In a previous post we emphasized the importance of an annual review of Harmonized Tariff codes 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 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. 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.

All C-level executives are justifiably concerned with risk management. Best practices in export compliance will reduce exposure to steep fines and penalties. Here is some information from the BIS (Bureau of Industry and Security) website showing details. For help with export compliance contact mitch@52.91.45.227

Penalties

Violations of the Export Administration Act of 1979, as amended (EAA), 50 U.S.C. app. §§ 2401-2420 (2000), and the Export Administration Regulations, 15 C.F.R. Parts 730-774 (2007) (EAR) 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. Administrative monetary penalties can reach $11,000 per violation, and $120,000 per violation in cases involving items controlled for national security reasons. When the EAA is in lapse, the criminal and administrative penalties are set forth in the International Emergency Economic Powers Act (IEEPA).

On October 16, 2007, President Bush signed into law the International Emergency Economic Powers (IEEPA) Enhancement Act, Public Law No. 110-96, amending IEEPA section 206. The Act enhances criminal and administrative penalties that can be imposed under IEEPA and also amends IEEPA to clarify that civil penalties may be assessed for certain unlawful acts. Criminal penalties can reach $1,000,000 and 20 years imprisonment per violation and the administrative penalties can reach the greater of $250,000 per violation or twice the amount of the transaction that is the basis of the violation. See Endnote below.

Violators may also be subject to denial of their export privileges. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the EAR. Furthermore, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person.

Here is a great post by Deep SenGupta on LinkedIn.  His Trade Compliance scorecard is a very useful tool.

Mitch Kostoulakos CTL,LCB commented on:

Increase your international trade compliance score

Deep SenGupta on LinkedIn

The past 12 years have been an incredible experience for me as I had the opportunity to develop and manage the international trade consulting practice for one of the world’s largest logistics companies! I have also had the…

 

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 §734.2(b)(2)(ii) 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. The General Technology Note states that the “export of technology” is controlled according to the provisions of each Category.” It further states that “technology required for the development, production, or use of a controlled product remains controlled even when applicable to a product controlled at a lower level.” Please note that the terms “required,” “development,” “production,” “use,” and “technology” are all defined in Part 772 of the EAR. Controlled technology is that which is listed on the Commerce Control List.

• 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.

A couple of recent projects in which Ad Hoc Logistics was engaged included determining  proper Incoterms. Here is info from a 2014 post on Incoterms. For help contact mitch@52.91.45.227

Incoterms are rules used to facilitate global trade. Incoterms were created and are administered by the International Chamber of Commerce and are updated every 10 years. Incoterms 2010 published by ICC Services Publications, Paris FR is a very good reference. Some of the important points covered in the book are:

• Incoterms must be in the contract of sale to apply
• > 120 countries have endorsed Incoterms 2010
• Now 11 rules in 2 groups
• 2 new rules deal with geographic place
• Incoterms is not a law…older versions can be used as long as all parties agree
• Incoterms replaces Uniform Commercial Code (UCC) in domestic commerce
• for reference  www.iccbooksusa.com
• Incoterms cover;
  • Who does what
  • Who pays for what
  • When risk of goods passes from seller to buyer
  • Who is responsible for insurance, export clearance, import clearance, and other costs pertaining to delivery of goods
• Incoterms do not cover;
  • Ownership or title to goods
  • Payment terms
  • Detailed requirements
  • Complete contract of sale

Incoterms 2010 includes several rules changes:

• Now referred to as rules not terms
• Remove DAF DES DDU DEQ
• New Rules  DAT DAP
• 2 Groups…Any Mode and Ocean/Inland Waterway Only
• Any Mode…EXW FCA CPT CIP DAT DAP DDP
• Ocean or Inland Waterway Only…FAS FOB CFR CIF

Attached chart is a quick guide to Incoterms 2010

Incoterms 2010 Quick Reference Chart 120610

One of the basic steps in export compliance is checking country of ultimate destination regulations. The tool for this step is the Commerce Country Chart which can be found in the Export Administration Regulations (EAR).

From the BIS website:

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.

Contact mitch@52.91.45.227 for help with export compliance.

Today I joined a BIS  (Bureau of Industry and Security- Dept of Commerce) teleconference on the new export regulations for shipments to Cuba. As noted in a previous post, BIS has established a new license exception SCP- Support for the Cuban People. Two existing license exceptions, GFT and CTD, have been expanded. Following is a link to a list of FAQ’s regarding the new regs. As always, it is a good practice to check CFR 740.2, which covers restrictions on use of license exceptions. http://www.bis.doc.gov/index.php/policy-guidance/faqs?view=category&id=114#subcat181

Contact mitch@52.91.45.227 for assistance

BIS has issued new regulations for exporting from the US to Cuba. More to come on this as I plan to participate in BIS conference later this month. For help with export regulations contact mitch@52.91.45.227

Cuba – Amendment to EAR and Treasury Regulations

January 16, 2015 – The Bureau of Industry and Security published a rule in the Federal Register today to implement some of the changes in Cuba policy that the President announced on December 17, 2014. The rule makes changes to License Exceptions GFT and CCD. It also creates a new license exception Support for the Cuban People (SCP). It also creates case-by-case licensing policy for items for environmental protection of U.S. and international air quality, waters and coastlines. This was published simultaneously with a rule amending the Cuban Assets Control Regulations of the Department of the Treasury, Office of Foreign Assets Control.

The Addition of a New License Type (C62) for Support for the Cuban People (SCP) has been added to the Automated Export System

A new license type (C62) SCP was created in AES for the reporting of certain items exported and re-exported to Cuba that are intended to improve the living conditions of the Cuban people; support independent economic activity and strengthen civil society in Cuba; and improve the free flow of information to, from, and among the Cuban people.

Link to BIS rule

Link to Treasury rule

Schedule B codes have been updated for 2015. Best practices for exporters include checking to make sure Schedule B codes are up to date. Using obsolete or inaccurate codes can mean customs delays, onerous re-work and lengthy communications with customs agencies in destination countries, as well as possible fines and penalties. Take the time now to verify  codes and update your parts lists.

For help contact mitch@52.91.45.227

When the ECCN (Export Control Classification Number) comes up on export documents most shippers 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