Supply Chain is not Logistics

Mitch’s comment on LinkedIn

Azukaego ChukwuelueStatus is reachableAzukaego Chukwuelue• 3rd+Supply Chain Expert (Sub-Saharan Africa) I Gender Inclusion Advocate I Thought Leadership1w • 

The question I am continuously asked is whether Supply Chain is synonymous to Logistics. And my answer has always been clear; Supply Chain is Not Logistics, Logistics is in fact a subsection of Supply Chain.

Status is onlineMitch Kostoulakos, LCB  YouLicensed Customs Broker, International Logistics Consultant9m

Agree…Supply Chain is strategic, Logistics is tactical

What’s Your Country

A client recently asked for help in determining Country of Origin for their imports. As they noted, it is not always obvious. 21st Century supply chains are complex for even the simplest products. Parts are sourced globally before being assembled and shipped to the final destination.

Country of origin, often abbreviated COO, is one of the elements, along with harmonized code and commodity valuation, in determining duty/tax rates. While trade agreements such as USMCA (formerly NAFTA) have specific and complex rules of origin, the basic COO elements are:

Country in which the commodity is made, mined, grown, manufactured, or underwent substantial transformation. The 3 way test for substantial transformation is new name, new character, new use.

Substantial Transformation Rule….used to determine country of origin if articles or components are not wholly obtained from one country…Does article have new name, character, or use?

Change in character- altered physical characteristics of article or components. Were changes cosmetic? What was the process that resulted in change?

Change in use- Is end use of article interchangeable with end use of components? Is end use of component predetermined at time of importation? What was the process that resulted in change of use? Predetermined end use generally precludes substantial transformation but subject to specifics of article/components in question.

Change in name- this is the least compelling of the factors supporting substantial transformation. Do components retain original name after processing?

Subsidiary/Additional Factors- extent and nature of operations (complex or simple); value added and/or cost incurred during transformation process; essential character of article (components transformed into finished product); change from producer to consumer good; tariff shift.

Ad Hoc Logistics can help with regulatory questions or your international logistics needs. Contact mitch@adhoclogistics.com

Absolute Performance

The economic downturn has resulted in some consolidation in the Logistics Service Provider (LSP) industry. When changing providers, or if you want to challenge existing LSPs, this is a good time to review your Key Performance Indicators. Rather than simply accepting standard KPIs presented by your LSP, consider creating your own indicators that are relevant to your operation.

For example, on-time service standards are basic and common to all LSPs. Most logistics service providers present clients with monthly reports touting their on-time delivery percentage. It is easy to become complacent when LSPs routinely report 97-99% on-time service after taking exceptions for weather and other factors.

Why not challenge them to measure absolute performance failures instead of percentages? In a high volume operation even a small percentage can mean a lot of late shipments and unhappy customers. In a smaller operation with fewer customers every shipment is critical. If LSPs can track and report percentages they should be able to do the same for absolute numbers of shipments. FedEx has measured absolute performance for years.

Finally, if you are an LSP, remember that you have a client on both ends of the shipment, so service failures have twice the impact. Tracking different metrics enables you to view your operations with fresh eyes.

Need help? Contact mitch@adhoclogistics.com

Check the Boilerplate

One of our most common services, for both new and existing clients, is reviewing customs entries for accuracy. Clients understandably want to make sure that they are not overpaying duties on their imports. This, of course, leads to examination of the commercial invoices.

As everyone involved in international trade knows, the commercial invoice is one of the primary documents of 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:

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

Description of goods – avoid trade names, brand names. What is it? What is it made of? What is it used for?

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)

For immediate assistance contact mitch@adhoclogistics.com

Got Training?

My background includes a number of years as a corporate trainer. So I understand that in an economic downturn one of the first cuts is to the training budget. This is problematic because staffing cuts are often made at the same time. Remaining staff will be taking on additional duties and performing out of their comfort zone with few opportunities for training.

This is not the time to risk logistics service failures or customs delays which can cost you business. Some basic training with practical “how to’s” is in order. We can help!

I have developed “A to Z of Managing Logistics”, a brief presentation designed for managers who wear several hats and must oversee logistics among other duties. The steps outlined in the presentation are also valuable in training new logistics employees.

If interested contact:

mitch@adhoclogistics.com

Attention to Detail

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@adhoclogistics.com

True North

Canada Border Services Agency (CBSA) has updated their Customs Tariff for 2021.

Canada is the United States’ largest trading partner for exports and 3rd largest for imports. Here is a link to the Canada Customs Tariff 2021. For 10 digit harmonized codes, the first 6 are universal and the last 4 differ from country to country.

https://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2021/menu-eng.html

CBSA maintains a robust, user friendly website. Here are several links that may be helpful for traders:

https://www.cbsa-asfc.gc.ca/agency-agence/program-eng.html

https://www.cbsa-asfc.gc.ca/export/guide-eng.html

https://www.cbsa-asfc.gc.ca/import/guide-eng.html

https://www.cbsa-asfc.gc.ca/import/courier/lvs-efv/menu-eng.html

A Little Management

Many of my clients are hard-working owners or operators of small businesses. They don’t have in-house compliance or logistics expertise so must wear several hats. Day to day activities or unexpected issues take up most working hours. As a result, functions such as logistics planning and import/export compliance are often unmanaged.

Making sure that your business is in compliance with import and export regulations is good risk management as well as good business. Think of it as insurance. I have written about compliance as risk management in previous blog posts. Here is an example:

Contact mitch@adhoclogistcs.com for immediate assistance or an initial discussion.