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Entrepreneurial Toolbox Series: Importing 101 for Entrepreneurs

Entrepreneurial Toolbox Series: Importing 101 for Entrepreneurs. Presented By: Stan Angelo Chairman, Westinghouse Lighting 2010 Entrepreneur-in-Residence. ENTREPRENEURIAL TOOLBOX. LUNCH & LEARN SERIES. The Power of Electricity. Three Late 19 th Century Titans of America’s Gilded Age.

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Entrepreneurial Toolbox Series: Importing 101 for Entrepreneurs

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  1. Entrepreneurial Toolbox Series: Importing 101 for Entrepreneurs Presented By:Stan AngeloChairman, Westinghouse Lighting2010 Entrepreneur-in-Residence ENTREPRENEURIAL TOOLBOX LUNCH & LEARN SERIES

  2. The Power of Electricity

  3. Three Late 19th Century Titans of America’s Gilded Age • Thomas Edison • The nation’s greatest inventor and creator of the incandescent light bulb • Nicholas Tesla • A Serbian immigrant who revolutionized the generation and delivery of electricity • George Westinghouse • A charismatic inventor from Pittsburgh and tough corporate entrepreneur

  4. Recommended Reading • Empires of Light: Edison, Tesla, Westinghouse and the Race to Electrify the World • By Jill Jones

  5. Introduction to Westinghouse Lighting

  6. Company History • Created in 1946 as Angelo Brothers Company, ABCO • Angelo Brothers acquired the Westinghouse license for light bulbs in 1998 • Corporate name was changed to Westinghouse Light Corp in 2005

  7. Top US Trading Partners -Trade Imports YTD May 2009Total All 15 Countries 588.2 Billions of Dollars In Billions of dollars

  8. Top Ten Import Product CategoriesImport Total $2,090,483 in millions of dollars (5 months)Total Top Ten $1,636,398.........78.3% In Millions of dollars

  9. Top Trading Partners Imports of Electrical Lighting (HTS 8512) YTD Sept 09 In Thousands of dollars

  10. The Basics of Importing

  11. Required Import Documents • Bill of Lading, airway bill or carrier’s certificate • Commercial invoice from seller • Entry manifest (Customs Form 7533) or Entry/Immediate Delivery (Customs Form 3461) • Packing lists

  12. Import Requirements • An individual may make his own customs clearance of goods imported • The U.S. Customs Service doesn’t require an importer to have a license or permit • Another agency may require a license or permit • All incoming merchandise to the U.S. must clear customs unless exempted by law • Generally, Customs duties are calculated ad valorem (percentage) applicable to the value of the goods • Some articles are dutiable at a specific rate or compound rate

  13. Import Requirements II • Customs determines the dutiable value of merchandise • Several appraisal methods are used to arrive at this value • Duties are prescribed according to HS code • The tariff schedule provides several rates of duty for each item • “General” rates for most-favored nations • “Special” rates for special trade programs • Processing fee may also apply

  14. What is a Harmonized Tariff Code? • Referred to as HS or HTS code • Issued by International Trade Commission • Primary resource for determining tariff classification for U.S. imports and exports • Based on the Harmonized System • Established by World Customs Organization • Used by virtually all countries around the world • Over 17,000 unique HS code numbers to classify everything from rubber bands to livestock

  15. Free Trade Agreements • Helps open markets and expand opportunities for American workers and businesses • Tools for promoting fair competition and encouraging foreign governments to adopt transparent, non-discriminatory trade laws • Reduces or eliminate tariffs between member nations • U.S. is party to many bilateral and multi-lateral trade agreements with many nations/regions • i.e. NAFTA, DR-CAFTA

  16. Why Import?

  17. Reasons to Import • Product Quality • If a product of the same or better quality can be produced offshore, then it’s only a matter of time before the product finds its way to the U.S. market • Product cost • Much of the lighting industry has gone offshore • Importing high volume items lowered our landed costs by at least 25% • Entire packaging and assembly operations eventually moved to China

  18. Reasons to Import II • Low cost of entry • Anyone can start importing, but many fail • “Briefcase warriors” • Buy direct from Asian factory and ship directly to customer • Customer eventually identifies manufacturer and eliminates middle man • Import Products/Export Labor • Countless jobs have moved to China • WLC has moved a portion of marketing and supply chain staff to China • Quality work at lower labor cost • Overseas staff closer to our suppliers

  19. Reasons to Import III • Finding the core vendor • Most critical decision • Success depends upon the integrity and commitment of people you are dealing with, domestically and internationally • Sourcing flexibility helps to create a competitive environment • Product Availability • Evaluating the person and company that is a potential vendor is a major hurdle • Several factory visits are required of all prospective suppliers • Secondary vendors should be part of your supply chain • Role of the customs broker or trading company • Finding the right representation is also critical • The agent will help you find the most suitable supplier • Assists with quality control, logistical issues, financing and translation

  20. What are Landed Costs? • The maker’s FOB (Free on Board) plus the following: • Duty % (depends upon type of good and from which country) • Insurance • Domestic Broker Costs • Local Drayage • Ocean Freight • Financial Terms • Letters of Credit (LCs); Standy LCs; • Wire Transfers • Open Account • Documentary Collections

  21. Currency Considerations • Preferable to buy in U.S. dollars (USD) • Better understanding and control of your costs • Supplier and buyer agree upon costs based on the currency • Currency hedge-attempt to offset price fluctuations in a market by basing your costs on a higher rate • Ex- If the Chinese Yuan is trading at 8.0 to the USD, using the rate of 7.6 would minimize risk and provide some cushion to the importer

  22. Finding Overseas Partners • Contact Local Chamber of Commerce • www.uschamber.com/chambers/directory/default.htm?d=false • Contact American Chamber of Commerce Abroad (AmChams) • For a complete list visit www.uschamber.com/international/directory/default • Contact Trade and Investment Offices of Individual Countries • Contact local embassy of the particular country • Search online for the specific country you are interested in • Ex-www.portugalglobal.pt/EN/SourceFromPortugal • Ex- http://www.taiwanembassy.org/US/NYC

  23. Import Regulations

  24. Automated Commercial System • Comprehensive system created by the U.S. Customs Service • Tracks, controls and processes all commercial goods imported into the U.S. • Will be phased out and replaced by the Automated Customs Environment (ACE) system • ACE is currently in the pilot phase

  25. Restricted Merchandise A license or permit is required from the responsible agency for the following for the following types of items: *Certain items in these categories may also be prohibited.

  26. Restricted Merchandise II The following regulatory agencies issue import licenses according to their category:

  27. U.S. Import-Related Agencies • U.S. Customs & Border Patrol • Division of the Department of Homeland Security • Assures that goods that arrive in the U.S. are legitimate and that and that the appropriate dues and fees are paid • www.cbp.gov • U.S. Import Administration • Division of the Department of Commerce • Primary role is to enforce effectively the U.S. unfair trade laws (i.e. anti-dumping and countervailing duty laws) and implement policies and programs aimed at countering foreign unfair trade practices • www.trade.gov/ia/index.asp • U.S. International Trade Commission • Provides international trade stats and U.S. tariff data to the public full-time and free of charge • http://dataweb.usitc.gov

  28. What is a trade sanction/embargo? • A trade sanction is a trade penalty imposed by one nation onto one or more other nations on certain types of goods • Referred to as “partial embargo” • i.e. North Korea and Former Liberian regime of Charles Taylor • An embargo is the prohibition of commerce and trade with a certain country • Referred to as “absolute embargo” • i.e. Cuba and Syria

  29. Which countries have trade sanctions?

  30. Office of Foreign Assets Control • Referred to as OFAC • Prohibits the unlicensed importation of merchandise originated from any country levied with trade sanctions or embargoes by the U.S. • Information and Informational materials are exempt • Nor can goods be imported or through commercial entities owned by any of these governments, regardless of location of the entity

  31. Office of Foreign Assets Control II • Any vessel or aircraft under the registry, ownership or control of the governments of or commercial entities may not import merchandise either • Part of importer’s due diligence requires the referencing of the various OFAC lists prior to engaging in international trade - www.treas.gov/offices/enforcement/ofac/

  32. What’s Next?

  33. Where to Next? • Japan 1950-1960 • Korea 1960-1975 • Taiwan 1975-1990 • China 1990-???? • What about Vietnam and Indonesia? • Which country will you import from? • Where will your true life adventure be in the global economy?

  34. Recommended Reading • Poorly Made in China: An Insider’s Account of the Tactics Behind China’s Production Game • By Paul Midler

  35. THE END Any Questions? Stan Angelo Chairman, Westinghouse Lighting 2010 IEI Entrepreneur-in-Residence stan@westinghouselighting.com 215-671-2121

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