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INTERNATIONAL BUSINESS. LECTURE 4 : Tariffs, trade barrier s , global trade: managing global trade flows Gregor Pfajfar, MSc Faculty of Economics University of Ljubljana E-mail: gregor.pfajfar @ef.uni-lj.si December 4th 200 9. Schedule. Management of global trade flows :

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international business

INTERNATIONAL BUSINESS

LECTURE 4:

Tariffs, trade barriers, global trade: managing global trade flows

Gregor Pfajfar, MSc

Faculty of Economics University of Ljubljana

E-mail: gregor.pfajfar@ef.uni-lj.si

December 4th 2009

schedule
Schedule
  • Management of global trade flows:
    • Tariffs and their importance in international business
    • Other indirect barriers to international trade
    • Quantity barriers to international trade
    • Export premiums and subventions
  • A review of legislation:
    • Customs code of European community (Commission Regulation (EC) No 1192/2008)
    • Act of European community customs regulation execution
management of global trade flows4
Management of global trade flows
  • TARIFFS
  • DEFINITION: A tariff is a value in a home currency, which is collected by the government from the owner of the goods, when he/she is passing the national borders (Trošt, 1998).
  • The effects of tariffs:
    • protection effect: tariffs are protecting home economy
    • fiscal effect: tariffs have an impact on state budget (today of less importance)
management of global trade flows5
Management of global trade flows
  • TARIFFS’ VARIETIES:
  • Classification of tariffs according to the way of goods’ movement:
    • import
    • export
    • transit
  • Classification of tariffs according to the way of settlement:
    • tariffs of value - ad valorem
    • quantity tariffs - specific
    • combined
management of global trade flows6
Management of global trade flows
  • 2. QUANTITY IMPORT BARRIERS:
    • import quotas - contingents
      • VER - voluntary export restrictions
      • comparing quotas and tariffs (quotas are more effective, as they can be changed easier, directly limit the import, offer negotiation advantage, are not supposed to increase internal prices?!)
      • global and individual quotas
    • other barriers that carry the same effect as import quotas
    • import licenses and permissions
    • embargo.
management of global trade flows7
Management of global trade flows
  • 3. INDIRECT TRADE BARRIERS
    • strict customs clearance processes and their execution
    • regulations about protections against unfair competition
    • regulations about labeling country of origin
    • import control of animals and animal products
    • sanitary conditions regarding the import of plants and vegetables
    • discrimination on tenders
    • other protective measures (e.g. boycott)
barriers hindering export initiation
Insufficient finances

Insufficient knowledge

Lack of foreign market connections

Lack of export commitment

Lack of capital

Lack of productive capacity

Lack of foreign channels of distribution

Management emphasis on developing domestic markets

Cost escalation

Barriers hinderingexport initiation
a review of eu legislation in the field of international trade
A review of EU legislation in the field of international trade
  • Customs code of European community (Commission Regulation (EC) No 1192/2008)
  • Act of European community customs regulation execution
customs code of european community
Customs code of European community
  • Determines customs regulations, accepted at the EU level that are used in the trade between members of EU and third countries.
  • It is uniformly used on the whole customs territory of the Community accept if international conventions, business habits or autonomous measures of the Community does not define differently.
customs code of european community11
Customs code of European community
  • The explanation of certain terms used:
  • Persons established in the Community: any person who is normally resident there (a natural person), or any person that has in the Community its registered office, central headquarters or a permanent business establishment (a legal person or an association of persons).
  • Customs office: any office at which all or some of the formalities laid down by customs rules may be completed.
  • Supervision by the customs authorities: action taken in general by those authorities with a view to ensuring that customs rules and, where appropriate, other provisions applicable to goods subject to customs supervision are observed.
  • Customs controls: specific acts performed by the customs authorities in order to ensure the correct application of customs rules and other legislation governing the entry, exit, transit, transfer and end-use of goods (e.g. examining goods, verifying declaration data and the existence and authenticity documents, examining the accounts, inspecting means of transport, etc.)
customs code of european community12
Customs code of European community
  • Customs status: community or non-community goods
  • Community goods:
    • wholly obtained in the customs territory of the Community and not incorporating goods imported from countries or territories not forming part of the customs territory of the Community.
    • imported from countries or territories not forming part of the customs territory of the Community which have been released for free circulation.
    • obtained or produced in the customs territory of the Community, either from goods referred to in the second indent alone or from goods referred to in first and second indents.
  • Non-community goods:
    • All goods that are not community goods. Goods gain this status when they leave the customs area of the Community.
customs code of european community13
Customs code of European community
  • Customs debt: the obligation on a person to pay the amount of the import duties (customs debt on importation) or export duties (customs debt on exportation) which apply to specific goods under the Community provisions in force.
  • Import duties:
    • customs duties and charges having an effect equivalent to customs duties payable on the importation of goods,
    • agricultural import charges introduced under the common agricultural policy or under the specific arrangements applicable to certain goods resulting from the processing of agricultural products.
  • Debtor means any person liable for payment of a customs debt.
  • Customs declaration: the act whereby a person indicates in the prescribed form and manner a wish to place goods under a given customs procedure. It is usually prepared by a forwarding agency.
customs code of european community14
Customs code of European community
  • Declarant: the person making the customs declaration in his own name or the person in whose name a customs declaration is made.
  • Customs-approved treatment or use of goods:
  • (a) the placing of goods under a customs procedure;
  • (b) their entry into a free zone or free warehouse;
  • (c) their re-exportation from the customs territory of the Community;
  • (d) their destruction;
  • (e) their abandonment to the Exchequer
  • Presentation of goods to customs: means the notification to the customs authorities, in the manner laid down, of the arrival of goods at the customs office or at any other place designated or approved by the customs authorities.
  • Release of goods: the act whereby the customs authorities make goods available for the purposes stipulated by the customs procedure under which they are placed.
customs code of european community15
Customs code of European community
  • Customs procedure:
  • Presentation of goods to customs – the liable person fills out the customs declaration, which represents an act by which the customs procedure starts;
  • Customs office accepts the declaration and inspects it. Then they check also the goods and take the sample (customs controls).
  • In the case of customs debt, the declarant is obliged to settle it.
  • Release of goods – goods attain one of the customs-approved treatments or uses. Imported goods attain the status of community goods.
    • release for free circulation;
    • customs procedure with economic effect;
    • transit procedure.
    • etc.
customs code of european community16
Customs code of European community
  • Import/export duties and other provisions of international trade policy are based on:
  • Customs Tariff of the European Communities
  • Exceptionally important is the goods’ country of origin – it is a tool to execute measures of foreign trade policy. European customs regulations describe two possible origins of goods:
    • Non-preferential origin (statistical, commercial), which does not offer any customs benefits.
    • Preferential origin, which is closely connected with customs benefits. Within regulation framework, which defines preferential origin, we must distinguish between rules that define mutual preferential treatment between EU and third countries and rules that apply only for one side preferential treatment from the EU (e.g. for least developed countries).
customs code of european community17
Customs code of European community
  • Customs debt
  • The origin
  • We must be aware of customs value (transaction value): a price that needs to be paid; includes all costs and other expenses (e.g. costs of transport, insurance, packaging, discounts, etc.) connected with the sales and dispatch of goods to the place, where goods come to the customs area.
  • Customs rate. Look at TARIC!
  • Terms of payment: not longer than 10 days after the day of notifying the debtor
  • Customs debt payment delay approval:
    • It can be maximal 30 days;
    • One additional condition has to be fulfilled: the payment has to be insured (debtors obligation) by a proper insurance instrument (bank guarantee).
what is taric
What is TARIC?
  • TARIC (Tarif Integre de la Communautee):
  • is information database that is available on the internet for free;
  • contains all the data and information the company needs, when making decisions regarding import/export ;
  • there are information on tariff rates, prohibitions and restrictions, custom quotas, quantity restrictions, etc.
  • TARIC code
  • http://taric-curs.gov.si/itaric/Prog.jsp?plang=EN
customs code of european community19
Customs code of European community
  • The 8 varieties of customs procedures:
  • (a) release for free circulation;
  • (b) transit;
  • (c) customs warehousing;
  • (d) inward processing;
  • (e) processing under customs control;
  • (f) temporary admission;
  • (g) outward processing;
  • (h) exportation.

Customs procedures with an economic effect

customs code of european community20
Customs code of European community
  • Transit procedure:
  • NCTS (New Computerized Transit System):
    • Is a computer transit system of members of EU and EFTA;
    • Settles the permissions for simplification of trade between EU members and third countries.
  • Basic rules of NCTS:
    • Data on temporary transit are filled in the system at the departure office (the entry is manual or the data are acquired electronically from the declarant).
    • Dispatch (departure) office sends the declarant the number of the customs declaration (MNR) and a message, which enables the declarant to dispatch the goods.
    • When the shipment arrives at the arrival office, they perform the goods control and sends message back to dispatch office.
    • Dispatch office then notifies the declarant of the completion of the transit procedure.
what is intrastat
What is INTRASTAT?
  • It is a system of collecting statistical data on goods exchange between countries that are members of EU.
  • A company has to report its trade within EU borders:
    • DISPATCH: if the total annual value exceeds 200,000 EUR
    • ARRIVAL: if the total annual value exceeds 120,000 EUR
  • At the state level the responsibility for INTRASTAT lies in hands of national statistical office that cooperates with the national customs office.
  • Available at:
  • http://www.stat.si/intrastat.asp
  • http://carina.gov.si/slov/intrastat/intrastat.htm#1
relevant resources in the field of trade barriers
Relevant resources in the field of trade barriers
  • Customs office of Slovenia
  • http://www.carina.gov.si/en/
  • Intrastat
  • http://www.stat.si/intrastat.asp
  • Market access database:
  • http://mkaccdb.eu.int/mkaccdb2/indexPubli.htm
  • European legislation:
  • http://www.europa.eu.int/eur-lex/en/index.html
  • http://eur-lex.europa.eu/en/legis/index.htm
  • World’s customs organization
  • http://www.wcoomd.org/