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.

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.

Most shippers by now are quite comfortable submitting ACE Export (formerly AES) filings. I have found, though, that EAR99 and NLR are often entered by default. While these may be the correct entries, it is a good business practice to check and confirm.

As part of any Export Management Program, exporters need to make sure they are using correct commodity classifications and license exceptions. While freight forwarders can provide expertise in these areas the exporter bears primary responsibility for compliance. If you are automatically using NLR and EAR 99 you may be at risk.  According to EAR part 732 “For items subject to EAR but not listed in CCL the proper classification is EAR 99. EAR 99 is a basket for items not specified under CCL and appears at the end of each Category on the CCL.”

For immediate assistance with exports contact mitch@52.91.45.227 .

Mitch Kostoulakos, LCB commented on this

Pete Mento • 2ndManaging Director Global Customs and Duties, Crowe LLP4h • Edited • Here’s a reality slap for you: There are only about 14,500 Licensed Customs House Brokers in US. And let’s be serious – a significant portion are retired or not engaged in license focused activities. I would guess less than half are actually working, licensed Trade Professionals. Given the horror stories of the way people were treated taking the last exam, how difficult CBP makes taking it, the absurdity of NCBFFA’s ideas of monetizing and monopolizing our continuing education and how we are outrageously undervalued ….We are ripe to unionize. And no, I’m not joking. The argument back will be that automation and systems are overcoming the need for the insights of brokers. If you are under that impression, you clearly haven’t been paying attention. Importing and global trade is only becoming more difficult. The process of becoming a broker needs to evolve to reflect that. Apprenticeships, comprehensive exams, multiple levels of licensure and real continuing education developed by CBP in conjunction with a non biased group of people not in it for the cash must be considered. And we have to find a way to bring more young professionals into this line of work as we are – literally – dying and retiring off at an alarming rate. hashtag#importhashtag#logisticshashtag#tradehashtag#NCBFFAhashtag#globaltradehashtag#shipping…see

Sign me up Pete. Compliance and regulatory expertise is worth a lot more than brokers are being paid. Entries will continue to be commoditized and automated but they are just the tip of the iceburg.

A recent client project consisted of reviewing a number of entries to check harmonized codes and duty rates. This, of course, led to examination of the commercial invoices. As everyone involved in international trade knows, the commercial invoice is one of the primary documents of the transaction. While there is no universal standard format for commercial invoices, including the following key elements will help reduce customs delays and entry mistakes:

Invoice Number, Page Numbers – Avoids confusion for entries with multiple CIs or CIs with multiple pages.

Country of Origin– Best to use ISO country codes.

Related/Not Related parties

Incoterms and currency- these are elements of the sales contract. Indicate version of Incoterms (2010, 2020) as all parties may not be aware of updates.

Harmonized tariff # and duty rate if known

Description of goods – avoid trade names, brand names. What is it? What is it made of? What is it used for?

Summary of Value- must include IV Invoice Value. Can also include NDC Non Dutiable Charge (subtractions), AMMV Add to Make Market Value (additions), NEV Net Entered Value (bottom line- dutiable)

For immediate assistance contact mitch@52.91.45.227