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Chapter 14 Questions for Discussion and

Review
14.1 Discuss some of the key political restrictions on crossborder trade.
1. Many nations ban certain types of shipments that might
jeopardize their national security.
o United States does not ship military equipment or strategic
materials to certain nations as Iran and North Korea.
2. Tariffs taxes that governments place on the importation of
certain items
3. Nontariff barriers refer to restrictions other than tariffs that are
placed on imported products
o Import quota limits the amount or product (either in units
or by value) that may be imported from any one country
during a period of time
o Health safety of a country
o If a material is found to be infested, it cannot enter the
country unit it is cleaned
o A product that does not meet safety standards
4. Embargoes the prohibition of trade between particular
countries
o Political tensions
5. The degree of federal government involvement in cross-border
trade
6. Federal governments are often more involved with international
transportation
7. Federal government involvement in cross-border trade is that
many nations provide subsidies, train their own merchant marine
officers, absorb portions of the costs of building commercial
vessels, and engage in other activities to promote their own
merchant fleets
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 252-254). Prentice Hall. Kindle Edition.
14.2 How might a particular countrys government be involved
in international trade?
Businesses involved in foreign trade find that a federal governments
roles is more significant than in domestic transitions, and as a result
the buying and selling parties are not always free to contract the terms
to suit their needs.

Governments also interferes with the way the product travels


- Ocean carriers and international airlines can operate as
extensions of a nations economy, and most of the revenues they
receive flow into the nations economy
Governments give subsidies, train their own merchant marine
officers, absorb portions of the costs of building vessels, and engage
in other activities to promote their own merchant fleets
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14).
Contemporary Logistics (11th Edition) (Page 253-254). Prentice Hall.
Kindle Edition.
14.3 Discuss how a nations market size might impact
international trade and, in turn, international logistics.
Population is one proxy for market size. China and Indian each have
populations in excess of 1.2 billion people and the two countries
combined account for about one-third of the worlds population. From a
population perspective, China and India might be potentially attractive
markets because of their absolute and relative size.
One strategy for marketing in countries with relative low GDP per
capital, such as India, involve single-use packets of products, called
sachet, because people may not be able to afford to buy products in
larger quantities.
From a logistical perspective, single-use packets require different
packaging and are easier to lose and more prone to left than products
sold in larger quantities.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 254). Prentice Hall. Kindle Edition.
14.4 How might economic integration impact international
logistics?
Varying degrees of economic integration exists, ranging from a free
trade area (such as the North American Free Trade Agreement), which
focuses on removing trade barriers among participant countries, to an
economic unions (such as the European Union), which integrates
economic policies among member nations and allows the free
movement of goods, services, and factors of production among
member nations.

Potential logistical implications of economic integration include


reduced documentation requirements, reduced tariffs, and the
redesign of distribution networks.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 255). Prentice Hall. Kindle Edition.
14.5 How can language considerations impact the packaging
and labeling of international shipments?
With respect to language, cargo handlers may not be able to read and
understand the language of the exporting countries, and it would not
be unusual for cargo handlers in some countries to be illiterate. Hence,
cautionary symbols, rather than writing, must be used.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 255). Prentice Hall. Kindle Edition.
14.6 What is a certificate of origin, a commercial invoice, and a
shippers export declaration?
Certificate of Origin: specifies the country(ies) in which a product is
manufactured and can be required by governments for control
purposes or by an exporter to verify the location of manufacture.
Commercial Invoice: similar in nature to a domestic bill of landing in
the sense that a commercial involve summarizes the entire transaction
and contains (should contain) key information to include a description
of the goods, the terms of sale and methods or payment, the shipment
quantity, the method of shipment, and so on.
Shippers Export Declaration (SED): contains relevant export
transaction data such as the transportation mode(s), transaction
participants, and the description of what is being exported
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 258). Prentice Hall. Kindle Edition.
14.7 Discuss international terms of sale and Incoterms.
Choosing the terms of sales involves parties working within the
negotiations channel, looking at the possible logistics channel, and
determining when and where to transfer the following between buyer
and seller:
1. The physical goods (the logistics channel)

2. Payment for the goods, freight charges, and the insurance for the
in-transit goods (the financing channel)
3. Legal title to the goods (the ownership channel)
4. Required documentation (the documentation channel)
5. Responsibility for controlling or caring for the goods in transit,
say, in the case of livestock (the logistics channel).
Transfer can be specified in terms of calendar time, geographic
location, or completion of some tasks. One must think in terms of both
time and location.
Incoterms: implemented at the beginning of a new decade, such as
Incoterms 1990 and Incoterms 2000.
Two key changes with Incoterms 2010 involve (1) organizing the terms
by modes of transport and (2) using the terms in both international and
domestic transportation.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14).
Contemporary Logistics (11th Edition) (Page 258). Prentice Hall.
Kindle Edition.
14.8 Name the four methods of payment for international
shipments. Which method is riskiest for the buyer? For the
seller?
Cash in advance extremely risk to the buyer
Letter of credit
Bills of exchange
Open account tremendous potential risk for the seller
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 261). Prentice Hall. Kindle Edition.
14.9 Discuss four possible functions that might be performed
by international freight forwarders.
Advising on acceptance of letter of credit
- When a client receives a letter of credit, the document contains
many conditions that the seller must meet. The forwarder
determines whether the client can meet these conditions, and, if
not, it will advise the client that the letter of credit must be
amended. The buyer and buyers bank must be notified before
the order can be processed.
Booking space on carriers

Space is frequently more difficult to obtain on international


carriers than on domestic carriers for several reasons. Vessel or
aircraft departures are less frequent, and the capacity of planes
or ships is strictly limited. Connections with other carriers are
more difficult to arrange, and the relative bargaining strength of
any one shipper with an international carrier is usually weaker
than it is with respect to domestic carriers. Forwarders are
experienced at keeping tabs on available carrier space, and
because they represent more business to the carrier than an
individual sipper does, they have more success when finding
space is difficult.

Preparing an export declaration


- An export declaration is required by the U.S. government for
statistical and control purposes and must be prepared and filed
for nearly every shipment.
Preparing an air waybill or bill of landing
- The international air waybill is a fairly standardized document;
the ocean bill of landing is not. The latter may differ between
ocean lines, coastal areas through which the shipments are
moving, and for a variety of other circumstances. Ocean bills of
lading are frequently negotiable, which mean that whoever
legally holds the document may take delivery of the shipment.
Because nearly every ocean vessel line has its own bill of lading,
a forwarders expertise is necessary to fill it out accurately.
ALSO: Obtaining consular documents, arranging for insurance,
preparing and sending shipping notices and documents, serving as
general consultant on export matters
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 261-263). Prentice Hall. Kindle Edition.
14.10 What is an NVOCC?
Nonvessel-operating common carrier (NVOCC): often confused with the
international freight forwarder, because both intermediaries
consolidate freight from different shippers and leverage this volume to
negotiate favorable transportation rates from ocean carriers.
Currently, three key factors differentiate NVOCCs from international
freight forwarders: (1) NVOCCs can issue their own bills of landing; (2)
NVOCCs can set their own rates for ocean and intermodal shipments;
and (3) NVOCCs can enter into service contracts with ocean carriers to
purchase transportation services.

Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary


Logistics (11th Edition) (Page 263). Prentice Hall. Kindle Edition.
14.11 What are the two primary purposes of export packing?
The first is to allow goods to move easily through customs.
The second purpose of export packing is to protect products in what
almost always is more difficult journey than they would experience if
they were destined for domestic consignees.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 266). Prentice Hall. Kindle Edition.
14.12 Discuss the importance of water transportation for
international trade.
-

Approximately 60 percent of cross-border shipments move by


water transportation.

China, Singapore, South Korea, and United Arab Emirates have


cities that rank top 10 busiest container port in 2012

Variety of ship types available for transporting international


shipments by water

Container shop dominates the traffic between Europe and the


United States, Europe and Asia, and the United States and Asia.

Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary


Logistics (11th Edition) (Page 266-267). Prentice Hall. Kindle Edition.
14.13 Explain the load center concept. How might load centers
affect the dynamics of international transportation?
The carrying capacity of containerships continues to increase, and this
increased vessel size is one contributor to the growth of load centers,
or major ports where thousands of containers arrive and depart each
week. As vessel sizes increase, it becomes more costly to stop (call) at
multiple ports in a geographic area.
Load centers might affect the dynamics of international transportation
in the sense that some ports will be relegated to providing feeder
service to the load centers.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 268). Prentice Hall. Kindle Edition.

14.14 Discuss the role of ocean carrier alliances in


international logistics.
In the mid-1990s, ocean carrier alliances, in which carriers retain their
individual identities but cooperate in the area of operations, began
forming in the container trades. There are presently three major ocean
carrier alliances: the Grade Alliance II, the New World Alliance, CYKH
Group.
These alliances provide two primary benefits to participating members,
namely, the sharing of vessel space the ability to offer shippers a
broader service network (i.e., ports of call). Although alliances are not
conferences, their size allows the alliance to exercise considerable
clout in their dealings with shippers, port terminal operators, and
connecting land carriers.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 268-269). Prentice Hall. Kindle Edition.
14.15 How do integrated air carriers impact the effectiveness
and efficiency of international logistics?
Focuses on parcel services offered by well-known carriers such as UPS,
FedEx, and DHL International. These companies provide land pickup
and delivery services from documents and small parcels and is called
integrated carriers because they own all their vehicles and the facilities
that fall in between. These parcel services are of special significance to
internal logistics because they often provide the fastest service
between many major points. They are also often employed to carry the
documentation that is generated by ad very much a part of the
international movement of materials, although many international
trade documents can now be transferred electronically. They integrated
also handle documentation services for their clients.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 269). Prentice Hall. Kindle Edition.
14.16 How do open-skies agreements differ from bilateral
agreements?
Historically, the routes of scheduled international air carries were
established by negotiations between nations and these negotiations
generally involved two countries (called bilateral agreements).
- The number of flights between the two nations
- The types of aircraft to be used,

The total number of seats to be offered


The regions or cities to be served
The carriers that were to serve particular regions or city pairs
Restrictive in nature

Open skies agreements, which liberalized international aviation


opportunities and limit federal government involvement, have become
increasingly popular in the twenty-first century.
- Open Aviation Area agreement between the United States and
the 27 European Union member states
o A key provision of this agreement is that any EU airlines as
well as any U.S. airline can fly between point in the EU and
any point in the United States.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 269). Prentice Hall. Kindle Edition.
14.17 Discuss the potential sources of delays in certain
countries with respect to motor carrier shipments that move
across state borders.
One source of delays is that certain countries limit a motor carriers
operations to within a particular states borders as a result, multistate
shipments must be transferred from one companys vehicle to another
companys vehicle whenever crossing into another state.
Another source of delays is that certain countries conduct inspections
of trucks as they move from one state to another. This can include
physical counting and inspection of all shipments, inspection of
documentation, vehicle inspection, as well as driver inspection.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 270). Prentice Hall. Kindle Edition.
14.18 Define what is meant by short-sea shipping (SSS), and
discuss some advantages of SSS.
Short-Sea Shipping (SSS): refers to waterborne transportation that
utilizes inland and coastal waterways to move shipments from
domestic ports to their destination.
Potential benefits to SS include reduced rail and truck congestion,
reduced highway damage, and reduction in truck-related noise and air
pollution, and improved waterways utilization.
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 270). Prentice Hall. Kindle Edition.

14.19 What are some challenges associated with inventory


management in cross-border trade?
Firms involved in international trade must give careful thought to their
inventory policies, in part because inventory available for sale in one
nation may not necessarily serve the needs of markets in nearly
nations.
Product return (reverse logistics) policies are another concern with
respect to international inventory management.
Warehousing is another inventory-related consideration associated
with international logistics
Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary
Logistics (11th Edition) (Page 271-272). Prentice Hall. Kindle Edition.
14.20 What is the Logistics Performance Index? How can it be
used?
Logistics Performance Index (LPI): first introduced in 200 and then
updated in 2010 and again in 2012; the LPI was created in recognition
of the importance of logistics in global trade and measures a countrys
performance across six logistical dimensions (seven logistical
dimension were evaluated in 2007):
1. Efficiency of the clearance process (i.e., speed, simplicity, and
predictability of formalities) by border control agencies, including
customs
2. Quality of trade and transport-related infrastructure (e.g., ports,
railroads, roads, information technology)
3. Ease of arranging competitively priced shipments
4. Competence and quality of logistics services (e.g., transport
operators, custom brokers)
5. Ability to track and trace consignments
6. Timeliness of shipments in reaching destination within the
scheduled or expected delivery time
Potentially valuable because the data can be analyzed from server
different perspectives
- Analyzed for all countries according to the overall LPI score as
according to scores to each of the six dimensions.
- Analyzed in terms of an individuals countrys performance (1)
over time, (2) relative to its geographic region, and (3) relative to
its income group

Murphy,Jr., Paul R.; Wood, Donald Michael (2014-01-14). Contemporary


Logistics (11th Edition) (Page 272). Prentice Hall. Kindle Edition.