Chapter 6 1 PEST Analysis Four parts that are used for consideration for going into a country for sourcing What does PEST stand for 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 2 Intellectual property rights IPR What are the 4 major intellectual property rights A Trademarks names logo color and 3D images B Copyrights drawings 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 Similar logo or color that would likely create confusions among consumers is considered trademark infringement Who enforces the IPR for goods brought into the country Customs and Boarder Protection CBP Immigration and Customs Enforcement ICE They monitor counterfeit and pirated good coming in the U S The total retail value of the products seized by both organizations was 1 1 billion Top commodities seized were 1 Apparel with 11 4 126 3 million 2 Footwear with 8 7 97 million 3 Perfume with 4 6 51 million Products were made and shipped from 1 China 62 2 Hong Kong 18 3 India 3 Why is it difficult to enforce IPR IPR is strictly adhered to in the U S However some of these goods can still be sold in other countries including the supplier s The regulations and enforcement of intellectual property rights differ in each country making it difficult to to enforce them in the global marketplace 3 What are some of the trade barriers Tarrifs and quotas are the two major barriers How do they affect costs Trade barriers raise the overall product cost through tarrifs or quotas This increased price then reduces overall demand for the products 4 What is a quota Quotas are established to set a physical limit on the quantity of a physical limit on the quantity of a good that can be imported into a country in a given period of time What are the two types of quotas in the US Absolute quotas 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 Tarrif rate quotas Allow a specific quantity of merchandise to entered into Country A from Country B at a reduced duty rate during a specific period Quantities above and beyond the specific quantity specified will be subject to higher rates of duty The amount of products entered with TRQ is being monitored through Tariff Preference Levels TPL 5 What is an FTA Free Trade Agreements are negotiated to promote trade among member countries by eliminating or reducing tariff rates and easing government trade rules Under FTAs qualified goods would gain duty free access to other FTA member countries resulting in lower prices for the goods Each FTA has different rules and conditions What are the five common provisions of FTAs FTAs are established to ensure reciprocal market access Most FTAs have the yarn forward rule of origin for most textile and apparel products to be duty free Most FTAs also have a safeguard mechanism that allows tariff snapback if textile and apparel imports cause serious damage to domestic markets such as sudden drops in price through dumping products at below the market price FTAs have policies on illegal transshipment transshipment can be illegal if the goods enter into the ultimate destination country with a false country of origin Most FTAs have rules on short supply of textile and apparel products 6 What is a Trade Preference Program TPP is legislated by U S Congress and provides duty free treatment to certain apparel products from designated beneficiary countries that meet the program s rules They are designed to allow duty free entry of apparel from a beneficiary country into the U S If the apparel is cut and assembled in a beneficiary country using U S Fabrics made of U S yarns Chapter 7 1 At which level of analysis do sourcers look into specific factories and compare for selection as a supplier At the Micro level The mission of the analysis is to find who would produce the right products in the right condition in the right quality at the right time at the right price the 5Rs 2 What is included in Social and Environmental compliances Enforcement policies past records of compliance practices code of conducts 3 What is WRAP Worldwide Responsible Accredited Production An independent objective non profit team of global social compliance experts Promote safe lawful humane and ethical manufacturing around the world through certification and education http www wrapcompliance org en about wrap Why would a retailer sourcer use the services of WRAP A retailer who is interested would want to know what certifications a manufacturers have which will promote the manufacturers as safe lawful humane and ethical They also would want to know what manufacturers are constantly training and always looking to improve 4 What is the role of Customs and Border Protection in protecting the supply chain Through Customs Trade Partnership against Terrorism C TPAT their role role is to improve the safety and security of private companies supply chains against terrorism 5 What are the 3 Rs to consider when selecting suppliers What might affect each of these 1 Right Product Each garment factory is organized to produce single or a few particular product categories such as knit products or woven products so they can achieve the highest efficiency Factories established to produce small article products such as underwear or innerwear are set up differently from factories for a large article product such as men s suits and outerwear Sourcing personnel must clearly understand the product category to be sourced and create a pool of right suppliers who can produce the right products for the sourcer 2 Right Quality The goal of coursing personnel is to deliver products of the right quality the quality expected by the consumers EX Egyptian cotton long staple cotton short staple cotton combed cotton carder cotton open end cotton 3 Right Time Today production lead