FREQUENT ASKED QUESTIONS

What is Sourcing?
Sourcing is the process of identifying, evaluating and negotiating with suppliers and service providers. This includes the entire vendor selection process as well as contract management. It opens doors to a rich supply of raw materials, facilities, and labors at lower prices, thus reducing costs and increasing competitiveness in markets around the world. The presence of foreign-produced finished manufactures in the US compels domestic industries to be innovative and efficient, both of which are keys to profitability and longevity.

How can both the United States and a third-world country benefit from an FTA?
Free trade benefits all partners to an FTA. In more general terms, trade between two countries with different economic means can benefit both countries under the principle of comparative advantage. Although the can produce most goods and services more cheaply than a third-world country, the latter can certainly produce a number of goods and services at a relatively lower price. Each partner can focus on those goods and services that it produces best in comparison to its partner, given the forces of market competition.

How can free trade benefit US small businesses?
Small businesses are the largest group of U.S. exporters as well as the major users of imported raw materials. 70% of new jobs in the United States are created in small businesses. These businesses are able to benefit from free trade because it brings them increased market access. While large businesses can afford to set up foreign affiliates in order to overstep trade barriers, small businesses rely on exports for access to foreign markets. Thus, free trade can expand current markets or open up new ones, either of which widens the customer base. It can lead to improved competitiveness that allows for increased growth and increased profits.

What are Incoterms?
Incoterms are standard trade definitions most commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they are at the heart of world trade. Among the best known Incoterms are EXW (Ex works), FOB (Free on Board), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), and CPT (Carriage Paid To).
Most contracts made after 1 January 2000 will refer to the latest edition of Incoterms, which came into force on that date. The correct reference is "Incoterms 2000".  Correct use of Incoterms goes a long way to providing the legal certainty upon which mutual confidence between business partners must be based. To be sure of using them correctly, trade practitioners need to consult the full ICC texts, and to beware of the many unauthorized summaries and approximate versions that abound on the web.

What is DDU Term?
The most common Incoterm that Logic Sourcing uses is DDU Delivered Duty Unpaid (...named place of destination).

Under this term, the seller/exporter/manufacturer clears the goods for export and is responsible for making them available to the buyer at the named place of destination, not cleared for import.  The seller, therefore, assumes all responsibilities for delivering the goods to the named place of destination, but the buyer assumes all responsibility for import clearance, duties, administrative costs, and any other costs upon import as well as transport to the final destination.

Common Import Charges Categories:
- Customs Documentation
- Pier pass
- Customs Duty: Based on your products and dollar amount
- Customs exam fee if any (most of time no exams)
- Custom Bond:  Single bond or Annual Bond.

Other features help you to identify when it is good to use DDU term:
- The DDU term can be used for any mode of transport. However, if the seller and buyer desire that delivery should take place on board a sea vessel or on a quay (wharf), the DES or DEQ terms are recommended (for more information, please visit http://www.iccwbo.org/incoterms).
- All forms of payment are used in DDU transactions.
- The DDU term is used when the named place of destination (point of delivery) is other than the seaport or airport.

What is a Tariff?
A tariff is a fee imposed on imported goods to give locally produced goods a price advantage over the same goods produced abroad and imported. Revenues from a tariff are collected by governments. There are two types of tariffs. An ad valorem tariff is a fee calculated as a percentage of the value of imported goods. For more information about tariffs and the Harmonized Tariff Schedule of the United States by chapter, please visit http://www.usitc.gov/tata/hts/bychapter/index.htm.

What is a Customs Duty?
A customs duty is another name for a tariff applied to imports. It is a fee imposed on some imported goods.

What is an import quota?
A quota is another form of import restriction that is nontariff barrier to trade. The quota is set by a national government and is a maximum amount of some import as measured based on quantity or value. Determining who is allowed to import under the quota is usually done through direct allocation or sales of import licenses. The licenses can be held by individuals or firms, both foreign and domestic.

What is a subsidy?
There are two types of subsidies. An export subsidy is a payment from the federal government to a domestic firm that is exporting a good in order to help the firm compete internationally and increase exports. A production subsidy is money given to a domestic firm for reasons not directly linked to competing in international trade.

What is a nontariff barrier (NTB)?
A nontariff barrier is any policy that is a barrier to trade other than a tariff. These policies can include bureaucratic regulations, procedures, or standards that deliberately disadvantage foreign producers. However, such policies when properly directed at protecting consumers' health and safety are not considered to be NTBs.

What is a certificate of origin?
A certificate of origin is a document certifying the origin of an export required by some countries and usually obtainable through organizations like your local chamber of commerce.
What is the WTO?

The World Trade Organization, or WTO, is an international organization established January 1, 1995. Located in Geneva, it serves as a forum in which representatives of its 148 member countries negotiate the rules of international trade and settle trade disputes. The rules of trade are set through a number of multilateral trade agreements signed at an ongoing series of negotiating rounds. The Doha Round is the name of the negotiations currently in progress. The WTO aims to liberalize trade, but the rules of trade also recognize the need to protect consumers.

More information on the WTO and its purpose can be found on the WTO Web site http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm

What is GATT?
The General Agreement on Tariffs and Trade (GATT) is the precursor to the WTO and now is one of the WTO's three main agreements (along with GATS and TRIPS). It governs trade in goods. The legal text includes detailed lists of commitments on tariff levels and quotas made by individual countries regarding special allowances for certain foreign products.

What is GATS?
The General Agreement on Trade in Services (GATS) is the set of regulations that governs trade in services within the WTO system. The legal text includes detailed lists of commitments made by individual countries on the allowed level of market access for foreign service providers in certain sectors.

What is TRIPS?
TRIPS, or Agreement on Trade-Related Aspects of Intellectual Property Rights, deals with the protection and enforcement of intellectual property rights including trade in counterfeit goods. There are no additions to the legal text of this agreement regarding differentiated market access.