Category Archives: Regulatory Updates

New Year Due Diligence

I frequently conduct no fee discussions (phone or Zoom) with new clients to determine if I can help them. They may be unsure about their HTS codes or a specific regulation. Codes change frequently so it is a good business practice to verify your data.

Exporters quite often assure me that their commodities fall under EAR 99 and NLR (No License Required). While this may be true, due diligence requires verification, which starts with checking ECCN (Export Control Classification Number). BIS (Bureau of Industry and Security) spells out the specific procedures for checking ECCN and licensing requirements. The CCL (Commerce Control List) Index is a good place to start.

https://www.bis.doc.gov/

https://www.bis.doc.gov/index.php/documents/regulations-docs/13-commerce-control-list-index/file

EAR99 Does Not Always Mean NLR

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.

Don’t assume- verify!

Contact mitch@adhoclogistics.com for immediate assistance.

Heads Up- Tariff Updates

The HTS (Harmonized Tariff Schedule) and Schedule B have been updated for 2024. Both publications show multiple pages of code changes. Due diligence in checking your codes at least annually is a best practice for importers and exporters. Make sure that you are not using obsolete codes to avoid customs delays and possible penalties.

Here are the HTS and Schedule B links. You can check individual codes or review the change records.

https://hts.usitc.gov/

https://www.census.gov/foreign-trade/schedules/b/2024/index.html

As a reminder HTS codes can be used for AES filing, with some exceptions, per the following:

NOTICE TO EXPORTERS

For reporting electronic export information in the Automated Export System (AES), the statistical reporting numbers in the HTS (with their respective descriptions and units of quantity) for articles falling in chapters 1 through 97 may be used in place of those in the Schedule B, except as noted below.

Contact mitch@adhoclogistics.com for assistance.

Customs Brokers Continuing Ed is Coming

I have always favored continuing education as a way to professionalize the Customs Broker position. Starting with the 2024-2027 Triennial period LCBs will be required to complete some continuing education credit hours.

While the Final Rule states that brokers must complete 36 continuing education credit hours per triennial status period, CBP will allow brokers to complete fewer than 36 hours to meet the requirement for the initial 2024-2027 triennial status period. Further guidance on how many continuing education credits will be required for the 2024-2027 triennial status period will be published on CBP.gov and in a Federal Register notice.

Here is a link to the CBP website. Right now there are more questions than answers about the requirements. Let’s hope CBP provides clear direction soon.

https://www.cbp.gov/trade/programs-administration/customs-brokers/continuing-education

Prepare for CARM

If you are a Canadian importer or NRI (Non-Resident Importer) you will want to get up to speed on CARM, which will be fully implemented in May, 2024.

The Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) project is a multi-year digital initiative that will change how CBSA collects duties and taxes for goods imported into Canada. Through CARM, the CBSA will modernize and streamline the process of importing commercial goods.

CARM is relevant to US exporters because many of them act as Non-Resident Importers (NRIs) in Canada. A Non-Resident Importer (NRI) is a business located outside of Canada that ships goods to customers in Canada and assumes responsibility for customs clearance and other import-related requirements.

Before May 2024, importers and other trade chain partners need to register and adapt their systems and business practices. At first glance the process appears daunting. However, CBSA has provided plenty of resources, including webinars and a detailed user guide:

https://ccp-pcc.cbsa-asfc.cloud-nuage.canada.ca/en/onboarding-documentation

Most importers and NRIs will engage their Canadian customs broker for help with CARM. While this is a good idea, CBSA makes it very clear that:

  • Importers need to register their businesses and delegate a business account manager in CARM as soon as possible. 
  • Customs brokers need to get their clients to register and may need new software. 
  • If you are a trade consultant, find out what you need to do to be able to advise clients.

The CARM on-boarding steps are:

  1. Obtain Business Number. Current importers and NRIs will already have a BN.
  2. Create CARM account portal.
  3. Link user account with business account.
  4. Grant access to employees or representatives.
  5. Conduct business with CBSA.

Here are a few pro tips from a recent CBSA webinar:

  • During initial set up select a Sign-In Partner or create a GC key. The Sign-In Partner option allows users to log in through the web portal of their financial service provider. Sign-In Partners are financial institutions and banks that have partnered with Secure Key Technologies to enable their customers to use their online credentials to log in to other secure sites. A GC Key is a unique credential that protects your communications with online Government programs and services.
  • Users have the option set up multi-factor authorization, a personal profile, and preferences.
  • Register a BAM (Business Account Manager) in the CARM portal. CBSA recommends at least 2 BAMs to ensure account access in the event of staff changes.
  • Request a Statement of Account from customs brokers to answer any questions about transactions during on-boarding process. The CARM portal will bring all info together.
  • Decide delegation of authority to employees, customs brokers, consultants, etc.

This article is a brief overview of CARM and will, hopefully, help importers and NRIs start the process with time to spare before May, 2024. I have always found the CBSA website to be user friendly and strongly recommend consulting it for research.

https://www.cbsa-asfc.gc.ca/services/carm-gcra/menu-eng.html

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

What’s Your ECCN ?

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 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.

Violations of the Export Administration Regulations, 15 C.F.R. Parts 730-774 (EAR) may be subject to both criminal and administrative penalties. Under the Export Control Reform Act of 2018 (50 U.S.C. §§ 4801-4852) (ECRA), criminal penalties can include up to 20 years of imprisonment and up to $1 million in fines per violation, or both. Violators may also be subject to the denial of their export privileges.

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.

Don’t guess; confirm your ECCN. Here are a couple of easy to use resources:

https://www.bis.doc.gov/index.php/documents/regulations-docs/13-commerce-control-list-index/file

https://www.bis.doc.gov/index.php/export-control-classification-interactive-tool

Contact mitch@adhoclogistics.com for assistance.

Compliance Roadblocks

Exporters, what has prevented you from implementing an Export Compliance Program? Here are the most common self-imposed roadblocks:

Inertia- initial steps are taken to develop an Export Compliance Program but progress stalls as more urgent tasks need attention.

Management believes that company is too small or doesn‘t export enough to need a formal ECP.

Lack of upper management commitment and/or willingness to put in the time.

Management doesn’t want to spend the money or devote resources to create an ECP.

Compliance is managed at lower levels with limited authority to get the project done.

Reliance on Logistics Service Providers for compliance. While LSPs are valuable business partners, the exporter is ultimately responsible for compliance.

An effective Export Compliance Program includes these elements: Management Commitment, Risk Assessment, Export Authorization (Agency Jurisdiction), Record Keeping, Training, Audits, Handling Export Violations (Corrective Action), and Build and Maintain an ECP Manual.

The most important element, by far, is Management Commitment. C-Level executives must allocate resources, communicate the importance of an ECP throughout the organization, and hold everyone accountable. Without strong management commitment and involvement you will end up with a weak program.

If you would like to get started contact mitch@52.91.45.227

Want Fast or Accurate Classifications?

Tariff classification requests are often for a “quick code lookup” or a “ballpark duty rate”. For many commodities I may actually be able to provide plausible codes and duty rates with no research, but that would be malpractice on my part . Compliance adds value through attention to detail, established protocols, oversight, and documentation. HTS classification is the first step in both export and import compliance.

Proper classification includes HTS lookup, GRI (General Rules of Interpretation) review, checking both chapter and additional notes, as well as CROSS (Customs Rulings Online Search System). Specs, diagrams, and manuals are helpful. For some commodities it may be necessary to consult with a subject matter expert in engineering, purchasing, or manufacturing for details about the item.

These are the procedural steps of classification, but there is more. Most listings require interpretation of the tariff language based on experience. Finally, the process needs to be documented for future reference and parts lists updated.

For accurate classification help contact mitch@52.91.45.227.

The Matrix

No, I’m not referring to the sci-fi film. As noted in recent posts, HTS and Schedule B codes have been updated for 2023 and both tariffs will post changes throughout the year. Reviewing your codes at least semi-annually is a good business practice. However, in small/medium companies with minimal staffing this can easily be overlooked. When working with new clients checking codes is my first step in helping them achieve compliance with import and export regulations.

Why not take it one step further and develop a parts matrix listing descriptions, HTS codes, Schedule B codes, ECCN, License info, Country of Origin, and any other relevant import/export data? Your matrix will enable you to document new parts additions and changes as they occur. All departments involved in trade will be working with the same information so errors and omissions will be reduced.

Contact mitch@52.91.45.227 for help with your matrix.