International trade and Finance Week 4 Section 2
Prepared byDavid LYNN McGraw-Hill/Irwin
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Fixed Exchange Rate There are two ways the price of a currency can be determined against another. A fixed, or pegged. Fixed Exchange Rate is a rate the government (central bank) sets and maintains as the official exchange rate. A set price will be determined against a major world currency. (Usually the U.S. dollar)
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Floating Exchange Rate Unlike the fixed rate, a floating exchange rate is determined by the private market through supply and demand. if demand for a currency is low, its value will decrease, thus making imported goods more expensive and thus stimulating demand for local goods and services. This in turn will generate more jobs, and hence an autocorrection would occur in the market. A floating exchange rate is constantly changing.
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Fixed Exchange Rate
In a floating regime, the central bank may also intervene when it is necessary to ensure stability and to avoid inflation; however, it is less often that the central bank of a floating regime will interfere.
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The World Once Pegged Between 1870 and 1914, there was a global fixed exchange rate. Currencies were linked to gold, meaning that the value of a local currency was fixed at a set exchange rate to gold ounces. This was known as the gold standard. With the start of World War I, the gold standard was abandoned.
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The World Once Pegged At the end of World War II, the conference at Bretton Woods, in an effort to generate global economic stability and increased volumes of global trade, established the basic rules and regulations governing international exchange.
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The World Once Pegged International monetary system, embodied in the International Monetary Fund (IMF), was established to promote foreign trade and to maintain the monetary stability of countries and therefore that of the global economy.
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Documents and Terms in International Trade
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Documents and Terms in International Trade
Asia-Pacific Economic Cooperation (APEC) Established in November 1989, the AsiaPacific Economic
McGraw-Hill/Irwin
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
General Agreement on Tariff and Trade
The General Agreement on Tariffs and Trade (typically abbreviated GATT) was originally created by the Bretton Woods Conference as part of a larger plan for economic recovery after World War II. GATT included a reduction in tariffs and other international trade barriers and is generally considered the precursor to the World Trade Organization.
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International Trade Generally speaking, There are two types of Importers Private importers Commercial importers
McGraw-Hill/Irwin
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
International Trade The exporter is responsible for: Making an accurate and correct Customs entry keeping all commercial documents for seven years and producing this documentation to Customs as required Compliance with all legislative requirements
McGraw-Hill/Irwin
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
International Trade Importer Responsibilities The importer is responsible for the following: Making an accurate and correct Customs entry. Monetary penalties may be imposed for entries containing errors or omissions (see below) Payment of all Customs charges Keeping all commercial documents for seven years and producing this documentation to Customs as required Compliance with all legislative requirements
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International Trade Types of Import Entries Commercial application, such as goods for use in your business, for re-sale or for distribution Private use, for example, gifts or mail order goods
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Calculation of Customs Charges Goods and Services Tax (GST) of 12.5 percent is then calculated on the dutyinclusive value plus international freight and/or insurance charges. No revenue collection will be made if the total amount owing on the goods imported is less than $50. The revenue waiver does not apply to tobacco products.
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Payment of Customs Charges Payments will only be accepted in New Zealand currency. Cash payment (which includes cash and cheques) is required for imports via air or sea. Personal cheques may only be accepted up to NZ$1,000. MasterCard and VISA are accepted for imports via mail. Call 0800 388 437 to make a payment.
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Refunds Refunds of duty and Goods and Services Tax (GST) be made when: Duty is paid in error A concession is later approved for the goods The goods are of faulty manufacture The goods were in a damaged or deteriorated condition prior to leaving Customs control The goods are destroyed, pillaged or lost prior to leaving Customs control.
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