Hull Importing Company is a U.S.-based firm that imports small gift items and sells them to retail gift shops across the United States. About half of the value of Hull’s purchases comes from the United Kingdom, while the remaining purchases are from Mexico. The imported goods are denominated in the currency of the country where they are produced. Hull normally does not hedge its purchases. In previous years, the Mexican peso and pound fluctuated substantially against the dollar (although not by the same degree). Hull’s expenses are directly tied to these currency values because all of its products are imported. It has been successful because the imported gift items are somewhat unique and are attractive to U.S. consumers. However, Hull has been unable to pass on higher costs (due to a weaker dollar) to its consumers, because consumers would then switch to different gift items sold at other stores.
Hull Importing Company is a U.S.-based firm that imports small gift items and sells them to retail gift shops across the United States. About half of the value of Hull’s purchases comes from the United Kingdom, while the remaining purchases are from Mexico. The imported goods are denominated in the currency of the country where they are produced. Hull normally does not hedge its purchases. In previous years, the Mexican peso and pound fluctuated substantially against the dollar (although not by the same degree). Hull’s expenses are directly tied to these currency values because all of its products are imported. It has been successful because the imported gift items are somewhat unique and are attractive to U.S. consumers. However, Hull has been unable to pass on higher costs (due to a weaker dollar) to its consumers, because consumers would then switch to different gift items sold at other stores.
Chapter9: Taxation Of International Transactions
Section: Chapter Questions
Problem 27P
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Hull Importing Company is a U.S.-based firm that imports small gift items and sells them to retail gift
shops across the United States. About half of the value of Hull’s purchases comes from the United
Kingdom, while the remaining purchases are from Mexico. The imported goods are denominated in the
currency of the country where they are produced. Hull normally does not hedge its purchases. In previous
years, the Mexican peso and pound fluctuated substantially against the dollar (although not by the same
degree). Hull’s expenses are directly tied to these currency values because all of its products are
imported. It has been successful because the imported gift items are somewhat unique and are attractive
to U.S. consumers. However, Hull has been unable to pass on higher costs (due to a weaker dollar) to its
consumers, because consumers would then switch to different gift items sold at other stores.
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