Global Sourcing Exam 2 Chapter 5 Global Sourcing and Line Review Key personnel within the company get involved in line review Sourcing personnel focus on whether proposed products are a functional b producible and c produced within the budget The size of neck opening the number of button the length of zippers a Functional etc b Producible Heat transfer rhinestones on highly brushed or pile fabric c Can it be produced within the budget Estimate potential upcharge or discount due to different trims fabrications and details from the past Global Sourcing and Product Classification During the development stage sourcers must check the proposed products against product classifications recognized by his or her country U S International Trade Commission publishes Harmonized Tariff Schedules of the United States with a product classification numbers b article descriptions c tariff rates and d special tariff programs It is critical for sourcers to understand product classification and interpretation or such classifications Product details and fiber contents directly affect how they will be classified by USCBP affecting duty rates Harmonized Tariff Schedule of the United States Total there are 22 sections and 99 chapters Sections 11 and 12 address textile based goods Section 11 Chapters 61 and 62 deal with apparel products Chapter 61 includes knitted apparel while Chapter 62 contains non knitted or woven apparel Rates of Duty in New Product Development Two critical aspects of the proposed products to reduce the overall cost of sourcing Sourcing personnel must compare different duty rates assigned for different fiber contents of the proposed products Sourcing personnel must have full knowledge of different duty rates from different countries depending on trade preference programs between the sourcer s and the supplier s countries Chapter 6 PEST Analysis For New Country Consideration Political environment analysis Tax policies trade agreements import export regulations and or political stability etc Economic environment analysis Currency exchange rates unemployment rates inflation rates etc Social environment analysis Work ethics culture and the quality of the labor force in the textile and apparel industry etc Technological environment analysis Ease of communication infrastructure related to air ocean and ground transportation the degree of automation in the textile and apparel industry etc Enforcement of Intellectual Property Rights Sourcer s must consider if they could share their unique designs and brands and be protected for their intellectual property rights IPR in the suppliers countries IPR are the rights given to persons over the creation of their minds Four major intellectual property rights a trademarks b copyrights c patents and d trade secrets Cohen 2008 a Trademarks Name logo color and three dimensional images similar logo or color that would likely create confusions among consumers is considered a trademark infringement b Copyrights Drawing designs websites or marketing materials c Patents Processes and products that the sourcer may uniquely possess d Trade secrets any confidential or classified information that the sourcer may only share with the supplier In the U S Customs and Border Protection CBP and Immigration and Customs Enforcement ICE monitor counterfeit and pirated goods coming into the country In 2011 the total retail value of the products seized by both organizations was 1 1 billion U S CBP 2011 Apparel footwear perfume and colognes were top seized commodities each representing 11 4 or 126 3 million 8 7 or 97 million 4 6 or 51 million representatively 62 of infringed products were made and shipped from China followed by Hong Kong 18 and India 3 Sourcers may have no power over the supplier s acts of IPR violations In 2008 62 of infringed goods produced in China stayed in China for Chinese consumption In 2008 38 of infringed goods produced in China were exported to different counties In China trademarks must be filed within China Trademark Office to be protected Yet design patents require no substantive examinations to get new patents so much easier to copy designs Cohen 2008 Trade Barriers and Trade Agreements since the Industrial Revolution The textile and apparel industry has been a core focus in trade negotiations The trade agreements and programs directly affect the sourcer s overall costs as these preferential agreements are established to promote trade and reduce trade barriers between the countries Retailers and importers favor trade liberalism with little or no trade barriers Domestic manufacturers and producers want trade protectionism with more restrictions on imports Trade Barriers Tariffs and quotas are two major tools used by many governments today to discourage importing and encourage domestic manufacturing Tariffs are duties or taxes imposed on goods being imported from foreign countries U S Customs and Border Protection 2006 Quotas are established to set a physical limit on the quantity of a good that can be imported into a country in a given period of time U S Customs and Border Protection 2006 Trade barriers raise the overall product cost either through tariffs or quotas products This increased price would then reduce the overall demand for such While domestic producers may still protect some of their market shares Tariffs Quotas Three different types of tariffs a ad valorem b specific and c combination U S Customs and Border Protection 2006 Ad valorem tariffs are assessed based on the percentage of the value of the products that are being imported Specific tariffs are set based on a pre determined monetary amount per unit Combination tariffs are assessed based on both ad valorem and specific tariffs In the United States there are two types of quota a quantity control on imports a absolute quotas and b tariff rate quotas U S Department of Homeland Security 2010 Absolute quota When Country A sets an absolute quota against Country B on a Product C during the period Country B could ship only a certain amount of quantity of Product C during that period Tariff rate quotas TRQ Allow a specific quantity of merchandise to be entered into Country A from Country B at a reduced duty rate during a specific period Quantities above and beyond the specific quantity specified they would be subject to higher rates of duty The amount of products entered with TRQ is being monitored through Tariff Preference Levels TPL TRL utilization rates are important for any