Rev.

5/15

Renaults Logan Car: Managing

Customs Duties for a Global Product

Prof. Warren H. Hausman

Stanford University
Warren H. Hausman

Background

Renault Company Status

Strategie Renault 2009

Role of Logan in companys strategy?

Warren H. Hausman

Typical Factors in Facility Location:

Warren H. Hausman

Additional Factors here:

Customs Duties
Most Favored Nation (MFN) Duty Rates
Free Trade Agreements (bilateral)
Regional Trade Agreements
Company-specific Trade Agreements
Local Content
Duty Drawback
Dynamic Evolution over time

Warren H. Hausman

Regional Trade Agreements 1948-2012

Warren H. Hausman

Global Automobile Trade Choices:

CBU: Completely Built-Up Vehicle (finished car)

CKD: Completely Knocked Down Units (parts kit)
IPO: Identify Parts Order (ship bulk parts)
Local parts suppliers

Warren H. Hausman

Why higher duties on CBUs vs.CKDs?

Warren H. Hausman

More Definitions:

HS Classification

Rules of Origin

Diagonal Cumulation

Warren H. Hausman

Active Learning I - 2 minutes,

nearest neighbor:
Name a product marketed globally that is NOT
affected by customs duties.

Warren H. Hausman

Logan Supply Chain

Ukraine

W. Europe

CBUs

Russia
Iran

Mexico

CKDs

Romania
CKDs

Romania
CBUs

Turkey

Colombia
Brazil

Morocco

Argentina
Ecuador,
Venezuela

Croatia

Tunisia
Egypt
Jordan
India

Thailand

So. Africa
Warren H. Hausman

Adding Duties
W. Europe
Duties

0%

Ukraine
0%

CBUs

Russia

0% for 7 yrs
D. 166

10%0%

31%

Mexico

CKDs

Romania
CKDs

Romania
CBUs

0%

0% w/regional
contents oblig.

Colombia

0%

14-21%

Brazil

0%

Iran

Croatia

Turkey

0% w/rules
of origin

Morocco

Tunisia
Egypt
Jordan

10%

Argentina
8-11%

Ecuador,
Venezuela

India

Thailand

So. Africa
Warren H. Hausman

Active Learning II:

What new opportunities were created by
Romanias entry into the EU in 2007?

Warren H. Hausman

Effects of inflation and exchange

rates?

Warren H. Hausman

Active Learning III:

Need a process to compare alternatives
systematically

Warren H. Hausman

South Africa Alternatives:

Unit Cost

CKD from
Romania

CBU from
Romania

CBU from
Morocco

1,500

1,800

1,800

500

N/A

N/A

Shipping Cost
Subtotal:
Import Duty Rates:
Duty Amount:

Assembly Cost
Landed Cost

Assume a 20 container holds 3 CKDs or 1.5 CBUs

Warren H. Hausman

Summary
Customs Duties can be critical for global
supply chains
They can be very complex and dynamic
Significant cost savings (and hence profit
improvements) are possible

Warren H. Hausman