Import Process for BMW tires from Perú

Presented by: Juan Sebastián Betancur

Juan David Cálad

Laura Victoria Díaz

Juan Pablo Henao

Presented to: Juan Alejandro Vásquez Ruiz

Catholic University of Pereira

Faculty of Administration and Economics Sciences

International Business Program

International Logistics Administration

2011- 02

Introduction

The financial crisis seems don’t affect the automobile sector, on the contrary every time we

find many models with different features in the market. According to the Colombian

magazine Dinero 2001, the growing supply of vehicles in Colombia, is due to the financing

and business strategies of different brands and it suggests that 2011 will be one of the

best years for the sector. This market is characterized by dynamism, not only for the entry

of new competitors into the market but for the increase of the demand of automobiles and

the different prices. At the same time this means that every year more cars are

depreciated having a lower price and this fact is decisive for possible Colombian buyers.

Both Colombia and Chile are the largest buyers’ countries of vehicles in South America,

after Argentina and Brazil.

BMW is one of brands already established in Colombia with a good position in the market.

The representative of BMW in Argentina, Alejandro Echagaray declares that the results of

the company in Latin America are very positive, so much that today the brand is a leader

in the region. He also affirmed that the BMW Group's success is based on a long-term

vision and a responsible action. So much that for the seventh consecutive year BMW

Group is the most sustainable automobile company all around the world, and has been

designated as a leader of industry classification for SAM Group in Dow Jones

Sustainability Indexes (DJSI). (BMW Colombia, 2011)

The official site of BMW Group for Colombia states that the brand has a wide range of

products and this will make this year the company sold 1.6 million automobiles in the

country. So that if Colombian people have BMW automobiles they are probably going to

need tires for them after a determined time and they will want definitively to buy their tires

designed by BMW automobiles and not another type of tires. Is why today there are many

enterprises and distribution centres that buy tires from a different country and them they

sold them in Colombia, directly to automobiles’ owners as well as the import enterprises of

vehicles.

Audi and Mercedes-Benz are the two mainly competitors of BMW because both of them

make sport and luxury as make BMW. So the clients are clearly part of high class people

and the challenge is to convince them with elegance, sophistication and quality. In 2010,

directives from this tree brands agreed with the positive result and success of the sales of

automobiles of high game. In this year, Audi sold 1.244 units, Mercedes-Benz 1.078 and

BMW 1.899. Despite the important growth of Audi in the Colombian market, BMW

maintains its leadership with the largest among of units sold. (Revista Summa, 2011)

Our objective consists of importing tires from Goodyear Perú for BMW serie 3 to our own

distribution centre called Distribuciones Chika, which has a warehouse in Bogotá Free

Trade Zone and from there every product is distributed to the rest of Colombia. We buy

mainly tires for BMW serie 3 because in Colombia this is the reference more common. We

will import 4 containers 20’ each one with 480 tires, it means a total of 1920 of tires of a

specific reference of BMW per month and then we distribute to the authorized importer of

BMW in Colombia, Autogermana, which has presence in differents cities of the country:

Barranquilla, Cúcuta, Bogotá, Bucaramanga, Pereira, Medellín and Cali. In this case we

are going to develop the import process of tires from Perú and the distribution of 100 tires

for BMW serie 318 i to Autogermana in the city of Pereira.

The tire’s name is Eagle F1 Asymmetric, which is unique in the Colombian market and is

used for luxury cars. We chose to import the tires from the Peruvian market because after

doing an analysis of the market of tires we conclude that the cost of this good in Perú is

inferior to the domestic market and the import makes positive profits.

The importance of the Peruvian market to Colombia is paramounth because the two

countries are part of the free trade agreement CAN (Comunidad Andina de Naciones),

Andean Community in english, which the products can be exchanged with great facilities,

free of taxes and a wider market area. In the other hand, geographically Perú is close to

Colombia, so this is an advantage for the logistics process because the route is shorter

compared to other countries that are not adjacent to Colombia. Therefore, the import time

is shorter, because orders can arrive in less than a week, in case of a customer to place

orders before the import process the merchandise will be delivered in less than a week.

CAN was signed in 1969 between Ecuador, Bolivia, Perú and Colombia and the main

objectives are the cooperation, development and economic growth to the members. It

intends to move forward in the deepening of integration that effectively contribute to

sustainable human development and equitable to live well.

The Decision 414 of the CAN, where Peru took a tariff elimination for imports and exports

from the members countries of Comunidad Andina de Naciones, where the process was

obtained as required 8 different tariff reductions, which refers to a shielded number of

products, which means a reduction of tariffs. Today is a 100% tariff reduction for the CAN

members.

Our product specifically is made with rubber material so the costs of tariffs and taxes are

zero, which is quite positive in terms of utility for us and also if we want to offer a good

price for our clients.

The following table shows the competitiveness of Peru according to La Cámara de

Comercio de Bogotá:

COMPETITIVENESS

Economic Performance

• 1st place in Latin America

• 14 global position

competitiveness

• 2nd place in Latin America

• 35 position globally

Business Efficiency

• 3rd place in Latin America

• 30 global position

Government Efficiency

• 2nd place in Latin America

• 32 position globally

In the other hand, the important index of the World Bank, Doing Business by 2011 shows

that Peru is the second best country in Latin America to do business, and is the third one

in the Latin Business Index. "Peru is in third place because it has the best macroeconomic

environment in Latin America, besides being the fourth best in the corporate environment

and technological level. It is also one of only two countries improved their index score

compared to 2008”. (GESTIÓN, Diario de Economía y Negocios del Perú, 2011)

Also it’s relevant to add the the main destinations for Peruvian exports tires are Colombia

and Ecuador, which together account for 55 percent of the total in 2010, reported La

Asociación de Exportadores del Perú, ADEX.

The main exporting companies of Perú are Goodyear del Peru, Laminates, Megacaucho y

TDerivados, Michellin and Perú, among others. (Exportaciones del Perú, 2011) The

supplier company of tires for BMW automobiles is Goodyear del Perú. It is ubicated in the

city of Callao in Perú.

Logistic Process

Size of the tire: 225/45R17 94Y XL - 2007

Weight: 23 lbs

Total weight for each container: 11040 lbs.

The 480 tires will compiled in packs of four tires.

Pack

52” = 4.3 feet

28” = 2.3 feet

Weight of the pack: 6 lbs

Total weight: 11046 lbs

Container 20” (19’4”long x 7’9” width x 7’10” height)

The tires will be packed like shown in the picture above, with the size of the

container being 19’4” long we can accommodate 4 “packs” long and 3 up, giving us

a total of 48 tires in a single row. The width of the container let us accommodate up

to 10 rows of tires (width of tire 8.9” and with of container is 93”). So in a container

of 20’ we can have 480 tires.

Location of the company in Colombia: Distribuidora Chika and is installed in

ZONA FRANCA BOGOTÁ, S.A. Cra 106 No. 15A-25 Casillero 3 Fontibon Bogotá

D.C., Colombia

Location of the company in Colombia in Perú: Goodyear Av. Argentina 6037,

Carmen de la Leyva, Callao, Perú.

Route:

-Puerto del Callao (city of Callao - Perú) – Puerto de Buenaventura (city of

Buenaventura –Colombia)

-Puerto de Buenaventura (city of Buenaventura – Colombia) – Distribuciones Chika

(Zona Franca Bogota Cra 106 No. 15A-25 Casillero 3 Fontibon)

- Distribuciones Chika (Zona Franca Bogota Cra 106 No. 15A-25 Casillero 3

Fontibon) – AutoGermana (city of Pereira; Avenida Circunvalar # 13-40 Centro

comercial Uniplex L. 10)

Total Amount of Imported Tires : 1920 units

INCOTERM: DDU (Delivered Duty Unpaid) This incoterm refers that Goodyear del Perú hire the logistics and insurance

company to transport the tires from Perú to Colombia’s Port more specifically to

Buenaventura’s customs. After the merchandise arrives and cross the border

Distribuciones Chika has the responsibility.

International Logistics Company: MAERKS S.A

The Transport from the Callo’s Port to Buenaventura’s Port is going to be maritime and the

trajectory is going to be direct. For that MAERKS S.A was the company chosen between

the export and us for transporting the tires. It’s a serious company that is consistently

recognized as one the most reliable container shipping company in the world.

From Buenaventura to our distribution centre in Bogotá and from Bogotá to Pereira the

transport of the tires is going to be by ground.

It is necessary to say that the added values that the transport enterprises have are the

weather. Colombia has different kind of weather and it directly affects the movement of the

merchandise. In the other hand, most of the drivers of the trucks normally stop in the road

to take a feed, we are taking it into account because of the time required and some costs.

COSTS

Prices

Price of purchase from Perú for each tire: 189 USD

Total sum (1920 tires): 362.880 USD

Price of sale in Colombia for each tire: 436,17 USD

Total sum (1920 tires): 837446,4 USD

Profit: 474566,4 USD

Cost USD Total

GoodYear Factory to Callao’s Port:

Transport (Gasoline 8km)

4 4 USD

From Callao’s Port To Buenaventura’s

Port

1.200 1200 USD

From Buenaventura’s Port to

Distribuciones Chika Bogotá:

Transport (Gasoline 533km)

250

250 USD

Distribuciones Chika Bogota to

Pereira: Transport (Gasoline 290km)

Unpackers Bogota and Pereira

140

10

140 USD

40 USD

Total: 1634 USD

Estimated time

From the factory Goodyear Argentina Avenue 6037 to the port of Callao is

8.6 Km away and the average of time is 18 minutes.

Then, the merchandise is discharged in the port and the average of this

operation is one day.

The next step is the Port of Callao, Perú - Port of Buenaventura, Colombia

Distance: 1.126 Nautic Miles (2.083 km). There is two days to the time of the

transport.

After that, the merchandise applies the customs requirements as the DIAN form (import

declaration) and the legal paper form to legalize and nationalize the merchandise in

Colombia. After that the tires will be collected to the Free Trade Zone of Bogotá in a truck.

The merchandise will be transported in two trucks each one with 2 containers to

Distribuciones Chika (Zona Franca Bogota Cra 106 No. 15A-25 Casillero 3 Fontibon)

(Buenaventura – Buga – Tulua – La Tebaida – Calarca – Ibague – Girardot – La Mesa –

Bogotá)

533 Kilometres: 11 hours and 30 minutes

Then when the truck arrives to Bogota it goes to Distribuciones Chika which is our own

distribution enterprise with a warehouse in Zona Franca Bogota Cra 106 No. 15A-25

Casillero 3 Fontibon.

The tires will be unloaded in the warehouse (45minutes) two people helping to unload.

payment for each one is US $10. And merchandise is ready to be sold.

Finally, the 100 tires are sent to AutoGermana Pereira located in Avenida Circunvalar #

13-40 Centro comercial Uniplex L. 10, using the Hyundai HD 78.

This is the route used from Bogota – Pereira

Bogota – La Mesa – Girardot – Ibagué – Calarcá – Cruces – Pereira

290 Kilometres: 8 hours.

DOCUMENTARY REQUIREMENTS:

FOR CUSTOMS AGENT OF PERU

Copy of ID of legal representative of the company.

Copy of deed of incorporation with social equity of not less $ 50,000.00 dollars.

Affidavit of legal representative indicating his home and not have been convicted

with final judgments.

Bank letter of guarantee or surety policy with a value of $ 150,000.00 dollars.

A copy of the municipal operating license.

FOR CUSTOMS AGENT OF COLOMBIA

Import Declaration

Bill of lading

Origin Certificate

Route Km. Estimated time

Factory GoodYear to Callao’s Port 8.6 18 mts

From Callao’s Port To Buenaventura’s Port 2.083 1 one in the port of Callao + 2

days of way = 3 days

From Buenaventura’s Port to Distribuciones

Chika (Zona Franca Bogota Cra 106 No. 15A-

25 Casillero 3 Fontibon)

533

11 hours and 30 minutes of

way + 45 minutes = 12 hours

and 15 minutes

From Distribuciones Chika (Zona Franca

BogotaCra 106 No. 15A-25 Casillero 3

Fontibon) to AutoGermana-Pereira

Total estimated time:

290

8 hours

5 days

Conclusions

It is viable to import the product based on the logistic costs because we are already users

of Free Trade Zone Bogotá and this is very important because of the costs of taxes. In a

Free Trade Zone, we only have to paid 15% of IVA, not 33%. For customs costs we paid

anything for importing. Additionally CAN agreement for tires has 0 taxes to import them.

In addition this agreement for our business creates an investment and trust incentive

between importers and exporters. Not only in the tire market also with other products of

the agreement.

The business relationship creates an excellent connection between both countries. In a

hypothetical case it is viable that the peruvian tires market in the future have a greater

confidence in our business and can export more merchandise to Colombia with loans and

financing issues without problems.

Bibliography

BMW. Una vez más BMW Group es la empresa automotriz más sustentable del

mundo. Extraido el 11 de octubre del 2011 de:

http://www.bmw.com.co/co/es/insights/news/content.html

Revista DINERO. 300.000 unidades en 2011. Extraido el 10 de octubre del 2011

de: http://www.dinero.com/edicion-impresa/especial-comercial/articulo/300000-

unidades-2011/135144

BERNALES, E. (2009). Oportunidades de negocios en el Perú. Available on:

http://camara.ccb.org.co/documentos/5223_colperu_como_hacer_negocios_con_p

eru_1_de_septiembre.pdf. Consulted on October 3nd of 2011

GESTION EL DIARIO DE ECONOMIA Y NEGOCIOS DEL PERU official web

page, available on: http://gestion.pe/noticia/283455/peru-tercer-mejor-pais-hacer-

negocios-region

Banco Mundial. Doing Business 2011. Extraido el 12 de octubre de:

http://www.doingbusiness.org/reports/global-reports/doing-business-2011

Revista Summa. Audi, Mercedes-Benz y BMW crecieron más de 19% en 2010 en

Colombia. Extraido el 26 de octubre del 2011 de:

http://www.revistasumma.com/negocios/8499-audi-mercedes-benz-y-bmw-

crecieron-mas-de-19-en-2010-en-colombia.html