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Here are a few best practices for your annual customs review. Contact mitch@52.91.45.227 if you need help.

Classification– review updates to Harmonized Tariff to make sure your codes and descriptions are accurate. Proper classification and valuation of imported goods are the first step in compliance. If you do nothing else, do this!

Duty Drawback– you may qualify for a refund of duties paid on imports that are later exported. As supply chains expand look for new opportunities for drawback. Record keeping is key here.

Chapter 98 of the Harmonized Tariff allows duty free entry of certain categories of goods. Examples are: American Goods Returned, American Goods Repaired or Altered Abroad, and American Components Assembled Abroad.

Check for trade agreements– programs which allow duty free or reduced duty rate entries.

Customs rulings– consider requesting formal customs rulings prior to large transactions. This ensures compliance and eliminates uncertainty about imports. Rulings can be requested thru the CBP website.

Correcting errors– when an entry mistake is discovered it can be corrected by a prior disclosure to CBP. The formal process is a Post-Entry Amendment/Post Summary Correction. A voluntary disclosure can help mitigate penalties.

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Clients often know that they need help with export compliance but don’t know where to start. A written Export Compliance Program is the ideal way to keep compliant and is a good investment for any company to make. An ECP establishes clear accountability, written instructions, and reduces risk of non-compliance. However, an ECP is costly and time consuming, requiring a significant commitment on the part of management. If the exporter has not experienced problems or incurred any fines it is easy to make compliance a “back burner” issue. But doing nothing does not mitigate the risk.

Here are few best practices to help you get started :

Review and confirm correct Harmonized Tariff and Schedule B codes in January and July as updates occur.

Check EAR regulations for correct ECCN and license exemption codes. Are you automatically using EAR99 and NLR? Bis.gov can help.

If exporting under ITAR you need a responsible trained officer.

Check common “Red Flags” such as denied parties lists, entities lists, and unverified lists. Once again, bis.gov provides details and training.

Review export documentation for possible improvements.

Make export compliance a front-end process not a last minute shipping function.

Posted on LinkedIn today:

Customs entries on imported merchandise involve calculating duties and taxes based on commodity classification (HTS), country of origin, and entry value. In most cases the commercial invoice or CI value is used for duty calculation. In situations where the transaction is not so clear Customs has established an appraisement hierarchy to determine entry value. The details can be found in US Customs and Border Protection (CBP) regulations 19 CFR part 152. Here is a summary:

Appraisement Hierarchy

1) Transaction Value- actual invoice value

2) Transaction Value of identical merchandise- same country, same class and kind

3) Transaction Value of similar merchandise- same country, commercially interchangeable

4) Deductive Value – start with US retail selling price and deduct commissions, transportation, insurance, duty/tax, and value of further processing

5) Computed Value- sum of the following. Importer can request computed instead of deductive.

Cost of Materials

Cost of Labor

Cost of Packaging

Profit

Overhead

G&A

6) Value if other values cannot be determined- if the value of imported merchandise cannot be determined it will be appraised on the basis of a value derived from the methods set forth in parts 152.103 thru 152.106.

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Engineering firms, software companies, researchers, manufacturers, and universities need to be aware of the “deemed export” rules. They may be engaged in export transactions without even knowing it.

From the BIS website:

An export of technology or source code (except encryption source code) is “deemed” to take place when it is released to a foreign national within the United States. See §734.13(b) of the Export Administration Regulations (EAR).

Technology is “released” for export when it is available to foreign nationals for visual inspection (such as reading technical specifications, plans, blueprints, etc.).

Per Part 772 of the EAR, technology is specific information necessary for the development, production, or use of a product.

Assuming that EAR99 does not apply and no license exception is available, U.S. entities must apply for an export license when: (1) they intend to transfer controlled technologies to foreign nationals in the United States; and (2) transfer of the same technology to the foreign national’s home country would require an export license.