Importing Mobility Scooters from Taiwan

A Hot Tip about Imports/Exports in Canada

Posted on: 11 Jul 2010

Import procedures for automated travel devices for handicapped persons.

WorldsRichestCountries.com IMPORT / EXPORT PROCEDURES SETTING UP AN IMPORT BUSINESS: Importing Mobility Scooters for Disabled Persons From Taiwan Into Canada Mobility Scooters Tariff classification numbers 8713.90.00.10 (three-wheel) and 8713.90.00.20 (four-wheel) per Customs Tariff Schedule Section XVII Vehicles, Aircraft, Vessels and Associated Transport Equipment Daniel Workman International Trade Feature Writer IMPORT ACTIVITY STUDY Mobility Scooters Executive Summary A company that effectively manages detailed commercial, financial and transportation document s r equ i r ed for import p r ocesses has a val uabl e compet i t i v e advantage. Th i s i s an ov er all finding that Toronto-based ValuWrite Importers gl eaned after its sear ch f or Tai w anese expor ters of mobility scooters for disabled persons. Insulated from cutbacks in discretionary spending due to the slowing global economy, disability scooters will en joy i ncr eased demand r el en t l essl y d r i v en by the long-term needs of the ageing baby boomer generation. Ot her major concl u si ons f r om t h i s anal y si s ar e ? Consi der ed med i cal d ev i ces, i mported mobility scooters from Taiwan are not subject to Canadian tariff duties, excise taxes or t he Gener al Sal es Tax (GST ) . ? Ev en i f any du t i es, t axes or ot her char ges w er e ev er i mposed , post -del i v er y assembly of scooters can create jobs in Canada which in turn may make scoot er s eligible for a home consumption drawback under the Customs Traffic Act. Fr om a document at i on per spect i v e, data i ncl ud i ng impor ter and expor ter names and add r esses ar e k ey -en t er ed mu l t i p l e t i mes throughout many import and export document s. An automated documentation dat abase sy st em can save much time and reduce errors for all parties involved in the import process. How Information in this Document is Presented To enabl e r eader s t o l ear n by examp l e, t h i s st ud y p r esen t s samp l e forms organized by t hei r pu r pose i n t he i mpor t p r ocess. Samples of drawn (filled-in) trade forms provide visual tip sheets for readers that t hey can r ef er t o w hen comp l et ing official documents for an import shipment. The descriptive text in this analysis includes embedded links to sou r ce mat er i al s for easy r ef er ence. These links will give r eader s access to current information. After the successf u l l aunch of t he i mpor t ed Tai w anese d i sabi l i t y scoot er p r oject , t he k ey success componen t s from this initiative can then be app l i ed t o ev al uat e ot her p r oduct s and p r ospect i v e suppliers from other foreign countries. Similarly, this document provides an information design template for future import and expor t p r oject s. IMPORT ACTIVITY STUDY Mobility Scooters Contents Execu t i v e Summar y 1. Product Analysis a) Ov er v i ew ......................................................................................................................... 1 b) Why Product was Chosen ............................................................................................ 1 2. Supplier Analysis a) Ov er v i ew ......................................................................................................................... 2 b) Why Exporting Country w as Chosen ......................................................................... 2 c) W h y Su p p l i er w as Chosen ....................................................................................... 2, 3 3. L ogi st i cs, Cust oms and Tr anspor t at i on I ssues a) Ov er v i ew ......................................................................................................................... 4 b) L ogi st i cs I ssues ............................................................................................................... 4 c) Cust oms I ssues ............................................................................................................... 4 d ) Tr anspor t at i on I ssues ................................................................................................... 5 4. Requ i r ed Tr ade Documentat i on a) Ov er v i ew ......................................................................................................................... 6 b) Documentary Collection .............................................................................................. 7 c) A dvantages of Documentary Collection .................................................................... 7 d ) D i sadvantages of Documentar y Col l ect i on ............................................................... 7 e) Commercial Documents Checklist ...............................................................................8 f) Financial Documents Checklist .................................................................................... 9 g) Transportat i on Document s Check l i st ....................................................................... 10 5. Drawing a Documentary Collection a) Ov er v i ew ....................................................................................................................... 11 b) Documentary Collection Order Components ................................................... 11, 12 c) Col l ect i on Or der Let t er ............................................................................................... 13 d) Collection Order Draft ................................................................................................ 14 6. Drawing Commercial Documents a) Ov er v i ew ....................................................................................................................... 15 b) Canada Customs Invoi ce (CI -1) ................................................................................. 16 c) Cargo Control Document (A8A) ................................................................................ 17 d) Certificate of Origin .................................................................................................... 18 e) Commer ci al I nv oi ce ..................................................................................................... 19 f ) Expor t Decl arat i on (B13A ) .......................................................................................... 20 g) Impor t Decl arat i on (B3) .............................................................................................. 21 h ) I nsu r ance Cer t i f i cat e ................................................................................................... 22 i) Packing List ................................................................................................................... 23 j) Weight Certificate ......................................................................................................... 24 IMPORT ACTIVITY STUDY Mobility Scooters 7. Drawing Financial Documents a) Ov er v i ew ....................................................................................................................... 25 b) Bill of Exchange ........................................................................................................... 25 c) Banker s Bi l l of Exchange ............................................................................................. 26 d) Traders Bill of Exchange ............................................................................................. 26 e) L et t er s of Cr ed i t ........................................................................................................... 27 f) Draft ................................................................................................................................ 28 8. Drawing Transportat i on Document s a) Ov er v i ew ....................................................................................................................... 29 b) Original Bill of Lading ................................................................................................ 29 c) Air Waybill .................................................................................................................... 30 d) Trucker Waybill ........................................................................................................... 31 9. Def i ned Ter ms a) Visual Dictionary ......................................................................................................... 32 b) Gl ossar y ........................................................................................................................ 33 c) Tr ust A ccounts ............................................................................................................. 34 d ) Ri sk s (Political, Economic, Legal) ..................................................................... 35 - 37 Appendices A ? Sample Cal cu l at i on of Taiw anese Impor t Dut i es and Taxes .................................... 38 B ? Tai w anese Scoot er Speci f i cat i on D iagrams ................................................................. 39 C ? Competitive Pricing from The Scooter Store ............................................................... 40 IMPORT ACTIVITY STUDY Mobility Scooters 1. Product Analysis a) Overv i ew . I n 1968, Allan R. Thieme built the first mobility scooter in Bridgeport, Michigan. That pow er -oper at ed v eh i cl e w as i nv en t ed t o hel p a fami l y member afflicted with multiple sclerosis move around i ndependent l y . Most mobility scooters are bat t er y - pow er ed , and ar e char ged f r om st andar d el ect r i c pow er . W i th a maximum l oad of 250 pounds (113.4 k i l ograms), front-w heel d r i v e scoot er s ar e usual l y smal l er and ar e gener al l y u sed i ndoor s. The l ar ger r ear -d r i v e v eh i cl es can car r y from 350 to 500 pounds (158.8 to 226.8 k i l ograms) and are mor e commonly driven outdoors. A mobility scooter benef i t s disabled or el d er l y per sons w ho l ack the stamina or arm and shou l d er f l ex i bi l i t y needed t o oper at e a manual w heel chai r . The scooter is most helpful for per sons w i t h sy st em i c or w hol e-body disabling conditions such as coronary problems, lung d i sease, chroni c arthritis and sev er e obesi t y . A mobility scooter has some const r ai nts. The v eh i cl e? s st eer i ng t i l l er r equ i r es t he d r i v er t o maintain an upright body posture, with some upper-body mobility and strength particularly in the shoulders and hands need ed f or saf e v eh i cl e oper at i on . Mobility scooters are typically much longer than manual wheelchairs. This can make turning in confined spaces difficult; loading on w heel chai r -desi gned lifts or ramps i s of t en impractical. Scooters al so have low ground clearance, which can be problematic in cities or towns with high cu r bs. Few scooter s hav e bod y suppor t op t i ons su ch as l eg r est s. From a financial perspective, el ect r i c scooter s ar e usually mor e expensi v e t han pow er ed w heel chai r s and ar e often harder to qualify for under gov er nment med i care p l ans particularly in the U.S. H ow ev er , many Canadians have qualified for mobility scooters under p r i v at e heal t h p l ans su ch as Bl ue Cr oss. b) Why Product was Chosen. A ccord i ng to the Toronto Seniors Demographic Snapshot 2006, 14% of Toronto? s overal l popu l at i on or 353,455 ci t i zens w ere seni or s age 65 or over in 2006. A lmost 95% of Toronto seniors live in private households w ith a corresponding need for i ndependent personal mobility that enables them to perform basi c t ask s like shopping and visiting health professionals. From 2001 to 2006, the population of Toronto seniors grew by 15,165 ? an i ncrease of almost 5% i n just 5 year s. And, more and more Baby Boomers are approaching their senior years. For examp l e, t he number of ci t i zens f r om ages 55 to 59 soared 26% i n 2006. By 2031, the number of seniors w ill make up 17% of the City of Toronto population. This represents a 42% i ncrease f r om 2006, an add i t i onal 55,100 men and 88,000 w omen ages 65 and over . Clearly, this growing cohort of Toronto seniors represents a st abl e, r ecessi on-proof market for mobility scooters. Page 1 of 40 IMPORT ACTIVITY STUDY Mobility Scooters 2. Supplier Analysis a) Overv i ew . Taiw an i s a w el l -respected trade partner. A World Trade Organization (WTO) member si nce January 2002, Taiw an has no importer complaints listed on the WTO? s disputes-by-count r y w eb page. Taiw an al so belongs to the International Chamber of Commerce (ICC), the world?s leading organization for gl obal t r ade dispute arbi t r at i on. H ome t o 23 billion people, Taiw an i s a world-l ead i ng manu f act u r er of notebook compu t er s, w i r el ess computer equ i pment and bi cy cl es. Taiw an? s economy is highly dependent on i nternat i onal t r ade. I n 2008, expor ts w or th $256 bi l l i on p l us $236 billion in i mpor t s accounted for 67% of Taiw an?s $739-billion Gr oss Domest i c Pr oduct (GDP). It?s Very Well Made in Taiwan is a YouTube video that promot es how Tai w anese expor t er s st r i v e to maintain their home country?s r eputat i on as a high-quality supplier of competitively priced products including motor cycl es and scooters. By specializing in dependabl e and l ong-lasting vehicles, Taiwan mak es qual i t y scoot er s superior to t he l ow er - end i tems that mainl and China mass produces. b) Why Exporting Country w as Chosen . Taiwan?s reputation for quality mitigates a d ramat i c spiral of price competition with low-cost Chinese rivals. In addition, Taiwan is know n as the ? Island of Innovation? backed by so many international engi neer i ng aw ards that i nsi der s al so r efer to Taiw an as ?Silicon Island?. Engi neer i ng excel l ence and ongoing t echnological leadership w er e major factors for sel ect i ng a Taiw anese scooter mak er . Quantitative metrics al so speak a compel l i ng argument for Taiw an. Mechanically propelled w heel chai r s and scoot er s (H armoni zed System code 871390) imported into Ontario from Taiw an rose 165% f r om 2004 to 2008. Ov er t hat same per i od , competitive disability i mpor t s from other countries fell by 49%. Imported into Ontario from: 2004 2005 2006 2007 2008 Taiwan $1,161,000 $1,102,000 $1,072,000 $1,921,000 $3,075,000 Other countries $29,586,000 $21,902,000 $16,241,000 $15,853,000 $15,211,000 Source: Industry Canada?s Trade Data Online Similarly, i mpor t ed Tai w anese w heel chai r s and scoot er s w er e up 59% for al l of Canada si nce 2004, while similar imports from other countries fell by 45%. Imported into Canada from: 2004 2005 2006 2007 2008 Taiwan $3,848,000 $3,529,000 $5,513,000 $5,367,000 $6,114,000 Other countries $35,480,000 $28,990,000 $27,410,000 $23,225,000 $19,593,000 Source: Industry Canada?s Trade Data Online The abov e t r ends favourabl e to mechani zed Taiw anese w al k i ng ai ds imply product competitive advantages that Canad ian consumers r ecogn i ze and demand. Page 2 of 40 IMPORT ACTIVITY STUDY Mobility Scooters c) Why Supplier was Chosen . A f ter target i ng Taiw an as the import nation of choice, th r ee Tai w anese expor t er s w er e v et t ed as pot ent i al supp l i er s. ? Genemax Medical Products Industry Co. (listed on A libaba.com) ? Comfort Orthopedic Co. Ltd. (listed on B2BM anufactures.com) ? Wheel Ta Ent. Co., Ltd. (listed on ttnet.net). After a car ef u l consi d er at i on of each company ? s st r engt hs and w eaknesses, a d eci si on w as made t o use Genemax as t he Tai w anese expor t er of choi ce f or mobi l i t y scoot er p r oduct s. One of the leading medical product manufacturers in Asia, Genemax w as est abl i shed i n 1992 and t hus has been i n busi ness ov er 16 y ear s. The company specializes in medical support ai d s i ncl ud i ng cr u tches, scoot er s, w heel chai r s and ot her homecar e mobility equ i pment . A nnual sal es of Genemax med i cal p r oducts currently exceed US$100 million. Genemax mobi l i t y scoot er s ar e compet i t i v el y p r i ced . For examp l e, t he Genemax del uxe model GM P-M S6G costs USD$2,000 per uni t compared w i th $2,899 for a comparabl e product from U.S. discounter The Scooter Store. Ot her k ey r easons f or sel ect i ng Genemax as a disability scooter provider ar e l i st ed bel ow . ? The company directly supplies repair or maintenance parts for all of its products. ? The company can supply up to 1,000 units per month. ? Genemax scoot er s have saf et y f eat u r es l i k e head r est s and si d e-mirrors. ? Pat en t ed Genemax functionalities include a detachable and/ or foldable head . ? Genemax has developed a growing line of 10 distinct mobility scooter model s. ? Genemax of f er s m i n i mum sh i pment or der s of 50 uni t s and smal l er samp l e or der s. Sample orders enabl e importers to slowly build a relationship based on trust bef or e p l aci ng large orders. To r esear ch pot en t i al supp l y p r obl ems w i t h Genemax, t he i mpor t er conduct ed Google sear ches on keyword phr ases like ? Genemax scoot er comp l ai n t s? . N o per t i nen t negat i v e f eedback w as f ound , al t hough t her e w as r ef er ence t o Genemax w heel chai r s bei ng t oo w i de to fit into public transportation vehicles in San Francisco. Unfortunately, the company representative contacted on June 8 has not replied about: ? Vol ume d i scoun t s? ? Supplier-provided promotional materials? ? Subsi d i zed sh i pp i ng cost s? For mor e det ai l s on Genemax products, see t heir company website. Page 3 of 40 IMPORT ACTIVITY STUDY Mobility Scooters 3. Logistics, Customs and Transportation Issues a) Overv i ew . The underlying root problem for importing Taiwanese scooters to Toronto i s the geographi c d i stance separat i ng Taiw an and Canada. The total d i st ance betw een t he Taiw anese cap i tal of Tai pei and Toronto i s 7,521 mi l es (12,103 k i l ometer s). A typ i cal commer ci al f l i gh t betw een t he tw o ci t i es t ak es r ough l y 15 hou r s. A ssum i ng an av er age speed of 25 m i l es per hou r (40 k i l omet er s), an ocean l i ner sh i pment of scoot er s f r om Tai pei to Toronto w i l l take r oughl y 13 days. b) Logi st i cs I ssues. Physical distance p r ev ent s t he use of ju st -in-t i me i nv en t or y . Consequent l y , t her e will be at l east a tw o-w eek del ay i n r ep l en i sh i ng i nv en t or y in Toronto. Smal l er , mor e f r equent or der s w ill result in higher shipping expenses. War ehousing a readily available supply of mobility scooters in Toronto is prohibitively expensi v e. The SCO OTER St o r e in the U.S. mitigates these costs by maintaining a netw or k of service and distribution hubs that ship mobility scooters to 48 states plus Puerto Rico. Sp ace-efficient packaging of detachable components including batteries will result in add i t i onal charges t o assembl e and r epackage sou r ce scoot er component s af t er t hei r i n i t i al delivery from Taiwan. It is unlikely that disabled customers will have the capacity to accept unassembl ed scoot er p r oduct s w i t hou t assi st ance. c) Customs I ssues. Senior compliance officer Donna Suta from t he Canada Bor der Ser v i ces Agency (CBSA) conf i r med the following for H ar mon i zed Tar i f f cod es 8713.90.00.10 (t h r ee- w heel ) and 8713.90.00.20 (four-w heel ), mechanically propelled disability scooters. ? M ost -Favoured Nation (MFN) shipments f r om Taiw an i nto Canada are du t y f r ee. ? No excise tax applies since disability scooters are not luxury items. ? Di sabi l i t y scoot er s ar e GST -exemp t under code 57, med i cal and assi st i v e dev i ces. As a medical device, mobility scooters are zero-rated products not subject to GST; a refund can be gr an t ed w her e GST i s pai d . Under the Customs Traffic Act, imported project may be eligible for a home consumption drawback of customs duties. That ? s because scoot er s par t s ar e pack aged and sh i pped unassembl ed . Post -del i v er y assembly of scooters can create jobs in Canada. I n A ppend i x A , w e p r esen t a count er f act ual examp l e t o show how t o cal cu l at e du t i es and taxes assum i ng t hey w er e payabl e on Tai w anese d i sabi l i t y scoot er s. Page 4 of 40 IMPORT ACTIVITY STUDY Mobility Scooters d) Transportation Issues. Bel ow ar e t he v ol ume w ei gh t and actual w ei ght cal cu l at i ons for a minimum shipment of 50 mobility scooters via truck or rail. While an assembl ed scoot er ? s volume i s 2.04 cubi c met er s (71.9 cubi c f eet ), shipment packaging is only 0.96 cubi c met er s (34 cubi c f eet ). Volume Weight Actual Weight Packaged volume = 1.15 m x 1.05 m x 0.795 m Per unit shipping weight = 121 kg (55 lb) = 0.96 cubic meters = 3.78 ft x 3.45 ft x 2.61 ft Per unit shipping weight x 50 = 5,050 kg = 34 cubic feet = 2,750 lb Compare volume weight in Imperial units Note: 1 lb = 2.2 kg = 34 cu ft x 10 = 340 lb per unit Since volume weight of 17,000 lbs exceeds Times 50 units = 340 x 50 units actual weight of 2,750, shippers will charge = 17,000 lb based on volume weight of load. Note: 1 meter = 3.28 feet For DHL, Tai w an r ep r esent s zone A2 which qualifies for rates of C$77.25 for the first kilogram per box plus C$13.09 for each add i t i onal hal f -kilogram. With a calculated volume w eight of 748 k i l ograms (340 pounds) per package, each unit costs roughly C$20,000 (NT$600,000) to ship via airmail. Note that significant savings can be achieved by sharing a Full Container Load (FCL) rather than t he mor e expensi v e Less than Container Load (LCL). Note that the UPS online time and calculation feature w as used for an ocean (Fu l l Cont ai ner Load ) quot e. H ow ev er , ou r on l i ne quer y w as not answ er ed . For i l l u st r at i v e pu r poses, t h i s p r oject assumes f r ei gh t and i nsu r ance cost s of NT$150,000 (C$5,000) v i a ocean t r anspor tat i on. Page 5 of 40 IMPORT ACTIVITY STUDY Mobility Scooters 4. Required Trade Documentation a) Overv i ew . Documents play a vital role in international trade. When accurately comp l et ed , t r ade documentat i on is like a town crier who descr i bes the shipped goods in a loud and clear voice. Tr ade d ocument s must sat i sf y t he d emands of not only the exporter and importer t hemsel v es, bu t sev er al ot her aud i ence segment s i ncl ud i ng: ? Importer and exporter bank representatives ? Customs officers l i k e t hose at t he Canada Bor der Ser v i ces A gency ( CBSA ) ? Other government agencies including t he Canada Rev enue A gency (CRA ) for tax matters, Foreign Affairs and International Trade (DFA IT) for special import permits and the Compet i t i on Bureau of Canada for packaging and labeling concerns ? Transportation compani es. Documentation in good order enables a smooth flow of export shipments to import cust omer s w i t hou t d el ay s, d et ai nment s or d i sposal s. Cust oms document at i on r equ i r ement s f or i mpor t i ng i n t o Canada ar e dep i ct ed bel ow . Value of Import Shipment Documents Required by CBSA Under C$20 No customs documents required for low-value shipments $20 to $1,599.99 1. Canada Customs Invoice 2. Cargo Control Document* 3. Certificate of Origin 4. Commercial Invoice Note: Customs may ask for proof of origin for NAFTA shipment *Replaced by air waybill for cargo sent via air transportation $1,600 or over 1. Canada Customs Invoice 2. Cargo Control Document* 3. Certificate of Origin 4. Commercial Invoice 5. Any special licenses or permits 6. Import Declaration B3-3 (Canada Customs Coding Form) Note: Importer must provide B232E Certificate of Origin for NAFTA shipment *Replaced by air waybill for cargo sent via air transportation Source: CBSA Guide to Importing Commercial Goods Page 6 of 40 IMPORT ACTIVITY STUDY Mobility Scooters b) Documentary Collection. Th i s set of d ocument s i ncl udes p r eci se i nst r u ct i ons from the expor t er to both remitting and collecting banks, w i th pertinent trade documents affixed. Source: TD Bank The front of a documentary collection lists affixed commercial, financial and transportation document s. To by pass pay ment of exci se t axes (st amp d u t y ) , somet i mes commer ci al d ocument s p l u s t he col l ect i on or der ar e cou r i er ed t o t he i mpor t er ? s bank w i t hou t f i nanci al d ocument s. Alternatively, financial documents can go t o t he i mpor t er ? s bank while commerci al document s ar e directly sen t t o t he i mpor t er . c) A dvan tages of D ocumentary Col l ect i on . Document ar y collections: ? A r e l ess comp l i cat ed and l ess expensi v e t han letters of cr ed i t ? A r e not r el eased t o impor t er s un t i l payment or accep t ance has been ef f ect ed ? May faci l i t ate post -export financing. d) Disadvantages of D ocumentary Col l ect i on . While convenient, here?s why documentary collections can be riskier than letters of credit. ? Ther e i s no guar an t ee of payment . ? Exporter's capital is tied up until funds are received. ? Count r y r i sk s ar e not hedged . Page 7 of 40 IMPORT ACTIVITY STUDY Mobility Scooters e) Commerci al D ocumen ts Check l i st . Sorted in alphabetical order, primary commerci al d ocument s for a sampl e documentar y col l ect i on ar e l i st ed bel ow . Document Form # Purpose Drawer Copies Canada Customs Invoice CI-1 Used to calculate duties and taxes based on Exporter 3 ad-valorem (on value) rates, the official CBSA form that details demand for payment from importer while acknowledging that exporter has shipped products Cargo Control Document A8A-B Used to report shipment arrival to CBSA Shipper 2 and importer, and to track shipment movement to inland CBSA office, sufferance warehouse or bonded warehouse Certificate of Origin B232E* Counter-endorsed by a recognized chamber Exporter 2 of commerce, joint document used to *NAFTA establish tariff treatment based on country required where product originated Commercial Invoice An exporter-generated invoice will only be Exporter 3 considered for calculating duties and taxes if it contains the same details as the Canada Customs Invoice Import Declaration (Canada B3-3 Details formal accounting for imported Importer 2 Customs Coding Form) commercial goods Insurance Certificate Endorsed by insurer, certifies coverage up Exporter 2 to a specific point (depends on INCOTERM); also enables Customs to check whether importer is undervaluing shipment to avoid duties and taxes Packing List Provides evidence of how goods are packed Exporter 2 (often in accordance with country-specific requirements) and is important for insurance purposes Special Licenses and Permits Legally required for restricted good (like Exporter 2 guns, dangerous chemicals and exotic animals) Weight Certificate Provides evidence of a shipment?s legal Exporter 2 weight in a specific unit of measurement A weight certificate must accompany weight-valued products such as sugar or rice. One is included for mobility scooter s t o ensu r e t he 50-unit cargo is combined into a Full Container Load (FCL) with lower shipping rates than Less than Container Load (LCL). L i k e t he pack i ng l i st , a w ei gh t cer t i f i cat e i s a document of ev i d ence. Page 8 of 40 IMPORT ACTIVITY STUDY Mobility Scooters d) Financial Documents Checklist. The following t abl e p r esen t s financial documents used to t r ansact impor t sal es through commercial banks and similar financial institutions. Document Form # Purpose Drawer Copies Bill of exchange A unconditional, signed order that requires Exporter 1 the person to whom it is addressed (importer or importer?s bank) to pay a sum of money to a specified person (exporter) Bankers bill of exchange An exporter?s demand for payment from the Exporter 1 importer that the bank guarantees Traders bill of exchange An exporter?s demand for payment for which Exporter 1 the importer is solely responsible without bank guarantee Letter of credit A conditional promise issued by the Importer 1 importer?s bank to pay the exporter for requested goods and services only if the exporter delivers all required documents and fully satisfies all other terms and conditions that the importer sets out Draft Issued after the letter of credit is drawn, the Importer 1 draft is the financial document used in payments for letters of credit The d r af t d escr i bed i n t he abov e t abl e i s specific to the letter of credit, but is somet i mes mistakenly con f used w i t h t he bi l l of exchange used i n document ar y col l ect i ons. Below is a flow diagram that shows when an importer?s issuing bank typically advises and confirms letter of credit to exporter?s advising bank. Source: TD Bank Page 9 of 40 IMPORT ACTIVITY STUDY Mobility Scooters e) Transportat i on D ocumen ts Check l i st . The major transportation documents used for i mpor t ed sh i pment s ar e l i st ed i n t he t abl e bel ow . Document Form # Purpose Drawer Copies Original Bill of Lading A contract of carriage between exporter or Shipper 3 shipper and the carrier, this is singularly the most important document in trade because it is used to transfer ownership title to the shipped goods Air Waybill Non-negotiable and not a document of title, Shipper 3 this document is used when goods are sent via air transportation; the importer?s bank holds the air waybill until the importer pays for the cargo Trucker Waybill Used mostly on domestic shipments, the Shipper 3 trucker waybill is evidence of the contract between exporter and importer used to track movement of cargo; however, like the air waybill, it is non-negotiable and not a document of title The original bill of lading is the only document that importers can use for collateral hypothecation (trade financing using the bill of lading as collateral for a loan). Because i t can be used for payment, the bil l of lading cannot be pre-dated. Shipping companies such as Fedex, Ship North America Transportation and UPS ar e excel l en t sou r ces for transportation forms like the bill of lading and r el at ed document s. Page 10 of 40 IMPORT ACTIVITY STUDY Mobility Scooters 5. Drawing a Documentary Collection a) Overv i ew . Bel ow ar e excer p t s f r om a document ar y col l ect i on t hat t he Tai w anese exporter has drawn for a shipment of 50 mobility scooters. Included ar e t he component s of a collection order, followed by an example of a collection order letter and then a collection or der payment draft. b) Documentary Collection Order Components. The excer p t bel ow i d en t i f i es t he expor t er , i mpor t er and t hei r r espect i v e bank s, the type of collection and number of copies for each at tached document . To: Exporter?s Bank Bank Ref: 01-xxx 180 Jih Hsin Street Date: MM DD, YYYY Shulin City, Taipei Hsien Taiwan 238 Drawer / Beneficiary (Full name & address) We send you draft and/or documents below for Genemax Medical Products Industry Corp. disposal in accordance with our following instructions #86 Ln 226 Tai Ming Rd and subject to our Letter of Hypothecation given to our Wujih Hsiang Taichung Hsien General Customer Agreement entered into with you. Taiwan 414 ? PURCHASE subject to final payment D rawee / Applicant (Full name & address) ValuWrite Importers ? COLLECTION 30 Church Street, Unit 201 ? NEGOTIATION under DOCUMENTARY CREDIT ? Toronto, Ontario Canada M5E 1S7 Collecting / Issuing Bank (Full name & address) Importer?s Bank 55 King Street West Toronto, Ontario Canada M5K 1A2 ? Please mark number of documents attached ? 1 Draft 1 Inspection Certificate 3 Commercial Invoice 3 Original Bill of Lading 2 Custom Invoice 3 N/N Copy Bill of Lading 2 Packing List 3 Original Air Waybill 2 Weight List 3 Copy Air Waybill 2 Beneficiary Certificate / Statement 1 Courier / Parcel Post Receipt 2 Certificate of Origin 1 Forwarder Cargo Receipt 1 Export License 1 Original Documentary Credit 1 Insurance Policy / Certificate ? Other documents ? 1 Licenses or Permits or Trading Cards (if necessary) Page 11 of 40 IMPORT ACTIVITY STUDY Mobility Scooters The excer p t bel ow i ncl udes speci f i c i nst r u ct i ons that the exporter ticks off for t he expor t er ?s bank to follow. For Bill not under Documentary Credit ? please follow instructions marked ?X? below X Release Documents against PAYMENT (D/P) Release Documents against ACCEPTANCE (D/A) ACCEPTANCE/PAYMENT may await arrival of carrying vessel CABLE advise of Non-payment and/or Non-acceptance AIRMAIL advise of Non-payment and/or Non-acceptance X PROTEST for Non-acceptance or Non-payment at our expense DO NOT PROTEST X NOTE: Notwithstanding any instructions to the contrary, the Bank may, at its discretion but at our expense, protest any draft which is dishonoured and take any other steps which the Bank considers appropriate to protest its interest In case of need please contact: David Colaluca 200 King Street East, Room 240 Toronto, Ontario Canada M5A 3W9 (416) 000-0000 who will assist you to obtain acceptance/payment but he/she has no authority to amend the terms of the bill. X From the proceeds deduct $500 to be paid to the above agent. X If Unpaid/Unaccepted, store and insure goods at our expense COLLECT charges from the DRAWEE X DEDUCT charges from the PROCEEDS Special Instructions: Confirm documentation collection is received by emailing genemax@ms31.hinet.net Invoice No. The invoice number is repeated on some of the attached documents Tenor Payment language ? term or sight Trade Terms INCOTERMS Brief Description of Goods (e.g. Toys, Garments, etc.) Documentary Credit No. LOC # ? Bill Amount ? (usually in Exporter?s currency) Authorized Signature(s) and company stamp Account No Fax No. Contact person Tel. No. Page 12 of 40 IMPORT ACTIVITY STUDY Mobility Scooters c) Collection Order Letter. Bel ow is an example of a collection order letter drafted by t he expor t er for t he expor t er ? s bank to follow. July 1, 2009 Exporter?s Bank Documentary Collection Services 180 Jih Hsin Street Shulin City, Taipei Hsien Taiwan 238 To whom it may concern: We enclose for collection the following documents: ? commercial Invoice ? 3 Original Bills of Lading ? Term Draft drawn 60 days after sight (1). These documents are to be delivered against acceptance (2) of draft of $1,000,000 by courier (3) to my customer's bank located at: Importer?s Bank Documentary Collection Services 55 King Street West Toronto, Ontario Canada M5K 1A2 All banking charges outside of Taiwan are for the Drawee's account (4). If customer does not accept the draft, please protest. Funds are to be wired to the following account: (5) Account 123456789 Exporter?s Bank Transit 12345 at 180 Jih Hsin Street, Shulin City, Taipei Taiwan 238 For any questions concerning this collection, please contact Jane Doe at (123)456-7890. Sincerly, Exporting Company Name & Address (1) For the draft, specify sight or term. (2) Settlement terms: either documents against payment or documents against acceptance. (3) I nst r u ctions on how to send the letter (options include courier and registered mail). (4) A ssi gnment of bank i ng charges. (5) Wher e col l ect ed f u nds ar e t o be deposi t ed . Page 13 of 40 IMPORT ACTIVITY STUDY Mobility Scooters d) Collection Order D raf t . Below is a samp l e d raf t attached to t he document ar y col l ect i on , with corresponding explanations for numbered information. (1) If this is a term draft and a specific maturity date applies, it is entered here. (2) Dat e w hen t he d r af t i s comp l et ed . (3) Pay ment t er ms such as at sight or 30 days after sight . (4) Dollar amount in words along with the currency. (5) Dollar amount in figures along with the currency. (6) Impor t er name and add r ess. (7) Expor t er name (company and si gnature). Because t he d raf t attached to a documentary collection is drawn against the importer, the exporter?s bank merely remits the draft with the rest of the documents but does not collect. Page 14 of 40 IMPORT ACTIVITY STUDY Mobility Scooters 6. Drawing Commercial Documents a) Overv i ew . Canada Bor der Ser v i ces A gency provides an online repository of excel l en t examp l es of commer ci al d ocument s and f or ms used i n t he i mpor t i ng p r ocess. Page 15 of 40 IMPORT ACTIVITY STUDY Mobility Scooters b) Canada Customs I nvoi ce (CI -1). Currency amounts shown in the sample bel ow ar e i n N ew Taiw an Dol l ar s. The exchange r at e for one Canad ian dol l ar is 30 Taiw anese dol l ar s. 1 1 Genemax Medical Products Industry Corp. 2009 / 07 / 01 #86 Ln 226 Tai Ming Rd Wujih Hsiang Taichung Hsien JUL-1900001 Taiwan 414 ValuWrite Importers Importer?s Bank 30 Church Street, Unit 201 55 King Street West Toronto, Ontario Toronto, Ontario Canada M5E 1S7 Canada M5K 1A2 Not applicable Taiwan Consignment shipment TWD 50 Deluxe disability mobility scooters (4-wheel) 50 $90,000 $4,500,000 ? 5,050 Kg 6,050 Kg $450,000,000 $100,000 (Deduct) $150,000 (Deduct) (Add) $850,000 (Add) (Deduct) $15,000 (Add) $50,000 (Add) Page 16 of 40 IMPORT ACTIVITY STUDY Mobility Scooters c) Cargo Control Document (A8A(B)). The samp l e below acts as the i ni t i al r ecord of a shi pment ? s ar r i val , and i s al so used for all sh i pment s mov ed i n-bond to an inland CBSA office, sufferance warehouse or bonded w ar ehouse. Cargo Control Number 001 Taiwa Toronto Importer?s Bank 55 King Street West Toronto, Ontario Canada M5K 1A2 Genemax Medical Products Industry Corp. #86 Ln 226 Tai Ming Rd Wujih Hsiang Taichung Hsien Taiwan 414 50 Deluxe disability mobility scooters (4- 6,050 Kg Storage container Taipei United Parcel Services UPS Freighter Page 17 of 40 IMPORT ACTIVITY STUDY Mobility Scooters d) Cer t i f i cate of Origin. Whi l e t her e i s a separ at e certificate of origin for N A FTA -member count r i es, t he samp l e bel ow for sh i pment s from a non-NAFTA nation. Genemax Medical Products Industry Corp. UPS Taiwan, 1234 Happy Time Road, Taipei, Taiwan 411 UPS Freighter Importer?s Bank June 27, 2009 Deluxe disability mobility scooters (4- Taiwan 12345 50 5,050 Kg 6,050 Kg Deluxe disability mobility scooters (4- Taipei, Taiwan June 2009 June 2009 29th 29th Joe Mante Bob Wilson The Taipei Chamber of Commerce Taiwan Lisa Balsamo Page 18 of 40 IMPORT ACTIVITY STUDY Mobility Scooters e) Commercial Invoice. Transportation companies provide sample commercial invoice f or ms, l i k e t he one shown below. Commercial Invoice Invoice #: 987654321 June 27, 2009 UPS Taiwan Importer?s Bank 1234 Happy Time 55 King Street West Road Toronto, Ontario Taipei Canada M5K 1A2 ValuWrite Importers 30 Church Street, Unit 201 Toronto Ontario Taiwan Taiwan 50 Pkg 50 2,750 C$3,000 C$150,000 Mobility Bob Wilson June 27, 2009 Page 19 of 40 IMPORT ACTIVITY STUDY Mobility Scooters f) Expor t D ecl arat i on (B13A ). The CBSA makes t h i s st andar d form avai l abl e to exporters. Page 20 of 40 IMPORT ACTIVITY STUDY Mobility Scooters g) I mpor t D ecl arat i on (B3). H er e? s a great samp l e plus CBSA instructions for filling it out. Header = Fields 1 to 9 (describe Importer) RN Business # ValuWrite Importers 30 Church Street, Unit 201 Toronto, Ontario C$150,000 Canada M5E 1S7 RT # 9 C 495 Export # UNY UNY 2 Subheader = Fields 10 to Genemax Medical Products Industry 1 06 27 TWD 19 (describe Exporter) Mobility scooters for disabled persons 121 NT$450,000,000 8713.90.00.10 50 NMB 13 Free Free C$150,000.00 $0 C$150,000.00 .00 $0.00 $0.00 Medical device is a zero-rated GST service: not subject to GST but refund can be given where GST was paid 0.00 For temporary goods only 999999UGUESS Cargo Control Number 001 0.00 UPSASSIGNED001 Page 21 of 40 IMPORT ACTIVITY STUDY Mobility Scooters h) I nsurance Cer t i f i cate. A ccord i ng to t r ade f i nance ru l es, a mi nimum of 110% of i nsu r ance cov er age must be pu r chased f or t he sh i pped car go. TW-0000001 1 123456789 500,000,000,000 TWD Taipei, Taiwan on June 27, 2009 50 $495,000,000 TWD $450,000,000 TWD June 27, 2009 Genemax Medical Products Industry Corp. Page 22 of 40 IMPORT ACTIVITY STUDY Mobility Scooters i) Pack i ng L i st . Below is an examp l e of a packing list. UPS Taiwan 1234 Happy Time Road Taipei Importer?s Bank 55 King Street West Toronto, Ontario Canada M5K 1A2 987654321 June 27, 2009 UPS Taiwan 101 Kg 0.795 x 1.05 x 50 Deluxe disability mobility scooters (4- 121 Kg 1.15 meters Page 23 of 40 IMPORT ACTIVITY STUDY Mobility Scooters j) Weight Certificate. Below is an examp l e of a weight certificate. Page 24 of 40 IMPORT ACTIVITY STUDY Mobility Scooters 7. Drawing Financial Documents a) Overv i ew . Depending on the payment language or tenor of the financial documents, importers pay ei t her : ? At sight when the importer accepts the financial documents, or ? After an agr eed -upon ter m like 30, 60 or 90 days following document acceptance. b) Bill of Exchange. Bel ow i s a samp l e si gh t bill of exchange f ol l ow ed by a t er m samp l e. Page 25 of 40 IMPORT ACTIVITY STUDY Mobility Scooters c) Bank ers Bi l l of Exchange. When a bank guar an t ees payment t o t he expor t er , t hat financial document is known as a Bankers Bill of Exchange. See the following example. d) T raders Bi l l of Exchange. Under a Tr ader s Bi l l of Exchange, t he i mpor t er i s r esponsi bl e for paying the exporter. H ow ev er , no bank has guarant eed that payment (see below). Page 26 of 40 IMPORT ACTIVITY STUDY Mobility Scooters e) Let ters of Cred i t . A l et ter of cr ed i t i s a documented guarantee that a bank w i l l pay an expor t er i f and on l y i f t he expor t er has full complied with the terms and conditions that the i mpor t er has speci f i ed i n t he l et t er of cr ed i t . See t he samp l e excer p t bel ow . Terms and conditions Page 27 of 40 IMPORT ACTIVITY STUDY Mobility Scooters f) D raf t . Bel ow i s a samp l e bank draft from the Appendix of International Trade ? A Simple View to a Complex Process (A Canadian Analysis) by Harmeet Singh Kohli. Page 28 of 40 IMPORT ACTIVITY STUDY Mobility Scooters 8. Drawing Transportation Documents a) Overv i ew . Whether imported goods are sent via ocean carrier, airplane, truck or railway, the shipper fills out the pertinent transportat i on d ocument s. b) Original Bill of Lading. A con t r act of car r i age betw een t he sh i pper and t he car r i er , a Bi l l of Lading (BOL) like the one below is used to transfer ownership title to goods. The BOL i s the only document that can be given as security for a loan. . Page 29 of 40 IMPORT ACTIVITY STUDY Mobility Scooters c) Air Waybill. Typically, an Air Freight Forwarder or an International Air Transportation Authority Agent fills out the air waybill. Not a document of title, the air waybill is a straight bill and is not negotiable. For more information, see the instructions following the FedEX samp l e below. (1) Fill in sender information, including shipper account number. (2) Include recipient's address and phone number. (Customs may require the importer?s tax number.) (3) This section does not replace a commercial invoice, but must be accurately filled out. (4) Specify method of shipping service required. (5) Indicate type of packaging needed. (6-9) Other details for completing and signing the air waybill. Page 30 of 40 IMPORT ACTIVITY STUDY Mobility Scooters d) T ruck er Wayb i l l . The t r anspor tat i on company or agent d raw s th i s t r anspor t at i on document , w h i ch p r ov i d es ev i d ence of t he con t r act and mov ement of car go. Un l i k e t he bi l l of lading, the trucker waybill is non-negot i abl e. A s seen i n t he examp l e below, the t r u ck er waybill mentions the packing list number and other transportat i on documents. Page 31 of 40 IMPORT ACTIVITY STUDY Mobility Scooters 9. Defined Terms a) Visual Dictionary. The gr aph i c bel ow gi v es an at -a-glance summary for different terminology used to refer to 4 principal parties that can participate in an import shipment. Exporter Exporter?s Bank ? Beneficiary ? Advising Bank ? Drawer ? Confirming Bank ? Principal (Cert. of Origin) ? Drawer?s Bank ? Payee ? Remitting Bank ? Seller ? Sender ? Shipper ? Vendor Commercial documents Finance documents Transportation documents Importer Importer?s Bank ? Applicant ? Collecting Bank ? Buyer ? Consignee (often) ? Consignee (seldom) ? Drawee?s Bank ? Drawee ? Issuing Bank ? Notified Party ? Opening Bank ? Payer ? Presenting Bank ? Receiver Page 32 of 40 IMPORT ACTIVITY STUDY Mobility Scooters b) G l ossary . Import terminology definitions are p r esen t ed below in alphabetical order. Term Definition Example Advising Bank A commercial bank of which the Exporter?s Bank in Taipei, Taiwan exporter is a customer Applicant Importer ValuWrite Importers, Toronto, Canada Beneficiary Exporter Genemax Medical Products Industry Corp., Taichung, Taiwan Collecting Bank A commercial bank of which the Importer?s TD Canada Trust bank in importer is a customer Toronto Confirming Bank A commercial bank of which the Exporter?s Bank in Taipei, Taiwan exporter is a customer Drawee Importer ValuWrite Importers, Toronto, Canada Drawer Exporter Genemax Medical Products Industry Corp., Taichung, Taiwan HSC Harmonized System Code (HSC) is a 8713.90.00.10 is the HSC for three- numeric representation of a product wheel mobility scooters. The first 6 according to its classification under the digits is an international code while the Harmonized Commodity Description first 8 digits are used to determine tariff and Coding System. An HSC is comprised duties. The last 2 digits are applied in rd of a chapter (first 2 digits), heading (3 and classification and statistical studies. th th th 4 digits), subheading (5 and 6 digits), th th tariff item (7 and 8 digits) and th th classification (9 and 10 digits). Issuing Bank A commercial bank of which the Importer?s TD Canada Trust bank in importer is a customer Toronto Opening Bank A commercial bank of which the Importer?s TD Canada Trust bank in importer is a customer Toronto Presenting Bank A commercial bank of which the Importer?s TD Canada Trust bank in importer is a customer Toronto Remitting Bank A commercial bank of which the Exporter?s Bank in Taipei, Taiwan exporter is a customer Risks Possible barriers to trade success or Political, economic and legal reasons for losses from an import (described in more detail on next page) activity Trust Accounts Agreements between the exporter and Open account, advance payment, pre- importer whereby the exporter grants a payment, consignment, partial facility to the importer to purchase payments and instalment payments goods under special conditions. Page 33 of 40 IMPORT ACTIVITY STUDY Mobility Scooters c) T rust A ccoun ts. The following table lists payment methods that exporters extends to i mpor t er s w i t h w hom t hey hav e dev el oped a t r u st r el at i onsh i p . Trust Payment Method Description Open Account ? An informal contract under which the exporter grants the importer the facility to buy imported goods on a regular basis ? The duration of an open account is usually one year, with interest accrued after 30 days payable by the importer and subject to a purchase maximum ? Before year-end, the importer must negotiate a new contract for the following year with the same or a larger or smaller maximum amount ? An estimated 80% of global trade is conducted on open account ? Biggest risk is importer not paying for open account tab Advance Payment ? Importer transfers a percentage of the invoiced total payment to the exporter before shipment is sent ? Because the exporter is holding the importer?s money, interest on the advance payment accrues to the importer if shipment is not made 30 days after payment is made Prepayment ? Importer sends full amount of invoice to exporter before goods are shipped ? Fully eliminates risk to exporter, while importer assumes risk that exporter will take money without shipping paid-for products Consignment ? Exporter ships goods to importer but holds onto title to that shipment ? Because title has not been transferred, exporter is at risk of non-payment ? Example of shipment on consignment is Delivery Duty Paid (DDP is an INCOTERM; for more details, see INCOTERMS chart of responsibility) Partial Payments ? Importer pays partial payments to the exporter with no goods sent until exporter receives full amount Instalment Payments ? Importer pays the full amount over a series of instalment payments ? Exporter ships goods to importer after receiving first instalment payment Page 34 of 40 IMPORT ACTIVITY STUDY Mobility Scooters d) Ri sk s. The following r i sk analysis is based on t he Su i t e101 ar t i cl e Eval uat i ng Taiw an as a Tr ade Par t ner by Dani el Workman. Political Risks in Taiwan: The bi ggest r i sk t o trading with Taiwan comes from questions abou t w het her emer gi ng super pow er Ch i na w i l l ev en t ual l y t ak e ov er and assi m i l at e Taiw an?s dynamic and hi ghl y prof i tabl e cap i tal i st economy . To date, Taiw an?s cur r ent government has loosened i t s control over private i nv estment and f or ei gn t r ade. Sev er a l l ar ge, state-ow ned Tai w anese bank s and i nd ust r i al f i r ms hav e al r eady been p r i v at i zed . Those gov er nment pol i ci es cou l d change should mainland China w i sh t o enforce its will. While Taiwan?s trading relationship with China may remain intertwined, other trading par tner s may react adver sel y and avoi d t r ad ing w i th Taiw an out of fear of r etal i at i on ? especially if t he Peop l e? s Republ i c becomes aggressive with its tiny neighbour. Thirdly, the risk that the government might expropr i ate l and or cap i tal becomes much more troubling should China govern Taiwan. As evidenced by the recent 2008 Beijing Olympics, Chinese authorities will not hesitate to use military force to confiscate land they w ant and ev en ev i ct little old lady l andowners without compensation. Similarly, iron-fisted authorities in Beijing may decide to nationalize recently privatized Taiw anese banks, i ndust r i al companies and other cap i tal i st enterpr i ses. These pol i t i cal r i sk s can af f ect Tai w anese i mpor t er s and expor t er s i n t h r ee w ay s: ? Rai se t he cost of d oi ng busi ness ? Cr eat e shor t ages i n t he mar k et ? Pr ev en t per manent st abi l i t y . Economi c Ri sk s i n Tai w an : Even though Taiwan joined the World Trade Organization (WTO) at the star t of 2002, Taiw an st i l l maintai ns t r ade bar r iers that restrict f u l l access t o A mer i can-expor t ed automobiles, rice, poultry, livestock and pharmaceutical drugs. Some U.S. exporters are pushing for free trade with Taiwan touting political, security as well as econom i c benef i t s of such an agr eement . On t he ot her si d e of t he coi n , f ew bar r i er s ex i st on products coming out of Taiwan i nto Canada or the U .S. The exchange r at e betw een A mer i can cu r r ency and t he Tai w an dol l ar show ed a r el at i v e w eakening of the U .S. dol l ar i n M ay 2009. Over a 6-month period, an average 33.6 Taiw an dol l ar s (TWD) bought one U .S. dol l ar , w i th a minimum of 32.5 TWD on December 18 and a maximum of 35.2 TWD on M arch 2. Today , Taiw anese expor ts cost more i n A mer i can f unds d ue t o t he l ow er r el at i v e v al ue of t he U .S. d ol l ar . Page 35 of 40 IMPORT ACTIVITY STUDY Mobility Scooters Economi c Ri sk s i n Tai w an: (continued) The unemp l oyment r at e i n Tai w an w as a v er y heal thy 4.1% i n 2008, compared w i th 7.2% i n the U .S. as of December 2008. Taiw an?s est imated i nf l at i on r ate w as a modest 3.7% l ast year , compared w i th 6% i n China. The cent r al bank d i scount i nterest r ate i n Taiw an w as 1.5% i n January 2009, compared w i th 3.5% in Canada which is revered for its conservative financial institutions. Perhaps because Taiw an i s such a successfu l p l ayer i n gl obal t r ade, the I sl and of I nnovat i on i s not associ at ed w ith a high level of black market activity like that associated with Venezuel a. Fi nal l y , Taiw an?s r at i o of t r ade (expor ts p l us impor ts) to i t s GDP of US$738.8 bi l l i on i n 2008 w as an impressi ve 66.6%. The following t abl e summar i zes macroeconomi c r i sk factor s. Risk Categories Taiwan Canada Trade Barriers (tariffs) Tariffs are competitive, although the US Applies generic Most Favoured Nation is pushing for free trade with Taiwan tariffs on imported Taiwanese scooters Trade Barriers (other) Few since Taiwan upgrades and Some retaliatory measures, but in finishes imported intermediate goods general discourages trade barriers like from other countries; no language onerous customs documentation restrictions like mandatory Mandarin Chinese translations on labels Export Policies 34.8% of GDP in 2008 was exports 35.3% of GDP in 2008 was exports th th (Taiwan is world?s 18 leading exporter) (Canada is world?s 11 leading exporter) Exchange Rates Relatively stable (range $32.51 to $35.2 C$1 = US$0.8260 Jan 2, 2009 over past 6 months) C$1 = US$0.891519 June 12, 2009 $1 TWD = US$1.030469 Jan 2, 2009 Source: Bank of Canada $1 TWD = US$1.030500 June 12, 2009 Protectionism Low risk because of need to supply Low risk because of need to supply US China with exports with exports Unemployment Rate Taiwan?s unemployment rate increased Canada?s unemployment rate to 5.77% on May 25, 2009 up from increased to 8.4% on June 5, 2009 up 4.1% in 2008 per CIA World Factbook from 6.1% in 2008 Inflation Rate -0.84% as of June 12, 2009 compared 0.4% for May 2009 compared with 1% with an estimated 3.7% for 2008 for January 2009 Interest Rate 1.25% on June 8, 2009 compared with 0.5% on June 12 compared with 3.5% 1.5% in January 1, 2009 in January 2009. Page 36 of 40 IMPORT ACTIVITY STUDY Mobility Scooters Legal Risks in Taiwan: Taiw an i s a par t i ci pat i ng member i n the I nternat i onal Chamber of Commerce (ICC), the world?s leading organization for international commercial dispute r esol u t i on . Ther ef or e, f or ei gn t r ader s w i t h Tai w an can escal at e d i spu t es f or I CC ar bi t r at or s t o r esol v e. Legal risks from breach of contract apply to both import and export partners with Taiwan. Back in April, Taiwan?s China Shipbuilding Corp announced a breach-of-contract lawsuit after Israeli shipping line Zim canceled orders for 6 container sh i p s. No breaches w er e f ound involving imported Taiwanese mobility scooters. Legal jurisdiction for any legal action that the importer initiates will likely be Taiwan, since t he p r oceed i ngs of a l egal act i on gener al l y t ak e p l ace i n t he count r y of expor t . Taiw an app l i es code l aw , t he same type of civil law that China applies. Th i s somet i mes l eads to l egal conf l i ct s, because nat i ons l i ke the U .S. and Canada r esol v e d i spu t es based on case law which involves more argumentation and r eason i ng based on p r ecedents. H ow ev er , t he gr eat est l egal bar r i er s may be well result from l anguage constraints if legal hear i ngs take p l ace i n Taiw an. That ? s because Mandarin Chinese is the official language in Taiw an w i th some Taiw anese (M in) and H akka d i al ects. Page 37 of 40 IMPORT ACTIVITY STUDY Mobility Scooters Appendix A Sample Calculation of Tai w anese I mpor t D u t i es and Taxes Consi der t he f ol l ow i ng examp l e w her e w e p r et end t hat d u t y and t axes w er e payabl e. In determining the Transaction Value on which duties and taxes would otherwise be app l i ed , t r anspor tat i on and i nsurance char ges as w el l as l abou r cost s t o assembl e t he scoot er s i n Canada must be deduct ed w her e t he i nv oi ced amount al r eady i ncl ude t hem . I nvoi ced amount for 50 scooter s = N T$4,500,000 Transpor tat i on and i nsurance charges = $150,000; Labour charges = $15,000 For illustrative purposes only, pretend that Duty = 10%, Exci se Tax = 10% and GST = 5% Therefore, Transact i on Value = N T = $4,335,000 ($4,500,000 - $150,000 - $15,000) Duty = 10% of $4,335,000 = $433,500; Exci se Tax = 10% of $4,768,500 ($4,335,000 + $433,500) = $476,850; GST = 5% of $5,245,350 ($4,768,500 + $476,850) = $262,267.50 Total pretend duty and taxes = NT$1,172,617.50 ($433,500 + $476,850 + $262,267.50). Page 38 of 40 IMPORT ACTIVITY STUDY Mobility Scooters Appendix B Tai w anese Scooter Specification D i agrams M easu r ement s f r om t he Tai w anese scoot er mak er ? s w ebsi t e are in metric units. Since Canad i an i mpor t er s use t he same sy st em , t her e i s no need t o conv er t t o Imperial units. Model: GMP-M S6G This is a sample scooter Length: 1480mm Width: 1350mm See below for more details H eight : 1020mm Sp eed : 14 km/ hr Page 39 of 40 IMPORT ACTIVITY STUDY Mobility Scooters Appendix C Competitive Pricing f rom The Scooter Store Product descriptions and prices below are from American-based The Scoot er St or e w ebsi t e. Go-Go U l t ra X 4 Wheel T ravel Scooter USD$879 The Go-Go Ultra X is loaded with design features like an innovative locking mechanism that allows one-handed f r ame d i sassembl y and a conv en i en t d r op -in battery box that makes transport and t r av el w or r y f r ee. M odel N o. SC44X Victory 10 4-Wheel $2,199 The sl eek 10" w heel ed , spor t y V i ct or y 10 scoot er d el i v er s h i gh per f or mance operat i on, al l -new f eat u r es and Feat her - touch disassembly. With a full complement of advanced standard f eat u r es, excl usi v e l ow -profile tires, back- lit battery gauge, and w raparound del ta tiller, the Victory 10 is a great value! Cel ebr i t y X 4-Wheel El ect r i c Scooter $2,099 Luxurious, stylish and loaded with f eat u r es l i k e an ad just abl e seat and special tiller-and i t d i sassembl es f or t r avel , too! M odel N o. SC4401 It's our fastest scooter with the longest r ange per bat t er y char ge and i t can be upgraded to a r ange of up to 25 mi l es. I t travels well, with pieces that latch easily t oget her (heav i est p i ece i s 66 l bs.) Hurricane PMV Personal Mobility $2,899 V eh i cl e 4-Wheel Scooter The Hurrican Personal Mobility Vehicle is a pow er f u l bl end of r u gged , heav y -duty per f or mance and r ef i ned l u xu r y . A stylish, practical and durable vehicle that's easy and fun to drive, powerful, and comfortable. M odel N o. PM V5001 Page 40 of 40
Posted: 11 July 2010

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