Ad Hoc Logistics is working with a New England engineering company to verify classification of commodities for export and the subject of Schedule B numbers and Harmonized codes came up for discussion. The link shown below is to FAQ’s at the export.gov website. These FAQ’s explain the difference between Schedule B and Harmonized codes pretty well so I won’t elaborate. As I explained to the client, Schedule B is for export from the US and Harmonized codes are for imports. Both are based on the HTS system in which the first 6 digits are universal. Importing countries can ( and do) use their own last 4 or 6 digits. So, since a US export is another country’s import, the Schedule B used for export may not match up exactly to the importing country’s harmonized code. As noted in a previous post, codes are updated annually so it is a good business practice to check and verify your data. Let me know if you need help.
Monthly Archives: March 2014
Reverse Logistics
Reverse logistics programs are fast becoming a major requirement in 3PL and procurement contracts. Not long ago “returns” were considered a nuisance by manufacturers, retailers, and logistics providers. They were handled only as a courtesy to customers. Today, environmental legislation is forcing companies to take responsibility for waste. At the same time consumers expect clear and efficient returns programs when making purchases. The EU is leading the way on reverse logistics with strong legislation and policies. In the US reverse logistics is evolving as progressive companies realize the opportunities to enhance their public image, lower operating costs, and improve productivity. In other words reverse logistics is moving from an added cost “returns” program to a value add process. Here are some recovery options in reverse logistics*
- Reuse– inspect, clean, and use again for identical or similar purpose, value add
- Remanufacturing– dismantle and reassemble or use for parts, value add in remanufacturing w/improvements
- Recycle– sorting process for scrap, no real value add but can recover some costs
While the above is good business practice it is difficult to plan and execute from a logistics point of view. One reason for this is uncertainty in timing and quantity of returns. Product life cycle and rate of technological innovation play a big role in timing of returns.
Successful reverse logistics implementation involves both external and internal factors. External factors include legislation, customer demand, and incentive. Internal factors include environmental concerns, strategic cost/benefits, volume and quality of returns, resources utilized, and integration and coordination.
- Customer demand– environmental responsibility is becoming a competitive necessity
- Incentive– companies need to make returns worth it for end users
- Environmental concerns– growing trend, not optional going forward
- Strategic cost/benefit– can help increase sales and asset utilization but will increase costs. Benefit is mostly long run after initial investments in equipment, design, process, and labor.
- Volume and quality– returns must be managed to avoid scrap as much as possible
- Resources– use available resources and assets as much as possible
- Integration and coordination– must use info systems to gain competencies in recovery so reverse logistics does not become a profit drain but a profit center
- Performance measures– forward logistics measures are not adequate for return logistics. Need to develop different metrics for return logistics. Ex: time required for product recovery, % recyclable/reusable at end of product life, core return rate, % product weight or volume disposed in landfills
*Global Logistics and Supply Chain Mgt by Mangan, Lalwani, Butcher, and Javadpour, 2nd Ed, John Wiley & Sons, 2012
Mexico Customs Disputes
Today I joined a US Commercial Service webinar “How to Settle Disputes with Mexico Customs.” Exporters to Mexico often experience frustrating customs delays. More serious issues involve denial of entry, seizure of goods, or NAFTA violations. The webinar info was very detailed so let me summarize my takeaways:
Mexican Importer of Record (IOR)
- very rare for foreign company to be MX IOR
- MX IOR is always liable for duties/taxes and compliance with non tariff barriers
- MX brokers have significant liability, explaining their caution and due diligence which can become red tape and delays for the US exporter
- MX IOR must have tax registration number and be listed on importer registry
Classification and Valuation
- HTS code up to 6 digits same as other countries but subject to customs verification
- MX uses 8 digit codes so last 2 digits are unique to MX
- MX broker verifies or determines correct code and non tariff barriers
- Valuation determines duty/tax according to MX law based on WTO rules (TV- Transaction Value, etc)
- Non tariff barriers are regs not related to taxation such as trade agreements, anti dumping, etc
- Binding rulings can be requested for classification, valuation or NAFTA rules of origin
When Are Goods Seized?
- unauthorized port of entry used…mostly contraband
- failure to comply with non tariff barriers
- goods not declared on entry docs including errors
- false name/address of IOR or false invoice
- undervalued goods
Frequent Issues for MX Customs
- Origin verification for US and CA companies claiming NAFTA preference
- Failure of exporters to respond to questionnaires from MX customs
- Exporters address different from address on NAFTA cert
- Exporters lack of knowledge about NAFTA rules of origin
- Lack of original records
MX Customs Recommendations
- Know your MX buyer and their customs broker
- It is OK to contact MX customs for info…they will reply in English
- Make sure NAFTA certificates or origin are accurate….many exporters simply guess
- Keep original copies of documents….MX customs will only verify using original docs
- Make sure to respond to questionnaires or requests from MX customs within 30 days
- Communicate before goods are seized or litigation begins…best to use a MX attorney
- Remember, prior notification to avoid liabilities does not exist in MX as it does in US
Basic Logistics Metrics
Measuring and managing logistics performance is a full time job for logistics professionals. The volume of data can be daunting. Managers in other functions such as finance, marketing, or manufacturing may need a quick view of logistics data as it relates to their responsibilities. Here are a few general measures for the dashboard. Please let me know of others you have used.
Absolute Performance- monitor absolute logistics failures rather than averages. For example, 99.5% on time performance appears very good. However, in a high volume operation, it could mean hundreds or thousands of late orders per day.
Inventory Turnover- common measurement in asset mgt.
Order Fill Rate- customer service and warehouse productivity measurement. Can also use item, line, or value fill rate.
Warehouse Utilization %- indicator of good asset mgt.
Warehouse Productivity- measure of units received, stored, picked, packed, and shipped per hour.
Order Cycle – reduced order cycle means less inventory in the system and greater customer satisfaction. Longer order cycle means more inventory in the system and reduced customer satisfaction.
Lost Sales- inverse relationship with inventory. Higher inventory costs, lower risk of lost sales. Lower inventory costs, higher risk of lost sales.
Transportation costs- always a trade off…. bulk shipments can reduce transportation costs but leads to higher inventory levels in system. Higher transportation costs due to mode shift (air vs. ground or air vs. ocean) can reduce inventory in system by shortening the order cycle.
Commodity value- higher dollar value means increased transportation, inventory, and packaging costs.
Density of product- High density (lbs/ cubic ft or kgs/ cubic meter) means lower transportation and inventory costs since the product takes up less space in containers or warehouse.
Loss and Damage- greater susceptibility to loss or damage means higher transportation rates and higher warehousing costs due to special handling.
Location Decision- Distance from sources or markets = relative advantage or disadvantage vs. competitors. This is an upper mgt responsibility.