HTSUS (Harmonized Tariff Schedule of the United States) classifications can be straightforward or not, as these two examples illustrate:

9506.69.2040 Baseballs

8532.10.0000 Fixed capacitors designed for use in 50/60 Hz circuits and having a reactive power handling capacity of not less than 0.5 kvar (power capacitors).

A thorough classification includes HTS lookup, GRI (General Rules of Interpretation) review, checking notes, and searching CROSS (Customs Rulings Online Search System). This is the procedural aspect of classification, but there is more. Most commodities require interpretation of the tariff language based on experience. Finally, the process needs to be documented for future reference and parts lists updated.

I sometimes recommend a binding ruling to ensure accuracy in entries. Binding rulings provide uniformity across all ports of entry, and protect the importer from variations in interpretation from current and future CBP personnel. Rulings can be requested on valuation and country of origin as well as classification. The downside to obtaining a ruling is that you must follow it or be subject to penalties, although rulings can be appealed.

If you decide to obtain a ruling it is best to engage an expert to draft your request for a specific classification rather than leave it totally in the hands of CBP.

For help with binding rulings contact mitch@52.91.45.227.

Earlier this week I posted about the appeal process for the Custom Broker License Exam. CBP has released the pass rate for October 2021.

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

Here is a sampling of exam questions with answers below:

Category III – Marking

9. What is the appropriate country of origin marking for a pair of shoes manufactured in China and imported with its unsealed shoebox that reads “Kicks! America’s Favorite Sneaker”?
   A. Shoes must be marked with country of origin; shoebox is exempt from country of origin marking.
   B. Shoes are exempt from country of origin marking.
   C. Both the shoebox and shoes must be marked with country of origin.
   D. Only the shoebox must be marked with country of origin.
   E. Shoes and shoebox can be marked with a sticker stating the country of origin.

Category VIII – Classification

34. An article of base metal containing two or more base metals is classified by the metal that
    ______.
    A. Is referenced last in the HTSUS
    B. Imparts the essential character of the article
    C. Predominates by weight over each of the other metals
    D. Has the highest value
    E. Is essential to its actual use

Category XI – Value

56. Exporter E provides the following quantity discounts on mattresses purchased by importers before
    their importation:
    • 1 to 99 mattresses – no discount
    • 100 to 499 mattresses – 10% discount
    • Over 500 mattresses – 15% discount
    Under the first scenario, Importer X purchases and imports 120 mattresses in a single shipment. The invoice price reflects a 10% discount. Under the second scenario, Importer Y purchases 120 mattresses in a single transaction at a price which reflects a 10% discount but imports them in four separate shipments each comprising 30 mattresses. What is the customs value of the imported mattresses under the two scenarios?
    A. Under both scenarios, the customs value is the price actually paid or payable for the imported mattresses reflecting a 10% discount.
    B. Under the first scenario, the customs value is the price actually paid or payable for the imported mattresses reflecting a 10% discount. Under the second scenario, the customs value is the price actually paid or payable for the imported mattresses reflecting no discounts.
    C. Under both scenarios, the customs value is the price actually paid or payable for the imported mattresses reflecting no discounts.
    D. Under the first scenario, the customs value is the price actually paid or payable for the imported mattresses reflecting a 10% discount. Under the second scenario, the customs
    value is the price actually paid or payable for the imported mattresses reflecting a 15% discount.
    E. In both cases, the customs value is the price actually paid or payable for the imported mattresses reflecting a 15% discount.

Answers 9-C, 34-C, 56-A

Logistics and compliance professionals have always understood the complexity of 21st Century supply chains. The last couple of years have certainly raised this awareness with C-level executives and owners of smaller businesses as well. LinkedIn contacts and outreach from search firms tell me that logistics and compliance expertise is in demand.

You may be looking to add a logistics or compliance pro to your staff and, understandably, want to make a good selection. In the meantime let me suggest training your shippers in some export compliance basics. I have always warned that compliance should not be left to a busy shipping department. However, a few hours of training is a good investment as it will enable shippers to spot possible export violations before shipments leave your dock. It will also allow your new professional to focus on more strategic matters and hit the ground running.

BIS (Bureau of Industry and Security) offers basic on-line export training at no cost. Why not improve the skills of your existing staff (on company time of course)?

Ad Hoc Logistics can also help with specific training at your site. Contact mitch@52.91.45.227.

Congratulations to those applicants who have passed the October 2021 CBLE (Customs Broker License Exam). The exam is very challenging with typical pass rates in the 10-15% range, although the October rate has not yet been posted. If you came up short consider taking it again in April 2022 now that you have some testing experience. You also have the option of appealing your answers to specific questions. Here is some info from the CBP website about how to appeal. Check the link for details.

How To Appeal

Appeal Instructions

Who can appeal?

Anyone who takes a Customs Broker License Examination and does not achieve a passing score may appeal questions on that examination.

When must an Appeal be submitted?

Any appeal must be submitted within 60 days of the date of the letter notifying the applicant of his or her score.

What is the basis for an Appeal?

The applicant must submit a compelling argument why his or her answer is better than the official answer for a specific question, or why the appealed question has no possible correct answer.

https://www.cbp.gov/trade/programs-administration/customs-brokers/how-appeal

The October 2021 CBLE (Customs Broker License Exam) has been posted to the CBP website. The answer key and pass rate have not yet been posted. Here is one of the easier questions from the Broker Compliance category.

76. Below are the basic requirements to obtain an individual broker’s license EXCEPT:
    A. Be a citizen of the United States
    B. Not be an employee of the Unites States government
    C. Be at least 18 years old at the time of submission of license application
    D. Be of good moral character
    E. Obtain a passing grade of 75% on the Customs Broker License Exam (CBLE)

The correct answer is C as applicants must be at least 21 years of age. It is well known that the exam is difficult to pass. How does CBP judge moral character? An extensive background investigation as noted by CBP:

Q:	What does the background investigation include?
A:	Each broker license applicant must undergo a background investigation that includes a fingerprint analysis and a review of character references, credit reports, and any arrest record. Arrests or convictions do not necessarily preclude the issuance of a license.

Factors to consider when selecting a freight forwarder

jamaica-gleaner.com • 

https://jamaica-gleaner.com/article/shipping/20211102/factors-consider-when-selecting-freight-forwarder

Mitch Kostoulakos, LCB Ad Hoc Logistics LLC, Licensed Customs Broker, International Logistics Consultant

The article covers most of the factors in choosing a forwarder. I would add the ability to advise on export compliance. While exporters bear the primary responsibility for compliance, forwarders can be a valuable resource in this area.

As a TRB committee member I know that this webinar will be worth attending.

A reminder that TRB is hosting a FREE webinar on Wednesday, November 3rd from 2:00 to 3:30 PM Eastern that will identify how to keep cargo moving.

More details and registration information can be found here:

https://lnkd.in/d7sB8vgc

Assisting clients with export compliance is a big part of my consulting practice as well as a steady topic of blog posts. As logistics and compliance managers know, there are plenty of regulations on the export side of international transactions. However, this only brings us to the waters edge (or land borders with Canada and Mexico). US exports are other countries’ imports and they all have different regulations.

Some of the recent challenges overcome by a very diligent client included:

How to be Importer of Record (IOR) in the UK without a physical presence.

How to engage an Indirect Representative.

How to defer VAT. How to bill duties.

Are EORI (Economic Operators Registration and Identification) and VAT numbers in place for both UK and EU? Remember UK is no longer in the EU.

Is one EORI number sufficient for all EU countries?

Is a VAT number needed for individual EU destination countries?

Can EU customs broker also act as freight forwarder or make recommendations for movement within EU?

Are last mile and delivery arrangements in place?

It is not easy to obtain all these answers in advance but a little planning goes a long way. Contact mitch@52.91.45.227 for assistance.

The topic of last week’s post was diversification of the nodes and links in supply chains. A daunting task to say the least. In the current turbulent environment traders are looking for alternatives to help solve their logistics problems. This is a good idea. However, when discussing rates and services with a Logistics Service Provider (LSP), don’t forget compliance. While exporters bear primary responsibility for compliance, LSPs are a valuable resource. If you have already implemented an Export Compliance Program (ECP) congratulations! This will reduce the risk of changing LSPs.

Export compliance is good risk management. While risk management always gets C level attention, export compliance is often a mid-management or lower level function. Fines and penalties for violations should make export compliance a basic part of risk management.

If you are relying on your logistics service providers, or your busy shipping department, for export compliance you may be at risk. Both upper management commitment and front line training are essential parts of an ECP.

BIS (Bureau of Industry and Security) offers a number of on-line courses at no cost. Check them out under the Compliance and Training tab and get started!

Under the EAR (Export Administration Regulations) criminal penalties can reach 20 years imprisonment and $1 million per violation. A denial of export privileges prohibits a person from participating in any transaction subject to the EAR. Furthermore, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person.

contact mitch@52.91.45.227 for help with export compliance

A recent LinkedIn post by Kristen Morneau is an informative and timely reminder that diversifying supply chains can help mitigate disruptions. This is certainly a long term strategy which must be driven by upper management. Consider the complexities of finding new suppliers that can meet your standards, offer competitive pricing, and then smoothly integrate into your supply chain.

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 suppliers should be evaluated for their export compliance and ability to perform first mile tasks. Vague or incomplete commercial invoice descriptions, 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