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I. TITLE: Hondas Free Trade in the Real WorldII. VIEWPOINT: Production Manager / Operations Manager / Head of Purchasing Dept.III. TIME CONTEXT: In 1992 - when Customs researchers argued that Honda was

overstating the local content of the cars it built in Ohio. Case is still on-going.

IV. PROBLEM STATEMENT: Dispute between US Customs and Honda regarding the local content of Honda Civic

V. STATEMENT OF OBJECTIVE: To prove that Hondas cars are 75% locally made To find the best possible way to settle the Honda-Customs dispute regarding the local

content of the engines

VI. AREAS OF CONSIDERATION: STRENGTHS:

a) Hondas localization of products / Products best suited the needs of local customersb)Hondas localization ofprofitsc) Hondas localization of productiond)Hondas localization of managemente) Employees are trained well to achieve quality products

WEAKNESSES:a) Well-trained employees may be pirated by other companiesb)Logistics

OPPORTUNITIES:a) Hondas powerful research and development as well as giving top priority to

maintaining high product quality resulted to successful business expansions.

b)Companys good reputation as seen by customers and other companies as wellc) Honda being the only fuel-efficient engine manufacturer in the US

THREATS:a) Competitors might take Hondas tight situation as an opportunity to get Hondas

market share.

b)Sanction or foreclosurec) Tendency to pay $20 Million plus penalty taxesd)Because of the alleged evasion of import duties, Hondas good reputation in the

market might be at stake.

VII. ASSUMPTION:__________(NO ASSUMPTION YET)______________________

VIII. ALTERNATIVE COURSES OF ACTION:1. Dialogue / Scheduled Meeting with Customs to present proof or evidences (receipts,

agreement with local suppliers, certificates, etc.) that will attest Honda Motor Co.s

compliance with the Trade Agreement as regards to the content of the engines.

2. Have a 3rd party (may be an auditor, consultant or the likes) check/ audit/ review the

companys cars to prove that Honda really observed the American Free Trade

Agreement regarding the content of the engines.

3. Suggest drafting of revised treaty to NAFTA negotiators to include special domestic

content and origin rules for the automobile and auto parts sectors as well as the rules

to specify certain costs which do not count.

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IX. ANALYSIS:1. Dialogue / Scheduled Meeting with Customs to present proof or evidences (receipts,

agreement with local suppliers, certificates, etc.) that will attest Honda Motor Co.s

compliance with the Trade Agreement as regards to the content of the engines.

Advantage:

All the issues / points of both parties will be presented / will be cleared out

Disadvantage:

Conflict of interest

2. Have a 3rd party (may be an auditor, consultant, independent legal scholars or the

likes) check/ audit/ review the companys cars to prove that Honda really observed the

American Free Trade Agreement regarding the content of the engines.

Advantage:

No conflict of interest because the 3rd party is not involved in the situation

Disadvantage:

Additional cost to Honda

3. Suggest drafting of revised treaty to NAFTA negotiators to include special domestic

content and origin rules for the automobile and auto parts sectors as well as the rules

to specify certain costs which do not count.

Advantage:

NAFTA becomes clearer and auto companies like Honda will be able to easily

understand the rules and follow.

Disadvantage:

Changes in the agreement may negatively influence the production, trade and

investment decisions of Honda and other foreign car makers.

X. CONCLUSIONACAs Is it timely? Cost

effectiveness

Is it easy to

implement?

Total

ACA 1 3 2 2 7

ACA 2 3 1 2 6

ACA 3 3 3 2 8

I therefore conclude that the best possible way to settle the Honda-Customs dispute is

to suggest drafting of revised treaty to NAFTA negotiators to include special domestic

content and origin rules for the automobile and auto parts sectors as well as the rules

to specify certain costs which do not count.

XI. PLAN OF ACTION