Chapter 12: Global Marketing, Logistics ~ Access And Documentation FAO CORPORATE DOCUMENT REPOSITORY Produced by: Agriculture and Consumer Protection Title: Global agricultural marketing management. (Marketing and Agribusiness Texts Chapter 12: Global Marketing, Logistics - Access And Documentation ‘Chapter Objectives ‘Structure Of The Chapter Complexity ‘Tenms of access international trade ‘Special trade terms in export sales Export documentation Commercial documents Official documents Insurance documents Transport documents Financial and financing documents Export financing Collection arrangements Letters of credit Conflict of taw Chapter Summary Key Terms Review Questions Review Question Answers References Bibliography Exporting and importing are two sides of the same coin; both supply customers with products manufactured outside the country. Exports now account for over 15% of global GNP and are growing at an annual compound rate in excess of 10%. Export marketing requires a knowledge of the target market, a marketing mix decision, planning, organisation and control and information systems. Exporting is often an incremental process, from unsolicited order filling to deliberate export planning. No doubt few firms will export unless profit and growth opportunities are expected. Theories of trade stress the basis as "comparative advantage", but in practice this is of little use. The most significant factors affecting trade are "firm" not "product" characteristics. McGuiness and Little (1981)' found two firm characteristics “restrained from exporting” and "high technology" as opposed to product characteristics had an overwhelming influence on the decision. Whilst exporting and importing are, this is not the way governments look at it when making policy. Simply, policy can be construed as two-faced. Often, every effort is made to improve and encourage exports whilst every effort is made to curb imports. The combination of policy measures can have an offsetting effect. Government, however, seeks to support export activities in three ways: by applying lower rates of tax to earnings from exporting or refunds; outright subsidies or assistance like information giving, Many African countries have incentives like export retention schemes and revolving schemes to aid potential exporters. phn egidoerepN S873EWES72e0nimexpert documentation ‘vama016 Chapter 12: Global Marketing, Logistics ~ Access And Documentation Chapter Objectives ‘The objectives of this chapter are: ‘+ To give an understanding of the complexity involved in managing global marketing logistics ‘To describe the terms of access, trade and the different types of export documentation required in global marketing and ‘* To show the importance of ensuring that export documentation is in order and legal recourse of any defaulting in global transactions, Structure Of The Chapter This chapter is very detailed, necessarily so, given the nature of the subject matter covered. ‘The various terms of access are described, including tariffs and duties, and the non-tariff barriers which can be quite effective in reducing the normal terms of trade. The chapter goes, on to discuss international contracts, the special terms of trade (FOB, CIF etc.) and other important export documents, These include commercial documents lke invoices, certificates of origin, and transport documents. The chapter concludes by looking at financial, insurance and transport documentation and the legal ramifications of any defaulting in international transactions. Note that all cases quoted in this chapter were sourced from Kwelepeta (1991)?, Complexity Exporting and importing requires an enormous amount of thought and attention to detail, especially documentation. If documents are missing or wrongly filled out then the transaction will be void. Consider the following example of the exportation of horticultural produce from Kenya. [Case 12.1 Kenya Horticultural Produce Export In organising for export, the exporter needs to be within reach of and must have an office with ltelephone, fax or telex since the exporter is dealing with a highly perishable commodity and |decisions have to made fast with no time lag. The documentation required is as follows: Certificate of Incorporation from the Registrar of Companies ‘a miscellaneous occupational Licence (Export) fram the Ministry of Commerce export Licence from HGDA (a fee of Kshs. 1,000/=) | a bank account . written contracts with farmers for supply of produce . have adequate knowledge on the quality standards for horticultural produce. Flow of documents in export of horticultural Produce by Air |A shipper is required to submit the following documents to facilitate the processing of exports: la) A duly complete invoice b) CD3 form (from Central Bank of Kenya) available from commercial banks) lc) Appendix HCDA 3 from HCDA (Horticultural Crops Development Authority) \d) Certificate of Origin, i) EUR 4 (for European Economic Community countries from KETA) ii) Certificate of Origin for Middle East countries from Kenya National Chamber of Commerce ii) GSP (for all other countries) le) Export Certificate I) Phytosanitary Certificate alpina ogidoerepN S873EWES72e0nimHexport documentation 2aman016 Chapter 12: Global Marketing, Logistics ~ Access And Documentation |STEP 1 Shipper to submit Invoice to produce inspectors for inspection of produce, |STEP 2 HCDA officer to vet prices, weights declared by the shipper and issue export certificate lwhich is endorsed by produce inspectors. |STEP 3 Shipper sends the documents to his/her agent (here the responsibilty of the shipper ends), the agent prepares other documents, i.e, Airway Bill and Customs entry (C.29), |STEP 4 Produce is weighed by Kenya Ainways Handling Services Ltd. and issue docket (correct |weights of produce). |STEP 5 All the documents (Invoice, CD3, Appendix 3, Certificate of Origin, Airway Bill and Docket) lare verified by HCDA for final approval ISTEP 6 Agent sends documents to customs officer for verification, |STEP 7 From customs, agent sends documents to Kenya Air freight Handling Ltd, who then passes) Ithe documents to the aitines. Terms of access ‘Terms of access refer to the conditions that apply to the importation of goods manufactured ina foreign country. The major instruments covered by this include import duties, import restrictions or quotas, foreign exchange regulations and preference arrangements. Tariff systems Tariff systems provide either a single rate of duty for each item applicable to all countries, or two or more rates, applicable to different countries or groups of countries. Tariffs are usually grouped into two classifications: Single column tariff: A simple schedule of duties in which the rate applies to imports from all countries on the same basis, ‘Two column tariff: The initial single column of duties is supplemented by a second column of "conventional duties, which shows reduced rates agreed through tariff negotiations with other countries. The second column is supplied to all countries enjoying "most favoured nation” status within the framework of GATT. Signatories to GATT, with some exceptions, apply the most favourable tariff to products. Preferential tariff: A reduced tariff rate applied to imports from certain countries. GATT prohibits preferential tariffs except historical preference schemes like the Commonwealth, those part of a formal economic integration treaty like a free trade area and preference to companies of a developing country importing into a developed country, Types of Duties: Customs duties are of two different types - ad valorem or specific amounts per unit, or a combination of these. i) Ad valorem - This duty is expressed as a percentage of the value of goods. As definitions of customs value vary from country to country itis best to secure valuation policy information first. ‘A uniform basis for the valuation of goods for customs purposes was elaborated by the Customs Cooperation Council in Brussels and was adopted in 1953 (the Brussels Nomenclature came out of this). In this case the customs value is landed GIF cost at the port of entry, This cost should reflect the arm's length Price of the goods at the time the duty becomes payable, il) Specific duties - Expressed as a specific amount of currency per unit of weight, volume, length, or number of other units of measurement, e.g, 25 cents per kg, Usually specific duties are expressed in the currency of the importing country. phn egidoerepN S873EWES72e0nimexpert documentation aa