Exporters know that EEI (Electronic Export Information) must be filed in the Automated Export System (AES), also known as the Automated Commercial Environment (ACE) , which is a US Customs and Border Protection (CBP) system. Finally, the EEI replaced the old yellow paper Shippers Export Declaration (SED) a number of years ago. Got all that?

I have found that most clients are quite proficient with the system and are able to process their filings easily. In many companies, however, EEI filings are forgotten after they go through and are not audited for accuracy. If you have a formal Export Compliance Program, which is highly recommended, EEI audits are probably included. If not you are at risk for fines and penalties.

Here is an example of a common filing error for which you may be in violation without realizing it. According to 15CFR part 30.6 the value reported in the EEI must include inland freight, insurance, and other charges to the US port of export. So simply entering the Commercial Invoice value in the EEI is a mistake unless these charges are also on the CI.

(17) Value. In general, the value to be reported in the EEI shall be the value of the goods at the U.S. port of export in U.S. dollars. The value shall be the selling price (or the cost, if the goods are not sold), plus inland or domestic freight, insurance, and other charges to the U.S. seaport, airport, or land border port of export. Cost of goods is the sum of expenses incurred in the USPPI’s acquisition or production of the goods. Report the value to the nearest dollar, omit cents. Fractions of a dollar less than 50 cents should be ignored, and fractions of 50 cents or more should be rounded up to the next dollar.

Ad Hoc Logistics can audit your EEI filings and help you avoid fines and penalties. Contact mitch@52.91.45.227 for immediate assistance.

I’ll never forget basic training at Fort Bliss, Texas, but let me suggest a much easier program. My background also includes a number of years as a corporate trainer. So I understand that in 2020 most companies were required to cut costs, including the training budget, and staffing cuts were often made at the same time. Remaining staff took on additional duties and performed out of their comfort zone with few opportunities for training.

This is not the time to risk logistics service failures or customs delays which can cost you business. Some basic training with practical “how to’s” is in order. We can help!

I have developed “A to Z of Managing Logistics”, a brief presentation designed for managers who wear several hats and must oversee logistics among other duties. The steps outlined in the presentation are also valuable in training new logistics employees.

If interested contact:

mitch@52.91.45.227

Dean Maciuba•

I was saddened to hear about the mass shooting at a FedEx Ground operations facility in Indianapolis. Since that time, I have seen some incomplete reporting in some cases. Here is my experience as a previous employee at FedEx for 35 years:

1) FedEx has robust security protocol in place at their ground operations facilities, including secured access and metal detector type scanning processes at many bldgs.
2) FedEx Ground does not skimp on security.
4) Cell phones are banned as a safety measure to prevent distractions at hubs/terminals, that could result in injury to employees.
5) Background and criminal checks are performed on all new employees.
6) FedEx has very close relationships with local and national law enforcement agencies.

Mitch Kostoulakos, LCB Licensed Customs Broker, International Logistics Consultant

As a former FedEx employee (18 years) I know that the safety of team members is at the top of their list of priorities. I mostly avoid politics on LinkedIn but this is a national problem. Thoughts and prayers are not working. We need real solutions.

I often hear from clients about shipments “stuck” in customs and, needless to say, they are always frustrated. The shipments may include critical parts needed for an equipment or plant shutdown, expensive high tech components not generally carried in inventory, or medical instruments for hospitals. Delayed orders also mean delayed payments which gets everyone’s attention.

The data used in customs entries comes directly from the commercial invoice for the transaction. All countries have different, and sometimes obscure, customs regulations. It is true, however, that most delays are caused by a few commercial invoice errors or omissions.

Commodity descriptions should answer the questions: What is it? What is it made of? What is it used for? Use plain language which can be understood by anyone. Avoid trade names, brand names, and jargon. These can be added below the description or to the packing list as needed. If using a harmonized code enter only the first 6 digits which are universal. All countries apply their own last 4 or 6 digits.

Value for customs may appear to be too low for the commodity being shipped. The customs agencies in the destination country need to make sure that duty rates are accurate and will hold up the shipment if in doubt. Make sure that your commercial invoice reflects the correct transaction value.

Recipient contact info is often lacking on the commercial invoice. Customs in the importing country will not contact the exporter if they have questions or issues. If they are unable to contact the importer the shipment will go into storage. Make sure you include recipient name, address, phone number, and e mail address on your CI.

Contact mitch@52.91.45.227 for immediate assistance.

Freight forwarders are essential logistics service providers in international trade. The functions performed by forwarders make it possible for any business to export their products without a large staff. In recommending forwarders to clients I always emphasize the importance of maintaining a good business relationship with providers. It is important to note, however, that primary responsibility for compliance with the EAR falls on the “principal parties in interest” (PPI) in a transaction. This usually means the US seller and the foreign buyer.

Here is some useful info from BIS:

Responsibilities of the Forwarding Community

Forwarding agents have compliance responsibilities under the Export Administration Regulations (EAR) even when their actions are dependent upon information or instructions given by those who use their services. However, hiring an agent, whether a freight forwarder or some other agent, to perform various tasks, does not relieve a party of its compliance responsibilities.

Agents are responsible for the representations they make in filing export data. Moreover, no person, including an agent, may proceed with any transaction knowing that a violation of the EAR has, is about to, or is intended to occur. It is the agent’s responsibility to understand its obligations.

Primary responsibility for compliance with the EAR falls on the “principal parties in interest” (PPI) in a transaction. Generally, the PPIs in an export transaction are the U.S. seller and foreign buyer. 

Contact mitch@52.91.45.227 for immediate assistance.

I frequently conduct no fee discussions (phone or Zoom) with new clients to determine if I can help them. They may be unsure about their HTS codes or a specific regulation. Exporters quite often assure me that their commodities fall under EAR 99 and NLR (No License Required). While this may be true, due diligence requires verification which starts with checking ECCN (Export Control Classification Number). BIS (Bureau of Industry and Security) spells out the specific procedures for checking ECCN and licensing requirements. The CCL (Commerce Control List) Index is a good place to start.

https://bis.doc.gov/index.php/documents/regulations-docs/13-commerce-control-list-index/file

Here is some more info from the BIS website:

What does EAR99 mean?

If your item falls under U.S. Department of Commerce jurisdiction and is not listed on the CCL, it is designated as EAR99. EAR99 items generally consist of low-technology consumer goods and do not require a license in most situations. However, if your proposed export of an EAR99 item is to an embargoed country, to an end-user of concern, or in support of a prohibited end-use, you may be required to obtain a license.

Contact mitch@52.91.45.227 for assistance

How About Those Regulations ?

My last post was about AEC/EEI filing for US exports, which has become routine for most shippers. The real complexity in international trade is the many different regulations applying to destination countries.

Customs delays in other countries are problematic, requiring a lot of time and effort to resolve. Best practices in exporting include due diligence and research when shipping to a country for the first time. The Country Commercial Guides published by the International Trade Administration are an excellent no cost starting point. Here is the link:

https://www.trade.gov/ccg-landing-page

I participated in a webinar last week in which one of the topics was invoice value for customs. Following is an overview of the topic.

Customs entries on imported merchandise involve calculating duties and taxes based on commodity classification (HTS), country of origin, and transaction value. In a previous post we discussed the importance of making sure that correct HTS codes are used. 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 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. Includes 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.

Parts 152.107 and 152.108 detail value if other values cannot be determined or used and unacceptable bases of appraisement.

Contact mitch@52.91.45.227 for assistance

Exporting does not always mean shipping a tangible commodity. Software, drawings, manuals, specs, and other intellectual property are exported on a regular basis. Engineering firms, software companies, researchers, manufacturers, and universities need to be aware of the “deemed export” rules. They may be engaged in export transactions without even knowing it. Best practices and due diligence will mitigate the risk of fines and penalties.

Here is some info from the BIS (Bureau of Industry and Security) website:

https://www.bis.doc.gov/index.php/policy-guidance/deemed-exports/deemed-exports-faqs

Contact mitch@52.91.45.227 for immediate assistance

Last week’s post emphasized the importance of an Export Compliance Program as a risk management tool. Unfortunately, most small/medium companies do not have full ECPs. Whether your company has a formal Export Compliance Program (ECP) or not, it is critical that you have procedures in place to screen orders for Red Flags.

Many companies rely on their busy shipping department to manage export compliance. I believe that this is a mistake because shippers are under time pressure to get shipments off the dock, they often don’t have training or expertise, and usually don’t have authority to stop shipments. In the absence of a formal Export Compliance Program, clear protocols for escalation and resolution must be in place when Red Flags appear.

Here is a list from the Bureau of Industry and Security (BIS) website of things to look for in an export transaction. Make sure you are not doing business with the bad guys. A little due diligence up front saves a lot of trouble later on.

The customer or its address is similar to one of the parties found on the Commerce Department’s [BIS’] list of denied persons.

The customer or purchasing agent is reluctant to offer information about the end-use of the item.

The product’s capabilities do not fit the buyer’s line of business, such as an order for sophisticated computers for a small bakery.

The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronics industry.

The customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing.

The customer has little or no business background.

The customer is unfamiliar with the product’s performance characteristics but still wants the product.

Routine installation, training, or maintenance services are declined by the customer.

Delivery dates are vague, or deliveries are planned for out of the way destinations.

A freight forwarding firm is listed as the product’s final destination.

The shipping route is abnormal for the product and destination.

Packaging is inconsistent with the stated method of shipment or destination.

When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for reexport.

For help contact mitch@52.91.45.227