Category Archives: Nuts & Bolts

Are you a Deemed Exporter?

December 11, 2016 mitch

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. Here is some info from the BIS website.

For help with exports contact mitch@52.91.45.227

Deemed Export FAQs

What is the “deemed export” rule?

An export of technology or source code (except encryption source code) is “deemed” to take place when it is released to a foreign national within the United States. See §734.13(b) of the Export Administration Regulations (EAR). For brevity, these questions and answers refer only to “technology” but apply equally to source code.
What is a “release” of technology?

Technology is “released” for export when it is available to foreign nationals for visual inspection (such as reading technical specifications, plans, blueprints, etc.); when technology is exchanged orally; or when technology is made available by practice or application under the guidance of persons with knowledge of the technology. See §734.2(b)(3) of the Export Administration Regulations (EAR).
What is “technology”?

Per Part 772 of the Export Administration Regulations (EAR), “technology” is specific information necessary for the “development,” “production,” or “use” of a product.
When do I need to apply for an export license for technology under the “deemed export” rule?

Assuming that a license is required because the technology does not qualify for treatment under EAR99 and no license exception is available, U.S. entities must apply for an export license under the “deemed export” rule when both of the following conditions are met: (1) they intend to transfer controlled technologies to foreign nationals in the United States; and (2) transfer of the same technology to the foreign national’s home country would require an export license.

Nuts & Bolts

Ear99 and NLR….Are you sure?

December 1, 2016 mitch

When the ECCN (Export Control Classification Number) comes up on export documents many exporters automatically enter EAR 99. For license questions NLR (No License Required) is often used as a default exception. While these may be the correct entries, it is a good business practice to check and confirm. Here is some info from a previous post.

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.”

If you need help contact mitch@52.91.45.227

Nuts & Bolts

Are you taking the Customs Broker exam in October?

September 14, 2016 mitch

If you are planning to take the customs broker exam in October you should be well into your preparations by now. In a previous post I shared the prep strategies that worked for me. Here is the info again with the key steps highlighted. Best of luck but don’t rely on luck.

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 but, as good as it was, it would have been difficult to pass the exam without additional study. I estimate that I spent about 60 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.

Nuts & Bolts, Regulatory Updates

Customs value…a quick summary

August 12, 2016 mitch

From the archives…

Customs entries on imported merchandise involve calculating duties and taxes based on commodity classification (HTS), country of origin, and transaction value, along with special notes. In previous posts we have 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.

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.

Transaction Value cannot be used and the hierarchy comes into play when:

There is a restriction on sale (except geographic)
Merchandise is sold on consignment
There is a barter transaction
There is “goodwill” value involved
Parties are related, unless relationship did not influence price

Unacceptable bases of appraisement:

The selling price in the US of merchandise produced in the US
A system that provides for the appraisement of imported merchandise at the higher of two alternative values
The price of merchandise in the domestic market of the country of exportation
A cost of production other than a value determined under 152.06
The price of merchandise for export to a country other than the US
Minimum values for appraisement
Arbitrary or fictitious values

Need regulatory help? Contact mitch@52.91.45.227 .

Nuts & Bolts

Are your shipments being inspected by CBP?

August 10, 2016 mitch

In previous posts we have discussed the World Bank Logistics Performance Index for international trade. The Index also contains a domestic component as detailed below:

Domestic LPI

The Domestic LPI looks in detail at the logistics environments in 160 countries. For this measure, surveyed logistics professionals assess the logistics environments in their own countries. This domestic evaluation contains more detailed information on countries’ logistics environments, core logistics processes and institutions, and performance time and cost. This approach looks at the logistics constraints within countries, not just at the gateways, such as ports or borders. It uses four major determinants of overall logistics performance to measure performance:
• Infrastructure,
• Services,
• Border procedures and time, and
• Supply chain reliability.

Here is some of the data for the US from the 2016 report. The low percentage of physical inspections stands out.


Shipments meeting quality criteria (%)	96.34%
Number of agencies – exports	3
Number of agencies – imports	2
Number of documents – exports	3
Number of documents – imports	3
Clearance time without physical inspection (days)	1 days
Clearance time with physical inspection (days)	2 days
Physical inspection (%)	4.29%
Multiple inspection (%)	2.58%
Declarations submitted and processed electronically and on-line (%)	100%
Importers use a licensed Customs Broker (%)	100%
Able to choose the location of the final clearance (%)	100%
Goods released pending customs clearance (%)	57.14%

Nuts & Bolts

World Bank Logistics Performance Index

July 9, 2016 mitch

The World Bank has posted their Logistics Performance Index for 2016. 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 2016 the US ranks 10th overall with an average score of 3.99 for the 6 benchmarks. The highest US score is 4.25 for timeliness, and the lowest is 3.65 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.

http://lpi.worldbank.org/international/global

Nuts & Bolts