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Nuts & Bolts

Compliance Alphabet Soup Revisited

ECCN, CCL, NLR, EAR99, AES, HTS, SchedB, and these are just the basics…

When the ECCN (Export Control Classification Number) comes up on export documents many shippers automatically enter EAR 99. For license questions NLR (No License Required) is often used as a default entry. While these may be the correct entries, it is a good business practice to check and confirm.   Logistics providers can offer expertise in these areas but the exporter bears primary responsibility for compliance.

As part of any Export Management Program, exporters need to make sure they are using correct commodity classifications and license exceptions. Your commodities may be listed on the  CCL (Commerce Control List) in which case EAR 99 is not valid.  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.”

Licensing is a function of both the ECCN and country of ultimate destination. If you determine that your commodity is listed on the CCL the next step is checking license requirements. Here is some info from the BIS (Bureau of Industry and Security) website:

Country Guidance

The country of ultimate destination is a key factor in determining license requirements administered by the Bureau of Industry and Security (BIS) pursuant to the Export Administration Regulations (EAR). BIS maintains the Commerce Country Chart to use in conjunction with other portions of the EAR to determine whether a license is required.  Please review Part 732 of the EAR for additional information on how to use the EAR, including the Commerce Country Chart.

For immediate assistance with exports contact mitch@52.91.45.227 .

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Nuts & Bolts

What is Country of Origin?

As we discussed in a previous post, duty rates on imports are determined by harmonized code, valuation of the commodity, and country of origin. While trade agreements such as NAFTA have specific and complex rules of origin, the basic COO elements are:

Country in which the commodity is made, mined, grown, manufactured, or underwent substantial transformation. The 3 way test for substantial transformation is new name, new character, new use.

Need help? contact mitch@52.91.45.227

Nuts & Bolts

Let Shippers Ship- Revisited

During our initial consultations clients often tell me that their shipping departments are responsible for screening exports for red flags and denied parties/unverified parties. This is a mistake for several reasons.

  • Pressure to get shipments out the door can get in the way of due diligence
  • Shipping personnel may lack training in export compliance
  • Shippers most likely do not have authority to stop orders when they spot red flags
  • Time and money wasted in processing orders all the way through to packing and shipping only to be stopped or cancelled
  • In the event of a mistake there is no final check when the truck backs up to the dock

Export compliance, list screening, and checking for red flags should be a front end process and not a last minute shipping function. Let your shippers do what they do best by moving the freight but don’t expect them to be regulatory experts.

Need help? Contact mitch@52.91.45.227 for a no obligation initial consultation.

Nuts & Bolts

Mexico Trade

In a recent post we discussed the World Bank Logistics Performance Index (LPI) for 2018. Mexico ranks 51st overall with customs clearance as the lowest category. As Mexico is the US’s 3rd largest trading partner, this can cause delays and frustration for traders.
Here are some takeaways from  a US Commercial Service webinar that may be helpful in understanding the process.

Mexican Importer of Record (IOR)

  • very rare for foreign company to be MX IOR
  • MX IOR is always liable for duties/taxes and compliance with non tariff barriers
  • MX brokers have significant liability, explaining their caution and due diligence which can become red tape and delays for the US exporter
  • MX IOR must have tax registration number and be listed on importer registry

Classification and Valuation

  • HTS code up to 6 digits same as other countries but subject to customs verification
  • MX uses 8 digit codes so last 2 digits are unique to MX
  • MX broker verifies or determines correct code and non tariff barriers
  • Valuation determines duty/tax according to MX law based on WTO rules (TV- Transaction Value, etc)
  • Non tariff barriers are regs not related to taxation such as trade agreements, anti dumping, etc
  • Binding rulings can be requested for classification, valuation or NAFTA rules of origin

When Are Goods Seized?

  • unauthorized port of entry used…mostly contraband
  • failure to comply with non tariff barriers
  • goods not declared on entry docs including errors
  • false name/address of IOR or false invoice
  • undervalued goods

Frequent Issues for MX Customs

  • Origin verification for US and CA companies claiming NAFTA preference
  • Failure of exporters  to respond to questionnaires from MX customs
  • Exporters address different from address on NAFTA cert
  • Exporters lack of knowledge about NAFTA rules of origin
  • Lack of original records

MX Customs Recommendations

  • Know your MX buyer and their customs broker
  • It is OK to contact MX customs for info…they will reply in English
  • Make sure NAFTA certificates of origin are accurate….many exporters simply guess
  • Keep original copies of documents….MX customs will only verify using original docs
  • Make sure to respond to questionnaires or requests from MX customs within 30 days
  • Communicate before goods are seized or litigation begins…best to use a MX attorney
  • Remember, prior notification to avoid liabilities does not exist in MX as it does in US
Nuts & Bolts

World Bank LPI for 2018

Posted on LinkedIn

Surprised? Check out these logistics rankings… The World Bank has posted their Logistics Performance Index for 2018. The index benchmarks 6 areas of performance and gives nations a score from 1-5 for each area.

The benchmarks are 1) Efficiency of customs clearance process, 2) Quality of trade related infrastructure, 3) Ease of arranging competitive pricing for shipments, 4) Competence and quality of logistics services, 5) Ability to track and trace shipments, and 6) Timeliness of shipments in reaching destination within scheduled time of arrival.

For 2018 the US ranks 14th overall, down from 10th in 2016, with an average score of 3.89 for the 6 benchmarks. The highest US score is 4.09 for tracking and tracing, and the lowest is 3.51 for ease of arranging international shipments. This may be due to the wide variety of services available to US traders which can make comparisons more complex.

Germany ranks highest in overall LPI rank.

https://lnkd.in/dh7Srey

Around The World

lpi.worldbank.org

Welcome to the 2018 LPI The LPI is an interactive benchmarking tool created to help countries identi…

Regulatory Updates

Importers, Help Yourself…

Posted on LinkedIn

Here are a few best practices for your annual customs review. Contact mitch@52.91.45.227 if you need help.

Classification– review 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– you may qualify for a refund of duties paid on imports that are later exported. As supply chains expand look for 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.

Check for trade agreements– programs which allow duty free or reduced duty rate entries.

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 voluntary disclosure can help mitigate penalties.

Regulatory Updates

Don’t Know Where to Start with Export Compliance?

Posted on LinkedIn

Clients often know that they need help with export compliance but don’t know where to start. A written Export Compliance Program is the ideal way to keep compliant and is a good investment for any company to make. An ECP establishes clear accountability, written instructions, and reduces risk of non-compliance. However, an ECP is costly and time consuming, requiring a significant commitment on the part of management. If the exporter has not experienced problems or incurred any fines it is easy to make compliance a “back burner” issue. But doing nothing does not mitigate the risk.

Here are few best practices to help you get started :

Review and confirm correct Harmonized Tariff and Schedule B codes in January and July as updates occur.

Check EAR regulations for correct ECCN and license exemption codes. Are you automatically using EAR99 and NLR? Bis.gov can help.

If exporting under ITAR you need a responsible trained officer.

Check common “Red Flags” such as denied parties lists, entities lists, and unverified lists. Once again, bis.gov provides details and training.

Review export documentation for possible improvements.

Make export compliance a front-end process not a last minute shipping function.

Nuts & Bolts

LinkedIn Comments

4 Tips to Improve Carrier Relationships

  • Published on May 23, 2019

Anthony (Tony) Nuzio

Founder/CEO ICC Logistics Services

Status is online

Mitch Kostoulakos, LCB   YouLicensed Customs Broker, International Logistics Consultant

Hi Tony, these are good tips. I would add share your shipping profile (volume, frequencies, lanes, freight characteristics) with prospective carriers. Holding back this info won’t get you a better deal.


Nuts & Bolts

Absolute Performance Anyone?

Posted on LinkedIn

Most logistics service providers (LSPs) present clients with monthly reports touting their on time delivery percentage. It is easy to become complacent when LSPs routinely report 97-99% on time service after taking exceptions for weather and other factors.

Why not challenge them to measure absolute performance failures instead of percentages? In a high volume operation even a small percentage can mean a lot of late shipments and unhappy customers. In a smaller operation with fewer customers every shipment is critical. If LSPs can track and report percentages they should be able to do the same for absolute numbers of shipments.

Finally, if you are an LSP, remember that you have a client on both ends of the shipment so service failures have twice the impact. Different metrics are like fresh eyes on an operation.

Regulatory Updates

How to Determine Customs Value

Posted on LinkedIn today:

Customs entries on imported merchandise involve calculating duties and taxes based on commodity classification (HTS), country of origin, and entry value. In most cases the commercial invoice or CI value is used for duty calculation. In situations where the transaction is not so clear Customs has established an appraisement hierarchy to determine entry value. The details can be found in US Customs and Border Protection (CBP) regulations 19 CFR part 152. Here is a summary:

Appraisement Hierarchy

1) Transaction Value- actual invoice value

2) Transaction Value of identical merchandise- same country, same class and kind

3) Transaction Value of similar merchandise- same country, commercially interchangeable

4) Deductive Value – start with US retail selling price and deduct commissions, transportation, insurance, duty/tax, and value of further processing

5) Computed Value- sum of the following. Importer can request computed instead of deductive.

Cost of Materials

Cost of Labor

Cost of Packaging

Profit

Overhead

G&A

6) Value if other values cannot be determined- if the value of imported merchandise cannot be determined it will be appraised on the basis of a value derived from the methods set forth in parts 152.103 thru 152.106.