Mastering Import and Export Management

236 Pages·2004·13.95 MB·English

by  Cook

MASTERING IMPORT &
EXPORT MANAGEMENT
Thomas A. Cook
with
Rennie Alston and Kelly Raia
Post-9/11 Security and Compliance Management
Inbound and Outbound Logistics
Documents, Operations, and Procedures
Risk Assessment and Mitigation
Import and Export Management Tools
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Library of Congress Cataloging-in-Publication Data
Cook, Thomas A.
Mastering import & export management / Thomas A. Cook.
p. cm.
ISBN 13 97644144-7203-3
ISBN 10 0-8144-7203-6
1. Exports-Management. 2. Export controls. 3. Export
marketing-Management. 4. Foreign trade promotion.
5. Imports-Management. 6. International trade. 7. Exports-
United States-Management. 8. Export controls-United States.
9. Export marketing-United States-Management. 10. Foreign
trade promotion-United States. 11. Imports-United States-
Management. 12. International trade. I. Title: Mastering import and
export management. 11. Title: Import & export management.
III. Title: Import and export management. IV. Title.
HF1414.4.C665 2004
658.8'4-dc22
2004006153
0 2004 Thomas A. Cook.
All rights reserved.
Printed in the United States of America.
This publication may not be reproduced, stored in a retrieval
system, or transmitted in whole or in part, in any form or by any
means, electronic, mechanical, photocopying, recording, or
otherwise, without the prior written permission of AMACOM, a
division of American Management Association, 1601 Broadway,
New York, NY 10019
Printing number
10 9 8 76 5
Preface
Mustwing lmport 6 Export Management is a timely publication as compa-
nies scramble to maintain open import and export supply chains with an
ever-increasing level of government scrutiny and compliance and security
changes.
Corporate America is redeploying its personnel, resources, and infra-
structure to manage supply chains that have greater foreign purchases
and expanding global markets.
Executives engaged in importing and exporting are being tested daily
with challenges requiring new and enhanced skill sets. These new chal-
lenges include: cost-effective logistics; better inventory management;
more skilled vendor services; compliance and security management; and
a changing political, economic, and regulatory climate in a global envi-
ronment.
Corporations are recognizing that in order to be competitive in world
trade, a company must reduce its cost of logistics. This book provides in-
formation on how to lower costs in shipping, inventory management, im-
port/export order processing, and manpower, and how to avoid fines and
penalties.
This book outlines all the historical legacy issues of world trade and in-
terfaces the new world order, post 9/11.
Today’s supply chain managers must confront the movement of goods
and services timely, safely, and cost-effectively. But that alone is not
enough. They must incorporate import/export supply chain strategies
that include post-9/11 compliance and security regulations that are both
new and evolving. This means that corporate America must initiate a vigil
to keep current and be flexible enough to implement revisions.
A key trait of successful global supply chains will be the ability to modify
and change import/export logistics, communications, suppliers, vendors,
and all interface parties.
The book makes an excellent argument that developing resources, man-
aging change, and affecting short-term supply chain strategies is an inte-
gral foundation for importers and exporters.
While some concepts and methodologies of the past have validity, the
truly successful and competitive company engaged in imports and ex-
ports will in tandem bring a whole new skill set to the ”deal” that will
have safe, secure, and compliant supply lines in their global make-up.
xxi
xxii Preface
Mastering Import & Export Management is a compendium for the serious
import and export supply chain manager to develop internal standard op-
erating procedures to ensure that their global supply chains stay open, op-
erate cost-effectively, and adhere to all the old and new regulations facing
importers and exporters.
Global trade requires numerous skill sets of the corporate executive in
managing their import/export supply chains. This book provides the “ul-
timate guide” to managing these skill sets, developing tactical resources,
and planning execution strategies to conquer all the obstacles.
Section One
The Global Supply Chain
1
1
Purchasing Management Skill Sets
in Foreign Markets
This chapter provides an overview of the skill sets that any supply chain executive
would benefit from in any aspect of their import or export activity. However, the fo-
cus set out here is for the "purchasing" manager to have a set of skill sets reviewed
that can be used when sourcing goods and material from overseas suppliers.
Purchasing from Foreign Sources
Purchasing managers have several goals in determining who to buy from overseas
suppliers: costs, specifications, and scheduling.
costs
The bottom-line potential saving with product that is less costly from a supplier lo-
cated in a country with cheap labor costs, deregulated Occupational Safety and
Health Administration (OSHA)-type controls, less environmental issues, etc.
An analysis of the "landed cost" will assist in determining this cost issue. One
must measure the "total" of all the incremental costs to then view the final landed
cost in determining ultimate supplier options. This analysis process requires an ex-
perienced eye and tenure in operations, logistics, and negotiation management.
Landed Cost Components
Quoting
Documentation
Handling
Inland Freight
Export Clearance
International Freight
Import Costs: License, Registrations
Import Clearance
Duty, Taxes, etc.
Warehousing
Inland Freight and On-forwarding
Possible Repacking, Remarking, or Relabeling
Possible Further Processing, Refinements, or Manufacturing
Black Money????
The experienced purchasing manager has to evaluate all these parameters to make
an intelligent decision in where to source product from.
3
4 The Global Supply Chain
Meeting Product Specifications
This parameter is relevant no matter where the goods originate. One only need to
be sensitive to the differences in language, culture, legal, design metrics, etc. when
comparing "apples to apples."
Prior to the 1980s foreign sourcing was always considered shabby. But the in-
fluence of western engineering, quality control, and technology to foreign manu-
facturing in the last twenty years has significantly brought up their capability. In
some product lines, like communication and broadcast equipment, high-end auto-
mobiles, foreign suppliers have proven very capable.
If you are venturing into product lines in which the overseas supplier has little
experience, the obvious initiative of being more diligent and exercising greater
scrutiny brings on new meaning.
Meeting Delivey Schedules
I witness many importers frustrated when purchasing from foreign suppliers who
continually miss shipping deadlines and delivery schedules. It is critical to bring
this into the overall formula in evaluating an overseas source, as missing deadlines
could prove to have deadly consequences to customer, inventory, or manufactur-
ing schedules. If they can't deliver on time, then "cheap" loses its value.
Many importers who have "just in time" inventory controls need to be more on
top of the inbound supply chain and more proactive in the face of potential delays
or work flow stoppage.
Some importers hold extra inventory that is sourced from overseas, allowing
potential delays to have minimal effect.
So cost, specifications, and delivery capabilities are the key governing factors in
determining overseas supply options. I know some import purchasing managers
who live by managing all three concerns in a manner avoiding pitfalls and lever-
aging opportunities.
Detail, Detail, and More Detail
Purchasing managers must pay attention to a lot of detail in making sure their
inbound supply chains are managed cost-effectively and are competitive. (See
Figure 1-1.)
The detail to be managed requires experience, creativity, and an awareness of
all the parameters of inbound supply chain management.
Inbound supply chain management is as much an art as it is a science. I have
outlined a number of areas that the purchasing executive ought to consider in their
day-to-day responsibilities.
Companies looking to foreign suppliers can create quality purchasing opportu-
nities. However, the importer must go through a number of steps before buying
the goods to make sure the deal will work successfully. For example, the importer
must make sure that the party overseas is a "legitimate" entity approved to do
business with U.S.c ompanies.
In addition, the importer must determine the duties and taxes applicable for an
importfiom that particular county, to analyze the "landed cost," which will
allow them to determine the competitiveness of that sourcing option.
Purchasing Management Skill Sets in Foreign Markets 5
Figure 1-1. The flow of goods from the world into the United States is enormous.
Importers have an array of steps they must take to purchase goods from foreign
suppliers. Some of these steps are:
1. Make sure all the entities you are doing business with are legitimate. Not
only is it a “general” business sense, but making sure you “check” them out, as you
would any party within the United States, before you would enter an agreement.
I am always astonished at the lack of due diligence in checking out foreign suppli-
ers in the face of million dollar transactions.
2. In addition, you should check all the U.S. Government lists, like Denied
Parties, Unverified, Office of Foreign Asset Control (OFAC) Sanctions, State De-
partment, to make sure the party and individuals you are engaging are not on
these lists. In the appendix, the access to these government sites is provided. It is
part of an importers due diligence to make sure these lists are checked.
3. Make sure that the supplier can meet all your manufacturing and produc-
tion needs. I would suggest before moving all your business with the new sup-
plier, you allow some period of ”testing and review” before long-term agreements
are reached. There should be no reason to rush into a new supplier and arrange a
long-term agreement until you are reasonably sure they can meet your needs on a
timely and efficient basis. Do not give up your existing supply lines until the new
one is solid. You may want to “wean” the new one into full time, while the other
is gradually turned off.
4. Review all vulnerabilities and set up ”Plan Bs” and contingency arrange-
ments. Set up a committee with all those engaged in the inbound supply chain.
Make a checklist of “what ifs” and “vulnerabilities.” Then create a new checklist
with a proactive strategy to deal with all the issues.
5. Work with qualified consultants and attorneys, in the United States and
locally overseas. Typical ”House” counsels lack the expertise required and ulti-
mately can cause more harm than good. Check with outside counsel, trade asso-
ciations, the Internet and vendors for names of experienced international legal
counsel.
6. Develop contracts that limit ”exclusivity” and have “arbitration” agree-
ments in them. Do not commit to “deals” that restrict your ability to change or
modify the agreement, if not satisfied with your supplier’s performance. All dis-
putes to be settled in a neutral setting like in an arbitration panel in London,
Toronto, or Sydney and not in the country where you are sourcing your goods.
6 The Global Supply Chain
7. Do extensive product testing before entering into the U.S. market or for use
in your full-scale manufacturing. It can become a real embarrassment when you
have a “boatload” of goods coming in, and the prototypes are not meeting specifi-
cation. Buying from overseas markets requires patience and thorough diligence.
8. Make sure your suppliers’ products meet all regulatory requirements. Cus-
toms, OSHA, USDA/FDA, BATF, DEC, DOT, FCC, CDC, etc., to name a limited
few. It is imperative that the importer coordinates the import legal requirements
with the various agencies that govern the specific product line. In many cases,
there could be multiple agencies involved with similar or conflicting regulations.
Larger corporations may have multiple compliance specialists in the various
purviews, like a pharmaceutical company that would have a FDA compliance per-
son, an OSHA compliance person, and import compliance manager.
9. Make sure your new supplier meets all packing, marking, and labeling re-
quirements. It is an importers responsibility, typically as “importer of record” to
ensure the goods entering the United States meet all requirements for how the
goods are marked, packed, and labeled. For example, a cereal product must have
the carton and the internal wrapping meet FDA standards. The outside of the car-
ton must meet United States Department of Agriculture (USDA) guidelines on
communicating product, handling and nutritional information, etc.
With new security guidelines in place, like the 24 Hour Manifest Ruling (page
196), the importer must make sure that the details of just what is entering the
United States is manifested by the inbound ocean carrier at least twenty-four hours
prior to the vessel sailing from the exporters outbound port.
New time frames for air, ocean, and truck shipments will be coming out in 2004.
10. Control the inbound logistics by controlling the terms of purchase. Use
free on board (FOB) Plant or Ex Warehouse International Commercial (INCO)
Terms. This will give you control of the inbound supply chain. This will typically
allow you better pricing, control of delivery scheduling, and all compliance re-
sponsibilities.
Many importers have determined, unwisely, that removing themselves from
the hassles of the import process and inbound logistics serves their best interest.
My group has studied this circumstance for over twenty years. Every analysis
clearly points out that the importer is always in a “best served“ position when they
control the inbound and “importer of record” responsibilities.
The importer benefits in reducing overall logistics costs, managing compliance
and security requirements, and maintaining control over the inbound status and
disposition of the imported merchandise.
11. Control who the customs broker will be. Use your customhouse broker
where you can have documentary and compliance controls in place. Where you
have the “relationship” to make things happen. Many importers appreciate being
out of the ”loop” of the clearance process. Customs has regulations referring to
”ultimate consignee” (page 183), which may force you to be the ”importer of
record” irrespective of who manages the clearance process.
We have always identified the scenario that those importers who “control” the
importing and clearance process are better exercising due diligence and reason-
able care, which are dictates of Customs Border and Protection.
In a new era of increased “compliance and security” post 9/11 control offers the
best strategy for mitigating risk, avoiding fines and penalties, and maintaining
open inbound supply chains.
I
. - . ~
Purchasing Management Skill Sets in Foreign Markets 7
12. Calculate the anticipated "landed costs." This is imperative to make sure
you are competitive in comparison to local purchasing or from other sites. This
is covered in more detail on page 15. Too many times we have seen importers
begin to import a product, raw material, or component from a foreign supplier
then get hit with duties, taxes, and inland charges, which make the transaction cost
prohibitive.
Do your homework before you import.
13. Pay attention to detail. Making sure all the minutia of information is rel-
evant and accurate, like but not limited to valuation, classification, origin, lan-
guage, invoice data, etc.
Failure to do so, after the fact, slows the inbound supply chain, adds unneces-
sary import costs, and opens you up to fine and penalty exposure. Utilization of
quality and compliant customhouse brokers will greatly assist you in this en-
deavor.
14. Make sure your transaction from point of purchase to point of process-
ing or sale is well documented and all records are maintained for at least five
years. This is a "reasonable care" standard, for which failure can result in serious
penal ties.
15. Make sure the shipment is insured for the full value of your expected
loss. The valuation for insurance purposes can be calculated to full sales
value, including profit. It is at the time of loss or damage that most companies
worry about "cargo insurance." Then it's too late. Set up the insurances to pro-
vide "All Risk" "Warehouse to Warehouse" coverage on your imports with a
quality third-party insurance company who specializes in international trans-
portation risks.
16. Pay attention to global and local economic and political events and
trends. Bring these circumstances into your equation for determining the viability
of the foreign source you are contemplating. Not paying attention could cost mil-
lions. Many foreign companies invested money into construction projects in Iraq,
pre-US. invasion. Now their investments are worth zero.
Companies sourced petroleum products from Venezuela in early 2003, only to
see the source not be able to deliver its products due to political strife.
Importers who pay attention to detail and follow the sixteen steps and integrate
these into Inbound Supply Chain standard operating procedures (SOPS)w ill place
themselves in the very best situation to always be compliant and secure, cost-ef-
fective, and competitive.
Determining the Best Overseas Suppliers
For the most part US. purchasing managers will have options when looking at po-
tential foreign suppliers.
The following set of guidelines will assist the purchasing executive with a set of
parameters to maximize the opportunity for the right choice.
Experience in manufacturing your specific product
Tenure in business
Experience in servicing foreign markets
Experience in selling into the United States and/or other destinations you are
purchasing on behalf of
Quality of operations staff
Number of personnel who speak, write, and communicate well in English
Willingness to travel to the United States dlid/or other overseas facilities