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I have often noted that export compliance is good risk management. While risk management always gets C level attention, export compliance is often a mid-management or lower level function. Fines and penalties for violations should make export compliance a basic part of risk
Best practices, including an Export Management Compliance Program, will reduce exposure to steep fines and penalties as described by BIS (Bureau of Industry and Security) on their website.
If you are relying on your logistics service providers, or your busy shipping department, for export compliance you may be at risk. Both upper management commitment and front line training are essential parts of an EMCP.
BIS offers a number of on-line courses at no cost. Check them out under the Compliance and Training tab and get started!
Under the EAR (Export Administration Regulations) criminal penalties can reach 20 years imprisonment and $1 million per violation. A denial of export privileges prohibits a person from participating 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.
We have been working with a New Hampshire client to determine the cause, and reduce the frequency, of customs delays on their imports. More accurate commodity descriptions on the commercial invoice and airbills will no doubt solve the problem.
As everyone involved in international trade knows, the commercial invoice is one of the primary documents in the transaction. While there is no universal standard format for commercial invoices, including the following key elements will help reduce customs delays and entry mistakes:
Description of goods – If you do nothing else take an objective look at your commodity descriptions. Avoid trade names, brand names. A good description answers the questions: What is it? What is it made of? What is it used for? Most customs brokers and integrators pre-clear shipments electronically so descriptions can sometimes be truncated in the process. Best practices would include leading the description with the most critical info. Additional data such as part numbers or specs can be included in the body of the CI if necessary.
Invoice Number, Page Numbers – Avoids confusion for entries with multiple CIs or CIs with multiple pages.
Country of Origin– Best to use ISO country codes.
Related/Not Related parties
Incoterms and currency- these are elements of the sales contract. Indicate version of Incoterms (2010, 2020) as all parties may not be aware of updates.
Harmonized tariff # and duty rate if known
Summary of Value- must include IV Invoice Value. Can also include NDC Non Dutiable Charge (subtractions), AMMV Add to Make Market Value (additions), NEV Net Entered Value (bottom line- dutiable)
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One of the key elements in export compliance is the ECCN or Export Control Classification Number. In order to determine if a license is needed for your exports it is first necessary to determine the ECCN for your commodity. As we have noted in previous posts, many exporters automatically enter EAR99 and NLR on shipping documents. This is a mistake unless you have done due diligence on your products. EAR99 indicates that a commodity is subject to Export Administration Regulations but is not specifically listed on the Commodity Control List (CCL). NLR states that no license is required.
ECCN can be determined by consulting with manufacturers of products, filing a classification request with BIS (Bureau of Industry and Security), or self classifying. BIS offers a specially designed decision tool that is very easy to use. Check it out on the Exporter Portal @ bis.gov.
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New mandatory EEI filing requirements effective 9/27/2020. Here is one of the the FAQs from the BIS website.
Q28: Are exporters required to file EEI for shipments of commercial items valued under $2,500 if destined to China and it is for commercial end use?
A: Yes. The new mandatory filing requirement in Section 758.1(b)(10) applies to all items that have an ECCN and are destined to China, Russia, or Venezuela, regardless of value, end use or end user. The only one of the exemptions in Section 758.1(c) that is available to overcome this requirement is License Exception GOV.
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When making entries on export documents shippers routinely use EAR99 for their ECCN (Export Control Classification Number) . While this may be the correct entry, it is important to first check the CCL (Commerce Control List) to make sure. Also items classified as EAR99 may require a license under certain conditions. Make sure you are using EAR99 and NLR (No License Required) appropriately. Here is some language from BIS (Bureau of Industry and Security) explaining EAR99.
If your item falls under U.S. Department of Commerce jurisdiction and is not listed on the CCL, it is designated as EAR99. EAR99 items generally consist of low-technology consumer goods and do not require a license in most situations. However, if your proposed export of an EAR99 item is to an embargoed country, to an end-user of concern, or in support of a prohibited end-use, you may be required to obtain a license.
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