When business slows down Logistics Service Providers (LSPs) must adjust staffing to match reduced volume and this presents challenges to their clients. Trusted LSPs and 3PLs are valuable resources for any business. They are the arteries through which supply chains function. Hopefully staffing cuts are temporary but, for now, they do add risk for clients.

Exporters, not LSPs, bear primary responsibility for compliance with regulations. In reality, though, many exporters rely on their freight forwarders to manage compliance for them. This has always been a mistake but even more so when the LSP reduces staffing. Documentation errors, misclassification, and failure to check licensing requirements are examples of the risk for exporters. Best practices in this area would be to review all documentation produced by LSPs, check shipments for “red flags”, and consider establishing a formal Export Compliance Program for the future. Here are some previous blog posts for reference:

Manage the Risk, 1/15/2020

How to Determine ECCN, 12/6/2019

Compliance Nuts and Bolts, 11/30/2019

Reviewed Your CI Lately? 11/3/2019

Red Flags, 9/29/2019 and 10/6/2019

Basic service levels are also impacted by LSP staffing cuts. Pick up and delivery routes will be combined so drivers are covering wider zones. This can mean late deliveries, missed pick ups, or late pick ups requiring overtime for the client. Remaining clerical staff may struggle to field customer service requests on a timely basis. Best practices here include gaining a comfort level with your providers’ on-line resources and developing problem solving protocols to save time. Blog posts for reference are:

Manage Your Carrier Relationships, 8/8/2019

Got Protocols? 4/6/2019

Need Help? contact mitch@52.91.45.227

Pete Mento • 2ndManaging Director Global Customs and Duties, Crowe LLP1d • Edited • 1 day agoYou can freak out a little about this: Everyone – and I mean EVERYONE engaged in cross border trade needs to do two things right now – learn everything they can about “Force Majeure” clauses AND start combing through all of their contracts to see where they are and how they will be impacted by them. Because that term is about to get swung around like a bottle of Jager at a bachelor party. Like Hunter Thompson always said – “When the going gets weird, the weird turn pro….” hS

Mitch’s Comment

good reminder to check the boilerplate

Many of my clients are hard-working owners or operators of small businesses. They don’t have in-house compliance or logistics expertise so must wear several hats. Day to day activities or unexpected issues take up most working hours. As a result, functions such as logistics planning and import/export compliance are often unmanaged.

Making sure that your business is in compliance with import and export regulations is good risk management as well as good business. Think of it as insurance. I have written about compliance as risk management in previous blog posts. Here are a few:

• Manage the Risk, 01/15/2020
• Start off 2020 With a Customs Review, 01/09/2020
• Compliance Nuts and Bolts, 11/30/2019
• Red Flags, 09/29 and 10/06/2019
• Let Shippers Ship, 06/13/2019

Logistics consists of equal parts planning, execution, problem solving, review/adjust, rinse and repeat. If you find yourself spending a lot of time problem solving then planning and/or execution need to be improved. Trusted LSPs (Logistics Service Providers) and 3PLs are valuable resources. At the very least, however, they need to be managed through monthly or quarterly review meetings for which you set the agenda. Here are a few more blog posts for reference:

• Negotiate Value Before Price, 09/10/2019
• Managing Carrier Relationships, 08/08/2019
• Got Protocols? 04/16/2019

Don’t be an unmanager!

For help contact mitch@52.91.45.227

Posted on LinkedIn

Are you taking the Customs Broker exam in April? If you are planning to take the customs brokers exam in April you should be well into your preparations by now. Passing rates are usually in the single digits so the exam is not easy. However, a step by step study plan will give you confidence. I devised a simple method that worked well for me. Read the attached post for details and best of luck.

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

Best of luck to applicants taking the Customs Broker Exam on October 17th. For anyone thinking about applying for a future exam here is a question from the April 2019 exam. I will post the answer next week and also respond to anyone who submits their answers.

10. Die cut steel plier levers were bolted together in China before having rubberized non-slip grips attached to each lever handle in Germany prior to being imported into the United States. What is the proper country of origin and marking method?

A. Made in Beijing printed on a hangtag

B. Made in China printed on a sticker attached to the pliers

C. Made in China die stamped into the pliers

D. Assembled in Germany printed on a sticker attached to the pliers

E. The pliers are exempt from marking in accordance with the J list