This study examines the use of import cif/fob (import ad valorem shipping charges) ratios as a measure of international transportation costs. The cif/fob import ratios of each country studied were related to the composition of each country's imports.
- INTRODUCTION
- BACKGROUND AND CONTEXT
- PROBLEM
- RESEARCH AIMS AND OBJECTIVES
- RESEARCH METHODOLOGY
- OVERVIEW OF THE RESEARCH
The main objective is to examine the measurement of international transport costs as measured by the country's import cif/fob ratios. To investigate the use of import cif/fob ratios as a measure of international transport costs.
INTRODUCTION
This is followed by an exploration of the role, perceptions and determinants of transport costs. The chapter concludes with a review of the impact of using these ratios as a measure of international transport costs and provides some concluding remarks.
THEORETICAL CONTEXT
The purpose of this chapter is to provide a compendium of the literature reviewed to gain a better understanding and to provide a concise basis for analyzing the measurement of international transport costs. Faber (2014) was aware of the impact that transport infrastructure development has on transport costs.
INTERNATIONAL TRADE
- INTERNATIONAL TRADE AND ITS ROLE IN THE ECONOMY
Since the last years of the twentieth century, developing countries have become increasingly integrated in international trade (Manger and Shadlen, 2015). Some of the logical questions asked today about international trade and its role in the economy are:.
INTERNATIONAL TRANSPORTATION
- THE INTERNATIONAL TRANSPORT INDUSTRY
- MARITIME TRANSPORT
- INTERNATIONAL TRANSPORT AND TRADE
- INTERNATIONAL TRANSPORT COSTS
- INTERNATIONAL TRANSPORT COSTS RELEVANCE TO TRADE
Kuwamori (2006) cites Limao and Venables (2001); Micco and Perez (2002); and Martinéz-Zarzoso and Suarez-Burget (2005) emphasized the key role of the quality of transport infrastructure. De (2007) agreed that trading costs are often cited as a major determinant of trading volume.
INTERNATIONAL TRANSPORT COST MEASUREMENT
- DIRECT AND INDIRECT MEASURES OF TRANSPORT COSTS
- EMPIRICAL DETERMINANTS OF INTERNATIONAL TRANSPORT COSTS
- DEFINITION
- NATURE AND COMPOSITION
- ERRORS, PERSPECTIVES AND PERCEPTIONS
Nevertheless, the use of the CIF/FOB factor as a benchmark for international transport costs has always been criticized and questioned. Inadequacies regarding the use of CIF/FOB ratios as a benchmark for international transportation costs should be the errors mentioned and noted.
THE PERCEPTION OF TRANSFER PRICING IN OVERVALUATION OF IMPORTS
Transfer pricing can be understood as the price charged for products and services sold between multinational firms controlled or affiliated in the same organization or simply put, a price at which a firm sells goods to its firm within or even the industry independent. In Shunko, Debo and Gavirneni, the transfer price is an intra-organizational price used for transactions between subsidiaries or related companies within the same enterprise”. Ponduri (2015:1) defines transfer pricing as "the price at which goods and services are transferred between two or more divisions of the same company".
In 1988, the United States led the development of comprehensive guidelines and proposals, which in 1994 regulated transfer pricing. However, the OECD in 1995 issued the first draft of the current transfer pricing guidelines, which were substantially amended in 1996 and 2010 (Ponduri, 2015:2).
CONCLUSION
How much transfer pricing firms benefit from the practice is in their intentions to avoid taxes and maximize after-tax profit. A survey conducted by Ernst and Young (2007) showed that over 90% of companies surveyed indicate that transfer pricing is crucial for international tax issues and with around 31% of companies indicating that it will be beneficial to them during next years. . Transfer pricing is used as a way to move taxable income from the country where it is earned to another country to another country to minimize income tax, de Boyrie, Pak and Zdanowicz argued that one of the ways to achieve this is by over-invoicing imports and under-invoicing exports.
Pak and Zdanowicz (1999) estimate that the U.S. Treasury lost approximately $35.6 billion and $46.2 billion in tax revenues between 1998 and 1999 due to transfer pricing problems in international trade. Within the South African context, the Commissioner of the South African Revenue Service (SARS) told Parliament's Finance Committee on 8 May 2012 that SARS has identified an increase in the use of cross-border structuring and transfer pricing manipulation by businesses to reduce local taxes unfairly and illegally. obligations” (Mberi, 2012:1).
- INTRODUCTION
- THEORETICAL FRAMEWORK
- THE NATURE OF STUDY AND RESEARCH DESIGN
- VARIABLES
- TYPES OF VARIABLES
- DATA COLLECTION
- SAMPLING THEORY AND CHOICE OF SAMPLE
- REASONS FOR SAMPLING
- CHOICE OF SAMPLE
- LIMITATIONS
- THE RESEARCH MEASURES AND PROCEDURE
- THE MEASURE
- PROCEDURES
- DATA ANALYSIS PROCESS
- PREPARING DATA FOR ANALYSIS
- FEEL FOR THE DATA
- TESTING THE GOODNESS OF THE DATA
- DATA INTERPRETATION
- SUMMARY
According to Bryman and Bell (2015:12) data collection is "the crux of any research project". Stevens defined measurement as "assigning numbers to aspects of objects or events according to one or another rule or convention." Kothari (2004:1) defines research as "a systematic method consisting of stating the problem, formulating a hypothesis, collecting facts or data, analyzing the facts and reaching a conclusion either in the form of solution(s) to the problem in words or in a certain generalization for some theoretical formulation".
Hair, Black, Babin, Anderson and Tatham, (2006), define validity as the extent to which a measure or set of measures correctly represents the concepts being studied – the extent to which it is free from any systematic or non-random error. ". Malhotra believed that "the validity of a scale can be defined as the extent to which differences in observed scale scores reflect true differences between objects on the characteristics being measured".
INTRODUCTION
The data were tabulated and displayed through tables and figures, with the aim of providing the best interpretation of the study results. Riff, Lacy, and Fico believed that “the emphasis on data reminds the reader that quantitative content analysis is reductive, with sampling and operational or measurement procedures that reduce communication phenomena to manageable data (eg, numbers) from which conclusions can be drawn about the phenomena themselves. The analytical tools used were discussed in the methodology presented in chapter 3 of this study and in the data presentation (section 4.2) and descriptive analysis of cif/fob data (section 4.3) of this chapter.
However, Section 4.4 presents data for each country included in this study, while Section 4.5 provides a full discussion of the findings as the data are interpreted in conjunction with the insights gained from the literature review.
PRESENTATION OF DATA
These codes are broadly classified by broad economic categories for the compilation of all trades entering and exiting the international market, which aims to promote international comparability of international trade statistics. SITC was first introduced by the United Nations Economic and Social Council in 1950, since then until 2006 the SITC classification has been revised at least four times (Affendy, Yee, & Satoru, 2010). According to Affendy, Yee and Satoru (2010), SITC Revision 2 is the only classification widely used and adopted by the United Nations Conference on Trade and Development (UNCTAD) when conducting their intensity commodity factor classification.
DESCRIPTIVE ANALYSIS OF CIF/FOB DATA
Country cif/fob ratios as a percentage of total imports Source: Authors' calculations from Quantec Easy Data. Figure 4.1 shows that the cif/fob import ratios for the USA, Germany and Australia have consistently declined over this period. Venezuela's cif/fob import ratios show little or no change over the period analyzed with a mean of 10.72% and a standard deviation of 0.45% from 1980 to 2012.
The fact that the CIF/FOB import ratios of South Africa and Venezuela do not follow the pattern of developed countries where trade data is taken into account raises concerns and questions about the quality of the data and its use as a direct measure of postage costs. This shows how much import CIF/FOB data samples collected for this study deviates from the average.
COUNTRY ANALYSIS
- UNITED STATES OF AMERICA
- Overview
- Data Presentation for United States
- GERMANY
- Overview
- Germany’s SITC Imports
- SOUTH AFRICA
- Overview
- South Africa SITC data Application
- AUSTRALIA
- Overview
- Australia’s SITC Data
- VENEZUELA
- Overview
- SITC data for Venezuela
Correlation analyzes examined the significance, direction, and magnitude of the relationship between the import composition of a country's trade and the cif/fob ratios of a country's imports (see Appendix A, Table A6). Furthermore, an increase in a country's share of low-valued imports encourages an increase in that country's cif/fob import ratios, all things being equal (ceteris paribus). The composition of United States imports, particularly through SITC 7 (high-value imports) and SITC 3 (low-value imports), clearly reports the adjustment of the cif/fob ratios of the country's imports.
This serves as a clear and further indication of a possible link between a country's cif/fob import ratios and its import composition. Therefore, a change in the composition of a country's imports has a substantial impact on the cost of transportation and on the measurement of that country's cif/fob import ratio.
CORRELATION ANALYSIS AND STATISTICAL SIGNIFICANCE
Using insights gained from literature reviews and the SITC data, this section focuses on assessing the relationship between the CIF/FOB ratios of the country's imports and the composition of imports. However, Table 4.4 shows the correlation results for South Africa for the period 1995 to 2012; a correlation between South Africa's CIF/FOB ratios and the composition of the country's imports are all statistically insignificant. These correlation results unequivocally and clearly support the theory that a variation in the share of a country's low-valued imports in SITC 0 through SITC 4 has a substantially significant effect on the country's CIF/FOB ratios.
The evidence for the presence of a statistically significant relationship between a country's CIF/FOB import ratios and the composition of that country's imports is not merely coincidental. The relationship between the composition of a country's imports and the CIF/FOB ratios of that country's imports is supported by both economic theory and statistical significance.
CONCLUSION
CONCLUSION
The data analysis of Australia, USA and Germany shows that a change in the import composition of a country has a significant change in that country's import cif/fob ratio variation. According to Chasomeris In the absence of direct measures, researchers have used an indirect measure of international transport costs - a country's import cif/fob ratio”. Despite this drawback, the study was able to provide significant evidence and explanation in the comparative study of the use of a country's import cif/fob ratio to measure international transport costs.
There is a relationship between the two variables, that is, a country's CIF/FOB import ratio and the composition of the country's imports. This was evident in the lack of a significant correlation between South Africa's import composition of trade (composition of imports) and the country's CIF/FOB import ratios.
RECOMMENDATIONS AND FUTURE RESEARCH
The Impact of International Transport Costs on Developing Country Exports: A Case Study of South Africa.
