I have always advised clients that export compliance equals good risk management. Furthermore, compliance functions should be viewed as value adds rather than as a cost center. Whether or not a formal ECP (Export Compliance Program) is implemented, there are a number of best practices that are essential for any company involved in international trade.

Compliance is often a “back burner” project for several reasons including: Don’t know where to start, lack of C-level commitment, reluctance to allocate resources, too small to worry about compliance, no previous problems, or just plain inertia.

While the ROI for export compliance will vary for individual firms, we can identify an overall value proposition.

Risk Management– avoid the cost of fines and penalties which can reach $1 Million for criminal violations. Think of compliance as insurance.

Save Time/Save Money– export compliance means less re-work or follow up of requests for information from customers, government agencies, or forwarders.

Make Money/ Grow the Business- basic competence in exporting enables expansion to international markets. Compliance problems will cause customs delays and be an impediment to growth.

Enhance the Brand– similar to ISO certification and C-TPAT, an ECP demonstrates professionalism. Show customers and prospective customers that you know what you are doing.

I would be interested in hearing other value propositions for compliance. In the meantime, why not get started?

Contact mitch@adhoclogistics.com for help with export compliance.

Export compliance means attention to detail, consistent procedures, up to date knowledge, and oversight. Due diligence is required for EEI filings, Schedule B and ECCN classification, Licensing entries, and Country of Origin determination. In spite of best efforts, mistakes will be made. In these cases a Voluntary Self-Disclosure is a smart move. Here is some info from the BIS (Bureau of Industry and Security) website:

Voluntary Self-Disclosure

BIS encourages the submission of Voluntary Self Disclosures (VSDs) by parties who believe they may have violated the Export Administration Regulations (EAR). VSDs are an excellent indicator of a party’s intent to comply with U.S. export control requirements and may provide BIS important information on other ongoing violations. BIS carefully reviews VSDs received from disclosing parties to determine if violations of the EAR have occurred and to determine the appropriate corrective action when violations have taken place. Additional information regarding VSDs can be found in Part 764.5 of the EAR, or the enforcement section of our website www.bis.doc.gov.

Voluntary Self-Disclosures and Disclosures Concerning Others 

Pursuant to Part 764.5 of the EAR, one copy of the information constituting a VSD or any other correspondence pertaining to a VSD may be submitted to:

Director, Office of Export Enforcement
1401 Constitution Ave.
Room H4514
Washington, DC 20230
Tel: (202) 482-5036
Facsimile: (202) 482-5889

Due to the current COVID-19 response measures, BIS is now accepting VSDs electronically.  Voluntary Self Disclosures, exhibits, and requests for filing deadline extensions may be submitted to BIS_VSD_INTAKE@bis.doc.gov .  Hard copy filing is not required in addition to electronic filing, and please be aware that receipt and processing delays may occur in instances where only a hard copy VSD is submitted.

Contact mitch@adhoclogistics.com for help with Voluntary Self Disclosures.

Mitch Kostoulakos, LCB• Ad Hoc Logistics LLC, Int’l Logistics Consultant/Licensed Customs Broker

Proud to serve on the MeVa Advisory Board and continue to be impressed by the cutting edge initiatives of Noah S. Berger and his team. MeVa is fare free on all routes!
https://www.mvrta.com/
Christina Minicucci

Pete MentoPete Mento•Global Trade And Customs Professional

Fellow Customs House Brokers – With the October Test looming for many looking forward to joining our ranks, I think it makes sense for us to set up a separate group here to answer questions from those preparing. I’ll be happy to set it up. All of us benefit from keeping this profession strong and thriving. Let me know if you think it’s a good idea. if we can get 8-10 of us to join it’ll be enough to help folks prepare. Let me know!

Status is online

Mitch Kostoulakos, LCB Ad Hoc Logistics LLC, Int’l Logistics Consultant/Licensed Customs Broker

I’m in….I answer a lot of questions leading up to exams but a “clearinghouse” is a good idea…With a 5.5% pass rate on the last exam it obvious people need help

Clients often say “we’ve used the same harmonized codes for years” and “our products are duty free“. As a Licensed Customs Broker and consultant this tells me that I need to do some checking on the client’s behalf. Using obsolete or invalid HTS (Harmonized Tariff Schedule) codes is a sign of an amateurish operation. The risks are customs delays, fines and penalties, or surprise duty/tax bills. It is likely that, for these clients, commercial invoice descriptions need updating. If they are also an exporter we should check ECCNs, License Exceptions, Countries of Origin, and Schedule B numbers as well.

The tariff archives show that the 2022 HTS was revised 15 times. The 2023 version already lists 8 revisions. Schedule B codes change frequently too. Here are the links to the changes:

https://hts.usitc.gov/download/archive

https://www.census.gov/foreign-trade/schedules/b/index.html

Don’t assume that your codes are valid. A little due diligence helps avoid problems down the road. Contact mitch@adhoclogistics.com for a review of your HTS codes.

Geek: “a person who has excessive enthusiasm for and some expertise about a specialized subject or activity”. Compliance folks sometimes refer to themselves as Geeks.

Demand for compliance professionals has never been higher, as LinkedIn users can readily see. Companies of all sizes and in all industries realize that being in compliance means fewer supply chain disruptions. At the very least compliance is good risk management. Think of it as insurance.

You may be looking to add a logistics or compliance pro to your staff and, understandably, want to make a good selection. In the meantime, let me suggest training your shippers in some export compliance basics. I have always warned that compliance should not be left to a busy shipping department; the factors are complex and need to begin early in the order cycle. However, a few hours of training is a good investment, enabling shippers to spot possible export violations before shipments leave your dock. It will also allow your new professional to focus on more strategic matters and hit the ground running.

Our copyrighted presentation “Exporting for Smart People” will provide your staff with upgraded skills and knowledge.

Contact mitch@adhoclogistics.com for more info.

Logistics Service Providers are quick to point out their technological enhancements and service improvements in order to differentiate themselves from their competitors. In the sales arena account executives work diligently to develop client relationships.

Many LSPs, especially motor carriers, make extensive use of “customer entertainment” to gain and retain market share. Lunches, dinners, and sporting events are part of the job for carrier representatives. Developing client relationships makes the time and expense worthwhile for the rep even when business is not actually discussed. Access to decision makers, information to be used in negotiations, opportunity to present logistics solutions, and benefit of the doubt when problems arise are the result of good relationships for the LSP.

For the client the benefits can include good faith negotiations, competitive pricing, industry intelligence, and faster problem solving . It is best, however, to manage the relationship. Keep it professional and not personal.

Business lunches can be productive for both parties. Clients should have an agenda with a few discussion points. Remember, as with any meeting, if you don’t have an agenda you are subject to someone else’s. Mention your agenda when scheduling lunch and you will have your rep’s attention. Consider having lunch brought in so you are on your turf.

Expensive dinners and sporting events are much less productive from a business perspective. Food and drink becomes the main event. Business discussions are limited, especially if spouses are in attendance. The game takes precedence at sporting events. Big ticket entertainment turns the relationship from professional to personal. It is best to limit your exposure and partake sparingly, if at all.

In summary manage your carrier relationships, Don’t let your providers “reward” you for your business. It makes it much more difficult to change providers or negotiate new deals.

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:

The obligation to obtain an export license from BIS before “releasing” controlled technology to a foreign person is informally referred to as a deemed export. Releases of controlled technology to foreign persons in the U.S. are “deemed” to be an export to the person’s country or countries of nationality. “Deemed” exports are described in 734.13(b) of the EAR. Typical organizations using “deemed” export licenses include universities, high technology research and development institutions, bio-chemical firms, as well as the medical and computer sectors. Note that those organizations having persons with permanent residence status, U.S. citizenship, and persons granted status as “protected individuals” are exempt from the “deemed” export rule.

Many of the licenses for ”deemed” exports involve those conducting scientific research. Note that under section 734.8 of the EAR, fundamental research is defined as “basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community” and, as such, is exempt from EAR licensing requirements. Research conducted using publically available information is also exempt from any license requirements.

The EAR defines a “release” of “technology” or source code in section 734.15 of the EAR, and defines activities that are not “deemed” reexports in section 734.20 of the EAR.

For help with exports contact mitch@adhoclogistics.com

As all logistics professionals know, problem solving is a big part of the job. My clients are mostly small or medium sized firms working with minimal staffs, so I frequently assist them in resolving service issues.

We engage with a variety of LSPs (Logistics Service Providers) including freight forwarders, carriers, integrators, and customs brokers. Most have automated systems for efficiency and cost control purposes. LSPs invest heavily in technological solutions and this is a major determinant in selecting a provider. When looking for a status update or answer to a simple question these systems are fine. Self service can be frustrating, though, when the problem is not easily described, and is of no use for more complex issues. Examples are customs delays, re-routing of shipments, special pricing, or real emergencies. Information is easier to get than action.

Solving problems on the spot is what defines great customer service. Reaching a human being requires patience and many times that person is simply reading from a script. If I haven’t been able to solve the problem on-line then I need someone with the ability and authority to resolve the issue. It seems that as logistics providers invest in technology they are disinvesting in human customer service.

LSPs, don’t force your clients to dump problems on their account rep or e mail the CEO. A few key people in customer service roles with the authority to fix problems on the spot will earn you a lot of customer loyalty.

Congratulations to all who passed the April 2023 Customs Broker License Exam! You are now eligible to go through the application process, background check, and fingerprinting to obtain your license.

It may come as a surprise that the entire process can take months before you receive your license. In addition to a passing grade on the CBLE, eligibility to become a customs broker requires applicants to be a US citizen at least 21 years of age, not be a current Federal Government employee, and possess good moral character.

Character is determined by an extensive background investigation:

“Each broker license applicant must undergo a background investigation that includes a fingerprint analysis and a review of character references, credit reports, and any arrest record. Arrests or convictions do not necessarily preclude the issuance of a license.“

Licensed Customs Brokers, via their entry filings, are responsible for the assessment of revenue for the United States in the form of duties and taxes. They must also ensure that they, and their clients, comply with the laws and regulations in all transactions. So the background check is more than a mere formality. Be patient applicants!