Barbara’s Blouses

Q1. Risks of buying overseas
        Although cost saving is the number one drive for moving toward oversea buying, there are many risks associate with this decision. Some risks that are related to the business environment of the foreign country may include lack of stability in political and economic environment; constraints of government regulations on tax and trade; fluctuation of currency exchange rate; difference in natural environment, and act of god.  These risks are very difficult to avoid as it is controlled by an outer force. However, some risks can be avoided or minimized if manage properly.  They include the difficulty in culture and language; difficulty of reordering and modifying; long lead in transition; as well as some quality control issue.

Q2. Currency of contracts

        Economic changes in both countries would be an impact in the exchange rate, sometimes it is difficult to predict the fluctuation of a foreign currencies against the US dollar. Therefore, it is better for Barbara’s firm to make transactions in US dollars, due to its strength. But if Barbara’s firm is not just a buyer in the foreign country, but also has sales in the same country, then transactions can be made in the foreign currency, as a way to avoid risk of exchange rate fluctuation.

Q3. Incoterms

        Barbara’s firm should be using Free On Board (FOB) incoterm. From the point of shipment up until it’s received, the seller pays for transportation of the goods to the port of shipment, plus loading costs. The passing of risks occurs when the goods are loaded on board at the port of shipment. For example, if Incoterm is FOB Louisiana, the seller will pay for transportation of the goods to the port of Louisiana USA, and the cost of loading the goods on to the cargo ship.  The buyer pays for all costs beyond that point, including unloading. Responsibility for the goods is with the seller until the goods are loaded on board the ship. Once the cargo is on board, the buyer assumes the risk.

Q4. Prevent forced labor goods

        There are some shared information and resources for Barbara’s firm to use, in order to prevent from importing forced labor goods. The Bureau of International Labor Affairs (ILAB) at the US Department of Labor maintains a list, revised when needed, of goods and their source countries that raise concerns about forced or child labor. This will alert the firm on details such as the areas of a country where the forced labor is concentrated, how widespread the problem is, and what type of goods are likely to be produced by forced labor, and etc. In addition to the list provided by the US government, there is also some information shared within the clothing industry, or from the country where they imported, as well as press reports. Also, some actions need to be taken by Barbra’s firm to clarify and reinforce the expectation about anti-forced labor with their suppliers.  Such expectation should be documented and complied. If possible, performing a supply audit would be helpful too.