Risk Management Includes Export Compliance

Risk management is a major concern of C-level executives for obvious reasons. While it is easy to overlook export compliance, managers should consider the financial risks of doing so. The Bureau of Industry and Security (BIS), which is part of the U.S. Department of Commerce, is charged with enforcement of export regulations. Penalties for non-compliance are steep. An export compliance program is sound business practice as well as good risk management. Here is some info from the BIS website.

  • Violations of the Export Administration Act and the Export Administration Regulations, 15 C.F.R. Parts 730-774 (2007) (EAR) may be subject to both criminal and administrative penalties.
  •  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.
  • 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.

Contact mitch@ for help with export compliance.

EAR 99 and NLR Revisited

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.”

For immediate assistance with exports contact mitch@ .

South of the Border

From the archives….Good info from  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 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 of 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


For help with exports contact mitch@

Mitch’s Comments in International Trade Compliance Experts

Mitch Kostoulakos CTL,LCB

  • From LinkedIn post group discussion: International Trade Compliance Experts.

    Good tips, especially #3. I would add regularly scheduled contract/performance reviews for optimal results.

10 Tips for Outsourcing Logistics Services to a 3PL Provider

linkedin.comToday’s economy demands that a business be efficient in all manners of its operations. In order to compete with a rapidly growing market, a company must find ways to gain an edge over its competitors. Time and money must be spent to improve its…

International Logistics Consulting; Licensed Customs Brokers