All posts by mitch

Nuts & Bolts

Are You Unmanaging?

Many of my clients are hard-working owners or operators of small businesses. They don’t have in-house compliance or logistics expertise so must wear several hats. Day to day activities or unexpected issues take up most working hours. As a result, functions such as logistics planning and import/export compliance are often unmanaged.

Making sure that your business is in compliance with import and export regulations is good risk management as well as good business. Think of it as insurance. I have written about compliance as risk management in previous blog posts. Here are a few:

  • Manage the Risk, 01/15/2020
  • Start off 2020 With a Customs Review, 01/09/2020
  • Compliance Nuts and Bolts, 11/30/2019
  • Red Flags, 09/29 and 10/06/2019
  • Let Shippers Ship, 06/13/2019

Logistics consists of equal parts planning, execution, problem solving, review/adjust, rinse and repeat. If you find yourself spending a lot of time problem solving then planning and/or execution need to be improved. Trusted LSPs (Logistics Service Providers) and 3PLs are valuable resources. At the very least, however, they need to be managed through monthly or quarterly review meetings for which you set the agenda. Here are a few more blog posts for reference:

  • Negotiate Value Before Price, 09/10/2019
  • Managing Carrier Relationships, 08/08/2019
  • Got Protocols? 04/16/2019

Don’t be an unmanager!

For help contact mitch@52.91.45.227

Nuts & Bolts

Are you taking the Customs Broker exam in April?

Posted on LinkedIn

Are you taking the Customs Broker exam in April? If you are planning to take the customs brokers exam in April you should be well into your preparations by now. Passing rates are usually in the single digits so the exam is not easy. However, a step by step study plan will give you confidence. I devised a simple method that worked well for me. Read the attached post for details and best of luck.

Regulatory Updates

USMCA Trade Deal

I just participated in another very informative KPMG webcast. The topic was The USMCA Trade Deal- The Way Forward. Here are some highlights from my notes:

  • USMCA is not NAFTA 2.0, it is much more complex
  • Full ratification is expected by all 3 countries when Canada completes review by early March 2020
  • In force 3 months later most likely July 2020
  • Summary of outcomes includes 5 areas…. Labor, Dispute Settlement, Environmental Provisions, Intellectual Property Rights, Rules of Origin
  • Overview of Agreement; 34 chapters, 13 annexes, 12 side letters
  • Includes uniform regulations and marking rules (not yet released) for all 3 countries

In the biggest differences with the NAFTA agreement, USMCA includes new regulations in the areas of digital trade, e commerce, rules of origin, express shipments, de minimis allowance, and environmental standards. No doubt these changes will have a big impact on supply chains. Trade professionals will be challenged as they get up to speed.

Regulatory Updates

What is Substantial Transformation?

Just participated in a KPMG Tax Watch webinar on Country of Origin- Substantial Transformation.

The presenters did an excellent job, as usual, covering a lot of detail. Some of the information served as a refresher to me, while other segments offered new material. Here are my takeaways:

  • Marking rules of origin- Part 34….articles wholly obtained from one country.
  • Rules of origin- Part 102…pertain to NAFTA and other FTAs
  • Preferential rules of origin can be found in FTA General Notes…HTUS
  • Other…Product of Jurisprudence applies substantial transformation test
  • Note- 2 sets of rules can apply to same transaction…marking or tariff rules

Substantial Transformation Rule….used to determine country of origin if articles or components are not wholly obtained from one country…Does article have new name, character, or use?

  • Change in character- altered physical characteristics of article or components. Were changes cosmetic? What was the process that resulted in change?
  • Change in use- Is end use of article interchangeable with end use of components? Is end use of component predetermined at time of importation? What was the process that resulted in change of use? Predetermined end use generally precludes substantial transformation but subject to specifics of article/components in question.
  • Change in name- this is the least compelling of the factors supporting substantial transformation. Do components retain original name after processing?
  • Subsidiary/Additional Factors- extent and nature of operations (complex or simple); value added and/or cost incurred during transformation process; essential character of article (components transformed into finished product); change from producer to consumer good; tariff shift.

The Role of Software of Firmware

  • Mere downloading of software or firmware does not generally result in substantial transformation.
  • Software development location is given more weight than where downloaded.
  • Software which enhances existing functionality is generally not considered substantial transformation.
  • PCB manufacturing is complex and each situation needs to be considered separately re: Country of Origin and Substantial Transformation.

KPMG Recommended Action Steps for Importers

  • Develop well documented analysis or obtain binding rulings before importation.
  • Train suppliers and trade partners and communicate plans.
  • Conduct periodic internal audits and risk assessments.
  • Documents policies and procedures.

Nuts & Bolts

Manage the Risk


I’m always amazed when clients tell me that they leave export compliance in the hands of their shipping department.

If you are relying on your busy shipping department or your logistics service provider for export compliance you may be at risk. Both upper management commitment and front line training are essential parts of an Export Management & Compliance Program. 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. Best practices, including an EMCP, will reduce exposure to steep fines and penalties as described by BIS (Bureau of Industry and Security) on their website https://www.bis.doc.gov/.

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

Penalties- Violators of the Export Administration Act of 1979, may be subject to both criminal and administrative penalties. When the EAA is in effect, criminal penalties can reach 20 years imprisonment and $1 million per violation.

Privileges – A denial of export privileges prohibits a person from participation in any transaction subject to the EAR.

contact mitch@52.91.45.227 for assistance.



Nuts & Bolts

Start Off 2020 With a Customs Review

An annual customs review is a good business practice. Another good practice is to make sure you are taking advantage of regulations that allow importing on a duty free or preferential basis. Here are a few basic items for your annual customs review. Contact mitch@52.91.45.227 if you need help.

  • Classification– review annual 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– this is a refund of duties paid on imports that are later exported. As supply chains expand there may be 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.
  • Trade agreements– programs which allow duty free or reduced duty rate entries. There are many agreements (such as NAFTA) in place.
  • 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 prior disclosure can help mitigate penalties.

Regulatory Updates

Canada Customs Tariff 2020

Canada Border Services Agency has updated their customs tariff effective January 1, 2020.

Canada is the 2nd biggest US trading partner, ranking just below China. Here is a link to the Canada Customs Tariff 2020. For 10 digit harmonized codes, the first 6 are universal and the last 4 differ from country to country.

https://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2020/menu-eng.html

For assistance contact mitch@52.91.45.227

Regulatory Updates

HTS Updated

Posted on LinkedIn


January is a good month to review harmonized codes. The United States International Trade Commission has updated the Harmonized Tariff Schedule of the United States effective January 1, 2020.

Using obsolete codes can result in customs delays, inaccurate  duty assessments, or fines and penalties so it is a good business practice to check the tariff. While you are at it are you sure EAR99 and NLR apply to your exports?

For assistance contact mitch@52.91.45.227

Regulatory Updates

How to Determine ECCN

In a previous post we discussed how to determine ECCN (Export Control Classification Number). Here is some additional information from BIS which can help.

 While it is true that many exported commodities can be designated EAR 99 and NLR (No License Required), it is important to first check for an ECCN. The correct ECCN is necessary in order to determine if a license is required for your shipments.

There are three ways to determine ECCN: 1) self classify, 2) consult manufacturers of commodities, 3) request a classification by BIS.

Here is a link to the CCL (Commerce Control List) Index which is a good place to start:

https://www.bis.doc.gov/index.php/documents/regulations-docs/2329-commerce-control-list-index-3/file

Here is a link to manufacturers’ commodity classification info:

https://www.bis.doc.gov/index.php/documents/licensing-forms/237-commodity-classification-information-1/file

For immediate assistance contact mitch@52.91.45.227

Regulatory Updates

Compliance Nuts and Bolts

The November 2019 edition of Logistics Management magazine includes an excellent article on trade compliance. 2020 Trade Update: More Complexity in Compliance by Patrick Burnson is a worthwhile read for trade professionals.

Some of the complex global issues to be monitored are the US-Mexico- Canada agreement, US-China tariffs, and the status of Brexit. Compliance managers and shippers are advised to get back to basics irrespective of international trade agreements.

Here are a few takeaways from the article:

Incoterms 2020 – changes can impact the price paid for materials and products. Shippers should review DDP contracts to make sure they are being accurately invoiced especially in light of the China 301 tariffs.

Antidumping and Countervailing Duties  (AD/CVD) – CBP has increased focus on imports subject to AD/CVD . Internal controls and periodic assessments can help reduce risk.

HTS Classifications – Review of HTS and Schedule B classifications is one of the most basic compliance tasks. Tariff numbers are frequently changed, updated, or deleted. Failure to keep on top of this can result in customs delays and/or inaccurate duty assessments.

Bond Sufficiency- Recent changes to duty rates, especially China 301 tariffs, are requiring shippers to increase their bond amounts. The difficulty is in projecting duties, fees, and taxes over the next 12 months.

Preparation and Planning- CBP reports an uptick in mistakes from traders who are trying new strategies to save on tariffs. Experts recommend looking at data in the same light as CBP does and then establishing compliance procedures. A strategic approach toward Section 301 tariffs could be analyzing the biggest dollar amounts paid to see where changes can be made in your supply chain.

In summary the challenge for compliance and logistics professionals is to both get back to basics and, at the same time, pay attention to new regulations.

For immediate assistance contact mitch@52.91.45.227