Two plus years of supply chain disruptions have required managers to examine and revise their global strategies. This calls to mind the term “wicked problem” from a noted supply chain management text*.

A wicked problem involves multiple stakeholders, each with different interests and values. As a result there is no single common goal , no clear mission, and no universal solution. Any solution, after being implemented, will generate waves of consequences and can result in making the problem worse.  A suggested framework for tackling a wicked problem consists of 4 levels of increasing complexity:

Level 1- Process Engineering and inventory management– This is the engineering approach focusing on what is being carried (work, cash, information) and process design within and between organizations. Risk management is about improved visibility and control.

Level 2- Assets and Infrastructure- This is the insurance and financial approach. Nodes and links are examined and strengthened to avoid disruptions along the supply chain.

Level 3- Organizations and Inter-organizational networks– This is strategic level problem solving involving outsourcing, partnering, offshoring, and nearshoring.

Level 4- the Macro Environment- This level uses PEST  (Political, Economic, Social, and Technological) analysis of environmental changes. Issues include green and legal/regulatory as well as geo political factors.

We can consider supply chain to be strategic while logistics is more tactical. Global supply chain problems are complex and involve all of the above levels. Logistics problems can usually be managed within Levels 1 and 2.

Contact mitch@52.91.45.227 for immediate logistics support.

*Global Logistics & Supply Chain Management by John Mangan, Chandra Lalwani, Tim Butcher, and Roya Javadpour

If you are taking the CBLE (Customs Broker License Exam) in April you should be well along in your preparations by now. No doubt it will be challenging. Most exams include one or two obscure questions. Here is one that has appeared on past exams.

Importations of switchblade knives is permissible by 15 U.S.C 1244 if:

A. The importation is pursuant to a contract with a branch of the State Militia.

B. The importation is destined for a specific member or employee in a branch of the Armed Forces of the United States specifically for personal pleasure off-duty use.

C. The importation of the switchblade knives have a blade not exceeding 6 inches in length.

D. The entry will contain, among other documents, a declaration in duplicate stating that the switchblade knife has a blade not exceeding 3 inches in length and is possessed by and is being transported on the person of an individual who has only one arm.

E. The entry will contain, among other documents, a declaration in duplicate stating that the switchblade knife has a blade not exceeding 6 inches in length.

Answer – D

There is still time to register for the April 2022 Customs Broker License Exam. The CBP website has details. As noted in a previous post, the exam is challenging, so you will need a study plan for the next 5-6 weeks. Let me know if you would like suggestions about how to prepare. If you are successful in passing the exam the next step is a background investigation and fingerprinting. This process can take up to a year before the license is issued. Best of luck.

Announcement – Customs Broker License Exam Date

The next CBLE will take place on Wednesday, April 27, 2022. Exam registration will open on Monday, February 28, 2022 and close on Monday, March 28, 2022.

contact mitch@52.91.45.227

Most managers or owners of small/medium companies wear many hats and usually do not have in-house logistics or compliance expertise. As a result, major projects such as implementing an Export Compliance Program go on the back burner. But doing nothing about compliance is not an option!

Let me suggest 3 spring cleaning best practices that will help you get started :

1) Scrub your parts list to make sure HTS or Schedule B codes are valid. The tariffs change periodically and we have found that every client parts list reviewed has included obsolete or invalid codes. Once identified these codes can be updated and lists maintained.

2) Check the CCL (Commerce Control List) to see if your commodities are listed. Exports must show the correct ECCN (Export Control Classification Number) in order to determine if a license is required. If you are automatically using EAR99 and NLR you are at risk of violation.

3) Set up procedures for checking common “Red Flags” such as denied parties lists, entities lists, and unverified lists. BIS (Bureau of Industry and Security) has up to date info on their website.

Ad Hoc Logistics can help you manage these tasks.

Contact mitch@adhoclogisics.com

Demand for compliance professionals has never been higher, as LinkedIn users can readily see. Companies of all sizes and in all industries realize that being in compliance means fewer supply chain disruptions. At the very least compliance is good risk management. Think of it as insurance.

Compliance is about attention to detail, consistency, process, and oversight. I guarantee that your compliance folks are not trying to practice “sales prevention”. The goal is to complete transactions the right way, avoid customs or logistics delays and reduce exposure to fines and penalties. However, there is no doubt that complying with all of the agencies involved in international trade generates a lot of red tape and can be frustrating.

Compliance managers must have the authority to stop shipments when red flags appear. In order to ensure independence compliance folks should not be in the supply chain, finance, or marketing chain of command. Better reporting relationships would be with the legal department, CEO, or COO.

Consider just a few of the details that can make or break a smooth transaction:

Harmonized Codes to the full 10 digits including heading and sub heading. It is very easy to transpose digits.

Schedule B Codes, ditto

ECCN , Alpha numeric, number, letter, followed by 3 numbers. Example 4A994. Then followed by sub paragraph level and don’t forget the dot between the last number and the sub para.

License Exceptions are designated by 3 letter codes and must be compatible with the ECCN listed.

COO, Country of Origin markings and proper codes on documents and AES filings. Best not to guess here. Have you ever entered CH for China?

Valuation must be determined accurately and is best covered in a separate post which I have done on 05/09/2019.

These tactical elements are just some of the basics. We could also mention commodity descriptions, red flag screening, and plenty of other details. Trade policy is more strategic, encompassing trade agreements, incoterms, and dealing with enforcement agencies. There is a lot at stake so, hats off to the compliance teams.

For assistance contact mitch@52.91.45.227

No, I’m not referring to golf, but using links as a logistics term. The pandemic and recent events have made it clear that diversifying supply chains can help mitigate disruptions.

Logistics is tactical in support of supply chain strategy, so must be able to adapt to the planned diversification. The textbook terms nodes and links are descriptive in logistics and supply chain discussions. Nodes are fixed locations such as factories and distribution centers. Links are Logistics Service Providers (LSPs) which connect the nodes from pick up (first mile), through line-haul operations (middle mile), to end user delivery (last mile). The links include ocean and air carriers, freight forwarders, truck lines, integrated parcel systems, customs brokers, and possibly 3PLs. It is easier to change links than nodes. However, if diversification is to reduce supply chain disruptions, both nodes and links must be strengthened.

New LSPs must be evaluated for their export compliance and ability to perform first mile, middle mile, and last mile operations. Details matter. Failure to review documentation, for example, can cause customs delays. New LSPs can make or break supply chain strategy. Consider their services as “value adds” rather than just cost. Consistent performance is more important than rates when new links are utilized in your supply chain.

Diversifying any supply chain requires time, a complete project plan, upper management commitment, and attention to detail.

We can help you work with the links. Contact mitch@52.91.45.227

Clients often say “we’ve used the same harmonized codes for years” and “our commodities are duty free“. As a Licensed Customs Broker and consultant this tells me that I need to do some checking on the client’s behalf. Using obsolete or invalid HTS codes is a sign of an amateurish operation. It is likely that, for these clients, commercial invoice descriptions also need updating. If they are an exporter we should check ECCNs, License Exceptions, and Schedule B numbers as well.

The Harmonized Tariff Schedule code is a 10-digit import classification system that is specific to the United States. HTS codes, also called HTS numbers, are administered by the U.S. International Trade Commission (ITC).

Customs brokers use the HTS, along with CBP regulations, in their day to day business. Importers and traders may also make use of the HTS in determining duty rates. Checking the validity of harmonized codes at least semi-annually is a good business practice. What may be surprising is the frequency of revisions to the HTS.

The tariff archives show that the 2021 HTS was revised 12 times. Don’t assume that your codes are valid. A little due diligence helps avoid problems down the road. Contact mitch@52.91.45.227 for a review of your HTS codes.

Following up on my February 3rd post about the April 2022 Customs Broker License Exam, here is some info from the CBP website:

Past CBLE Information

The October 21, 2021 CBLE resulted in a 25% pass rate prior to appeal decisions.

The April 21, 2021 CBLE resulted in a 19% pass rate prior to appeal decisions. 

These results are significantly higher than for previous exams. The CBLE remains challenging, however, even for those who have experience in the field. If you are planning to take the exam on April 27th you should be well into your preparations by now.

Contact mitch@52.91.45.227 if you would like study tips.

My January post about due diligence in compliance included reviewing updated HTS and Schedule B codes. Another best practice is to check your ECCN codes and License Exceptions. Chances are you have been using the same ECCN and License Exceptions or EAR99 and NLR as default entries.

Here is some recent info from BIS (Bureau of Industry and Security) about changes to ECCN and License Exceptions. While this notice may not apply to you, the point is that ECCNs and License Exceptions can change. For help contact mitch@52.91.45.227.

1/12/2022
87 FR 1670

Information Security Controls: Cybersecurity Items; Delay of Effective Date

On October 21, 2021, the Bureau of Industry and Security (BIS) published an interim final rule that establishes new controls on certain cybersecurity items for National Security (NS) and Anti-terrorism (AT) reasons, along with a new License Exception, Authorized Cybersecurity Exports (ACE), that authorizes exports of these items to most destinations except in the circumstances described in that rule.  That rule was published with a 45-day comment period, which ended on December 12, 2021, and a 90-day delayed effective date (January 19, 2022). This rule delays the effective date of the interim final rule by 45 days (March 7, 2022).  This action does not extend or reopen the comment period for BIS’s previous request for comments on the interim final rule.

Rebecca Dabkowski•

Trade Compliance Director at Cambridge Isotope Laboratories, Inc

Keep filing your EEI to PR and USVI.

Mitch Kostoulakos, LCB 

Ad Hoc Logistics LLC, Licensed Customs Broker, International Logistics Consultant

Disappointing that US territories are treated as foreign countries.