Posted on LinkedIn today…
My previous post reported that the Harmonized Tariff Schedule of the United States (HTUS) was updated on 7/1/2019. Canada Border Services Agency has also updated their Customs Tariff 2019 effective 7/1.
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Harmonized Tariff Updated
The United States International Trade Commission has updated the Harmonized Tariff Schedule of the United States. This revised edition of the 2019 Harmonized Tariff Schedule is effective July 1, 2019.
It is a good business practice to review your codes at least once or twice per year to make sure you are in compliance. For help with your codes contact mitch@52.91.45.227
Logistics and Baseball
Logistics and baseball have some common features. We play every day, errors can have a big impact , managers get criticized, and there are plenty of rules and regulations. Like sabermetrics in baseball, we can measure logistics performance in many different ways.
Measuring and managing logistics performance is a full time job for logistics professionals and the volume of data can be daunting. Managers in other functions such as finance, marketing, or manufacturing may need a quick view of logistics data as it relates to their responsibilities.
Here are a few general measures for the dashboard:
Absolute Performance- monitor absolute logistics failures rather than averages. For example, 99.5% on time performance appears very good. However, in a high volume operation, it could mean hundreds or thousands of late orders per day.
Inventory Turnover- common measurement in asset mgt.
Order Fill Rate- customer service and warehouse productivity measurement. Can also use item, line, or value fill rate.
Warehouse Utilization %- indicator of good asset mgt.
Warehouse Productivity- measure of units received, stored, picked, packed, and shipped per hour.
Order Cycle – reduced order cycle means less inventory in the system and greater customer satisfaction. Longer order cycle means more inventory in the system and reduced customer satisfaction.
Lost Sales- inverse relationship with inventory. Higher inventory costs, lower risk of lost sales. Lower inventory costs, higher risk of lost sales.
Transportation costs- always a trade off….bulk shipments can reduce transportation costs but leads to higher inventory levels in system. Higher transportation costs due to mode shift (air vs. ground or air vs. ocean) can reduce inventory in system by shortening the order cycle.
Commodity value- higher dollar value means increased transportation, inventory, and packaging costs.
Density of product- High density (lbs/ cubic ft or kgs/ cubic meter) means lower transportation and inventory costs since the product takes up less space in containers or warehouse.
Loss and Damage- greater susceptibility to loss or damage means higher transportation rates and higher warehousing costs due to special handling.
Location Decision- Distance from sources or markets = relative advantage or disadvantage vs. competitors. This is an upper mgt responsibility.
Need help? contact mitch@52.91.45.227
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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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
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.
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
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.
Around The World
lpi.worldbank.org
Welcome to the 2018 LPI The LPI is an interactive benchmarking tool created to help countries identi…
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.
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.