All posts by mitch

Nuts & Bolts

Negotiate Value Before Price

We have discussed negotiating with LSPs in previous posts. Here is a quick summary which can help guide engagements with providers. The key takeaway is value before price.

The motor carrier and air freight industries are extremely competitive, giving shippers an advantage in carrier selection and negotiations. A common mistake made by small and medium sized clients is failing to prepare before meeting with carrier representatives. Another mistake is focusing on price. A better strategy is to emphasize value in your discussions with LSPs. If you determine that they have the capabilities to provide quality services, then you can move the discussion to price. Consider: if simply asking for lower rates can result in transportation savings, how much better would the result be with a little preparation? Here are some suggestions from someone who has spent many years on the carrier side of the table.

Determine your specific transportation needs and goals ….for example

  • Price- compare net rates (not % off because base rates differ), minimums
  • Transit Times/Reliability- including pick up and delivery, terminal services, linehaul
  • Inventory Costs- reduced transit time = reduced inventory costs… how transportation adds value
  • Product Differentiation- faster, better service as a marketing tool
  • Capability/Access- carrier has right equipment in right place at right time
  • Security- carriers claim ratio and loss/damage experience
  • Relationship- responsiveness and problem solving protocols

Analysis Prior to Negotiation

There is not much advantage to withholding your shipping profile from LSPs. Because the industry is so competitive you will get a better deal if transportation providers know what volume they are bidding on and any specific service requirements. If this information is not available to them they will hedge their bets and be less aggressive in their offers. Gather some data and present it. This will give you professional status in the eyes of your carriers. Here is some minimum information needed. Most of it can be found in bill of lading or invoice files.

  • Volume/Frequency- # of shipments per day, week, or month
  • Weight- average weight per shipment
  • Dimensions- standard dimensions, if any… palletized or non palletized…pictures are helpful
  • Heaviest Shipping lanes- domestic and international
  • Services- priority or economy, express or deferred
  • Density- pounds per cubic foot ( for motor carriers)
  • Classification- NMFC item numbers (for motor carriers)
  • Dimensional Weight or Dim Factor (for air freight forwarders)
  • Packaging type- transportation only, display, labeling
  • Freight Payment Terms- prepaid, collect, third party
  • Control- Who has authority to sign an agreement? Who makes routing decisions?

Request for Proposal/Request for Quotation

A formal RFP or RFQ is an effective way to both reduce transportation costs and gain the value that you need from your carriers. Ad Hoc Logistics can prepare your RFP/ RFQ, get it to the appropriate transportation providers, and even negotiate on your behalf. Get started by contacting Ad Hoc Logistics.

Regulatory Updates

What are ADD/CVD?

Anti-Dumping Duties and Countervailing Duties are risks to be avoided in international trade. The topic can be confusing so here is a quick summary of ADD/CVD. Consult the CBP website for details.

Anti-dumping (ADD) and Countervailing duties (CVD) are intended to protect the US manufacturing industry from foreign manufacturers flooding the market at artificially reduced prices.  Dumping occurs when foreign companies sell goods in the US at less than fair value.  Countervailing situations are when a foreign government gives their companies tax breaks and subsidies allowing them to sell goods cheaply in the US. ADD and CVD lead to foreign undercutting of US manufacturers prices.

Anti-dumping duties are calculated at a company-specific level, where the duty amount makes up for the difference between the foreign manufacturer’s price and fair market value. In these cases, certain companies have been identified, investigated, and additional duties have been charged on their products.

Countervailing duties are determined on a country-specific level, and the duty rates counteract the subsidy or tax breaks given to the foreign manufacturer by their government with the intent of leveling the playing field.

When either of these situations occur, petitions for relief may be filed by U.S. manufacturers or businesses with the Department of Commerce (DOC) which, along with the US International Trade Commission (USITC), opens an investigation. If the results are positive, U.S. Customs and Border Protection (CBP) withholds liquidation of entries and collects ADD/CVD duties. The entries are not liquidated until the DOC instructs CBP headquarters to do so.

 CBP procedures affecting US importers

A positive result; an investigation which finds evidence of injury to the US industry, triggers CBP procedures which affect US importers. For an Anti-dumping (ADD) case CBP issues a case number beginning with (A), Case # A…. for a particular manufacturer. Importers and/or customs brokers then must report the case number on every entry (CBP form 7501, block 29) pertaining to this manufacturer. CBP will also look for evidence of bond during their investigation. If determined guilty, CBP will set the penalty and retroactively collect additional duties through the bond. These additional duties are determined by ITC and DOC with CBP as the enforcing agency.

Procedures for countervailing duties (CVD) are similar to those for anti-dumping duties (ADD): Investigation, case number beginning with (C), retroactive penalties. The difference is that under CVD the foreign manufacturer is subsidized by their government.

How to determine if a commodity falls under ADD/CVD

Your customs broker should be able to help you determine if a commodity falls under ADD/CVD. Further, you can review the scope of ADD/CVD orders to determine whether the merchandise falls under the scope of an order.  The scope of AD/CVD orders can be found in several places:

ADD/CVD is a highly technical aspect of trade and requires due diligence on the part of importers. It is imperative to engage the services of a reputable and knowledgeable customs broker. While the importer of record (IOR) bears primary responsibility for following the law, the broker’s role is to guide their client and make sure that proper procedures are followed.

Nuts & Bolts

LinkedIn Comment

Andrea Jones • 2ndMarketing Communications Professional // Writer // Strategic Planner1wI am becoming increasingly frustrated with what LinkedIn is becoming — an avenue for what I will lovingly call “junk mail.” Almost all of the connection invitations I’ve received over the past few months have been from salespeople looking to prospect. What started as a business relationship-builder has become a direct-marketing vehicle. Am I the only one frustrated by this? hashtag#linkedi

Mitch Kostoulakos,

Agree, although you never know when a connection will lead to an opportunity. I usually ignore random requests unless I have met or done business with the requester. I  pay more attention to a request if it has a note attached. When I send a connection request I always add a note indicating why I would like to add them to my professional contacts. 

Regulatory Updates

Classification Best Practices

As an independent consultant and Licensed Customs Broker my most frequent client requests are for classification help.

There are 3 ways to classify: 1) self classify, 2) consult with commodity manufacturer, 3) request rulings from CBP (imports) or BIS (exports).

HTS and Schedule B best practices include checking and confirming commodity classifications at least annually. Here is some info which will help:

  • Classification is subjective- tariff schedules do not necessarily keep up with technology
  • Customs definitions can differ from industry definitions
  • Different interpretations exist between countries and also between ports within the same country

The basic components of a best in class process are:

  1. Break down items from universe into groups
  2. Research- even if you think you know the correct classification    customsinfo.com is a good tool
  3. Identify necessary info needed for classification such as materials, dimensions, intended use, etc
  4. Documentation- needed to support your determination
  5. Automation- implementing a software classification tool will improve efficiency and productivity
  6. On-going maintenance and monitoring for changes in HTS binding rulings and in your products is essential

Supporting documentation includes

  • spec sheets, drawings, photos
  • info requests from engineers, scientists, chemists, etc
  • HTS chapter and section notes that apply to your product
  • explanatory notes
  • informed compliance publications
  • customs rulings that apply to your product
  • record keeping (5 years)

contact mitch@adhoclogisticsfor immediate assistance.

Nuts & Bolts

Performance Chain Revisited

The logistics industry is heavily dependent on data and technology. The most successful LSPs (Logistics Service Providers) are innovative in their efforts to improve service and productivity to the benefit of both clients and providers. The nuts and bolts of logistics also involves people, so basic front line management skills can improve operations.

Here is a proven method for the toolbox. The links of the performance chain can help with day to day management and problem solving.

Expectations– Are goals and deliverables crystal clear? Don’t assume. Feedback– Information which is specific, timely, and relevant. Not just an annual review. Resources– Time, tools, and staffing to do the job right. Skills/Knowledge– Is training needed? Managers often point to training as the solution to problems. However, if employees know how to do the job training may not be the answer to performance issues. Look to the other links of the chain. Capacity– Does the person have the physical and mental ability to do the job with training? If not, reassign or terminate, and screen new hires more carefully. Incentives– What rewards are most meaningful to the workforce? These include money, benefits, flex time, etc. and will vary for individuals. Incentives are external and provided by the company. Motivation– Internal and personal to each employee. Top performers are self motivated. For others the idea is to bring out their motivation through incentives, training, or simply clearer expectations and feedback.

New to management? The performance chain is a good starting place. Experienced manager? Old dogs can learn new tricks.

Thanks to Jack Zigon for refreshing my memory.

Nuts & Bolts

LinkedIn Post

Posted 8/16/2019

Taking the Customs Broker exam ?

In a recent post I gave an example of a tricky question which sometimes appears in the exam. Here is the question and the correct answer (D).

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

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.

The exam is difficult, with normal passing rates of around 11%. For my prep strategies click here:

Customs Broker Exam Prep
Nuts & Bolts

Trade War Comment

Mitch’s comment on LinkedIn

Pete Mento • 2ndManaging Director Global Customs and Duties, Crowe LLC1dThe decision to split Section hashtag#301Tariff List 4 so that a portion doesn’t go into effect until well after the holidays was a major concession and a possible significant misstep by the hashtag#WhiteHouse. S

Mitch Kostoulakos, LCB   

I’m not an economist but how about this? Declare victory and call off the trade war. With interest rates at historic lows borrow money and invest in badly needed infrastructure. Maybe avoid recession.

Nuts & Bolts

Manage Your Carrier Relationships

LSPs, especially motor carriers, make extensive use of “customer entertainment” to gain and retain market share. Lunches, dinners, and sporting events are a big part of the job for carrier representatives. Developing client relationships makes the time and expense worthwhile for the rep even when business is not actually discussed. Access to decision makers, information to be used in negotiations, opportunity to present logistics solutions, and benefit of the doubt when problems arise are the result of good relationships for the LSP.

For the client the benefits can include good faith negotiations, competitive pricing, industry intelligence, and faster problem solving . It is best, however, to manage the relationship. Keep it professional and not personal.

Business lunches can be productive for both parties. Clients should have an agenda with a few discussion points. Remember, as with any meeting, if you don’t have an agenda you are subject to someone else’s. Mention your agenda when scheduling lunch and you will have your rep’s attention. Consider having lunch brought in so you are on your turf.

Expensive dinners and sporting events are much less productive from a business perspective. Food and drink becomes the main event. Business discussions are limited especially if spouses are in attendance. The game takes precedence at sporting events. Big ticket entertainment turns the relationship from professional to personal. It is best to limit your exposure and partake sparingly if at all.

In summary manage your carrier relationships, Don’t let your providers “reward” you for your business. It makes it much more difficult to change providers or negotiate new deals.

Nuts & Bolts

What’s a Schedule B Code?

Posted on LinkedIn:

A recent client project involved research and advice about Schedule B codes used in AES (Automated Export System) filings. Shippers often use Schedule B or Harmonized codes they have been given without understanding what the codes mean. 

 As I usually explain to clients, Schedule B is for export from the US and Harmonized codes are for imports. Both are based on the HTS system in which the first 6 digits are universal.

https://lnkd.in/eVc

Importing countries can ( and do) use their own last 4 or 6 digits.  So, since a US export is another country’s import, the Schedule B used for export may not match up exactly to the importing country’s harmonized code. 

As noted in a previous post, codes are updated annually so it is a good business practice to check and verify your data. If you need help contact mitch@52.91.45.227T