EXAM 2 global sourcing

Question 1

role of sourcing personnel

Answer 1

• trade shows
• collaboration
• review past sales
• forecast future demand

Question 2

line review

Answer 2

ensures that proposed designs are both attractive and functional in their final garment form
- functionality
- producibility
- affordability

Question 3

HTSUS

Answer 3

harmonized tariff schedule of the United States

Question 4

HTSUS includes

Answer 4

product classification numbers, article descriptions, tariff rates, and special tariff programs
- textile sections: sections 11 & 12, focusing on apparel in 61 (knits) & 62 (wovens)

Question 5

HTSUS classification system

Answer 5

• 10 digit number for each product category
• differentiates by gender (odd-men, even-women)
• includes subheading for garment style, fiber content, and a statistical suffix
• 3 digit quota category number

Question 6

classification impact on duty rates

Answer 6

fiber content and origin affect duty rates

Question 7

rules of origin

Answer 7

• preferential: lower rates
• non-preferential: standard rates

Question 8

tariff cost reduction strategy

Answer 8

compare duty rates based on fiber content and origin to optimize sourcing costs

Question 9

purpose of macro analysis

Answer 9

assess the feasability and potential risks of entering new countries for sourcing
- PEST analysis

Question 10

PEST analysis

Answer 10

• Political environment
• Economic environment
• Social environment
• Technological environment

Question 11

IPR

Answer 11

Intellectual Property Rights: Protects unique designs and brands from infringement in supplier countries

Question 12

Patents

Answer 12

Protects unique processes and products

Question 13

US Monitoring

Answer 13

Prevents counterfeit and pirated goods from entering thr country
- ICE: Immigration and Customs Enforcement
- CBP: Customs and Border Protection

Question 14

Protectionism

Answer 14

Uses trade barriers to limit imports and support domestic production

Question 15

Free Trade

Answer 15

Allows unrestricted exchange of goods between countries

Question 16

Trade Barriers

Answer 16

Includes tariffs (tax on imports) and quotas (limit on import quantity)

Question 17

Ad Valorum vs. Specific Tariffs

Answer 17

Ad Valorum: Based on product value percentage
Specific: Fixed fee per unit
Combination: Mix of the two

Question 18

Absolute quotas vs. Tariff-Rate quotas

Answer 18

Absolute: Fixed quantity limits
Tariff-Rate: Allows a certain quantity at a reduced rate for a limited period

Question 19

textile and apparel quotas were…

Answer 19

eliminated among WTO members in 2005

Question 20

FTA

Answer 20

Free Trade Agreement

Question 21

TPP

Answer 21

Trade Preference Programs: offer duty free treatment for specific products from eligable countries

Question 22

US TPPs

Answer 22

• AGOA (African Growth & Opportunity Act)
• CBTPA (Caribbean Basin Trade Partnership Act)
• HOPE Act (duty free access for Hatian textile & apparel goods

Question 23

purpose of micro analysis

Answer 23

assess each factory’s strengths and weaknesses within a country to identify the best potential suppliers based on compliance, cost, and efficiency

Question 24

The 5 Rs

Answer 24

• Right Product
  
  • Right Condition
  • Right Quality
  • Right Time
  • Right Price

Question 25

C-TPAT

Answer 25

Customs-Trade Partnership Against Terrorism: voluntary U.S. Customs and Border Protection (CBP) program focused on securing the supply chain from terrorist threats.

Question 26

5 major components of direct costs

Answer 26

* Fabric * Labor * Trims and embellishments * Transportation * Duties

Question 27

Ex Point of Origin

Answer 27

Supplier covers all costs up to the point of origin

Question 28

Free Along Side (FAS)

Answer 28

Supplier delivers goods alongside the vessel

Question 29

Free on Board (FOB)

Answer 29

Supplier responsible until goods are loaded onto the vessel.

Question 30

Cost and Freight (C&F)

Answer 30

Supplier covers costs up to the destination but not insurance.

Question 31

Cost, Insurance, and Freight (CIF)

Answer 31

Supplier includes insurance to the destination.

Question 32

Landed Duty Paid (LDP)

Answer 32

Supplier covers all costs to the destination, including duties

Question 33

Delivered Duty Paid (DDP)

Answer 33

Supplier covers all costs, including transport to the final destination.

Question 34

Indirect Costs Examples

Answer 34

* Cost of samples, reworking products, and production monitoring. * Communication expenses (e.g., emails, calls). * Costs due to expedited shipments and potential reputational damage. * Indirect costs can be unpredictable, so sourcing agents often add 5-10% to budget for unexpected expenses.

Question 35

Purchase Order

Answer 35

official document issued by the buyer, specifying what the supplier will provide, at what price, and under what terms. - includes a negotiated method of payment to ensure clear financial arrangements.

Question 36

components of a purchase order

Answer 36

1. Product Identification: Unique id number for each product, often linked to a Universal Product Code (UPC) or barcode 2. Product Descriptions: Details about fabrics, trims, embellishments, and their placement. Technical design sketches, size specifications, production techniques, and label/tag requirements. 3. Quantity: Total quantity per contract, including size ratios and color choices. 4. Price & Terms: Per unit and total amount, along with any specific pricing terms. 5. Delivery Date & Method 6. Other Terms: Quality assurance polieis, order cancellation policies, contingency plans (actions in case of contract violations)

Question 37

Types of Payment

Answer 37

- Consignment Sales - Open Account - Documentary Collection (Documentary Draft) - Letter of Credit (L/C) - Cash in Advance

Question 38

Letter of Credit (L/C)

Answer 38

A common method where a bank issues a line of credit to the buyer. * Provides security for both parties; the supplier is guaranteed payment upon shipping goods and providing documents. * Requires a good credit rating for the buyer and involves complex coordination among banks.

Question 39

Cash in Advance

Answer 39

Buyer pays before shipment; used when the buyer has a poor credit rating or if there is instability in the buyer’s country. * The supplier assumes no risk of nonpayment, making it the least risky option for them.

Question 40

Documentary Collection (Documentary Draft)

Answer 40

Involves the supplier’s bank (remitting bank) and the buyer’s bank (collecting bank). The buyer pays their bank to receive the necessary documents to clear the goods.

Question 41

Open Account

Answer 41

Payment term ranges from 30-120 days after receipt. Higher risk for the supplier; not a common method.

Question 42

Consignment Sales

Answer 42

Payment is made after the goods are sold to a third party. Low cost and risk for buyer; not commonly used.