.TR,
FORM A, suppliers declarations
f. Phytosanitary and/ or health related documents
g. Packaging list
h. Conformity declaration – declaration that the proof compliance with the
certain regulations of the import country
i. Import permit
j. Export permit
k. Other
4. TARIC – EU regulation containing the Common Customs Tariff, which meets the
requirements of external trade statistics and EU policies relating to import or export
a. Tariff measures
b. Agricultural measures
c. Trade defense instruments
d. Prohibitions and restrictions of import and export
5. Export procedures and custom regimes
a. Export
 i. Step 1: export declaration
ii. Step 2: presentation of the goods for export
iii. Outward processing – union goods may be temporarily exported form the
customs territory of the Union in order to undergo processing operations
iv. Storage
6. Export documentation
a. Customs declaration – standardized
b. Transport documentation – CMR, CIM, BL, AWB
c. Invoice
d. Packing list
e. Preference document
f. Phytosanitary and/or health related document
Topic 6: International trade risks
1. Risk management process
a. Identify risk
b. Assess risk
c. Control risk
d. Review controls
2. Risk assessment

3. Product risks
a. Product quality
b. Product availability
c. Cost
d. Product liability
4. Market risks
a. Demand issues
 b. Product launch timing
c. Competition strategy
d. Customers perceptions of the product
5. Logistics risks
a. Lack of equipment
b. Delays
c. In transit quality changes
d. Transport costs high fluctuations
6. Financial risks
a. Insecurity of payment
b. Lack of financing
c. Fraud risks
d. Currency risks
7. Political and regulatory risks
a. A sudden change in a country’s laws and regulations
b. An issue in one sector/ business related to the international trade between 2
countries that affects other non-related sectors engaged in the international
trade between same two countries
c. Unexpected events
Topic 7: Risk management
I. Managing product related risks
1. Product quality related
a. Pre-determined quality specifications – detailed requirements that define the
quality of a product, service or process, includes measurements and intangible
elements like smell and taste
b. QMS (quality management system)
c. Trainings of employees and tests of the products
d. Pre- shipment inspections
e. Customers feedback analyses
f. Identify the urgency and importance of your availability issues
g. Apply covey matrix – time management technique created by president Dwight
Eisenhower and popularized by Stephen Covey (7 habits of highly effective
people)
h. Plan alternative supply options
 2. Product liability – responsibility of manufacturers, distributors, suppliers, retailers
and others who make products available to the public are held responsible for the
injuries those products cause
a. Product liability insurance – protects you against the cost of compensation for:
personal injuries, loss or damage to property, circumstances such as product
faults that the quality control system couldn’t identify
i. Types of PLI
a. Business liability insurance (BLI)
b. Extended product liability insurance
c. Recall cost insurance
d. Environmental liability insurance (ELI)
e. Environmental damage insurance (EDI)
f. Financial damages and professional liability insurance
II. Managing market related risks
3. Demand (demand management) – planning methodology that results in tighter
coordination of strategy, capacity and customer needs, bridge between the
marketplace and a company’s internal operations
a. Objectives
i. Improved customer service
ii. Forecasting with greater accuracy
iii. Reduced costs
iv. Enhance existing products and excel new product introductions
 v. More efficient planning
4. Customer perceptions
a. Identify your target markets and find out how they perceive your products
b. Develop and maintain a positive connection with your customers
c. Follow up
d. Improve
e. Be present
III. Managing logistics related risks
5. LRMS (logistics risk management system)
a. Identify key losses – cargo breakage, water damage, handling and storage loss,
theft and pilferage, hipping denting, scratching, rusting, oxidation and
discoloration etc.
b. Identify the reasons – accidents, natural losses, fires, temperature variation,
moisture, condensation, contamination, etc.
6. Cargo insurance – insurance that generally protects shipments from loss, damage, or
theft while in transit
a. Types of CI according to the means of transport – land, marine and air
b. Types of CI according to the coverage – all-risk insurance, with average
insurance, free of particular average insurance
IV. Managing finance related risks
7. Credit insurance
a. Export credit insurance – protects an exporter of goods against the risk of non-
payment by a foreign buyer
b. Covers commercial risk – insolvency of the buyer, bankruptcy or protracted
defaults/ slow payment
c. Political risk – war, terrorism, riots and revolution
d. Types
i. By term
a. short term – up to 95% against the buyer’s nonpayment risk
b. medium term/ long term – up to 90% - against commercial and political
risks
ii. single/ multi buyer cover
iii. single risk/ multiple risk
iv. letter of credit – contractual commitment by the foreign buyer’s bank to
pay once the exporter ships the goods and presents the required
documentation to the exporter’s bank as a proof
a. irrevocable LC – cannot be cancelled or modified without consent of
the seller, reflects absolute liability of the Bank (issuer) to the other
party
b. revocable LC – can be modified by the bank of the other party without
the permission of the seller – no liabilities for the bank to the
beneficiary after revocation of the LC
 c. stand by LC – flexible collaboration opportunity to seller and buyer –
the bank will honor the LC when the buyer fails to fulfill payment to the
seller
d. confirmed LC – the bank guarantee of the LC issued, irrespective to the
payment by the bank issuing the LC (issuer), the bank confirming the LC
is liable for performance of obligations
e. unconfirmed LC – only the bank issuing the LC will be liable for
payment
f. transferable LC – enables the seller to assign part of the LC to other
parties
g. back-to-back – considers issuing the second LC on the basis of the first
LC. LC is opened in favor of intermediary as per buyer’s instructions and
on the basis of this LC and instructions of the intermediary a new LC is
opened in favor of seller of the goods
h. Payment at sight LC – payment is made to the seller immediately (up to
7 days) after the required documents have been submitted
i. Deferred payment LC – payment to the seller is not made when the
documents are submitted but at a letter period defined in the LC. In
favor of the seller
j. Red clause LC – seller can request an advance for an agreed amount of
the LC before shipment of goods and submittal of required document
8. Exchange risk management – risk of financial impact due to exchange rate
fluctuations namely the risk that a business financial performance or financial
position will be impacted by changes in the exchange rates between countries
a. Transaction risk
b. Translation risk
c. Economic risk
V. Managing politics and regulation related risk
9. Risk analysis
10. Consult with local partners
11. Local banking
12. Political risk insurance
13. Monitor global issues