An annual customs review 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.

Most shippers by now are quite comfortable submitting ACE Export (formerly AES) filings. I have found, though, that EAR99 and NLR are often entered by default. While these may be the correct entries, it is a good business practice to check and confirm.

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@52.91.45.227 .

Mitch Kostoulakos, LCB commented on this

Pete Mento • 2ndManaging Director Global Customs and Duties, Crowe LLP4h • Edited • Here’s a reality slap for you: There are only about 14,500 Licensed Customs House Brokers in US. And let’s be serious – a significant portion are retired or not engaged in license focused activities. I would guess less than half are actually working, licensed Trade Professionals. Given the horror stories of the way people were treated taking the last exam, how difficult CBP makes taking it, the absurdity of NCBFFA’s ideas of monetizing and monopolizing our continuing education and how we are outrageously undervalued ….We are ripe to unionize. And no, I’m not joking. The argument back will be that automation and systems are overcoming the need for the insights of brokers. If you are under that impression, you clearly haven’t been paying attention. Importing and global trade is only becoming more difficult. The process of becoming a broker needs to evolve to reflect that. Apprenticeships, comprehensive exams, multiple levels of licensure and real continuing education developed by CBP in conjunction with a non biased group of people not in it for the cash must be considered. And we have to find a way to bring more young professionals into this line of work as we are – literally – dying and retiring off at an alarming rate. hashtag#importhashtag#logisticshashtag#tradehashtag#NCBFFAhashtag#globaltradehashtag#shipping…see

Sign me up Pete. Compliance and regulatory expertise is worth a lot more than brokers are being paid. Entries will continue to be commoditized and automated but they are just the tip of the iceburg.

A recent client project consisted of reviewing a number of entries to check harmonized codes and duty rates. This, of course, led 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@52.91.45.227

Best of luck to applicants taking the Customs Broker Exam on October 17th. For anyone thinking about applying for a future exam here is a question from the April 2019 exam. I will post the answer next week and also respond to anyone who submits their answers.

10. Die cut steel plier levers were bolted together in China before having rubberized non-slip grips attached to each lever handle in Germany prior to being imported into the United States. What is the proper country of origin and marking method?

A. Made in Beijing printed on a hangtag

B. Made in China printed on a sticker attached to the pliers

C. Made in China die stamped into the pliers

D. Assembled in Germany printed on a sticker attached to the pliers

E. The pliers are exempt from marking in accordance with the J list

In previous posts we have reported on the World Bank Logistics Performance Index and how the United States ranks compared to other nations.

Another view of world trade is presented by the World Bank in their report Trading Across Borders- Doing Business. In the most recent report the US ranked 36th in trading across borders. Here is a link to the report along with some introductory info.

https://www.doingbusiness.org/en/data/exploretopics/trading-across-borders

 Trading across Borders

Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. 

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.

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. 

The logistics industry is heavily dependent on data and technology. The most successful LSPs (Logistics Service Providers) are innovative in their efforts to improve service and productivity to the benefit of both clients and providers. The nuts and bolts of logistics also involves people, so basic front line management skills can improve operations.

Here is a proven method for the toolbox. The links of the performance chain can help with day to day management and problem solving.

Expectations– Are goals and deliverables crystal clear? Don’t assume. Feedback– Information which is specific, timely, and relevant. Not just an annual review. Resources– Time, tools, and staffing to do the job right. Skills/Knowledge– Is training needed? Managers often point to training as the solution to problems. However, if employees know how to do the job training may not be the answer to performance issues. Look to the other links of the chain. Capacity– Does the person have the physical and mental ability to do the job with training? If not, reassign or terminate, and screen new hires more carefully. Incentives– What rewards are most meaningful to the workforce? These include money, benefits, flex time, etc. and will vary for individuals. Incentives are external and provided by the company. Motivation– Internal and personal to each employee. Top performers are self motivated. For others the idea is to bring out their motivation through incentives, training, or simply clearer expectations and feedback.

New to management? The performance chain is a good starting place. Experienced manager? Old dogs can learn new tricks.

Thanks to Jack Zigon for refreshing my memory.

Posted 8/16/2019

Taking the Customs Broker exam ?

In a recent post I gave an example of a tricky question which sometimes appears in the exam. Here is the question and the correct answer (D).

Importations of switchblade knives is permissible by 15 U.S.C 1244 if:

D. The entry will contain, among other documents, a declaration in duplicate stating that the switchblade knife has a blade not exceeding 3 inches in length and is possessed by and is being transported on the person of an individual who has only one arm.

The exam is difficult, with normal passing rates of around 11%. For my prep strategies click here:

Customs Broker Exam Prep