All posts by mitch

Nuts & Bolts

Customs Review Best Practices

An annual review of Harmonized Tariff codes is a good business practice. Another good practice is to make sure you are taking advantage of regulations that allow importing on a duty free or preferential basis. Here are a few basic items for your annual customs review. Contact mitch@52.91.45.227 if you need help.

  • Classification– review annual updates to Harmonized Tariff to make sure your codes and descriptions are accurate. Proper classification and valuation of imported goods are the first step in compliance. If you do nothing else, do this.
  • Duty Drawback– this is a refund of duties paid on imports that are later exported. As supply chains expand there may be new opportunities for drawback. Record keeping is key here.
  • Chapter 98 of the Harmonized Tariff allows duty free entry of certain categories of goods. Examples are: American Goods Returned, American Goods Repaired or Altered Abroad, and American Components Assembled Abroad.
  • Trade agreements– programs which allow duty free or reduced duty rate entries. There are many agreements (such as NAFTA) in place.
  • Customs rulings– consider requesting formal customs rulings prior to large transactions. This ensures compliance and eliminates uncertainty about imports. Rulings can be requested thru the CBP website.
  • Correcting errors– when an entry mistake is discovered it can be corrected by a prior disclosure to CBP. The formal process is a Post-Entry Amendment/Post Summary Correction. A prior disclosure can help mitigate penalties.
Nuts & Bolts

Logistics Customer Service

From the archives

Logistics service providers point to their technological solutions and KPI’s (Key Performance Indicators) to add value for their clients. KPI’s are essential to the management of logistics providers as well as to their clients. Some customer service functions, however, are not as easy to measure. Clients of logistics providers include shippers, consignees, importers, and exporters. Whether your logistics provider is a motor carrier, freight forwarder, customs broker, or warehouse company, you will need customer service assistance from time to time. Let’s differentiate:

Request for Information– shipment status, tracking and tracing, claims status, rate requests, invoice balance. This type of customer service is best obtained on line. Take the time to become familiar with your providers’ info systems so you don’t waste time on the phone or waiting for a call back. If your provider does not offer this type of info on line they are either inefficient or very small. To avoid frustration ask yourself if you just need information or action by your provider. Information is easier to get than action.

Action Needed- This level of customer service most likely requires human intervention. Examples include customs or regulatory delays, stopping or diverting shipments, credit issues, special pricing, or real emergencies. While no one likes calling an 800 number, it is a good idea to get your request into the provider’s system as soon as possible as a first step. The difficulty is in reaching the right contact and getting the action you need. If you use a 3PL you may be able to delegate the problem for their handling and have them provide timely updates. If you do not use a 3PL, then you need to manage the issue on your own. One mistake clients make is to rely on their  account rep for all customer service. Account reps are usually on the road and in meetings so this causes delays in action. Another mistake is to depend on the super efficient Mary, Debbie, or Bill in your provider’s office. Everyone takes vacations and sick days so don’t rely on one person for your customer service needs. A better way to get good customer service is to establish protocols with the help of your providers.

Protocols- Day to day logistics consists of planning, execution, and problem solving. Good planning is essential but not foolproof. Logistics managers deal with changing schedules, equipment failures, weather delays, regulatory issues, and miscommunication on a daily basis. Most problems, however, are not new. The same situations tend to repeat themselves so they can be anticipated. I suggest developing a set of problem solving protocols for the most common issues in your supply chain. This approach will save you time since you will not be starting from scratch when a problem arises. It will also enable your colleagues to act in your absence. A basic protocol defines the problem and lists steps to be followed as well as the resources involved. Your logistics providers can help by providing resources. They should be willing and able to give you relevant operations contacts along with phone and e mail info for your identified problem areas. Your account rep may be surprised when you ask for help developing protocols but they should welcome the opportunity. This method can be a big time saver for them as well. Get commitment from your providers to respond to your requests in an agreed to amount of time. You can update the protocols as needed. Make them a part of your review meetings with your account reps and you will get better customer service.

Finally, if your account rep says “Just call me”, don’t accept this response.

We help small and medium sized companies stay compliant with Customs and export regulations and manage logistics. Contact mitch@52.91.45.227

Regulatory Updates

How to Determine ECCN

Exporters, do you know how to determine your ECCN? While it is true that the majority of exports can be designated EAR 99 and NLR (No License Required), it is important to first check for an ECCN.

There are three ways to determine ECCN: 1) self classify, 2) consult manufacturers of commodities, 3) request a classification by BIS.

Here is some info from the BIS (Bureau of Industry and Security) website.

Export Control Classification Number (ECCN)

A key in determining whether an export license is needed from the Department of Commerce is finding out if the item you intend to export has a specific Export Control Classification Number (ECCN). ECCNs are five character alpha-numeric designations used on the Commerce Control List (CCL) to identify dual-use items for export control purposes.  An ECCN categorizes items based on the nature of the product, i.e. type of commodity, software, or technology and its respective technical parameters.

An ECCN is different from a Schedule B number, which is used by the Bureau of Census to collect trade statistics. It is also different from the Harmonized Tariff System Nomenclature, which is used to determine import duties.

Contact mitch@52.91.45.227 for help with exports

Nuts & Bolts

Are you a Deemed Exporter?

Engineering firms, software companies, researchers, manufacturers, and universities need to be aware of the “deemed export” rules. They may be engaged in export transactions without even knowing it. Here is some info from the BIS website.

For help with exports contact mitch@52.91.45.227

Deemed Export FAQs

  • What is the “deemed export” rule?

    An export of technology or source code (except encryption source code) is “deemed” to take place when it is released to a foreign national within the United States. See §734.13(b) of the Export Administration Regulations (EAR). For brevity, these questions and answers refer only to “technology” but apply equally to source code.

  • What is a “release” of technology?

    Technology is “released” for export when it is available to foreign nationals for visual inspection (such as reading technical specifications, plans, blueprints, etc.); when technology is exchanged orally; or when technology is made available by practice or application under the guidance of persons with knowledge of the technology. See §734.2(b)(3) of the Export Administration Regulations (EAR).

  • What is “technology”?

    Per Part 772 of the Export Administration Regulations (EAR), “technology” is specific information necessary for the “development,” “production,” or “use” of a product.

  • When do I need to apply for an export license for technology under the “deemed export” rule?

    Assuming that a license is required because the technology does not qualify for treatment under EAR99 and no license exception is available, U.S. entities must apply for an export license under the “deemed export” rule when both of the following conditions are met: (1) they intend to transfer controlled technologies to foreign nationals in the United States; and (2) transfer of the same technology to the foreign national’s home country would require an export license.

Nuts & Bolts

Ear99 and NLR….Are you sure?

 

When the ECCN (Export Control Classification Number) comes up on export documents many exporters 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.”

If you need help contact mitch@52.91.45.227

 

Publications

Book Review of Move: Putting America’s Infrastructure Back in the Lead

Book Review published in Transportation Journal, Fall 2016

 

Rosabeth Moss Kanter, Move: Putting America’s Infrastructure Back in the Lead

W.W Norton & Co., New York NY, 2015

ISBN 978-0-393-24680-3

325 pp.

$26.95

 

In the United States we have become accustomed to traffic congestion, poor public transit, and the inability of the federal government to remedy these problems. Rosabeth Moss Kanter takes on these issues from the perspective of the general public in her new book “Move: Putting America’s Infrastructure Back in the Lead”. It will come as no surprise that the many nations outperforming the US in infrastructure development are able to do so, in part, because of their national priorities and policies. A recurring theme in the book is what the author calls “the quintuple wins” of greater safety, less congestion, higher efficiency and productivity, less pollution and carbon emissions, and greater economic opportunity.

The opening chapters describe the current deficiencies in our infrastructure and the statistics are stunning. While I found the book to be quite interesting, it is a bit heavy on data. Nevertheless, the point is well made that we have a massive problem which is getting worse by the day and our economic opportunities and quality of life are being limited. Kanter traces the root cause of our problems to the Interstate Highway System and the outmoded Highway Trust Fund. She goes on to examine all modes of transportation and notes that solutions need to be multi-modal and, most importantly, build connections.

While the public is generally aware of our 3rd world passenger rail system, not many know how efficient and profitable US freight rail has become. Indeed, 21st century freight railroads can be characterized by financial responsibility and reinvestment of profits in infrastructure. This is in contrast to other modes which have deferred investment turning hubs into bottlenecks.  Commuter rail is examined as an important part of getting America moving again. It is acknowledged that public transit systems cannot cover operating expenses with fares but that they are essential for economic development and mobility. Beyond operating expenses transit systems, other than busses, require huge capital investments. The US has disinvested in rail infrastructure, allocating 4.9% of federal transportation dollars in 1976 and only 1.2% in 2014.

Chapter 3, “Up In the Air”, describes what all travelers know about the ordeal of airline travel today. Technological innovations that can improve the system are highlighted but perhaps the biggest need is for a national strategy. Airports are managed by municipalities and regional authorities while air traffic is managed by the FAA. Airlines want to get passengers out of town while airports view delays as a way to keep them spending money locally. Interestingly, while airport land is very valuable, private companies have been unwilling to own and operate airports. Multiple stakeholders with different interests result in a complex system.

Chapter 4, “Smart Roads Meet the Smart Phone”, is both inspiring and exciting. Kanter introduces the concepts of dynamic pricing as an alternative or supplement to the fuel tax. The reader learns how software can enable many improvements allowing smarter use of existing assets. “Re Thinking Cities,” the subject of Chapter 5, examines how streets can be used as assets for people as well as cars. The author shows the direct correlation between efficient public transit and social mobility. Achieving full interoperability across systems, modes, and geographic regions will require bold policy and political will.

The discussion comes around again to the role of policy makers in the next chapter, “The Will and the Wallet”. In the US we may have more wallet than will. Our 2.4% of GDP investment in infrastructure pales in comparison to 5% in the EU and 9% in China. Kanter does not believe that privatization of infrastructure is a good idea and makes the case that it will cost more in the long run. She is a proponent of PPP’s, Public Private Partnerships. Along with Infrastructure Banks, PPP’s can be an alternative to government bonds or privatization. Unfortunately this section of the book is dominated by a much too detailed and difficult to follow story about the Miami Access Tunnel.

The final chapter, “How to Move”, emphasizes that we need to look to mayors, governors, and regional authorities to do what the federal government cannot do. Kanter believes that coalitions including the private sector are the way to implement infrastructure improvements. This may be the only way in the absence of a national strategy but seems a little idealistic. However, this is an informative book with an optimistic outlook and well worth reading.

 

Mitch Kostoulakos, CTL

Adjunct Faculty

Southern New Hampshire University

m.kostoulakos@snhu.edu

 

Regulatory Updates

Don’t know where to start with Export Compliance?

Published on LinkedIn today:

Clients often know that they need help with export compliance but don’t know where to start. A well written and maintained Export Management and Compliance Program is the ideal way to keep compliant and there is no question that a written EMCP is a good investment for any company to make. An EMCP establishes clear accountability, written instructions, and reduces risk of non-compliance. However, an EMCP is costly and time consuming, requiring a significant commitment on the part of management. If the exporter has not experienced problems or incurred any fines it is easy to make an EMCP a “back burner” issue. There is considerable risk in being non-compliant, so don’t make the mistake of doing nothing because you are not in a position to implement an EMCP. A few best practices can help. To get started I suggest the following:

  • Review and confirm correct Harmonized Tariff and Schedule B codes in January and July as updates occur.
  • Check EAR regulations for correct ECCN and license exemption codes. Are you automatically using EAR99 and NLR? Help is available @ bis.gov.
  • If exporting under ITAR you need a responsible trained officer.
  • Check common “Red Flags” such as denied parties lists, entities lists, and unverified lists. Once again, bis.gov provides details and training.
  • Review export documentation for possible improvements. Your forwarder can be a good resource here but the exporter has ultimate responsibility for compliance.
  • Make export compliance a front-end process not a last minute shipping function.

 

 

Nuts & Bolts

Are you taking the Customs Broker exam in October?

 

If you are planning to take the customs broker exam in October you should be well into your preparations by now. In a previous post I shared the prep strategies that worked for me. Here is the info again with the key steps highlighted. Best of luck but don’t rely on luck.

According to CBP Customs and Border Protection passing rates for the customs brokers exam average only 3-11% nationwide. The test is given twice per year in April and October. It consists of 80 multiple choice questions and a passing grade is 75%. The exam is open book which makes it seem easy. However, the books consist of  the HTUS Harmonized Tariff of the United States and CFR 19 Code of Federal Regulations, totaling hundreds of pages. The difficulty is in being able to quickly access the right section for each question. It is a four hour exam so three minutes per question is not much time.

I took a prep course but, as good as it was, it would  have been difficult to pass the exam without additional study. I estimate that I spent about 60  hours on weekends leading up to the exam.

I used 6 previous exams and a 3 step process. In step 1 I took each test for accuracy, ignoring the clock. In step 2 I took the tests again in the same order, while timing myself to make sure I could finish within 4 hours. I believe that step 3 was the key to my success. For this phase I circled all the questions I had missed in steps 1 and 2 and created a separate mini exam which I took several times until I answered all the questions correctly.

Regulatory Updates

Export Compliance = 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 management.  Best practices, including an Export Management  & Compliance Program,  will reduce exposure to steep fines and penalties. Don’t leave this responsibility to your shipping department!  Here is some information from the BIS (Bureau of Industry and Security) website showing details. For help with export compliance contact mitch@52.91.45.227

Penalties

Violations of the Export Administration Act of 1979, as amended (EAA), 50 U.S.C. app. §§ 2401-2420 (2000), and the Export Administration Regulations, 15 C.F.R. Parts 730-774 (2007) (EAR) may be subject to both criminal and administrative penalties. When the EAA is in effect, criminal penalties can reach 20 years imprisonment and $1 million per violation. Administrative monetary penalties can reach $11,000 per violation, and $120,000 per violation in cases involving items controlled for national security reasons. When the EAA is in lapse, the criminal and administrative penalties are set forth in the International Emergency Economic Powers Act (IEEPA).

On October 16, 2007, President Bush signed into law the International Emergency Economic Powers (IEEPA) Enhancement Act, Public Law No. 110-96, amending IEEPA section 206. The Act enhances criminal and administrative penalties that can be imposed under IEEPA and also amends IEEPA to clarify that civil penalties may be assessed for certain unlawful acts. 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. See Endnote below.

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.