Red Flags Mean Stop!

Whether your company has a formal Export Compliance Program (ECP) or not, it is critical that you have procedures in place to screen orders for Red Flags. Shippers need authority to stop shipments along with clear protocols for escalation and resolution.

Here is a list from the Bureau of Industry and Security (BIS) website of things to look for in an export transaction. Make sure you are not doing business with the bad guys. A little due diligence up front saves a lot of trouble later on.

  • The customer or its address is similar to one of the parties found on the Commerce Department’s [BIS’] list of denied persons.
  • The customer or purchasing agent is reluctant to offer information about the end-use of the item.
  • The product’s capabilities do not fit the buyer’s line of business, such as an order for sophisticated computers for a small bakery.
  • The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronics industry.
  • The customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing.
  • The customer has little or no business background.
  • The customer is unfamiliar with the product’s performance characteristics but still wants the product.
  • Routine installation, training, or maintenance services are declined by the customer.
  • Delivery dates are vague, or deliveries are planned for out of the way destinations.
  • A freight forwarding firm is listed as the product’s final destination.
  • The shipping route is abnormal for the product and destination.
  • Packaging is inconsistent with the stated method of shipment or destination.
  • When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for re-export.

For help with export compliance contact mitch@adhoclogistics.com

Negotiate Value Before Price

We have discussed negotiating with LSPs in previous posts. Here is a quick summary which can help guide engagements with providers. The key takeaway is value before price.

The motor carrier and air freight industries are extremely competitive, giving shippers an advantage in carrier selection and negotiations. A common mistake made by small and medium sized clients is failing to prepare before meeting with carrier representatives. Another mistake is focusing on price. A better strategy is to emphasize value in your discussions with LSPs. If you determine that they have the capabilities to provide quality services, then you can move the discussion to price. Consider: if simply asking for lower rates can result in transportation savings, how much better would the result be with a little preparation? Here are some suggestions from someone who has spent many years on the carrier side of the table.

Determine your specific transportation needs and goals ….for example

  • Price- compare net rates (not % off because base rates differ), minimums
  • Transit Times/Reliability- including pick up and delivery, terminal services, linehaul
  • Inventory Costs- reduced transit time = reduced inventory costs… how transportation adds value
  • Product Differentiation- faster, better service as a marketing tool
  • Capability/Access- carrier has right equipment in right place at right time
  • Security- carriers claim ratio and loss/damage experience
  • Relationship- responsiveness and problem solving protocols

Analysis Prior to Negotiation

There is not much advantage to withholding your shipping profile from LSPs. Because the industry is so competitive you will get a better deal if transportation providers know what volume they are bidding on and any specific service requirements. If this information is not available to them they will hedge their bets and be less aggressive in their offers. Gather some data and present it. This will give you professional status in the eyes of your carriers. Here is some minimum information needed. Most of it can be found in bill of lading or invoice files.

  • Volume/Frequency- # of shipments per day, week, or month
  • Weight- average weight per shipment
  • Dimensions- standard dimensions, if any… palletized or non palletized…pictures are helpful
  • Heaviest Shipping lanes- domestic and international
  • Services- priority or economy, express or deferred
  • Density- pounds per cubic foot ( for motor carriers)
  • Classification- NMFC item numbers (for motor carriers)
  • Dimensional Weight or Dim Factor (for air freight forwarders)
  • Packaging type- transportation only, display, labeling
  • Freight Payment Terms- prepaid, collect, third party
  • Control- Who has authority to sign an agreement? Who makes routing decisions?

Request for Proposal/Request for Quotation

A formal RFP or RFQ is an effective way to both reduce transportation costs and gain the value that you need from your carriers. Ad Hoc Logistics can prepare your RFP/ RFQ, get it to the appropriate transportation providers, and even negotiate on your behalf. Get started by contacting Ad Hoc Logistics.

What are ADD/CVD?

Anti-Dumping Duties and Countervailing Duties are risks to be avoided in international trade. The topic can be confusing so here is a quick summary of ADD/CVD. Consult the CBP website for details.

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 for relief may be 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:

ADD/CVD is a highly technical aspect of trade and requires due diligence on the part of importers. It is imperative to engage the services of a reputable and knowledgeable customs broker. While the importer of record (IOR) bears primary responsibility for following the law, the broker’s role is to guide their client and make sure that proper procedures are followed.

LinkedIn Comment

Andrea Jones • 2ndMarketing Communications Professional // Writer // Strategic Planner1wI am becoming increasingly frustrated with what LinkedIn is becoming — an avenue for what I will lovingly call “junk mail.” Almost all of the connection invitations I’ve received over the past few months have been from salespeople looking to prospect. What started as a business relationship-builder has become a direct-marketing vehicle. Am I the only one frustrated by this? hashtag#linkedi

Mitch Kostoulakos,

Agree, although you never know when a connection will lead to an opportunity. I usually ignore random requests unless I have met or done business with the requester. I  pay more attention to a request if it has a note attached. When I send a connection request I always add a note indicating why I would like to add them to my professional contacts.