International Trade Logistics and Inventory Management
Warehouse Regimes in International Trade
Warehouse Regimes in International Trade: These are specific areas where imported products are temporarily exempt from paying customs tariffs, VAT (Value Added Tax), and special taxes. The exemption lasts as long as the goods remain in that special area. They are perfectly delimited (clearly defined boundaries), and goods can stay there for an unlimited period of time. Each country is free to establish as many of these areas as it wants.
Customs Clearance and Procedures
Customs clearance: When merchandise arrives in the EU, a customs regime must be applied to it. This means a set of rules that products must follow to move legally in or out of a country.
The Four Steps of Customs Procedure
- Submission of a customs declaration: Filling in the form, attaching documents, and showing the goods.
- Checking and control of goods: Verifying information, determining quantity and characteristics, and classifying goods according to the tariff.
- Acceptance of the customs declaration: Eligibility check and recording of results.
- Release of goods: The goods can now legally move.
Customs and Bonded Warehouses
Customs/Bonded Warehouses: Facilities strategically located near ports, airports, and other critical entry points for international trade. They are authorized by customs authorities to store imported goods without immediate payment of duties and taxes. This concept has two meanings: a physical facility and a legal customs situation.
The 11 Types of Bonded Warehouses
- Temporary storage premises (RTO)
- Free warehouse
- Bonded logistics parks
- Aircraft and ship stores
- Bonded bins
- General Order (GO) warehouses
- Modification warehouses
- Type B
- Type C
- Type D
- Type E
Free Zones in the EU Customs Territory
Free Zones: Enclosed areas within the EU customs territory where non-Union goods can be introduced free of import duty, taxes, and commercial policy measures.
Permitted Activities in Free Zones
- Usual Manipulations: Inventory taking, placing marks, seals, or labels, packing, etc.
- Processing: Under the inward processing regime.
- Destruction: Destruction of goods.
- Abandonment: Abandonment of goods.
After these activities, goods can be released for free circulation or re-exported.
Benefits of Bonded Warehouses
- Payment control
- Cost savings
- In-house fulfillment
- Long-term storage
- Restricted goods flexibility
- International shipping
- 24/7 Access
- Increased security
Inventory Types and Management
Classification by Degree of Transformation
- 1. Raw materials
- 2. Manufacturing products/components
- 3. Finished products
Classification by Function
- Cycle inventory
- Seasonal inventory
- Security inventories
- Inventories of recoverable material
- Inventories of useless material
Inventory Management Costs
- Supply Cost (Ca)
- Storage Cost (Cal)
- Unsatisfied Demand Cost: Includes stock-out cost and rupture cost.
Financial and Stock Formulas
Average Maturity Period (PMM)
The Average Maturity Period (PMM) measures how many days it takes for a company to recover the money it invested, from the purchase of raw materials all the way to collecting payment from customers.
- Economic PMM formula: PMMe = PMa + PMf + PMv + PMc
- Financial PMM formula: PMMf = PMMe – PMp
Tax and Stock Level Calculations
- VAT: Tax Base x Rate
- MIN Stock: Cmn x Tr
- MAX Stock: (Cmx x Tr) + Emn
Economic Order Quantity (EOQ) Model
The Wilson Model, also known as the EOQ (Economic Order Quantity) system, is a very widely used stock management method to reduce inventory costs in a warehouse. It is one of the simplest stock management models to implement, which is why it is so widely used.