Daily Archives: September 30, 2010

Don’t Forget the Binding Ruling!

Industry Week recently ran yet another 10-step checklist for those who are planning to offshore production of an existing or new product for the consumer market. While most of the steps mirrored every checklist that came before and contained no new advice, there was golden needle in that bale of hay that I haven’t seen before, and its one that can make or break your offshoring initiative. Step 5, get a binding ruling to determine import duties, is an often overlooked but critical step before you commit to overseas production and packaging. It can literally be the difference between healthy profit and mounting losses.

Not only can one slight difference be the difference between VAT and no-VAT markups on export, but one slight difference in opinion can mean the difference between one classification in the HTS system that carries an import duty of 5% and another classification in the HTS system that carries a duty of 10%. Literally. Consider 6204.19.40 and 6204.19.80 which are both for women’s or girls’ suits of textiles material. In the first case, the duty rate is 1%. In the second, 6.5%. That’s a difference of 5.5%. What’s the difference? In the first case, the suit contains 70% or more by weight of silk or silk waste, in the second case, under 70%. 1% difference in composition can cost you an additional 5.5%. There are hundreds, if not thousands, of other examples where a minor difference in material, packaging, or classification can have a whopping difference on your profitability. So get the ruling first. Otherwise, offshoring might not be as attractive as it looks.

Share This on Linked In

Cultural Intelligence I: An Introduction to Culture

This series is edited by Dick Locke, SI’s resident expert on International Trade, author of Global Supply Management — A Guide to International Procurement (which was the definitive guide for almost a decade), and President of the Global Procurement Group which regularly gives seminars on International Trade and working with International Cultures.

As per Wikipedia, culture is a term that has various meanings. For example, Alfred Kroeber and Clyde Kluckhohn compiled a list of 164 definitions of “culture” in Culture: A Critical Review of Concepts and Definitions.

For our purposes, we’ll define culture as the set of shared attitudes, values, goals, practices, qualities, and beliefs regarding daily interaction, manners, arts, and worthwhile pursuits for a characterizeable group of people.

Culture is important because, as noted by social scientist Geert Hofstede, it conditions individuals’ responses to their environment. Deeply embedded inside each of us, culture affects our mannerisms, our manner of speaking, our dress, and just about every other aspect of our personality. Since it deeply affects who we are, it affects the way we do business, and an understanding of different cultures is thus deeply important when conducting international trade.

Therefore, this series will continue what Dick and I started last year in Overcoming Cultural Distances in International Trade by not only defining what Cultural Intelligence is, but discussing some of the basics of cultural intelligence with respect to each of the seven countries we covered last year: China, Germany, India, Japan, (South) Korea, Mexico, and Thailand.

But first, we’ll discuss some characteristics of culture, as put forward by David C. Thomas and Kerr Inkson in their book Cultural Intelligence, People Skills for Global Business. Culture is:

  • Shared

    and people within a group have it in common, so even if each individual in the group has a distinct personality, each member of the group shares a common understanding

  • Learned and Enduring

    as it is absorbed over long periods of time and deeply ingrained

  • A Powerful Influence on Behavior

    as we have a natural tendency to revert to our cultural roots and it will unconsciously influence our decisions

  • Systematic and Organized

    and every value is contextually related to every other

  • Largely Invisible

    as the values and beliefs that define the culture are much deeper than the expressions of those values and beliefs.

Furthermore, its effects and behavior and decisions are many and varied. For example, it:

  • Influences our Perception

    as it determines what we focus on in any given situation, and what we don’t; for example, some people will hang on your every word and ignore everything else about you while others won’t listen to a word you say while instead focussing on all of your non-verbal behaviors

  • Defines our Categorization

    and helps us place people into groups such as race, culture, country, ethnic background, and social status

  • Creates our Stereotypes

    that tell us what we should expect, right or wrong, from a person of a certain cultural background

  • Specifies our Attributions

    and determines our rationale for why people do what we do.

That last point is key, for if we assume that a response means yes when it actually means no, or vice versa, in our international pursuits, we’re just setting ourselves up for failure.

Share This on Linked In