Question

Approach this case as if you are heading the compliance department of USA Corp., a small, but growing
U.S. manufacturing interest. To date, the company has not done any international trade and has limited
its purchases and sales to other U.S. entities. The CEO approaches you with her belief that the
corporation can significantly improve its profit if it begins to import a certain raw material (the type
should not be critical to your analysis; but, if it makes it easier for you to approach the problem, feel free
to identify a specific material and explain its importation) from Mexico. In the future, she would like to
consider selling finished product overseas, but currently is only interested in minimizing the cost of
production.
Answer each of the following questions for your boss, including such other information you think is
important and/or necessary for her to make informed decisions. Be sure to explain the conclusions you
reach and why one alternative is better than another. Your boss values knowing why a decision is
correct and looks to your knowledge and expertise to guide her.
1. Identify the key U.S. and international trade laws that apply to the importation of goods to
the United States from Mexico? Do these laws make it “easy” to do business?
2. What types of protective clauses should be included in the purchasing contracts?
3. What are the major risks associated with doing business with a new (unknown) international
supplier? What steps should be taken to ensure a safe transaction?
4. What impact (if any), does the President’s rhetoric about Mexico have on whether this is a
sound business decision?

Answer 1

1. The most important trade agreement was NAFTA- North American Free Tade Agreement that governs trade between US, Mexico and Canada.

Recently US and Mexico reached an agreement to modernise its old NAFTA into 21st century high standard agreement. The updated agreement will support mutual benefits like trade leading to free markets, fairer trade and robust economic growth.

2. Before purchasing contacts the protective clauses to be taken such as proper agreement with complete information like the trade details with time and duration, in case of violation compensation agreement to be there etc.

3. Business with new international the risks which might have are they might dump cheaper product which might effect countries economy because people tend to buy cheaper dumped products than local products. So some trade barriers and traffis to be kept.

4. President Rhetoric about Mexico this leads to high cost of production which inturn helps in growth of economy.