Everything You Should Know About Foreign Trade Regulations

If I were to ask you what a distributor is, would you be able to define it? How about a duty or a domestic export? If you hesitated to answer, you need to brush up on the Foreign Trade Regulations. Here are a couple of examples of how it will come in handy.

First, though, let’s answer those questions!

What is a distributor? According to the Foreign Trade Regulations, a distributor is an agent who sells directly for a supplier and maintains an inventory of the supplier's products.

 The appointment becomes an agreement between a manufacturer and a distributor that outlines terms of the relationship, such as manufacturing, distribution, ownership, duration, price and intellectual rights, to name just a few.  For a refresh on what an international distributor does and what you need to know before appointing one, visit:  A Guide to Working With an International Distributor.

What is a duty? It is a charge imposed on the import of goods. Duties are generally based on the value of the goods (ad valorem duties); some other factor, such as weight or quantity (specific duties); or a combination of value and other factors (compound duties).

Domestic export? These are goods that are grown, produced, or manufactured in the United States, and commodities of foreign origin that have been changed in the United States, including changes made in a U.S. Foreign Trade Zone, from the form in which they were imported, or that have been enhanced in value or improved in condition by further processing or manufacturing in the United States.

What are Incoterms?  Importers and exporters must agree in advance on their respective roles and the terms, conditions and definitions of the sale. A buyer and seller should know where a risk begins and ends, who is responsible for what (e.g., costs and documentation), who owns what and at what geographical point.

 Incoterms are the most commonly used foreign trade terms provided by the International Chamber of Commerce's Incoterms rules.

What is Automated Export System (AES)?  The Automated Export System (AES) is an electronic export information gathering and processing system developed through the U.S. Customs and Border Protection, the export community, the U.S. Census Bureau, and other federal agencies.  The AES collects export information electronically from pre-approved participants to the system.  

Why is it important to know these terms? Because the more you know, the better your chance of being successful and minimizing any misunderstandings when negotiating with overseas customers and foreign suppliers. The last thing you want to do is accidentally give away any competitive advantage that might result from a lack of knowledge.

You may not have all the answers, but if you know where to get them, you will boost your confidence level and communicate more effectively on import/export trade negotiations.

For more information, visit the Electronic Code of Federal Regulations.  For the A-Z on Common Trade Definitions, visit Foreign Trade - US Census Bureau.

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