CHAPTER 12: INTERNATIONAL LOGISTICS
CHAPTER 12: INTERNATIONAL LOGISTICS
PART II
END-OF-CHAPTER QUESTIONS
CHAPTER 12: INTERNATIONAL LOGISTICS
1. Explain how developing nations ensure that an increasing proportion of supply chain activities are conducted within their borders.
Because the role of these governments in their economies is substantial, they are able to exert considerable influence over outside firms desiring to do business within their borders. The governments are becoming more insistent that much of their foreign trade be carried on vessels or planes owned by “their” companies and headquartered within their boundaries. The governments also want their local firms to have at least their fair share of revenues from the sale of freight forwarding services, marine insurance, and other distribution functions.
2. Discuss some of the challenges associated with international logistics.
Economic changes, such as changes in the relative value of currencies, have a profound affect on international trade patterns. When one country’s currency is weak relative to other countries, it becomes costly to import products but exports often surge; when one country’s currency is strong relative to other currencies, the opposite occurs.
Differences in regulations, laws, and legal systems also add to the challenges of international logistics and the degree of enforcement of existing regulations and laws is not uniform from country to country. Cultural considerations, such as differences in language, also contribute to international logistics challenges. Moreover, for goods moving in cross-border trade, it is not safe to assume that cargo handlers can read English and it would not be unusual for some cargo handlers to be illiterate.
3. What are some key political restrictions on cross-border trade?
Many nations ban certain types of shipments that might jeopardize their national security. Likewise, individual nations may band together to pressure another country from being an active supplier of materials that could be used to build nuclear weapons. Some nations restrict the outflow of currency because a nation’s economy will suffer if it imports more than it exports over a long term. A relatively common political restriction on trade involves tariffs or taxes that governments place on the importation of certain items. Another group of political restrictions can be classified as nontariff barriers, which refer to restrictions other than tariffs that are placed upon imported products. Another political restriction involves embargoes, or the prohibition of trade between particular countries.
4. Discuss the roles that a particular country’s government might play in international transport.
Governments may exert strong control over ocean and air traffic because they operate as extensions of a nation’s economy and most of the revenue flows into that nation’s economy. In some cases, import licenses may restrict movement to a vessel or plane owned or operated by the importing country. Although federal governments have often owned ocean carriers and international airlines, some are moving toward the private sector. In addition, some nations provide subsidies to develop and/or maintain their ocean and air carriers. Governments also support their own carriers through cargo preference rules, which require a certain percentage of traffic to move on a nation’s flag vessels.
5. What is a certificate of origin, a commercial invoice, and a shipper’s export declaration?
A certificate of origin specifies the country (ies) in which a product is manufactured and can be required by governments for control purposes or by an exporter to verify the location of manufacture. A commercial invoice is similar in nature to a domestic bill of lading in the sense that a commercial invoice summarizes the entire transaction and contains (should contain) key information to include a description of the goods, the terms of sale and payment, the shipment quantity, the method of shipment, and so on. A shipper’s export declaration contains relevant export transaction data such as the transportation mode(s), transaction participants, and description of what is being exported.
6. What is determined by the terms of sale?
The terms of sale determines when and where to transfer the following between buyer and seller:
· The physical goods (the logistics channel)
· Payment for the goods, freight charges, and insurance for the in-transit goods (the financing channel)
· Legal title to the goods (the ownership channel)
· Required documentation (the documentation channel)
· Responsibility for controlling or caring for the goods in transit, say, in the case of livestock (the logistics channel).
7. Pick, and describe, one C Incoterm, one D Incoterm, one E Incoterm, and one F Incoterm.
Any of the respective C, D, E, and F Incoterms can be described.
8. Discuss the role of the letter of credit with respect to international shipments.
The letter of credit is a very popular payment alternative that spreads risk across buyers and sellers. A letter of credit is issued by a bank and guarantees payment to a seller provided that the seller has complied with the applicable terms and conditions of the particular transaction.
9. Discuss four possible functions that might be performed by international freight forwarders.
The text describes eight such functions, so discussion of any four would be appropriate.
10. What is an NVOCC?
An NVOCC (non-vessel operating common carrier) is often confused with international freight forwarders. Although both NVOCCs and international freight forwarders must be licensed by the Federal Maritime Commission, NVOCCs are common carriers and thus have common carrier obligations to serve and deliver, among others. NVOCCs consolidate freight from different shippers and leverage this volume to negotiate favorable transportation rates from ocean carriers. From the shipper’s perspective, an NVOCC is a carrier; from an ocean carrier’s perspective, an NVOCC is a shipper.
11. What services do export management companies perform?
An export management company is a firm that specializes in handling overseas transactions. They represent manufacturers and help them find overseas firms that can be licensed to manufacture their products in other countries. The export management company also handles sales correspondence in foreign languages, ensures that labeling requirements are met, and performs other specialized functions.
12. What are the two primary purposes of export packing?
One function is to allow goods to move easily through customs. For a country assessing duties on the weight of both the item and its container, this means selecting lightweight packing materials. The second purpose of export packing is to protect products in what almost always is a more difficult journey than they would experience if they were destined for domestic consignees.
13. What are RO-RO vessels?
Roll on-roll off (RO-RO) vessels have large doors on their sterns or on their sides. Ramps are stretched to the shore and cargo is moved off RO-RO vessels in trailers. The required port facilities are relatively inexpensive; only a ramp for driving trailers on or off is needed.
14. What is a parcel tanker?
Parcel tankers have over 50 different tanks of varying capacities. Each tank can carry a different liquid and is loaded and unloaded through a separate piping system. The tanks have different types of coating and some are temperature controlled.
15. Explain the load center concept. How might load centers affect the dynamics of international transportation?
Load centers are major ports where thousands of containers arrive and depart each week. As vessel sizes increase, it becomes more costly to stop at multiple ports in a geographic area, and as a result, operators of larger container ships prefer to call at only one port in a geographic area. Load centers might impact the dynamics of international trade in the sense that some ports will be relegated to providing feeder service to the load centers.
16. Discuss service contracts as applied to international water transportation.
A service contract consists of a commitment by a shipper to a shipping conference or individual carrier for a minimum volume of cargo, with rate levels indicated as intermodal, point-to-point or port-to-port. The carrier or conference must guarantee regular service and there are clauses for damages in case the shipper does not live up to its commitment (such as loss of overseas sales).
17. Discuss the role of alliances in the container trades.
Carriers retain their individual identities but cooperate in the area of operations. These alliances provide two primary benefits to participating members, namely, the sharing of vessel space and the ability to offer shippers a broader service network. Whereas an individual carrier might only be able to provide weekly service on a particular route, an alliance might be able to offer daily service. The size of the alliance allows them to exercise considerable clout in their dealings with shippers, port terminal operators, and connecting land carriers.
18. How do the rates established by the International Air Transport Association influence international airfreight?
To obtain lower rates from the IATA carriers, the shipper must tender the freight loaded to airline specifications; at the other end of the journey, the entire load must be destined to one consignee. The result has been to increase the average size of shipments handled by the airlines and this has reduced the number of individual packages each airline terminal must handle.
19. Discuss some of the challenges to surface transport in other countries.
Few nations have as wide a range of modes to choose from because the
The widespread use of seaborne containers has brought about hopes for standardizing land vehicles for carrying containers on the landward legs of their journeys. However, there is opposition to truck transportation in some countries. Rail equipment sizes, as well as bridge and tunnel clearances, vary throughout the world and most nations use equipment that is much smaller than that used in the
20. What are some of the challenges associated with inventory management in cross-border trade?
Because of greater uncertainties, misunderstandings and transport delays, safety stocks must be larger. Inventory policies should be modified to accommodate the relevant marketing area and tailoring products for individual markets can be problematic.
Return items are extremely difficult, if not impossible, to accommodate in international distribution—particularly for products that must cross multiple borders. Furthermore, inventory valuation on an international scale is difficult because of fluctuations in the various currencies. When a nation’s (or the world’s) currency is unstable, investments in inventories rise because they are believed to be less risky than holding cash or securities. Inefficient warehousing practices can impact inventory carrying cost through increased storage, handling, obsolescence, or shrinkage costs.
PART III
EXAMINATION QUESTIONS
CHAPTER 12: INTERNATIONAL LOGISTICS
1. What brought an end to the colonial system of international trade?
a. computerization
b. advances in telecommunications
c. World War II
d. the end of the Cold War
e. none of the above
(c; p. 291)
2. During 2006, the
a. 75
b. 135
c. 190
d. 230
(d; p. 291)
3. A ____ is used in areas in which dockworkers cannot read but need a method to keep documents and shipments together.
a. RFID tag
b. Shipper’s mark
c. Bar code
d. Shipment coordinator
(b; p. 293)
4. What is a consular office?
a. a place where tariffs are filed
b. sources of information regarding a nation’s import and currency exchange regulations
c. another name for a police department
d. a location where imported goods must be inspected to ensure that they are free from plant and animal diseases
(b; p. 294)
5. ____ are taxes that governments place on the importation of certain items.
a. Tariffs
b. Embargoes
c. Surcharges
d. Reciprocities
(a; p. 295)
6. Which of the following is not a political restriction on international trade?
a. embargoes
b. tariffs
c. barring certain types of shipments
d. nontariff barriers
e. all are political restrictions
(e; p. 295)
7. Cargo preference rules ____.
a. are synonymous with embargoes
b. indicate how each shipment should be loaded into / onto a transport vehicle
c. indicate preferred shippers
d. require a certain percentage of traffic to move on a nation’s flag vessels
(d; p. 296)
8. A ____ is similar in nature to a domestic bill of lading and summarizes the entire transaction.
a. shipper’s letter of instruction
b. shipper’s export declaration
c. commercial invoice
d. certificate of origin
(c; p. 296)
9. A ____ often serves as the basis for a company’s official export statistics.
a. certificate of origin
b. commercial invoice
c. shipper’s export declaration
d. shipper’s letter of instruction
e. none of the above
(c; p. 296)
10. Incoterms refer to:
a. terms of sale for international shipments
b. a specific method of payment for international shipments
c. standardization of international trade terminology
d. standardized procedures for handling international shipments
(a; p. 297)
11. From a seller’s perspective, the most basic Incoterms transaction is:
a. free on board
b. ex-works
c. cost and freight
d. delivered ex ship
(b; p. 297)
12. A letter of credit ____.
a. is only used for domestic shipments
b. allows a consignee with poor credit to pay by credit
c. is provided when a transportation vehicle is loaded or unloaded prior to its allotted free time
d. is a popular payment alternative for international transactions
(d; p. 299)
13. International freight forwarders can provide a number of functions. Which is not one of them?
a. booking space on carriers
b. obtaining consular documents
c. preparing an export declaration
d. arranging for insurance
e. all are possible functions
(e; p. 300)
14. Which is not a source of export forwarders’ income?
a. buying space wholesale and selling it retail
b. commissions on shipping revenues generated for carriers
c. fees for document preparation and performing research
d. payment for freight pick up and delivery
e. all are sources of income
(d; p. 303)
15. A(n) ____ oversees the efficient movement of an importer’s goods (and accompanying paperwork) through customs and other inspection points.
a. customshouse broker
b. international freight forwarder
c. import management company
d. shippers association
(a; p. 303)
16. A main difference between international freight forwarders and customshouse brokers is:
a. there are no differences
b. forwarders take title to goods although customshouse brokers do not
c. forwarders tend to handle exports while customshouse brokers tend to handle imports
d. customshouse brokers are typically government agents
(c; p. 303)
17. Which international logistics service provider is often confused with the international freight forwarder?
a. customshouse broker
b. export management company
c. non-vessel operating common carrier
d. export trading company
(c; p. 304)
18. ____ represent manufacturers and help them find overseas firms that can be licensed to manufacture their products.
a. International freight forwarders
b. Shippers associations
c. Export management companies
d. Export trading companies
(c; p. 304)
19. ____ and international freight forwarders are closely related because together they can offer a complete overseas sales and distribution service to the domestic manufacturer that wants to export but does not know how.
a. Export management companies
b. Export trading companies
c. Non-vessel operating common carriers
d. Customshouse brokers
(a; p. 304)
20. An ____ custom packs shipments when the exporter lacks the equipment or the expertise to do so itself.
a. export management company
b. export packer
c. export trading company
d. international freight forwarder
(b; p. 304)
21. Because the distances associated with international shipments are often much greater than those associated with domestic shipments, the buyer and seller must often choose between ____ and ____ transportation.
a. Air; water
b. Rail; air
c. Water; rail
d. Water; truck
(a; p. 305)
22. Approximately ____ of cross-border shipments move by water transportation.
a. 40%
b. 50%
c. 60%
d. 70%
(c; p. 305)
23. Much of the world’s ocean shipping tonnage is used to carry:
a. containers
b. petroleum
c. grain
d. coal
(b; p. 305)
24. A ____ has over 50 different tanks, and each tank can carry a different liquid.
a. bulk tanker
b. storage tanker
c. tramp ship
d. parcel tanker
(d; p. 306)
25. ____ refer to major ports where thousands of containers arrive and depart each week.
a. Hubs
b. Consolidation points
c. Ship parks
d. Load centers
(d; p. 307)
26. ____ is when vessel lines bump waste paper cargo for loads of higher-paying cargo.
a. Rolling
b. Bumping
c. Detention
d. Stowability
(a; p. 308)
27. Users of ocean shipping companies view ____ as the most important contract provision.
a. predictable, stable rates
b. guaranteed space availability
c. all-inclusive rates
d. door-to-door service
(a; p. 308)
28. Shipping conferences refer to ____.
a. annual meetings of large international shippers
b. the same thing as shippers’ associations
c. cartels of ocean vessel operators operating between certain trade areas
d. water ports that are located in the same geographic area
(c; p. 308)
29. Ocean carrier alliances provide two primary benefits to participating members, namely, the sharing of vessel space and ____.
a. anti-trust immunity
b. the ability to offer shippers a broader service network
c. lower rates
d. faster transit times
(b; p. 308)
30. Which of the following is not a type of international air freight operations?
a. chartered aircraft
b. scheduled air carriers
c. integrated air carriers
d. tramp air carriers
(d; p. 309)
31. The freight rates for international air carriers are established by:
a. individual carriers
b. government negotiations
c. the International Air Transport Association
d. shippers associations
(c; p. 309)
32. Integrated carriers:
a. are those that own several modes of transportation
b. utilize the services of scheduled airlines
c. own all their vehicles as well as pick up and delivery facilities
d. perform transportation in tightly linked supply chains
(c; p. 311)
33. ____ refers to ocean shipping along a region’s coast, rather than across oceans.
a. Drayage
b. Intramodal
c. Land bridge
d. Short sea
(d; p. 311)
34. Short sea shipping is unlikely to become a more common transportation option in the
a. 40
b. 30
c. 20
d. 10
(c; p. 311)
35. Which of the following statements about international inventory management is false?
a. return items are quite difficult to accommodate
b. inventory valuation is difficult because of continually changing exchange rates
c. inefficient warehousing practices can impact inventory carrying cost
d. an inventory in one nation generally serves the needs of markets in nearby nations
e. all are true statements
(d; pp. 313-314)
True-False Questions
1. World War I brought an end to the colonial system of international trade. (False; p. 291)
2. Developing nations insist that an increasing proportion of assembling and manufacturing be conducted within their own borders. (True; p. 291)
3. International logistics is both more costly and challenging than domestic logistics. (True; p. 291)
4. When one country’s currency is weak relative to other currencies, it is more costly to import products into that country. (True; p. 291)
5. A shipper’s mark is used in areas in which dockworkers cannot read but need a method to keep documents and shipments together. (True; p. 293)
6. Consular offices are current sources of information regarding their nation’s import and currency exchange regulations. (True; p. 294)
7. Reciprocities refer to taxes that governments place on the importation of certain items. (False; p. 295)
8. The primary purpose of a non-tariff barrier is to encourage exports. (False; p. 295)
9. Embargoes are physical limits on the amount that may be imported from any one country during a period of time. (False; p. 295)
10. Some nations with weak balance-of-payment positions issue an import license on the condition that the goods move on an aircraft or vessel flying that nation’s flag. (True; p. 295)
11. Cargo preference rules indicate how each shipment should be loaded into / onto a transport vehicle. (False; p. 296)
12. The documentation requirements for international shipments can act as a nontariff barrier to trade. (True; p. 296)
13. A certificate of origin specifies the country (ies) in which a product is manufactured. (True; p. 296)
14. A shipper’s letter of instruction contains relevant export transaction data such as the transportation mode(s), transaction participants, and description of what is being exported. (False; p. 296)
15. Some free trade agreements have actually resulted in an increased in documentation requirements. (True; p. 297)
16. The use of Incoterms is mandatory for international shipments. (False; p. 297)
17. An Ex-Works (EXW) transaction is considered the most basic transaction in the Incoterms framework. (True; p. 297)
18. A commercial invoice is a very popular payment alternative that spreads risk across buyers and sellers in international transactions. (False; p. 299)
19. International freight forwarders can handle either vessel shipments or air shipments. (True; p. 299)
20. Consular documents involve obtaining permission from the importing country for goods to enter. (True; p. 301)
21. Customshouse brokers are another name for international freight forwarders. (False; p. 303)
22. From the shipper’s perspective, a non-vessel operating common carrier (NVOCC) is a carrier; from an ocean carrier’s perspective, an NVOCC is a shipper. (True; p. 304)
23. Non-vessel operating common carriers are not allowed to enter into contract arrangements with individual shippers. (False; p. 304)
24. Export trading companies represent
25. Export packers custom pack shipments when the exporter lacks the equipment or expertise to do so itself. (True; p. 304)
26. International transportation cannot be effective or efficient without fairly identical handling equipment being in place at each end of the trip. (True; p. 305)
27. Much of the world’s shipping tonnage is used for carrying agricultural products. (False; p. 305)
28. Load centers refer to major ports where thousands of containers arrive and depart each week. (True; p. 307)
29. In terms of necessary contract provisions, ocean shippers view guaranteed ship space as the most important factor. (False; p. 308)
30. Shipping conferences refer to annual meetings of large international shippers. (False; p. 308)
31. Some water carriers are engaged in a new type of alliance in which carriers retain their individual identities but cooperate in some areas of operations. (True; p. 308)
32. Ocean carrier alliances provide two primary benefits to participating members, namely, the sharing of vessel space and lower rates. (False; p. 308)
33. The three types of international airfreight operations are chartered aircraft, scheduled air carriers, and integrated carriers. (True; p. 309)
34. The schedules and routes of international air carriers are established by the International Air Transport Association. (False; p. 309)
35. UPS and FedEx are examples of integrated air carriers. (True; p. 311)
36. Drayage refers to ocean shipping, often along a region’s coast, rather than across oceans. (False; p. 311)
37. Short sea shipping is unlikely to become a more common transportation option in the
38. An inventory held in one nation may not necessarily serve the needs of markets in neighboring nations. (True; pp. 313-314)
39. Return items are virtually impossible to accommodate in an international distribution system. (True; p. 314)
40. Inventory valuation on an international scale is difficult because the value of various currencies continually change. (True; p. 314)
PART IV
CASE SOLUTIONS
CASE 12-1: HDT TRUCK COMPANY
Question 1: Assume you are Vanderpool. Draft the comparison Pon just requested.
Many students will calculate transportation costs. For the movement via Chicago, they will choose to use rail. Here’s the comparison:
Via Chicago
Costs ($)
Vessel charter
72,000
Load and block ($20/trk)
2,000
Rail rate at $90/trk
9,000
Wharfage
1,070
Loading and stowing ($80/trk)
8,000
Seaway tolls ($27/trk)
2,700
Unloading
4,200
Insurance ($105/trk)
10,500
Total
109,470
Via Baltimore
Costs ($)
Load and block ($30/trk)
3,000
Rail rate at $448/trk
44,800
Handling @ Baltimore ($100/trk)
10,000
Ocean freight ($720/trk)
72,000
Insurance ($75/trk)
7,500
Total
137,300
Question 2: Which of the two routing alternatives would you recommend? Why?
In terms of transportation costs only, the chartered vessel is cheaper. However, when we take into account cash flows and the value of money, the Baltimore route becomes advantageous. Assume we use the charter vessel. It should arrive on May 30th and HDT will be paid. However, if trucks are sent two at a time via Baltimore, the middle pair (#25 and #26) should be finished on about April 16th and arrive at Doha about May 8th, when they will be paid—in other words, 22 days earlier than if they arrived on May 30th on the chartered vessel. HDT pays 8% per year for its money so here is how to calculate the savings for truck #25 or #26:
($172,000 times .08 times 22) divided by 365 = $829.37
Multiplying $829.37 times 50 yields $41,468.50. When added to the costs of using Chicago ($109,470), the total cost now becomes $150,938.50—which is more expensive than using Baltimore.
Question 3: Assume that the buyer in
All the transportation costs, calculated above, could be subtracted. The revised terms of sale should also specify dates when cargo would be picked up and paid for, and the price should include HDT’s daily costs in investment in finished inventory.
Question 4: Answer question 3 with regard to changing the terms of sale to delivery at port in Baltimore. The buyer would unload the trucks from the railcars.
The answer for question 3 holds here as well. Note that HDT still has responsibility for getting the trucks to Baltimore on railroad flatcars, although the buyer would be responsible for unloading the railcars.
Question 5: Is there an interest rate that would make HDT change from one routing to another? If so, what is it?
Let i equal the rate of interest. Refer to answers to questions 1 and 2.
The relevant equation is: $109,470 + (8,600,000 times 22/365i) = $137,500
Solving for i yields an approximate value of .053
Substituting .053 into the left side of the relevant equation (i.e., shipping via Chicago) above yields a value of $109,470 + $27,473, which comes to slightly less than $137,000—thus less than the costs via Baltimore.
Question 6: Assume that it is the year 2005 and the cost to HDT of borrowing money is 12% per year. Because the buyer will pay for trucks as they are delivered, would it be advantageous for HDT to pay overtime to speed up production, ship the trucks as they were finished via the Port of Baltimore, and collect their payment earlier? Why or why not?
The selling price of each truck is still $172,000. Each day that HDT must wait for payment costs [(.12 times $172,000) divided by 365], or $56.55 per day. They should pay overtime only if it costs less than this amount.
CASE 12-2: BELLE TZELL CELL COMPANY
Questions 1-5: Questions 1–4 ask for the total inventory carrying costs of alternatives 1 through 4, respectively; question 5 asks for which alternative Kupferman should recommend and why.
These questions can be approached in the same manner although a few simplifying assumptions are needed. We will set up annual costs. We will ignore the problem of “Pancho Villa.” We will also assume that the additional inventories can be produced without undue strain on the firm’s ability to fill current orders.
a. Each day’s production at Nogales represents a cost of $10,000.
b. Each day’s production at Tucson represents a cost of $14,000 (the cost at Nogales plus costs of transporting plates to Tucson plus costs at Tucson).
c. Annual costs of maintaining inventory are 12% of the costs.
d. Assume that trailers and truck-tractors have 3-year lives.
Alternatives
1
2
3
4
Interest cost on inventory (annual) ($)
6,000
6,480
5,760
5,040
Annual costs of trailers @ $1,000 per trailer ($)
5,000
4,000
4,000
3,000
Annual costs of truck-tractor @ $1,667 per truck-tractor
1,667
3,333
3,333
1,667
Total ($)
12,667
13,813
13,093
9,707
Offhand, alternative 4 is the least costly. Also, it has the advantage of larger inventories in Tucson, where there should be fewer worries about timely delivery. Therefore, this appears to be the best alternative.
Question 6: Tzell “wanted enough inventory in reserve that the Tzell Cell Company could fill 99% of all orders on time.” This is, as you may recall, a customer service standard. How reasonable is a 99% level? Why not, say, a 95% level? How would Nell and Kupferman determine the relative advantages and disadvantages of the 95% and the 99% service levels? What kind of cost calculations would they have to make?
This depends on the costs of not maintaining a 97% service level. What is the percent of delayed shipments, with penalty clauses the firm must confront, and what losses can be incurred? To decide between a 95% and 97% service standard, the company would have to figure out the expected costs from penalties and the loss of customers and reputation that would result from a drop to the 95% service level. Is the firm losing more through penalty clauses than it would from increased storage charges?
Question 7: Jedson Electronic Tools invoked a penalty clause on a purchase order that Tzell Cell Company had accepted and the Tzell Cell Company had to forfeit $3,000. Draft, for Nell Tzell’s signature, a memo indicating when and under what conditions the Belle Tzell Cell Company should accept penalty clauses in purchase orders covering missed delivery times or “windows.”
The memo should only commit Tzell to a penalty clause where the company believes there is little chance for delay. There is no information in the case to determine which delivery requests are riskier. It might be a good idea to limit the amount of penalty payment to the amount that the customer will lose because of the delay.
Question 8: In your opinion, is it ethical for a U.S.–based firm to relocate some of its operations in
Although not illegal, such behavior is not ethical. Having said this, one’s competitors may be relocating to
Question 9: Should the firm be willing to pay bribes at the Mexican border to get their shipments cleared more promptly? Why or why not?
The “obvious” answer is no, if for no other reason than bribes are prohibited by the Foreign Corrupt Practices Act. Having said this, the behavior of various Mexican border agents is resulting in extended delivery times for certain shipments. These extended delivery times are contributing to poorer customer service, and in some cases, Tzell is paying penalty fees that range into the thousands of dollars. Students can be encouraged to think about alternatives that accomplish the same purpose as bribes, but would not be considered bribes from a legal perspective.
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