Módulo: Mecanizado (MEC) · Web view1st 2 digits indicate the chapter: 08 (chapter 8, “edible fruits and nuts: peel of citrus fruits or melons) With the 2 digits of the chapter,

AF_CM02_ International Trade Procedures

Unit 1: Introduction to Foreign Trade Procedures

Unit 1: Introduction on foreign trade procedures

Before you start, you should already have some knowledge of

international trade institutions and Incoterms (International

commerce terms).

In this unit you will start with trade procedures.

The objectives you are expected to achieve are:

1. To be able to distinguish between international trade,

external and community trade.

2. To be able to classify goods by tariff classification (TARIC

or HS).

TO STARTHere you have a video made by the EU to introduce you to the importance of the Community trade to European growth and success

EU Trade Policy

1.1 Community trade versus foreign trade

Nowadays there is no country in the world that can be considered self-sufficient and which does

not need relationships with other countries in order to buy or sell raw materials, manufactured

products or services. Therefore international commerce is necessary for countries to grow and

meet their citizen’s needs.

1.1.1. National trade versus international trade

First you have to distinguish in trade (sales) from a national commercial transaction to an

international one.

National commercial transaction:

Is a commercial transaction where both seller and buyer are from the same country, and the

merchandise is bought and sold in this same country.

AF_CM02_ International Trade Procedures / Unit 1 1

https://www.youtube.com/watch?v=IiOC5XG2I5Y



Unit 1: Introduction on foreign trade procedures International commercial transaction:

For a commercial transaction to be considered international it must have the following

characteristics:

An onerous Exchange (sale, purchase-acquisition); this means that it can’t be for

free.

Output of "goods" have to go from one country to another destination (export / intra-

Community delivery)

Entry of "goods" have to come from another country (import / intra-Community

purchase)

The nationality of traders isn’t important but we rely on the movement of the goods or

services and transport from one country to another as a consequence of a sale;

these are the key.

Ex: A sale, where the seller is a German businessman, from a workshop in Berlin; who

sells a consignment of screwdrivers to an Australian entrepreneur that has started his

own business in a workshop in Sidney. The goods travel from Berlin to Sidney; this is

international trade, because Australia and Germany are two different countries

But, imagine that this German businessman sells to the Australian entrepreneur (who

has a workshop in Berlin) a consignment of screwdrivers but to this workshop in Berlin.

The goods don’t move or travel out of Germany, so, for this reason, we don’t consider

this an international commercial transaction, on the contrary, it’s a national trade

transaction, because the goods are sold and used in the same country.

Before going ahead, you have to be familiar with the proper vocabulary and terms of

international trade procedures and also to be able to distinguish between trade among

European members, foreign trade or both occasions; and also the context or situations when

using them.

A1. Practising vocabulary on international trade terms

This is a quizlet activity to practise vocabulary used in common international transactions.




Unit 1: Introduction on foreign trade procedures Depending on the item you study or play, your practise will improve your spelling, listening …

and always the knowledge.

http://quizlet.com/65467299/international-trade-terms-flash-cards/

1.1.2. Intra-community trade versus foreign trade

Now, we have to work on and learn more about International trade. Once understood what

International trade is, we continue with two possible classifications of this kind of trade (sales),

depending on the countries and their commercial relationship that are taking part in the

transaction.

Intra-Community Trade:

We call Intra-Community trade to the international trade (international commerce transaction)

where the seller and the buyer belong to an area of free trade or have joined (also with other

members) in a Single Market area or a Trade Custom Union, … Nowadays, there are a lot of

examples different trade group. These are some examples:

EU: 28 European countries have formed the EU, this is a free trade area and also a

single market; where goods can move, be sold and bought from one country to another

without any restrictions and neither paying any customs tariff. A common external tariff

has been established and common commercial, economic, policies… In EU, some of

the European countries have also the same currency, the Euro.

NAFTA (Nord-American free trade agreement): US, Canada and Mexico, where they can

sell and buy goods in free conditions, and this agreement also include labour

cooperation.

MERCOSUR (Brazil, Argentina, Uruguay, Paraguay and Venezuela): This free trade

agreement implies the free movement of goods, services and factors of production

between countries and also the establishment of a common external tariff, the adoption

of a common commercial policy, macroeconomic policies, and common legislation

among the member States…

Foreign Trade:

We call foreign trade to the international trade (international commerce transaction) where the

seller and the buyer are from different countries and these countries haven’t joined in any kind

of Single Market or Trade Customs Union, nor any other free trade agreement.


http://quizlet.com/65467299/international-trade-terms-flash-cards/



Unit 1: Introduction on foreign trade procedures For example, China and U.S. are countries that don’t belong to any Single market,

neither a have signed any free trade agreement…

IMPORTANT

International trade is an exchange made through the purchase and sale of goods, products or

services, between two individuals, companies or governments of various countries.

We are going to call this form of commerce “foreign trade” as the importer and exporter

countries are not in a free trade zone or a trade community.

However, in the case where they are, such as in the EU, we call this trade as intra-Community acquisition and intra-Community supply/delivery of goods.

More information about Intra-Community trade in EU:

Since 1993, the date of implementation of the European Single Market, there are no physical

borders between the Member States of the European Union (then 12 countries, currently there

are 28). Thus, not only goods but also people with luggage can move freely from one Member

State to another without any administrative controls and customs fees. Commercial companies

that trade among EU countries have only to fulfil the requirements specified by the EU Trade

policy, normally based on administrative and legal regulations on invoices and other commercial

documents.

As we have said, the EU is a free trade zone and also a customs union; that means that the

28 state members can sell and buy merchandise among them without any restrictions or

barriers (tariffs…) and the merchandise that is bought from third countries have the same

customs tariffs and policies in all the member states.

This means that all the EU member states, work as one in commercial issues.

TO KNOW MORE

The following video shows the large amount of trade operations that the EU carries out as one

commercial area, formed by all the member states.

One minute in the life of European Customs


https://www.youtube.com/watch?v=hWhAcztn06k



Unit 1: Introduction on foreign trade procedures Here you have the EU website where you can check the member states of EU and learn more

about general details such as life, business, laws … and especially about trade policy.

EU website

A2. Classify and translating vocabulary on trade terms

After you have practised the activity A1 enough, you are required to translate the commercial

trade terms in quizlet into your own language, and to classify them depending on the type of

commercial transaction they are more suited to.

Only Intra-Communty trade

Only foreign tradeBoth Intra-Community

and foreign trade Translation

1.2.Classifying goods using TARIC codification in the EU

1.2.1. The harmonized goods description and coding system around the world.

In international commercial trade is essential to establish a "tariff nomenclature" internationally

uniform, because when selling and buying goods from one foreign country to another, all the

agents in the procedure could classify and register the operations with the best information and

transparency. The best way to work in international is to establish a code for each good that

identifies the product and gives information about the composition, customs tariffs, and other

information or certificates required at customs.

HS (Harmonised system):

In 1983, the GATT (General Agreement on Tariffs and Trade), that today is known as WTO

(world trade organisation) agreed with all the world member states, a codifying system called


http://europa.eu/index_en.htm



Unit 1: Introduction on foreign trade procedures Harmonised System (HS), this code was accepted and used by more than 200 countries and guaranties and ensure the transparency of each tariff system and the correct identification

of all the goods that are sold in international trade. Every 5 years the WTO reviewed it, in order

to add or exclude codes of goods depending on the trade market needs (some products

disappear and other new products are developed).

HS code is formed by 6 number digits code; the 4 first digits describe the nature of the

product, and the following 2 describes more concrete the product or good.

This codifying system is organised in a list of sections, chapters, headings and subheading:

This is the structure:

- Section I is: Live animals, animal products

o Chapter 01 is: Live animals

Heading 0101 is “live horses, asses, mules and hinnies”

Heading 0102 is “live bovine animals”

...

o Chapter 2 is: Meat and edible meat offal

o ….

- Section II is: Vegetable products

- Section II is: Animal or vegetable fats and oils and their cleavage products...

- Section IV is: Prepared foodstuffs: beverages, spirits and vinegar, tobacco...

- Section V is: Mineral products

- Section VI is: Products of the chemical or allied industries

- Section VII is: Plastics and articles thereof...

- ….

- Up to section XXI.

Thus, it’s organized into 21 sections, 96 chapters... and it’s accompanied with general rules of

interpretation and explanatory notes.

Here you have an example of a product, a vegetal product, from section II... (0805.10) oranges:

1st 2 digits indicate the chapter: 08 (chapter 8, “edible fruits and nuts: peel of citrus fruits

or melons)




Unit 1: Introduction on foreign trade procedures With the 2 digits of the chapter, and 2 more, you have 4 digits that formed the heading:

1st, 2nd, 3rd and 4th digits indicate the heading: 0805 (citrus fruit, fresh or dried)

After the heading, if you add two more digits 5th and 6th, it will be 6 digits; you will have

the subheading, which defines a concrete product. 0805.10 (oranges)

To conclude, the HS codification with the example of the product “oranges” is like this:

Chapter: 08

Heading: 0805

Subheading: 0805.10

All the countries that have adopted this codification system have to use HS code to codify the

goods that are sold around the world in order to identify them in all the commercial documents

no matter the language of the buyer or seller, with this code all the merchandise is identified

completely. Moreover, every country can add more subcategories (digits) to include more

information and special indications to their products and commercial specifications; normally up

to 10 digits.

Following the ruling that enable all the countries to add digits to define more specifically their

products, we are going to show the codification rules that adopted the EU.

1.2.2. The harmonized goods description in EU.

CN (Combined nomenclature):

In EU area, some years after adopting HS codification system, a more developed nomenclature

was adopted in 1987 called the Combined Nomenclature (CN), which is formed adding 2 more

digits to the HS codification system.

This code encompasses the European Tariff System in EU commercial policy. It also explains

trade measures applied to each single product, referring for example to quantitative restrictions,

customs tariff, anti-dumping and countervailing duties, etc.., (this will be studied in a future

Learning Activity).

It’s possible that a product can’t be more deeply defined, so it’s no need to add more digits. In

this situation, these 2 new digits, are two zeros (00).




Unit 1: Introduction on foreign trade procedures The charter below shows the codification of the previous example of “oranges” to a more

concrete product.

We go on with the same example of "oranges 0805.10” more concrete information about a

product is for example with a product called "sweet oranges, fresh (0805.10.20)" is coded in

this way:

After the subheading, if you add two more digits 7th and 8th, it will be 8 digits; you will

have the CN (in EU), which defines a more concrete product. 0805.10.20 (sweet oranges, fresh).

To conclude, the CN codification with the example of the product “sweet oranges, fresh” is like

this:

Chapter: 08

Heading: 0805

Subheading: 0805.10

CN: 0805.10.20

TARIC CODE:

After developing CN system in EU, the complex common trade policy that encompass all the

commercial rules for intra-community and foreign trade, needed more digits in the codification

system, to define and describe more efficiently the products and also the customs tariff

associated to the importation of each product.

For this reason, EU implements a more developed codification system called TARIC, the

codification nomenclature that is currently in use. TARIC stands for (Integrated Tariff of the

European Communities) and is represented by a 10 digits number code that implies another

subdivision to the 8 digits of CN, formed adding two more digits to the CN, the 9th and 10th.

It’s possible that a product can’t be more deeply defined, so it’s no need to add more digits. In

this situation, these 2 new digits, are two zeros (00).

In the previous example of oranges, there isn’t nor more concrete product neither code,

so the product in EU scope, it will be codified in this way:

After the NC (0805.10.20 sweet oranges, fresh), you add two more digits 9th and 10th,

and you will have a more concrete information about this product, in this case, “higher




Unit 1: Introduction on foreign trade procedures quality”, so you will have the TARIC (EU), 0805.10.20.11 (sweet oranges, fresh, of higher quality).

Here you can see the link with the Taric codification of the “oranges” example:

Taric Eu website with the previous example of codification

To conclude, the TARIC codification with the example of the product “sweet oranges, fresh, of

higher quality” is like this:

Chapter: 08

Heading: 0805

Subheading: 0805.10

CN (EU): 0805.10.20

TARIC CODE (EU): 0805.10.20.11

Taric codification system has more than 20,000 positions (different encodings for different

products), and it is a dynamic information system, because it can have variations (adding or

removing code products and code as new products are developed); the EU publish the changes

annually in the official web of TARIC.

The TARIC code has been in use since January 1998, and its purpose is to facilitate

information, and to comply with all the Community Customs Laws and Regulations. It is

arranged in a simple structure and it is used by government and individuals. Currently, it allows

quick identification of the characteristics of a particular product and its import regime.

IMPORTANT

The TARIC code must be included in all the customs declarations and statistical Intrastat

declaration (a form where traders inform of their intra-community sales in order to inform EU for

statistics purposes), as well as in other intra-Community commercial documents; in foreign trade

TARIC code can be used but also it is enough to use HS code.

A3. Using the web page of EU TARIC code; learning to codify a product:

Now it’s time for you practise this codification system.


http://ec.europa.eu/taxation_customs/dds2/taric/measures.jsp?Taric=0805&Lang=en&GoodsText=&Domain=TARIC&MeasText=&Offset=0&Area=&ExpandAll=&callbackuri=CBU-1&LangDescr=es&SimDate=20150109



Unit 1: Introduction on foreign trade procedures In this exercise, you only will learn how to codify, following the steps indicated below, using the

previous example “oranges”, because you will be sure that you are doing well due to you have

the solution.

Here you have the link from the EU website on how to codify goods:

TARIC code EU website

Tips to codify a product:

You have to start in the website of Taric code given above.

1st option: If you know the first 4 digits of the product code (heading)

If you know the first 4 digits of the product code (heading), you can type them in “goods code”

box and click “retrieve measures” a list will appear with all the products content in the current

heading.

But normally, you don’t have any idea about the 4 digits that form the heading, so you have to

go directly to the 2nd option.

2nd option: If you don’t know any information about the product code

If you don’t know the heading, you have to click on “advance search” so as to have more

concrete information to type; and after it, the best option is to write in “search text” box the name

of the product or any word related to it, and then click as before in “retrieve measures”.

Here you have a “print screen” image of what you would see when doing the codifying exercise:


http://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp?Lang=en&Taric=&EndPub=&MeasText=&Area=&Regulation=&LangDescr=&callbackuri=CBU-2&MeasType=&SimDate=20150109&StartPub=&OrderNum=&GoodsText=&Level=&Expand=false



Unit 1: Introduction on foreign trade procedures

1. For example, we can start writing, “citrus fruit” or something related o more concrete

as sweet oranges,…, in order to find the code for sweet oranges, in the box which

indicates “search text”, and click retrieve measures, then the application search for all

the products that contain the words citrus fruit or they are related with citrus and fruit.

2. You will be showed a screen like this:




Unit 1: Introduction on foreign trade procedures 3. Here, you can see a list of codes of HS for each fruit; there are 200 codes, and you can

go ahead from one page to next until you find your product…

In 0805 you can read citrus fruit (marked in yellow because is the couple of words you

were looking for), so, in this heading (0805) must be your product, orange…

4. You have to click this heading to go in the subheadings… or to go back to the initial

webpage, and introduce in the “goods code” box the number of the heading…

5. After clicking retrieve measures, you will see this screen, with all the products under

0805 heading “citrus fruit, fresh or dried.

6. Now you are able to see the exact code for your product.

The result of the codification process is the following codes:

HS code is 0805.10 (oranges)

CN code is 0805.10.20 (sweet oranges, fresh)

Taric code is 0805.10.20.11 (sweet fresh oranges of high quality)

Now you are ready to practise codifying in this webpage… you can start with the other way

round, to decode some codes you will be given.




Unit 1: Introduction on foreign trade procedures Typing the heading in the “good code” box of the Taric EU webpage, and playing to understand

and guess the products… you can choose the codes or products you like.

For example here you have two codes with the exact product they codify, and the screen in the

webpage to practise:

- 0405.10.00.00: butter of a fat content, by weight, not exceeding 85%

- 2204.21.06.00: wine of fresh grapes, not sparkling, in containers of 2 litters or less, with

a protected destination of origin…




Unit 1: Introduction on foreign trade procedures A4. Codifying goods in TARIC code

Now you are ready to start codifying your goods!

Imagine you are a trader and you have to sell the following goods to another country, in this

case, for example to an EU state. Thus, you have to know their exact TARIC code to include it

in commercial documents, and if it is for exportation you have to include the customs

documents.

Cylindrical stoppers made of cork

“Lampante” virgin olive oil

Cider apples

Metal desk used in offices (furniture)

After that practise, you can think about more products and try to codify them yourself.


Documents

Módulo: Mecanizado (MEC) · Web view1st 2 digits indicate the chapter: 08 (chapter 8, “edible fruits and nuts: peel of citrus fruits or melons) With the 2 digits of the chapter,