All posts by mitch

Regulatory Updates

Importing Due Diligence

Our previous post suggested an annual review of Harmonized Tariff descriptions as 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 items for your annual customs review. Contact Ad Hoc Logistics 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. 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

Harmonized Tariff Due Diligence

The International Trade Commission publishes updates to the Harmonized Tariff System of the United States (HTSUS) twice per year in January and July.  Accurate classification and valuation of imported goods are essential. The Harmonized codes and descriptions filed upon entry determine duty rates or duty free status. Harmonized tariff descriptions also give Customs and Border Protection (CBP) information about what commodities are entering the country and determine if any other agencies such as the FCC or FDA also have jurisdiction. An annual review of your HTSUS codes and database update is a good business practice. Contact your broker or Ad Hoc Logistics if you need help.

Projects

Carnets

Ad Hoc Logistics is currently advising an engineering company about international trade show and conference shipments. We are researching pros and cons of using carnets and recommending carriers. Contact mitch@52.91.45.227  if you have similar needs.

Projects

Freight Forwarder Outlook

Let me share some observations about the freight forwarder industry at the end of 2013 based on meetings with forwarders and shippers as well as data from trade publications. Contact us for more info.

 
  • Modal shifts from air to ocean will continue as a cost reduction strategy.
  • Airlines have improved load factor and profitability by cutting flights. This means less freight capacity overall.
  • Air freight forwarders will focus on higher yielding commodities to make up for weak demand and to better utilize existing capacity.
  • Shippers looking for full services forwarder with advanced technology and capabilities but still price sensitive.
  • Mega forwarders have advantage in buying power, capacity, coverage, and variety of services. They may be at a disadvantage in unique local markets.
  • Current ocean freight overcapacity in APAC-US lane leads to erratic rates.
  • Dominated by shipping alliances ocean carriers will reduce capacity and put upward pressure on rates.
  • While current spot rates (ocean) may be low they will rise in 2014.

 

Nuts & Bolts

Inventory Management Overview

The supply chain functions with the biggest financial impact are inventory and transportation management. Logistics managers tend to focus on transportation decisions as one of their major responsibilities. It is important, however, that all managers in the supply chain have a good understanding of inventory policy. The attached is a brief synopsis of Inventory Management from the textbook Supply Chain Logistics Management .

 

 

INVENTORY MANAGEMENT

 

 

Projects

Supply Chain Certificate Program

I am working with Northern Essex Community College on revisions to their Supply Chain Certificate program for 2014. Planned modules include: Introduction to Supply Chain, Operations, Materials Management/Purchasing, Inventory/Warehousing, Transportation and Logistics, and International Trade. Details will be provided in the Spring/Summer catalog on the NECC website.

Nuts & Bolts

Carrier Negotiations

The motor carrier and air freight industries are extremely competitive, giving shippers an advantage in carrier selection and negotiations. A  common mistake made by shippers 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 carriers. 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 carriers. 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.

Projects

Low Cost Airlines vs Ultra Low Cost Airlines

A recently completed project involved comparing Spirit Airlines with competitors Southwest and Jet Blue. I looked at a number of features and characteristics: # of Destinations, Hubs, Fleet Size, Aircraft Types, Fares/Fees/Surcharges, Frequent Flyer Programs, Domestic Market Share, and Skytrax Rank. In the low cost airline market, Spirit has only one advantage and that is ultra low fares. In all other areas Spirit ranks below both Southwest and Jet Blue. The flying public is becoming accustomed to unbundled services and new fees seem to pop up on every flight. Spirit charges for all “extras” and cites their ultra low fares as justification. Ultra low fares means that Spirit must be aggressive in controlling costs. This can lead to service issues and customer complaints reflected in Skytrax ratings. Southwest and Jet Blue are low cost airlines which project perceived value for relatively low fares. This is crucial in attracting business flyers. If Spirit wishes to expand beyond their current vacation traveler clientele they may need to adjust their business model.

 

Spirit Airlines Comparison

Regulatory Updates

Export Administration Regulations Tips

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.”

BIS has some easy to use tools on their website. A good place to start checking is the BIS Website Decision Tree.

Contact Ad Hoc Logistics if you need help.

Nuts & Bolts

Customs Broker Exam Tips

According to CBP Customs and Border Protection passing rates for the customs brokers exam average only 3-11% nationwide. The test is given twice per year in April and October. It consists of 80 multiple choice questions and a passing grade is 75%. The exam is open book which makes it seem easy. However, the books consist of  the HTUS Harmonized Tariff of the United States and CFR 19 Code of Federal Regulations, totaling hundreds of pages. The difficulty is in being able to quickly access the right section for each question. It is a four hour exam so three minutes per question is not much time.

I took a prep course in Boston taught by  Atty. Mary Wright. The class met two nights per week for 6 weeks prior to the exam. Mary explained the material very thoroughly from her background as a customs attorney and prior experience as an import specialist for CBP. We also reviewed previous exams in class. As good as this class was, I would not have been able to pass the exam without additional study. I estimate that I spent about 40-50 hours on weekends leading up to the exam. I used 6 previous exams and a 3 step process. In step 1 I took each test for accuracy, ignoring the clock. In step 2 I took the tests again in the same order, while timing myself to make sure I could finish within 4 hours. I believe that step 3 was the key to my success. For this phase I circled all the questions I had missed in steps 1 and 2 and created a separate mini exam which I took several times until I answered all the questions correctly. I had many years of transportation experience but no customs brokerage background before taking Mary’s course. This actually proved to be an advantage for me. Most of the others in the class were working for brokers and may have felt overconfident.