Marketing Scenario 1

1. You are the international marketing manager for a small firm in El Paso. You have just heard about the U.S.-Chile trade agreement and want to import a Chilean musical pipe instrument manufactured in Chile. You assign a new hire, a UTEP business graduate, to prepare a table that compares duty rates applicable under different preferential tariffs available. She submits the following for your consideration:

		Tariff Programs
Product		Preferential Rates of Duty (%)
Value	NTR	HTS9802 US-Chile NAFTA	GSP
$1000 (US)	10.0	10.0 5.0 0.0	0.0

Content Value

U.S. 28.0%

Chile 20.0%

Mexican

Other* 43.0%

Dutiable Value for

US Importation

US Duty (S)

Other material content (43.0%) is foreign materials processed wholly in

Chile and has undergone substantial transformation in-country. The U.S.Chile rule of origin for this product requires 60.0% U.S.-Chile content value.

1. Given your studies, what are the applicable duties on the instrument for each of the eligible preferential tariff programs. Which program would you use to import the item into the U.S. market? (Justify and explain your answer.)
2. Assume that a similar instrument could be imported from the Cayman Islands. This country is located in the Caribbean Basin and may qualify for the CBI or GSP programs. This product has the following material content: Cayman materials 30.0%; U.S., 50.0% and foreign components (for assembly), 20%. Given the initial (Exercise la) and above tariff programs, which program would best apply. Would you now import the Cayman Island instrument? Justify and explain your answer.