Present were: V.S., H. S., Z.Y., A. M.

Absent were: H.A., K.M.

The meeting was held at 10PM on Triviz Avenue, Las Cruces at the residence of H.A.

E-Mail Correspondence related to the purchase of approximately five 32MB-RAM computer units by Transnational for sale to VS’ cousin in Guatemala City was reviewed by all present. Specifications required were itemized in the e-mail dated January 8, 2000 and follow-up comments by ZY and AM were transmitted thereafter, in a message dated January 12, 2000. The text of these two messages is appended.

Z.Y. expressed the need to purchase "so few units" from a wholesaler in Los Angeles, rather than through a major supplier in Shanghai. If Transnational were to purchase only five units directly from Shanghai the total cost/unit would be approximately the same as in Guatemala or the USA. No one would profit under those circumstances, he added. ZY knows of a Los Angeles-based wholesale outlet that could arrange shipment of the five CPUs and monitors via a freight carrier such as UPS to a free-trade zone address in El Paso, in fact, a facility owned by one of VS’ uncles. The merchandise would then be shipped from El Paso via Freight Forwarders to Houston and on to Guatemala City, VS clarified.

The estimated cost to Transnational of each unit, described in the e-mail dated January 8, 2000 would be $350, plus the monitor and software, if requested by the client. Cost to the client for the CPU alone would be $350 plus shipping ($50 per unit) and a Transnational service mark-up of approximately $125, bringing clients’ cost to approximately $525, 75 dollars below the client’s theoretical supply cost in Guatemala City. The client’s retail price could be fixed at approximately $600 to $650, yielding him a profit of $75 to $125 per unit. These figures are tentative, and subject to further confirmation of LA costs and shipping fees, ZY and VS pointed out.

[Further information is required to determine whether Spanish-language software is required and whether keyboards, monitors and accessories might also be ordered by VS’ cousin.]

After brain-storming how to best avoid customs duties, it was decided that such duties could be entirely waived since the merchandise would be declared "gifts", shippable to a church-related address in Guatemala City as further confirmation of their duty-free status in Guatemala.

It was concluded that (1) payment would be guaranteed and actually made by VS’ credit card for payment to the LA wholesaler, and that (2) VS’ cousin would transfer payment in full, upon receipt of merchandise, to VS’ account in Las Cruces.

All parties present noted that this first Transnational transaction was rather small, but that bonds of trust would be established all along the chain of supply, particularly if repeat purchases were made. Repeat purchases are possible if VS’ cousin is encouraged to promote and market his computer units in Guatemala City. Such units at other outlets in G.C. seem to be selling rapidly at the present time, it was noted.

It was also considered important for VS to contact his cousin in Guatemala City to determine the exact number of units to be purchased, and whether all units would require monitors or software, the latter presumably available in Spanish Language editions. Such software could presumably be purchased from a supply-house in Los Angeles that could be located in directories or on the Internet.

VS noted that his uncle in El Paso owns and operates a perfume retail outlet on the "Paseo de las Luces" adjoining the Mexican Border well within the Free-Trade Zone. His uncle makes periodic trips to Los Angeles and to North Carolina to re-supply his shop in El Paso. Transnational could conceivably purchase small quantities of computers in Los Angeles, as required, and combine his uncle’s perfume purchasing business with Transnational’s requirements, thus effecting cost savings for both. His uncle’s shop could also serve as an outlet for any perfumes and toiletries which Transnational may discover on the international market, particularly in China where ZY may be able to locate extremely inexpensive supplies of quality products (though not name-brands).

AM noted, within this context, that the perfume business was highly competitive and that unethical tactics are sometimes used to enforce existing market arrangements.

All present agreed, however, that potential to realize considerable profits existed in the lucrative perfume trade in El Paso.

Similarly, VS reported that another relative was located in Las Cruces who planned to open a small Asian Goods outlet, somewhat like MacFrugal’s, although smaller, where goods made in China could be sold to the local population. AM and ZY mentioned that market surveys would have to be conducted to determine the most suitable merchandise to feature. Care would have to be taken to avoid over-saturation of the local market with certain goods. Discussion ensued relative to the size of VS’ uncle’s intended retail operation and possible sources in Shanghai for goods. Containers for shipping of several merchants’ goods could be consolidated, it was determined, so that an entire container would not have to be filled by any one merchant.

Importantly, ZY confirmed that no brokerage license is necessary if goods are shipped directly from a supplier to an existing retail outlet. This is a distinct advantage of owning a business.

VS agreed to contact his uncle with respect to ZY’s potential contacts in Shanghai, and will determine the amounts of funding available for establishment of a retail outlet in Las Cruces. Further information on this point should be available at the next Transnational meeting.

Referring to prior import-export experience in Central Africa, AM noted that the most desirable strategy would be to avoid shipment of easily damaged relatively expensive merchandise over long distances. Although the computer-deal mentioned in Point I., above, was likely to succeed, risks should be minimized whenever possible in future transactions.

An example of a high-volume, high-profit, low-risk item, would be, for example, thong-sandals, originally purchased for $.30 a pair and sold for as much as $1.50 a pair in Third World countries. By purchasing huge quantities of sandals, shipping them in bulk, containerized, to a Third World nation, and offering them to a local retailer in a major urban setting (e.g. Managua, Quito, Lima, Dakar, Abidjan, Kinshasa or Dar-es-Salaam), large profits can be generated at low risk of damage, theft, or loss.

V. Tiles, Purchased in China & Shipped to Las Cruces for Distribution Worldwide

VS mentioned that one of his relatives owns a large tile distributorship in Las Cruces. The business is extremely successful and serves clientele throughout the Southwest. ZY added that China is able to produce tiles at extremely low cost. A full range of tiles could be imported. It was noted that tiles were a lower-risk item than computers in terms of potential damage, and could be shipped more easily.

High profits can be generated if tiles are manufactured in China with different patterns and designs inspired by cultures throughout the world. For example, Kuwait could provide sample designs of Arab-type decorative tiles for low-cost manufacture in China and ultimate distribution either through Transnational or through the existing Las Cruces firm (with a percentage or commission to Transnational).

This idea was discussed at some length. VS agreed to contact his local relative for further details of demand for certain types of tiles. And ZY agreed to provide a catalogue of existing tile products currently manufactured in China.

Reference was briefly made to the original idea of shipping large quantities of low-cost, no-brand computers to Guatemala City. It is imperative that VS’ relatives in Guatemala locate appropriate outlets for such merchandise, whether within AVICOLA or within the local education, government, or retail market. VS confirmed that he had his uncle and cousin in good positions to help encourage promotion of computers, which (if Chinese pricing data works out well) might be able to undercut the existing cost-structure in Guatemala City and create high sales volume for Transnational. Those present at the meeting acknowledged that this is only a preliminary concept, however, requiring further investigation and work.

Further information is required from VS’ uncle. We are currently awaiting details and specifications for the electronic panels to be ordered and purchased by Avicola from a low-cost Chinese source to be located by ZY.

In the final moments of the meeting, VS and ZY agreed to obtain basic cost-related, shipping and production information for the specific products and import-export concepts discussed above.

The meeting was adjourned at 11:35PM.

"VS and HS have just visited and confirm that their uncle and his son are planning to order an undetermined number of computers for their new RETAIL OUTLET in Guatemala City.

1. There is no need to have brand name equipment; so "no-brand" Chinese manufactured computers are perfectly acceptable.

2. The specifications are:

400 MHZ
Hard Drive 4 - 6 gigabytes
Multimedia 44X
32 MB of RAM
56K
Video 8MB
Celeron or AMD

3. These units are priced in Guatemala and the US at between $600 and 650 (wholesale apparently), according to VS' cousin.

4. Pentium III Processors sell less well in Guatemala City, since the above models are far more popular.

5. Please locate a Chinese manufacturer who can sell us these models at considerably less than the figures quoted above. Obviously, we also need to calculate transportation costs, insurance, and customs duties and our profit margin before entering into any contractual arrangement with Victor's cousin.

6. We can assume that he will purchase approximately 5 units to begin, and more later. So we probably need a range of price quotes from Shanghai for 1-5, 5-10, 10-20 and 20+ units.

As of 1/12/00, there are two absolutely vital things that ZY
requires:

1. A confirmation of payment modality, whether via 
Credit Card Transfer, Cash, Letter of Credit, Other.

You need to realize: A Letter of Credit costs mucho bucks...in
commissions to the BANK. The bank fee is the SAME for a small
amount of funds (say: $2000 or 3000 which seems to be the total
amount of your cousin's order) AND for a large amount of funds
(say: $200,000). 

The fee is EQUAL in both cases, but represents an 
unrealistically high percentage of a small order.  
You need to know that.

2. ZY feels that it is not practical for four people to 'run
around' for five computers from China. No profit in that.

SO THE POTENTIAL SOLUTIONS ARE--->

--->SCENARIO ONE: We can purchase 5 of them in California for
400 dollars each, sell them to your cousin for 500 and make a
(very) small profit of 100 each on them, minus transportation.

--->SCENARIO TWO: We can ask your cousin to locate two or three
other COMPUTER RETAILERS in Guatemala City and combine his order
with theirs. This should amount to HALF A CONTAINER LOAD...which
is practical and profitable for us. (ZY will apparently
arrange for the other half to be filled by Chinese businessmen
in Shanghai who also wish to ship goods to Guatemala)

3.  Your UNCLE's requirements are all separate, of course.  And we are
waiting for details on his ‘chicken-raising’ electronic panels.