CPSM Blog

Cross-Border Transaction documentation

Cross border transactions require good documentation. These are guided by the UN Convention on Contracts for International Sale of Goods (CISG) and the International Commercial Terms (Incoterms ) used for contracting.

Additional points to consider are relating to the US Foreign Corrupt Practices Act. the International Ant-Bribery Act of 1998,Anti-boycott legislation and the Export Administration act. Security considerations encourage the use of RFID for verifying identity of goods.  Finally, professional brokers specialized in documentation  can assist with documentation and ensuring that all the transactions are thoroughly well documented.

International sources of materials and Services and 4PL

This section provides a mix of guidelines including researching and benchmarking global suppliers, interpersonal skills required, cultural awareness,financial issues including computing different exchange rate concepts like Nominal Official Exchange Rate (NOER), Real official exchange rate (ROER) etc.

The growing trend (1/3) of transactions being done by subsidiaries on behalf of holding company and then avoiding letter of credit and other international costs is an interesting development. Understanding tariff systems like Ad Valorem vs. Value Added Tax (VAT) is important as is the need to articulate a business case for international procurement.

Finally, the discussion on 3rd Party vs 4th Party logistics (4PL) or a lead logistics provider (LLP) does confuse matters!

Identifying and assessing international markets for sourcing

The advantages of a global "flat world" in terms of technology,travel and cultural links today allow the sourcing of goods and services like never before. The supply manager has to accordingly be come aware of cultural differences between suppliers from different countries, understand micro-economic and macroeconomic factors operating in the country and examine infrastructure including transportation,technology and stability of government.

An interesting point in this section is that today global sourcing becomes imperative because your competitors are doing it  and becoming more competitive and if you do not, then your organization may be left behind.