Center for Supply Chain Excellence
Niagara University
International Logistics - Import
Jack Ampuja
Globalized Economy
International sourcing
- supply chains lengthen
- purchasing more important
- self manufacturing less vital
Need strong linkage between purchasing & logistics for reliable supply chain
Global Optimization
Worldwide procurement & distribution
Centralized planning with local execution
Operations justified around the world
Product rationalization
Common processes & IT integration
Taxation minimalization
International Impact
US economy generates over $10 trillion in goods & services per year - GDP
$1 trillion [10%] is exported
- 25% goes to Canada
More than $1 trillion is imported
- results in negative balance of trade
Supply Chain Basics
All international shipments have export and import segments
- freight forwarder & customs broker
Length of supply chain is proportional to risk of disruption
Water transport is slowest & cheapest
- air transport fastest & most expensive
International Security
International survey of food retail executives in North America, Europe, Asia Pacific by Food Business Forum & KPMG International
#1 CEO issue is food safety and security
Inbound to US
Largest points of origin for ocean containers:
Hong Kong
Shanghai
Singapore
Wal*Mart
Imports from China:
$10B in ’01
$12B in ’02
$15B in ’03
$25B….soon
..#1 US importer from China
Port Ranking Transactions
Port Total
Port of Detroit, MI 2,115,460
Port of Buffalo, NY 1,698,209
Port of Los Angeles, CA 1,221,146
Port of Port Huron, MI 1,188,505
Port of Chicago, IL 950,791
FEDEX Courier, Memphis, TN 846,967
Port of New York-Newark, Elizabeth, NJ 838,417
Port of JFK Airport, NY 830,352
Port of Laredo, TX 778,242
Port of Champlain-Rouses Point, NY 768,247
Port of LAX, Los Angeles, CA 694,459
Port of Blaine, WA 563,659
San Francisco International Airport, CA 428,460
UPS Courier, Louisville, KY 424,650
Port of El Paso, TX 369,240
Port of Otay Mesa , CA 350,043
Free Market Economy
Means that merchandise grown, mined or manufactured in foreign lands may enter the commerce of the United States to be consumed as unique products or to compete side by side with similar domestic products.
Foreign Products
Imported foreign products are subject to the same laws and regulations of other government agencies that domestic products are subject to
All imported products must comply fully with US laws & regulations
U.S. Customs Laws
U.S. Customs laws were established by the first Congress in 1789 and are among the oldest laws in the U.S.
Changing with the Times
Since that time, Customs laws have become more and more complex despite efforts to simplify the importation process through the use of electronic and automated systems
.US Customs
Renamed: Bureau of Customs & Border Protection
www.customs.govInitial focus on inbound ocean
- now monitoring all modes in & outbound
Online search by Library of Congress at
- http://thomas.loc.gov
Who is Customs?
US Customs & Border Protection [CBP] is the primary enforcement agency protecting the Nation’s borders
Customs & Border Protection
It is the only border agency with an extensive air, land, and marine interdiction force and with an investigative component supported by its own intelligence branch
A Typical Day for Customs
Customs guards our borders against substandard, restricted and prohibited goods.
Legal Responsibilities
To act as an enforcement agency to ensure that foreign manufactured products imported into the United States comply with the laws of the land and are monitored by the government agencies of the land
Monetary Responsibility
To protect the national revenue by collecting import duty and depositing that revenue into the nation’s Treasury.
Revenue Collection
Customs provides the Nation with its second largest source of revenue. Last year, they returned $22.1 billion to the U.S. Treasury.
Scientific Support
Customs’ laboratories continually check imports to ensure that they comply with the myriad of laws involving public health, safety, and protection of intellectual property rights.
Customs Inspection
Value of goods and dutiable status
Proper marking including country of origin
Correct invoice for shipment
Check for prohibited articles
Compliance with US federal regulations
Matching of invoice to product
Customs Enforcement
As many as 40 US agencies can be involved
Most common:
- Bureau of Alcohol, Tobacco & Firearms
- Animal & Plant Inspection Service
- Fish & Wildlife Service
- Food & Drug Administration
- Consumer Product Safety Commission
Customs Update
Post 9/11 US Customs stepped up border surveillance + increased inspections to 20%
24 hour manifest rule already in effect
C-TPAT: Customs-Trade Partnership Against Terrorism
GTM: Global Trade Management software
Increased Inspection
4% of food imports are now checked
vs 2% pre 9/11
Estimated $1B/yr increased national expense
Port of Oakland asked for $69 million in security support…received $7 million
Customs Perspective
CTPAT = voluntary program
ISR = immediate subsequent recipient
- down one link in supply chain
IPR = immediate previous recipient
- up one link in supply chain
Pushing Borders Off-Shore
C-TPAT:
As of 9/03 4100 companies participate
Overseas manufacturers being added
CSI [Container Security Initiative]:
19 of world’s 20 major ports + 3 second tier participate
US Targeting officers now at 16 ports
Import Thresholds
Under $200: no entry required
Between $200 & $2500: informal entry
Over $2500: formal entry required
- Threshold is not total shipment value but on HTS/Schedule B number
Import Requirements
Bill of lading, airway bill or carrier certificate naming consignee destination
Commercial invoice showing value and description of merchandise
Customs form [entry/immediate delivery or entry manifest]
Packing list or documents listing products
Pre-Arrival Notices
By air:
From Americas - before flight
From Asia & Europe – 4hrs before landing
Railroad – 2hrs before US entry
Truck – 1hr before US entry unless certified by FAST
- Canadian regulations are similar
Duty Drawback
Imported product on which duty has been paid is then exported from US
Duty can be refunded to product owner by filing for "duty drawback"
Meticulous records must be kept to substantiate claim
Foreign Trade Zone
Legally not part of commercial US
Product in FTZ has not entered country and is not subject to duty
Product can be worked, milled, processed etc in FTZ
If product is exported from FTZ…there is no import duty
Guidelines for Success
Understand new regulations & impact on daily operations
Automate processes to provide Customs required data
Secure import supply chains in accord with Customs recommended practices
Get involved in trade security rulemaking
Pareto’s Principle [80/20 Rule]
From Vilfredo Pareto Italian economist and sociologist [1848 – 1923]
- 80% of consequences flow from 20% of causes
- 80% of outputs result from 20% of inputs
- 80% of results come from 20% of efforts
Few things are important…most are not
Center for Supply Chain Excellence
Niagara University
International Logistics - Export
Jack Ampuja
Globalized Economy….
Targeting customers around the world
- Service tailored by market
- Distribution chains lengthen
- Service reliability is critical to success
Need strong linkage between marketing & logistics for efficient supply chain
Basic Thoughts
It’s all about culture and not strictly business
Most difficult obstacle is vast array of political systems, cultural norms and ethical frameworks
Successful interpersonal relationships are a prerequisite: cultural bonding & friendships
Package Considerations
$/cubic meter is the standard calculation for both international air and ocean shipments
- 64" is maximum length for air cargo on passenger aircraft
- 117" is maximum any aircraft
Ratio of weight to volume: 1kg = 305 cu in
- known as dimensional weight
Payment Considerations
Cash is the safest alternative
Not easy to send between some countries
Carries risk to both parties: when to pay
Letter of credit is best option after cash
Banks charge between 0.5% & 2%
Buyer pays opening, seller confirming bank
The Captain Rules
The captain of a ship or airplane is final decision maker on acceptability of cargo for safety of his vessel
He cannot unfairly ban cargo but if he considers it unsafe he can keep it off even if your shipment is within international guidelines
NAFTA 1994
Trade with Canada grew from $242B to $409 [+69%]
Trade with Mexico grew from $100B to $248B [+148%]
Full reciprocal trucking between US & Mexico by 2000…still not complete
No discernable impact on employment
Canada Customs
PARS: Pre-arrival release system
- each shipment is pre-released
FIRST: Frequent Importer Release System
- products are pre-qualified by Canada
Customs Self Assessment:
20 importers, 110 carriers, 11,000 drivers
are currently in approval process
Basics About US-Canada Trade
86% of Canada’s exports go to US
24% of US exports go to Canada
Canada = largest export market for 37 states
US is #1 market for
all 10 provinces
Strength of Linkage
Canada supplies more energy to the United States than any other country
The volume of trade going across the Ambassador Bridge in Detroit is greater than that between the US and Japan
A truck crosses the border every three seconds; six people cross every second
Economy
45% of Canada’s GDP depends on exports
Canada is the most trade dependent of G-7 countries
Goods production is 33% of Canada’s economy
Did You Know?
Diamonds are now being mined in the Northwest Territories, and that emeralds have been found in the Yukon
Canadian government revenues are 44.3% of GDP versus 31.6% in the US
3 out of 4 Canadians work in services sector
Canadians
Canada’s population heritage is
40% British
27% French
20% Other European
12% Asian, African, Latin
2% Indigenous Natives
Canada - A Nation of Immigrants
Approximately 250,000 people per year immigrate to Canada
Between 1996 and 2001, 445,000 settled in the Toronto area
Did You Know?
Canada is 46% Roman Catholic
Catholic schools are supported with government tax dollars
Canada never had Revolution or Civil War
The British took control of all of Canada from the French in 1763 during the Seven Years War
Plains of Abraham, Quebec City, 1762
Canada - An Urban Population
Over 80% reside in large urban areas
-15.3 million in four major centres
Golden Horseshoe-Toronto
Montreal
Vancouver
Calgary
- 6.7 million live in Golden Horseshoe
Did You Know?
Canadian & US dollar last equal in 1976
Canada spends less of its GDP on health care than US, yet both countries have the same level of government involvement in health care
The Canada Health Act created socialized medicine
Canadian personal income taxes are 14.6% of GDP versus 11.8% in the US
GDP and Quality of Life
GDP of C$29,000 versus US of $36,000
In 1998, the C$ = US$0.67, but bought US$0.84 of goods
United Nations rankings consistently place Canada in top five in quality of life
Trade Act 2002 [Aug]
"Fast Track Authority"
Shipping documents for ocean cargo must be tendered to carrier 24hrs before shipment
All exporters must file SED electronically
Greater penalties: Cargo seizure or Civil penalty equal to cargo value or transportation
Treasury must develop system for security monitoring of all cargo in transit
Export-Import Bank
Assumes credit & country risks that private sector cannot or will not handle
Provides loan guarantees to support export loans of commercial lenders
Working capital covers 90% of principal & interest…100% guarantee available
Regional offices in New York, Chicago, Miami, Houston, Long Beach
Export Assistance
Provided by US Dept of Commerce through US Commercial Service division
Buffalo Export Assistance Center
Located in Buffalo & Rochester
$50/year membership fee
More Support Services
ECIDA International Division
- specializes in financial services to help exporters compete on level playing field
[www.ecidany.com]
Purchasing Management Assoc of Buffalo
- Has an international sourcing committee
Ensuring International Success
Be aware – watch news & trends
Utilize an expert – freight forwarders & customs brokers
Conduct research – get as much info as possible before you launch:
Chamber of Commerce, US Customs,
US Embassy, CIA [www.odci.gov/cia]
More Success Factors
Standardize – consistency in approach makes problem resolution easier
Broaden your view – consider the entire supply chain in your decision so that you evaluate total cost & service
Be flexible – domestic success guarantees nothing outside of the US
Foreign Taxes
American firms receive a US tax credit
- dollar-for-dollar offset of all taxes paid in other countries
Other countries do not tax foreign profits
- their businesses get major advantage
US taxes are due when profit is repatriated
- Unrepatriated profits = $600 Billion
China: Dos & Don’ts
Don’t assume you have to pay bribes
- many now know this is criminal in US law
Do demand a big down payment ~70%
- avoid looking silly in a cash society
Don’t bank on promises of state subsidies or incentives….they often disappear
Do follow written rules although local officials may urge non-compliance
China Inspections
Private on site help through KRT of Calif
- about $300 Per Container
Address: poor quality, short shipments, wrong items, seller compensation refusal
10 years in business/ 6 locations in China
- managed by Americans
www.chinainspect.com