President at InterMart, Inc.
Companies that allow employees or contractors to take commercial items across a border—known as a hand carry—are taking on a big compliance risk. Here’s what you need to know to stay compliant.
Mitch Kostoulakos, LCB
Excellent post David. I think most hand carries are treated casually without much thought to the risk.
In previous posts we have noted 3 common causes of customs delays: vague or incomplete descriptions, questionable valuations, and lack of IOR contact info on commercial invoices. These are the easy fixes. The real complexity in international trade is due to the many different regulations applying to destination countries.
Customs delays in other countries are problematic for exporters, 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
Contact mitch@52.91.45.227 for help.
Tariff classification requests are often for a “quick code lookup” or a “ballpark duty rate”. For many commodities I may actually be able to provide plausible codes and duty rates with no research, but that would be malpractice on my part . Compliance adds value through attention to detail, established protocols, oversight, and documentation. HTS classification is the first step in both export and import compliance.
Proper classification includes HTS lookup, GRI (General Rules of Interpretation) review, checking both chapter and additional notes, as well as CROSS (Customs Rulings Online Search System). Specs, diagrams, and manuals are helpful. For some commodities it may be necessary to consult with a subject matter expert in engineering, purchasing, or manufacturing for details about the item.
These are the procedural steps of classification, but there is more. Most listings require interpretation of the tariff language based on experience. Finally, the process needs to be documented for future reference and parts lists updated.
For accurate classification help contact mitch@52.91.45.227.
Customs Broker Permit User Fee as payment is due no later than February 24, 2023. The fee is $163.71 for each permit held.
Nice to pay for just one permit this year.
Nerd: “socially awkward” and “an intelligent but single-minded person obsessed with a nonsocial hobby or pursuit” Geek: “a digital-technology expert or enthusiast” and “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.
Compliance is about attention to detail, consistency, process, and oversight. I guarantee that your compliance folks are not trying to practice “sales prevention”. The goal is to complete transactions the right way, avoid customs or logistics delays and reduce exposure to fines and penalties. However, there is no doubt that complying with all of the agencies involved in international trade generates a lot of red tape and can be frustrating.
Compliance managers must have the authority to stop shipments when red flags appear. In order to ensure independence compliance folks should not be in the supply chain, finance, or marketing chain of command. Better reporting relationships would be with the legal department, CEO, or COO.
Consider just a few of the details that can make or break a smooth transaction:
Harmonized Codes to the full 10 digits including heading and sub heading. It is very easy to transpose digits.
Schedule B Codes, ditto
ECCN , Alpha numeric, number, letter, followed by 3 numbers. Example 4A994. Then followed by sub paragraph level and don’t forget the dot between the last number and the sub para.
License Exceptions are designated by 3 letter codes and must be compatible with the ECCN listed.
COO, Country of Origin markings and proper codes on documents and AES filings. Best not to guess here. Have you ever entered CH for China?
Valuation must be determined accurately and is best covered in a separate post which I have done on 05/09/2019.
These tactical elements are just some of the basics. We could also mention commodity descriptions, red flag screening, and plenty of other details. Trade policy is more strategic, encompassing trade agreements, incoterms, and dealing with enforcement agencies. There is a lot at stake so, hats off to the compliance teams.
For assistance contact mitch@52.91.45.227
Agree. Importers and consumers pay the duties or tariffs. They are simply a type of tax.
Good post Mike. I agree completely. It is also a reminder to focus on existing accounts. It is much easier to keep a customer than gain a new one.
Electronic Export Information (EEI) filing has become routine for exporters and it is easy to “file it and forget it” once the submission has gone through.
Auditing EEI ((also referred to as AES) filings is a good business practice. If you are a self filer is anyone checking the accuracy of your submissions? Does your freight forwarder have an audit procedure in place if they are filing for you? Here is the risk:
§ 30.71 False or fraudulent reporting on or misuse of the Automated Export System.
(1) Failure to file; submission of false or misleading information. Any person, including USPPIs, authorized agents or carriers, who knowingly fails to file or knowingly submits, directly or indirectly, to the U.S. Government, false or misleading export information through the AES, shall be subject to a fine not to exceed $10,000 or imprisonment for not more than five years, or both, for each violation.
Are you aware of this potential filing error?
A common misconception is that EEI and Commercial Invoice value should match. However, inland freight and insurance charges must be accounted for in the EEI filing whether or not they are on the commercial invoice.
For audits of your EEI filings contact mitch@52.91.45.227
Clients often say “we’ve used the same harmonized codes for years” and “our commodities 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 codes is a sign of an amateurish operation. It is likely that, for these clients, commercial invoice descriptions also need updating. If they are an exporter we should check ECCNs, License Exceptions, Country of Origin, and Schedule B numbers as well.
The Harmonized Tariff Schedule code is a 10-digit import classification system for commodities imported into the United States. HTS codes or numbers are administered by the U.S. International Trade Commission (ITC). The first 6 digits, sometimes referred to as HS codes, are standard for more than 200 countries. The last 4 digits are specific to the United States. Schedeule B numbers are used for export and are often, but not always, identical to HTS codes. They are administered by the U.S. Census Bureau.
Customs brokers use the HTS, along with CBP regulations, in their day to day business. Importers and traders may also make use of the HTS in determining duty rates. Checking the validity of harmonized codes at least semi-annually is a good business practice. What may be surprising is the frequency of revisions to the HTS.
The tariff archives show that the 2022 HTS was revised 12 times. Don’t assume that your codes are valid. A little due diligence helps avoid problems down the road. Contact mitch@52.91.45.227 for a review of your HTS codes.