Indonesia and U.S.

A
International Trade

Eka Darmadi Lim 3094802

International Business Networking Universities of Surabaya 2011

I.

INTRODUCTION ABOUT USA 1. Capital : Washington, D.C. 2. Independence Day : July 4, 1776 3. Motto : In God We Trust 4. National Bird : Bald Eagle 5. National Flower : Rose 6. National Anthem : The Star-Spangled Banner 7. Area : 9,631,418 sq. km 8. Comparative Size: About one-half the size of Russia; about three-tenths the size of Africa; about one-half the size of South America (or slightly larger than Brazil); slightly larger than China; about two and one-half times the size of Western Europe. 9. Largest State : Alaska 10. Smallest State : Rhode Island 11. Largest Cities : New York, Los Angeles, Chicago, Houston, Philadelphia, San Diego, Detroit, Dallas, Phoenix, San Antonio 12. Border Countries and Oceans : Canada, Mexico, Atlantic Ocean, Gulf of Mexico, Pacific Ocean 13. Population : 295,734,134 14. Languages : English 82.1%, Spanish 10.7%, other Indo-European 3.8%, Asian and Pacific island 2.7%, other 0.7% 15. Religions : Protestant 52%, Roman Catholic 24%, Mormon 2%, Jewish 1%, Muslim 1%, other 10%, none 10%

II.

TRADE BETWEEN INDONESIA AND USA In 2009, U.S. goods and services trade with Indonesia totaled $20 billion. Exports totaled $6.5 billion, and Imports totaled $13 billion. In 2009, Trade in services with Indonesia (exports and imports) totaled $1.8 billion. Services exports were $1.4 billion; Services imports were $425 million. A. EXPORTS :

In 2010, Indonesia was the 32nd largest goods export market in the United States. In 2010, U.S. goods exports to Indonesia were $6.9 billion, up 35.9% ($1.8 billion) from 2009, and up 147% from 1994. The top export categories that USA export to Indonesia in 2010 were: Aircraft ($1.7 billion), Miscellaneous Grain, Seed, Fruit (primarily soybeans) ($827 million), Machinery ($678 million), Food Waste and Animal Feed ($425 million), and Electrical Machinery ($307 million). In 2010, U.S. exports of agricultural products to Indonesia totaled $2.2 billion. It becomes the 8th largest U.S. Agricultural export market. Leading categories include: soybeans ($806 million), cotton ($294 million), feeds and fodders (excluding pet food) ($267 million), dairy products ($160 million), and wheat ($130 million). In 2009, U.S. exports of private commercial services to Indonesia were $1.4 billion , 11.7% ($187 million) less than 2008 but 61% greater than 1994 levels. B. IMPORTS : In 2010, Indonesia was the 24th largest supplier of goods imports in the United States. U.S. goods imports from Indonesia totaled $16.5 billion in 2010, up 27.3% ($3.5 billion) from 2009, and up 153% over the last 16 years. The five largest import from Indonesia to USA in 2010 were: Knit Apparel ($2.5 billion), Rubber ($2.2 billion), Woven Apparel ($1.9 billion), Electrical Machinery ($1.8 billion), and Mineral Fuel (oil) ($1.1 billion). In 2010, U.S. imports of agricultural products from Indonesia totaled $2.9 billion. It becomes the 6th largest supplier of Agricultural imports. Leading categories include: rubber and allied products ($1.7 billion), cocoa beans ($324 million), coffee (unroasted) ($236 million), spices ($146 million), and cocoa paste and cocoa powder ($123 million). In 2009, U.S. imports of private commercial services were $425 million, down 18.7% ($98 million) from 2008 and down 4.0% from 1994 levels.

Trade Regulations of USA Trade Policy The US continues to pursue a policy of free and open trade which has contributed to prosperity that American people enjoy today. Bilateral free trade agreements (FTAs) are being negotiated with many countries including South Korea and Malaysia. The existing major FTAs are Canada, Australia, Bahrain, Chile, four Central American countries i.e. El Salvador, Guatemala, Hondurans and Nicaragua, Columbia, Israel, Jordan, Morocco, Omen, Panama, and Singapore. The United States has taken additional steps to incorporate security considerations into its import procedures, notably by promulgating regulations in relation to the Trade Act of 2002 and the Bioterrorism Act. To support exports, the United States provides insurance and export financing through its official export credit agency (the Export-Import Bank). Export restrictions and controls are maintained for national security or foreign policy purposes, or to ensure sufficient domestic supply. Quotas and Import Licensing US import quotas can be divided into two types: absolute and tariff rate. Absolute quotas are quantitative and apply mainly to dairy and agricultural products. No more than the amount specified is permitted entry during the quota period. Commodities subject to absolute quota refer to textiles and apparel imported from China under the bilateral agreement effective through 2008, and from non WTO members of Vietnam, Ukraine and Russia. Most agricultural dairy products are subject to US tariff-rate quotas, providing for entry of a specified quantity at a reduced rate of duty during a given period. Higher duty rates apply to quantities entered in excess of the quota for that period. Import Tariff The United States accords most-favored-nation (MFN) tariff treatment to all but one WTO Member (Cuba). In 2004 the average applied MFN tariff rate was 4.9% while that for agricultural products 9.7%. Close to 38% of all tariff items entered the United States duty free in 2004. When goods are dutiable, ad valorem, specific or compound rates may be assessed.

The country of origin of the goods would affect the rate of duty, eligibility for special programmers, admissibility, quota, procurement by government agencies and marking requirements. In general the MFN or NTR (Normal Trade Relations) tariff rates apply to imports from China and Hong Kong while more preferential rates apply to many beneficiary countries under the special tariff programmers such as African Growth and Opportunity Act, Andean Trade Preference Act, Caribbean Basin Initiative, Generalized System of Preferences, and US Free Trade Agreements with North American (Canada and Mexico) countries, Chile, Israel, Jordan, Singapore, Australia etc. Customs Procedures The Customs and Border Protection (CBP) is the agency in charge of administering and enforcing customs regulations. It combines the functions of the Customs Service, Immigration and Naturalization Service, Border Patrol, and part of the Animal and Plant Health Inspection Service. The principal mission of CBP is to prevent terrorists and terrorist weapons from entering the United States, while facilitating the flow of legitimate trade and travel. Imports of goods into the United States must be accompanied by entry documents as specified in the Customs Regulations. The introduction of the Automated Commercial Environment (ACE) is intended to operate as a single Internet portal for the processing of imports. Through ACE, users will be able to interface not only with CBP, but also with other government agencies involved in import (and export) procedures. Goods brought into the US are subject to import duties except from some preference-beneficiary countries. Import licenses are generally not required. Imports are usually subject ad valorem and/or specific import duties. Regular rates are applied on imports from countries enjoying NTR or formerly MFN status, including Hong Kong and China. CBP has the authority on tariff classification for duty rates purposes. US tariff rates and HS commodities classification can be searched online via the Tariff Information Center of the US International Trade Commission.

Product Safety Imports of a wide range of products such as toys, children articles, bicycles, fireworks, flammable fabrics, cigarette lighters, electronic products, food and drugs, cosmetics, medical devices, motor vehicles and boats etc. would be refused entry if it fails to comply with applicable product safety standard or regulation or specified labeling or certification requirements administered by the Consumer Product Safety Commission (CPSC). The CPSC strongly recommends that manufacturers full comply with both CPSC mandatory standards and private sector voluntary standards. Although private sector standards are conceived as voluntary requirements, products that fail to comply with them may be considered to present a "substantial product hazard" and will be refused entry into the US. Click here for the list of regulated products provided by the CPSC. Certain major household appliances must comply with applicable energy standards specified by the Department of Energy. These appliances include refrigerators, freezers, dishwashers, clothes dryers, water heaters, room air conditioners, home heating equipment, pool heaters, furnaces, fluorescent lamps, faucets, showerheads, toilets, and urinals. In addition, these appliances are required to be labeled to indicate expected energy consumption or efficiency. Please click here for more information from the US Department of Energy. Marking and Labeling Requirements Imported goods are usually required to be marked with the country of origin in English. The marking has to be permanent, legible and conspicuous. Additional labelling is required on food, cosmetics, textiles and apparel, selected household products and flammable fabrics. The TDC publication titled "Guide to Doing Business with the US" contains special labelling and marking requirements for a wide range of consumer goods such as watch and apparel imported into the US. Please contact the TDC Business Info Centre for details.

The US rigorously enforces laws on dumping. When the US Department of Commerce (DOC) determines that a class of foreign goods in the US at less than its fair value, an anti-dumping

(AD) duty investigation may be conducted. If all the determinations are affirmative, the DOC will issue a duty order. Currently there is no AD duty investigation on goods manufactured in Hong Kong. However, Hong Kong may be affected by AD investigations and AD duties imposed on goods made in China and sold by a Hong Kong exporter. Please click here for details on US Antidumping/countervailing duty investigation notices on goods made in the Chinese mainland. In November 2005, the US and China reached a broad agreement on textile trade with effect from 1 January 2006 and will end on 31 December 2008. Under the agreement quota restraint limits are placed on Chinas 'core' exports of 34 product categories of textiles and apparel to the US. Although Hong Kong textiles and apparel exports are not restricted in the US market since January 2005, valid export licenses are required for surveillance.

Documentary Requirements Bill of Lading: Specified by importer and endorsed by the consignor, the bill of lading may service as evidence of the right to make entry. An air waybill may be used for goods arriving by air. Commercial Invoice: Signed by the shipper or seller or agent a properly prepared commercial invoice is acceptable for customs purposes. As required by the Tariff Act the invoice must provide the following information: names and contact details of shipper and consignee, place of loading and discharge, detailed description of goods with grade and quality, country of origin, HS codes, value and currency of each commodity item with corresponding quantities in weights and measures. There are no known requirements of consular/customs invoice and insurance certificate. Packing List is not required but its use will expedite clearance and may be requested by importer. If the required commercial invoice is not filed at the time the merchandise enters the border, a pro-forma invoice must be filed by the importer at the time of entry.

Political System: Constitution-based federal republic Strong democratic tradition Chief of state & head of government : President : Barack H. Obama Vice President : Joseph R. Biden

3 levels of government: Federal,State,Local \Dominance of only 2 main parties Democratic Party Republican Party Economy in U.S.A Largest and most technologically powerful economy in the world Capitalist mixed economy Largest national GDP in the world

Per capita GDP

: $47,400

GDP growth rate : 2.7% Unemployment Inflation Poverty : 8.9% : 2.7% : 14.3%

Largest importer of goods and third largest exporter The New York Stock Exchange is the world's largest by dollar volume Government is the leading field of employment : 21.2 million

The largest private employment sector is health care and social assistance : 16.4 million

US Tax System: Complex system

Imposed in federal, state and local governments

Tax burden low for individuals

Tax burden high for companies

About Indonesia

I.

Geography

1. Area: 2 million sq. km. (736,000 sq. mi.) ; maritime area: 7,900,000 sq. km 2. Cities: Capital--Jakarta (est. 9.6 million). Other cities--Surabaya 2.8 million, Medan 2.1 million, Bandung 2.4 million 3. Terrain: More than 17,500 islands; 6,000 are inhabited; 1,000 of which are permanently settled. Large islands consist of coastal plains with mountainous interiors 4. Climate: Equatorial but cooler in the highlands

II.

People

1. Nationality: Noun and adjective Indonesian(s) 2. Population : 240.3 million 3. Annual population growth rate : 1.136% 4. Ethnic groups : Javanese 40.6%, Sundanese 15%, Madurese 3.3%, Minangkabau 2.7%, others 38.4% 5. Religions : Muslim 86.1%, Protestant 5.7%, Catholic 3%, Hindu 1.8%, others 3.4%

6. Languages : Indonesian (official), local languages, the most prevalent of which is Java

III.

Economy

1. GDP (2009): $539 billion; (2010): $707 billion; (2011 est.): $823 billion. 2. Annual growth rate (2009): 4.5%; (2010 est.): 6.1%; (2011 est.): 6.2%. 3. Inflation, end-period (2009): 2.8%; (2010 est.): 7%; (2011 est.): 7.3%. 4. Per capita income (2010 est., PPP): $4,394. 5. Natural resources (11.2% of GDP, 2010): Oil and gas, bauxite, silver, tin, copper, gold, coal. 6. Agriculture (15.3% of GDP, 2010): Products--timber, rubber, rice, palm oil, coffee. Land--17% cultivated. 7. Manufacturing (24.8% of GDP, 2010): Garments, footwear, electronic goods, furniture, paper products, automobiles. 8. Trade: Exports (2010)--$158 billion including oil, natural gas, crude palm oil, coal, appliances, textiles, and rubber. Major export partners--Japan, U.S., China, Singapore, Malaysia, and Republic of Korea. Imports (2010) : $136 billion including oil and fuel, food, chemicals, capital goods, consumer goods, iron and steel. Major import partners : Singapore, China, Japan, U.S., Malaysia, Thailand, South Korea.

Trade law in USA

Trade Regulations are laws enacted by Congress and/or by a state to ensure a free and competitive economy. The U.S. Constitution, through the Commerce Clause, gives Congress exclusive power over trade activities between the states and with foreign countries. These regulations promote free trade and fair competition, and prohibit anti-competitive business practices. Trade regulation is closely associated with antitrust law, and is often referred to as antitrust and trade regulation law. Antitrust law prohibits anti-competitive conduct or business structures, such as price-fixing, bid-rigging, trusts and monopolies. Other federal agencies that assist in trade regulation include the Department of Commerce (DOC) and its bureau, the International Trade Administration (ITA). The DOC promotes economic growth, jobs and technological advancement. The ITA promotes trade and investment through enforcement of U.S. trade laws and agreements, and works to strengthen the international trade position of the U.S.

Background business in the USA

More than any other industrialised country, the United States has adopted what could be labelled a 'scientific' approach to business. Every aspect of commercial life is studied and analysed and this scientific approach is both respected and acted upon. Far more resource is available in the US for the study of the methodology of business than in any other country and most new management theory and doctrines have their origins in the States. In the States everything is quantified and assessed. All processes, even down to such issues as HR and Training are analysed in a detailed manner and the results of this analysis carry weight with decision makers. Business structures in the USA are incredibly varied but tend to have several characteristics in common. Firstly, the company is an entity in its own right and exists independently from its employees. Members come and go, perform necessary tasks at particular points in the life cycle of the company and then leave when no longer required for the wellbeing of the organisation. The relationship between employer and employee is a transactional one where relationship and sentiment are a luxury which cannot be justified. Secondly, the CEO of an American organisation holds great sway within the company. Senior management is more embedded in the personality at the top than in some other countries, such as Germany, where senior management is collegiate in approach. Although the company will have a Board of Directors, the Board is highly unlikely to have any input on the day-to-day running of the company which is left very much in the hands of the CEO who stands or falls on results. Thirdly, accountability within the company tends to be vertical and easily observable. Americans like to know exactly where they stand, what are their responsibilities and to whom they report American managing style American management style can be described as individualistic in approach, in so far as managers are accountable for the decisions made within their areas of responsibility. Although important decisions might be discussed in open forum, the ultimate responsibility for the consequences of the decision lies with the boss support or seeming consensus will evaporate when things go wrong. The up side of this accountability is, of course, the American dream that outstanding success will inevitably bring outstanding rewards. Therefore, American managers are more likely to disregard the opinions of subordinates than managers in other, more consensus or compromise- oriented cultures. This can obviously lead to frustrations, which can sometimes seem to boil over in meeting situations. (See 'Approach to meetings' below.) Titles can be very confusing within American organisations with a bewildering array of enormously important-sounding job descriptors on offer (Second Vice-President etc.). Titles, in any case, tend to be a poor reflection of the relative importance of an individual within a company. Importance is linked to power, which could be determined by a number of factors such as head-count responsibility, profitability of sector or strategic importance to the organisation at that point in time

Top tips in USA bisnis culture Tip 1 Americans value straight talking and 'getting to the point'.

Tip 2 Respect is earned through conspicuous achievement rather than through age or background.

Tip 3 Self-deprecation is often misunderstood by Americans as a sign of weakness. Sell your plus points.

Tip 4 Humour is frequently used in business situations but is unlikely to be appreciated when matters become very tense.

Tip 5 Remember that time is money in the States - wasting people's time through vagueness is lack of a sense of purpose which will not produce good results.

Tip 6 Compromise is often sought - at the brink. This can often equate to the end of a quarter or financial year.

Tip 7 Do not be offended by seemingly overly personal questions.

Tip 8 Dress code in the States is very variable - check on the appropriate mode before departure.

Tip 9 Short-termism is endemic. Structure proposals to emphasise quick wins rather than long-term objectives (although these should also be included.)

Tip 10 You may encounter an 'American is best' view to doing things be prepared to counter this with quantitative and qualitative counter- argument

Many Americans never leave the States. Be prepared for a parochially American view of the world.

Tip 12 Enthusiasm is endemic in business. Join in. Do not exhibit a jaundiced, 'old world' approach as this will be interpreted as defeatist.

Tip 13 New is good. Change is ever present in American corporate life and therefore so is the easy acceptance of new ideas, new models etc.

Tip 14 Gift giving is unusual in the States and many companies have policies to restrict or forbid the acceptance of presents.

Tip 15 Americans tend to work longer hours and take fewer days of vacation than their European counterparts.

Tip 16 Try to be punctual for meetings - if you are late apologise.

Tip 17 Despite the seeming lack of hierarchy within an American organisation, the boss is the boss and is expected to make decisions and is held accountable for those decisions.

Tip 18 Americans often socialise with work colleagues outside the office - and this often includes the family.

Tip 19 Titles are an unreliable guide to relative importance within an organisation due to their proliferation.

Tip 20 Business is a serious thing in the States and it is important that you are seen to be serious in your intent and commitment.

The USA in Figures Land Area Population: Population density: Life expectancy: Adult literacy: Average per household Divorces per1,000 : The Economy Currency: GDP: GDP per heads: Employment (% of total):

9, 372,600 sq km 297m 31 sq km Men 75 yrs Women 80 yrs 99% 2.6 4.8 US dollar US$11,712bn US$39,430 Agriculture 2% Industry 22% Services 76% Unemployed 6% Capital goods exculding vehicles Industrial supplies Consumer goods exculding vehicles Vehicles & products Food and beverages Canada 23% Mexico 14% Japan 7% UK 5% China 4% EU25 21% Consumer goods exculding vehicles

Main Exports:Type:

Destinations: (% total)

Main Imports:Type:

Main countries of origin:

Capital goods exculding vehicles Industrial supplies Vehicles & products Food & beverages Canada 17% China 13% Mexico 11% Japan 9%