Nuts & Bolts

Those Annoying Compliance Geeks

The current logistics environment is as challenging as I have ever seen. Tight capacity in trucking, containers not available where needed, astronomical ocean rates, and shortages of critical components. These are just a few of the problems confronting supply chain managers on a daily basis. So it is understandable that compliance may be taking a back seat at the moment. Who has the time or energy to deal with that annoying compliance person? As a proud compliance geek, let me offer the following.

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 are just some of the basics. We could also mention commodity descriptions, red flag screening, incoterms, and plenty of other details. So, hats off to the compliance teams.

For assistance contact mitch@52.91.45.227

Nuts & Bolts

LinkedIn Comment- Spare Parts Inventory

Tony Rodriguez• 1stPresident & Owner, Daniel Penn Associates. LLC

Part 1 – How to get a grip on space parts inventory management for your maintenance organization. #assetmanagementinsights#maintenancestrategyhttp://ow.ly/UCd050FzfWS

Mitch Kostoulakos, LCB Ad Hoc Logistics LLC, Licensed Customs Broker, International Logistics Consultant

Hi Tony, thanks for an informative post. Can I suggest adding HTS (harmonized tariff schedule) codes to the CMMS? This step can facilitate sourcing of imported parts.

Regulatory Updates

ADD/CVD Overview

For Your Customs Reference File:

ADD/CVD Anti-Dumping Duties and Countervailing Duties

Anti-dumping (ADD) and Countervailing duties (CVD) are intended to protect the US manufacturing industry from foreign manufacturers flooding the market at artificially reduced prices. Dumping occurs when foreign companies sell goods in the US at less than fair value.

Countervailing situations are when a foreign government gives their companies tax breaks and subsidies allowing them to sell goods cheaply in the US. ADD and CVD lead to foreign undercutting of US manufacturers prices.

Anti-dumping duties are calculated at a company-specific level, where the duty amount makes up for the difference between the foreign manufacturer’s price and fair market value. In these cases, certain companies have been identified, investigated, and additional duties have been charged on their products. Countervailing duties are determined on a country-specific level, and the duty rates counteract the subsidy or tax breaks given to the foreign manufacturer by their government with the intent of leveling the playing field.

When either of these situations occur, petitions are filed by U.S. manufacturers or businesses with the Department of Commerce (DOC) which, along with the US International Trade Commission (USITC), opens an investigation. If the results are positive, U.S. Customs and Border Protection (CBP) withholds liquidation of entries and collects ADD/CVD duties. The entries are not liquidated until the DOC instructs CBP headquarters to do so. CBP procedures affecting US importers A positive result; an investigation which finds evidence of injury to the US industry, triggers CBP procedures which affect US importers. For an Anti-dumping (ADD) case CBP issues a case number beginning with (A), Case # A…. for a particular manufacturer. Importers and/or customs brokers then must report the case number on every entry (CBP form 7501, block 29) pertaining to this manufacturer. CBP will also look for evidence of bond during their investigation. If determined guilty, CBP will set the penalty and retroactively collect additional duties through the bond. These additional duties are determined by ITC and DOC with CBP as the enforcing agency. Procedures for countervailing duties (CVD) are similar to those for anti-dumping duties (ADD): Investigation, case number beginning with (C), retroactive penalties. The difference is that under CVD the foreign manufacturer is subsidized by their government. 

How to determine if a commodity falls under ADD/CVD

Your customs broker should be able to help you determine if a commodity falls under ADD/CVD. Further, you can review the scope of ADD/CVD orders to determine whether the merchandise falls under the scope of an order. The scope of AD/CVD orders can be found in several places:

• Federal Register notices from Commerce, available at

https://enforcement.trade.gov/frn/index.html

https://www.cbp.gov/trade/priority-issues/adcvd/antidumping-and-countervailing-duties-adcvd-frequently-asked-questions

Nuts & Bolts

13 Flags For Shippers

Ad Hoc Logistics followers know that we always recommend an Export Compliance Program (ECP) as a best practice for companies of all sizes. At the same time, however, we recognize that implementing an ECP is a daunting task and is often a “back burner” project.

The export compliance process should begin early in the order cycle and not be delegated to a busy shipping department. However, shippers can be a last line of defense if they know the 13 key red flags to look for. Our 90 minute presentation can train your shippers on the basics.

Contact mitch@52.91.45.227 for info.

Nuts & Bolts

Old School But Still Relevant

Among the many challenges faced by logistics managers in 2020, remote work became a big factor. Communication is more important than ever. I have written about the Performance Chain in previous posts and this refresher may be helpful.

The logistics industry is heavily dependent on data and technology. The most successful LSPs (Logistics Service Providers) are innovative in their efforts to improve service and productivity to the benefit of both clients and providers. The nuts and bolts of logistics also involves people, so basic front line management skills can improve operations.

Here is a proven method for the toolbox. The links of the performance chain can help with day to day management and problem solving.

Expectations– Are goals and deliverables crystal clear? Don’t assume. Feedback– Information which is specific, timely, and relevant. Not just an annual review. Resources– Time, tools, and staffing to do the job right. Skills/Knowledge– Is training needed? Managers often point to training as the solution to problems. However, if employees know how to do the job training may not be the answer to performance issues. Look to the other links of the chain. Capacity– Does the person have the physical and mental ability to do the job with training? If not, reassign or terminate, and screen new hires more carefully. Incentives– What rewards are most meaningful to the workforce? These include money, benefits, flex time, etc. and will vary for individuals. Incentives are external and provided by the company. Motivation– Internal and personal to each employee. Top performers are self motivated. For others the idea is to bring out their motivation through incentives, training, or simply clearer expectations and feedback.

New to management? The performance chain is a good starting place. Experienced manager? Old dogs can learn new tricks.

Thanks to Jack Zigon for refreshing my memory.

Contact mitch@52.91.45.227 for more info or assistance.

Nuts & Bolts

USMCA is 1 year Old

The US-Mexico-Canada Agreement (USMCA) went into force on July 1, 2020 replacing NAFTA. As traders know, shipping to/from Mexico is a bit more complicated than to/from Canada. In general the services of a Mexican customs broker are needed and shipments need to be transferred between US and Mexican carriers at specific ports of entry.

Some NAFTA provisions remain in effect but USMCA does contain new regulations as well. Here is a link to FAQs from the CBP website.

https://www.cbp.gov/trade/priority-issues/trade-agreements/free-trade-agreements/USMCA/FAQs

Contact mitch@52.91.45.227 for more info.

Nuts & Bolts

5 Steps to Export Compliance

Clients often know that they need help with export compliance but don’t know where to start. A written Export Compliance Program is the ideal way to keep compliant and is a good investment for any company to make. An ECP establishes clear accountability, written instructions, and reduces risk of non-compliance. However, an ECP is costly and time consuming, requiring a significant commitment on the part of management. If the exporter has not experienced problems or incurred any fines it is easy to make compliance a “back burner” issue. But doing nothing does not mitigate the risk!

Here are few best practices to help you get started :

1) Review and confirm correct Harmonized Tariff and Schedule B codes and maintain master list as updates occur. Proper classification follows established protocols and is the starting place for compliance.

2) Check Export Administration Regulations (EAR) for correct ECCN and license exception codes. Are you automatically using EAR99 and NLR? https://www.bis.doc.gov/ can help.

3) Confirm Country of Origin for all imports. This is not always obvious so consider consulting a Licensed Customs Broker.

4) Check common “Red Flags” such as denied parties lists, entities lists, and unverified lists. Once again, https://www.bis.doc.gov/ provides details and training.

5) Review export documentation for possible improvements.

Make export compliance a front-end process not a last minute shipping function. Remember, while Logistics Service Providers (LSPs) are valued partners, the exporter bears primary responsibility for compliance. Finally, if exporting under ITAR you need a responsible trained officer.

Contact mitch@52.91.45.227 for immediate assistance.

Nuts & Bolts

TRB Meeting

On July 13th I was honored to participate in the midyear meeting of the Standing Committee on International Trade and Transportation, which is part of the Transportation Research Board: National Academies of Sciences, Engineering, and Medicine. The committee reviews cutting edge research studies and makes recommendations for publication. While many committee members are from academia, I bring a logistics practitioner’s perspective.

The meeting included a very informative presentation on “Post Covid 19 Impacts on International Trade and Transportation”.

Becoming a “Friend of” a TRB committee thru the attached link is a great way to learn and get involved.

https://www.nationalacademies.org/trb/transportation-research-board

International Logistics Consulting; Licensed Customs Brokers