There are thousands of stories, many of which we’ve read here at China Law Blog, of companies attempting to sell into China before understanding the legal and regulatory environment for their product. Importing into China is one of these often-overlooked areas, specifically, the rules and regulations as they apply to individual products. In my experience, [...]
There are thousands of stories, many of which we’ve read here at China Law Blog, of companies attempting to sell into China before understanding the legal and regulatory environment for their product. Importing into China is one of these often-overlooked areas, specifically, the rules and regulations as they apply to individual products. In my experience, the importation process creates more issues and lost revenue over time than any other day-to-day activity involved with selling into China.
From the inception of your idea to enter the China market, to the daily grind of fulfillment and sales, there are three keys to getting your goods into the commerce of the PRC.
First, understand the importation process and how it should be performed for your specific product before you ship anything (even samples). DUE DILIGENCE.
Second, if you are importing your own products into China, your relationship with China’s importation regulatory institutions is vital to your success. If you are not the importer of record for your product, see point one.
Third, always make sure your paperwork is correct before you ship, especially with samples and new products. This includes keeping up to date with new laws, regulations and enforcement rules for your industry.
Click here to read the complete article.
Source: Shawn Mahoney via Dan Harris @ China Law Blog
Trade community members who have utilized the Centers of Excellence and Expertise being opened by U.S. Customs and Border Protection have largely had a positive experience, according an initial survey of CEE users conducted in March. Just over half the 769 survey respondents identified themselves as importers, and the industries most represented among respondents were [...]
Trade community members who have utilized the Centers of Excellence and Expertise being opened by U.S. Customs and Border Protection have largely had a positive experience, according an initial survey of CEE users conducted in March. Just over half the 769 survey respondents identified themselves as importers, and the industries most represented among respondents were textiles, apparel and footwear; industrial and manufacturing materials; and consumer products and mass merchandising.
Of the nine percent of survey respondents who are currently CEE participating account members, 54% are also members of the Importer Self-Assessment program and 100% are participating in the Customs-Trade Partnership Against Terrorism. Three-quarters of these respondents said they were very satisfied, and over 96% had their issues resolved, after contacting a CEE. Most said they contact the CEEs a few times a year, often to discuss C-TPAT questions and procedures, and their primary trade facilitation concerns include cargo holds and CBP requests for information (CF-28s). In addition, most respondents said they have seen benefits such as fast shipment delay resolutions, direct contact with CBP and transparency into CBP requirements.
The survey revealed similar information on the 21% of respondents that are CEE non-participating account members. These respondents primarily contact CEEs about C-TPAT questions and procedures, CBP holds and release times, and exams, and their top trade facilitation concerns were also CF-28s and cargo holds. Nearly 20% reached out to CEEs on compliance issues and 61% of those said they received adequate assistance. Benefits cited included one-point contact and transparency into CBP requirements. Continue reading »
U.S. Customs and Border Protection has announced an expansion and modification of a general test concerning its Centers of Excellence and Expertise, which aim to facilitate the entry of merchandise imported by companies within certain industries. A notice concerning this test, including the application process and eligibility and selection criteria, is available in the April [...]
U.S. Customs and Border Protection has announced an expansion and modification of a general test concerning its Centers of Excellence and Expertise, which aim to facilitate the entry of merchandise imported by companies within certain industries. A notice concerning this test, including the application process and eligibility and selection criteria, is available in the April 4 Federal Register.
CBP’s goal is to incrementally transition the operational trade functions that traditionally reside with the ports of entry until they reside entirely with the CEEs. By focusing on industry-specific issues and providing tailored support for participating importers, CBP is seeking to facilitate trade, reduce transaction costs, increase compliance with applicable import laws, and achieve uniformity of treatment at ports of entry. CBP believes that providing broad decision-making authority to the CEEs for entry processing issues will better enable them to achieve these goals and is conducting the ongoing CEE test to determine if that is true. Read more here.
Source: STR Trade Report
Earlier this year, the National Industrial Transportation League (NITL) cited customs and international trade law firm Sandler/Travis’s reporting in its Daily Report that “CBP is expected to issue by the end of May a proposed rule that would make various changes to increase the accuracy and reliability of the advance information submitted under the importer [...]
Earlier this year, the National Industrial Transportation League (NITL) cited customs and international trade law firm Sandler/Travis’s reporting in its Daily Report that “CBP is expected to issue by the end of May a proposed rule that would make various changes to increase the accuracy and reliability of the advance information submitted under the importer security filing, or ‘10 + 2 rule.’
It added that while fines for non-compliance were set at $5,000 per incident, Sandler/Travis said that CBP has not strongly required full compliance and that the proposed rule could set forth the agency’s intention to do so and establish standards under which full compliance could take place.
Considering I have not heard or seen a whole lot regarding ISF/10+2 of late, I thought it might be a good idea to ask someone in the know, Albert Saphir, principal of ABS Consulting, in Bradenton, Florida. What Albert told me was very interesting.
“CBP has stated that a final ISF rule (the current one is still not a final one legally speaking) should be forthcoming this year, and everyone expecting penalties (liquidated damages) to then be enforced by CBP,” he said. “From what I know, CBP has not issued any penalties yet for ISF violations and failures. In my view this is resulting in many importers and customer brokers (and forwarders) taking a relaxed approach which often means late and inaccurate filings from what I have seen. Many have stated to me privately that ‘CBP does not care so why should we?’ It is not a good attitude but understandable if ISF is not enforced.
What’s more, he said that CBP made such a big issue about ISF, even codifying benefits for compliant companies (obviously elusive until enforced) that he has been surprised that enforcement has not yet taken place, although this most likely this will finally change in 2013, he said.
Click here to read the complete article.
Source: Logistics Management | Jeff Berman
The U.S. Department of Justice (“DOJ”) recently announced that a Japan-based company, Toyo Ink SC Holdings Co. Ltd., and various affiliated entities, have agreed to pay $45 million plus interest to settle allegations that they knowingly failed to pay antidumping and countervailing duties. DOJ alleged that these companies, between 2002 and 2010, knowingly misrepresented or [...]
The U.S. Department of Justice (“DOJ”) recently announced that a Japan-based company, Toyo Ink SC Holdings Co. Ltd., and various affiliated entities, have agreed to pay $45 million plus interest to settle allegations that they knowingly failed to pay antidumping and countervailing duties. DOJ alleged that these companies, between 2002 and 2010, knowingly misrepresented or caused to be misrepresented the country of origin on documents presented to U.S. Customs and Border Protection (“Customs”). These misrepresentations allegedly allowed the companies to avoid paying duties, and particularly countervailing and antidumping duties, on certain imported products.
This case represents much more than just an importer allegedly evading duty payments as it has many different elements to it, one being substantial transformation. The products at issue were colorant carbazole violet pigment number 23 (CVP-23). While the companies represented the products’ country of origin to be either Japan or Mexico, to which antidumping or countervailing duties would not apply, the products actually originated either in India or China, to which antidumping or countervailing duties would apply. The CVP-23 products went through a finishing process either in Japan or Mexico before being imported into the U.S., but the government maintained that those processes were not sufficient to substantially transform the products into products of Japan or Mexico. Consequently, the government challenged the companies’ claims that the products were not subject to antidumping or countervailing duties. If nothing else, this case underscores the value of making honest and accurate country-of-origin claims based on substantial transformation. But this case raises important additional concerns for importers. Continue reading »
Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee The EU relies heavily on international trade for its economic development and is exposed to security and safety threats that come with this trade. Illicit international trade also undermines economic and social welfare in the EU. Effective risk [...]
Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee
The EU relies heavily on international trade for its economic development and is exposed to security and safety threats that come with this trade. Illicit international trade also undermines economic and social welfare in the EU. Effective risk management of the movement of goods through the international supply chain is critical for security and safety and essential to facilitating legitimate trade and protecting the financial and economic interest of the EU and its Member States.
Since ‘9/11’ and other terrorist attacks in Europe and elsewhere, security has become a top priority for European customs. The security of the EU, of the Member States and of citizens depends on each and every single point of entry of goods into the EU. If customs failed to act to tackle risks consistently along the EU’s external borders, the customs union and the EU single market would become unsustainable.
Customs policy is an EU competence: the Member States follow a common approach. The EU has the responsibility of supervising the Union’s international trade and upholding minimum standards of customs risk management and controls. Like many other jurisdictions and in line with international standards, the EU has a common policy framework intended to address risks and accelerate legitimate trade. In addition to adopting the relevant legislation, the customs administrations throughout the EU have taken action to overhaul control procedures, techniques and resources.
The purpose of this Communication is to:
- review the implementation of customs risk management policy;
- put forward a strategic approach for the years ahead;
- make recommendations for action with a focus on efficient deployment of resources.
Click here to download the document.
US customs and Border Protection (CBP) has revealed the results of its foreign factory visits conducted by its textile production verification teams during the 2011 fiscal year. • Of the 174 factories CBP visited in nine countries in Latin America, the Middle East and Africa for illegal transshipment verifications, 21 were closed and 21 were [...]
US customs and Border Protection (CBP) has revealed the results of its foreign factory visits conducted by its textile production verification teams during the 2011 fiscal year.
• Of the 174 factories CBP visited in nine countries in Latin America, the Middle East and Africa for illegal transshipment verifications, 21 were closed and 21 were deemed high-risk. One of the factories refused to admit CBP inspectors or produce requested documents, and evidence of transshipment was found at two factories.
• In Lesotho nine factories were found to be compliant with the African Growth and Opportunity Act, none of the factories visited were in violation, and two had insufficient documents to support AGOA claims.
• CBP found 59 factories in five countries to be in compliance with DR-CAFTA while ten were in violation, 17 had insufficient documents to support DR-CAFTA claims, and 13 were closed.
• Ten factories in Jordan were determined to be in compliance with the U.S.-Jordan FTA, none were in violation, three had insufficient documents to support FTA claims and two were closed.
• In Egypt, CBP found 14 factories that were in compliance with requirements under the Qualifying Industrial Zone program and none that were not, although seven had insufficient documentation to support QIZ claims and one was closed.
• CBP found nine factories in Peru to be compliant under the U.S.-Peru FTA but 11 had insufficient documents to support FTA claims and two were closed.
Source: Petah Marian | Just-Style
Customs regulatory developments and enforcement are on the rise in many Asian countries such as China, India, Indonesia, Thailand and Malaysia, as pressure grows to increase customs revenue collections. Failure to be informed and plan ahead in this evolving and complex area can result in border delays, stiff penalties, increased risk of inspections and customs [...]
Customs regulatory developments and enforcement are on the rise in many Asian countries such as China, India, Indonesia, Thailand and Malaysia, as pressure grows to increase customs revenue collections. Failure to be informed and plan ahead in this evolving and complex area can result in border delays, stiff penalties, increased risk of inspections and customs audits, and missed production or delivery deadlines.
Multinationals willing to succeed in Asia and international trade face evolving and complex tax and customs regulations. Enforcement cases are high-profile, audits are on the rise, and yesterdays’ knowledge simply isn’t enough to make the right trade compliance decisions today.
After the tremendous success of its inaugural Asia Customs Compliance Summit in June 2011 and its flagship trade compliance conferences in Europe and the United States, ACI and C5 Group are proud to announce the 2nd Advanced Singapore Summit on Asia Customs Compliance.
The unique conference was specifically designed for Asia trade compliance executives, accountants and attorneys, and will provide a comprehensive Asia customs compliance roadmap to meet your company’s operational challenges on a country by country basis. Benefit from the experience of senior customs executives from the high technology, automotive, consumer products, life sciences and manufacturing industries. Gain practical tips on:
- How to import used equipment in China and the Philippines
- How to spot opportunities under the ASEAN-China FTA and ensure communication between procurement, tax, and global trade compliance departments
- How to respond to customs violations in Thailand
- Calculating transfer price v. custom value on related party transactions in China
- How a multinational should organize staff and what is expected of customs and trade professionals in each country
- Implementing compliance procedures based on Korea-US FTA and Korea-EU FTA ratification
Participants will also receive comprehensive materials prepared by the speakers especially for this conference. These are invaluable reference materials which you will use again and again long after the conference is over.
Date: Monday, February 25 to Tuesday, February 26, 2013
Location: Singapore Marriott Hotel, Singapore
Register now to ensure your place at this unique customs compliance benchmarking event in Singapore. Call +1 416 926 8200 in the US, or +44 20 7878 6888 in Europe, or register online.
In today’s global economy, the transportation of goods could have significant customs implications. Moreover, customs duties can have a direct impact on the bottom line. Unfortunately, importers often overlook or mismanage duties and customs compliance, which can result in significant and unnecessary duty costs. Below, we’ve outlined the top 10 customs-related issues facing Canadian importers. [...]
In today’s global economy, the transportation of goods could have significant customs implications. Moreover, customs duties can have a direct impact on the bottom line. Unfortunately, importers often overlook or mismanage duties and customs compliance, which can result in significant and unnecessary duty costs.
Below, we’ve outlined the top 10 customs-related issues facing Canadian importers.
1. Origin preferences Although imported goods can be subject to customs duties, preferential origin treatments such as the North American Free Trade Agreement (NAFTA) can provide significant duty relief to importers.
Canada has numerous multilateral, bilateral and unilateral origin-based relief mechanisms in place. Importers should be aware of and take advantage of any applicable origin-based duty relief opportunities. Otherwise, they can face significant unnecessary duty outlays that have a clear impact on the bottom line.
Importers who do take advantage of origin-based duty relief opportunities need to ensure that they manage them appropriately. This includes having valid and complete documentation and the respective rules of origin need to be followed. Failure to properly apply and document preferential origin-based duty treatments could result in significant duty costs and, in some cases, duty relief could be revoked.
Importers can leave significant duties on the table and be subject to significant compliance-related costs if they do not manage matters appropriately.
Read the complete article here.
Source: Ernst & Young | Financial Post
U.S. Customs Border Protection doubled the number of its centralized compliance facilities on May 11, announcing two more centers of excellence and expertise aimed at the petroleum and automotive/aerospace industries. Acting CBP head David Aguilar said the agency will Centers of Excellence and Expertise (CEE), will create a Center of Excellence and Expertise (CEE) for [...]
U.S. Customs Border Protection doubled the number of its centralized compliance facilities on May 11, announcing two more centers of excellence and expertise aimed at the petroleum and automotive/aerospace industries.
Acting CBP head David Aguilar said the agency will Centers of Excellence and Expertise (CEE), will create a Center of Excellence and Expertise (CEE) for Automotive and Aerospace in Detroit and another for Petroleum, Natural Gas and Minerals in Houston.
CBP began the program last October, establishing CEEs for the information technology and consumer electronics industry in Los Angeles and pharmaceuticals, health and chemicals in New York.
The first international conference on the new trade paradigm, mainly referring to the Authorized Economic Operator, kicked off in Korea on Tuesday. About 800 senior public officials, business leaders and professors from around the world are attending the three-day forum co-hosted by the World Customs Organization and the Korea Customs Service. The conference is drawing [...]
The first international conference on the new trade paradigm, mainly referring to the Authorized Economic Operator, kicked off in Korea on Tuesday.
About 800 senior public officials, business leaders and professors from around the world are attending the three-day forum co-hosted by the World Customs Organization and the Korea Customs Service.
The conference is drawing interest as this marks the first global gathering since a group of customs authorities officially introduced the so-called AEO concept in 2005.
The AEO indicates a party involved in the international movement of goods that has been approved by a national customs administration as complying with World Customs Organization or equivalent supply chain security standards.Among them are all stakeholder groups such as importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors.
Aimed at improving the efficiency of customs administration and increasing the safety of trade goods, the program offers AEOs diverse benefits such as quicker customs clearance and exemption from customs check-ups, while tightening surveillance on unauthorized products or companies for potential security threats.
Since the U.S. adopted the program in the aftermath of the Sept. 11 terrorist attacks in 2001, 54 countries around the world have joined that comprise about 77 percent of global trade volume. Countries adopt the AEO program for different reasons according to their individual situations.The U.S. focuses more on supply chain security, while countries like Japan and New Zealand prioritize supporting their exporting countries. Others including Korea, China and EU seek both purposes.
Canada has established a self-reporting and self-assessing customs scheme. To some extent, self-reporting and self-assessing schemes rely upon the honesty and integrity of the declarations provided by importers and exporters. However, officers conduct verifications and audits to: (a) audit or verify compliance; (b) correct non-compliance; (c) assess or re-assess duties, taxes and charges; and (d) [...]
Canada has established a self-reporting and self-assessing customs scheme. To some extent, self-reporting and self-assessing schemes rely upon the honesty and integrity of the declarations provided by importers and exporters. However, officers conduct verifications and audits to:
(a) audit or verify compliance;
(b) correct non-compliance;
(c) assess or re-assess duties, taxes and charges; and
(d) assess interest, penalties and other consequences for non-compliance.
A customs verification or audit can be a confusing, difficult and time-consuming experience in the absence of compliance planning. Disorganized, incomplete or inaccurate responses to customs authorities may lead to findings of non-compliance and assessments of duty, penalties and interest. With compliance planning, an importer or exporter may stand a better chance of obtaining a successful verification or audit result. Some steps that importers or exporters can take in order to plan for verification and audit compliance include the following:
(a) Ensure that a business representative is responsible for receiving and responding to correspondence, verification letters, Detailed Adjustment Statements and other similar customs related documents in a timely way. Many audits result in the assessment of Administrative Monetary Penalties for failure to respond to the requests issued by CBSA officers.
(b) If a CBSA verification officer conducts a verification or an auditor conducts an audit, ensure that only one person is responsible for communicating with the verification officer or auditor. Also ensure that all other relevant personnel are advised of the purpose of the verification or audit and the identity of the business point person.
(c) Ensure that the business leaders understand the consequences for failing to respond to CBSA correspondence, verification questionnaires, Detailed Adjustment Statements and the like.
(d) Obtain the resources (internal staff, customs brokers, consultants, legal counsel) necessary to deal with requests that are issued by the CBSA. For example, the CBSA may issue a verification questionnaire relating to 25 sample transactions.
The CBSA officer may request relevant supply documents including the purchase orders and B3 Canada Customs Coding Forms. The CBSA officer may also request related documents such as royalty agreements in order to verify whether or not royalty payments should be included in the value for duty. It may be necessary to obtain assistance from persons within the verification team in order to comply with the request.
The foregoing is an extract from a series of articles outlining the elements necessary in planning an effective customs compliance program, written by Daniel Kiselbach that appeared in the I.E. Now trade publication.
Daniel Kiselbach is a partner in the International Trade, Customs and Commodity Tax Group of Miller Thomson LLP in Vancouver. He can be reached by phone at (604) 643-1263 or by email at dkiselbach@millerthomson.com.
(Richard McCormack – Manufacturing & Technology News) Hidden Costs And Growing Risks Make U.S. Attractive For Manufacturing Rising costs in China along with dozens of hidden costs are making it more economical to either keep manufacturing in the United States or bring it back from China, according to research into the true costs of outsourcing. [...]
(Richard McCormack – Manufacturing & Technology News)
Hidden Costs And Growing Risks Make U.S. Attractive For Manufacturing
Rising costs in China along with dozens of hidden costs are making it more economical to either keep manufacturing in the United States or bring it back from China, according to research into the true costs of outsourcing.
Companies are not adequately accounting for dozens of hidden costs and growing risks associated with outsourcing production to China, according to David Meeker of Neoteric Product Development based in Acton, Mass., and a lecturer at the Massachusetts Institute of Technology. When companies tally all of the costs of offshore outsourcing and adopt new design techniques for streamlining manufacturing, the cost advantage of moving production to China disappears.
“If you look at all the costs and total them up and you do a really good job of doing design, the chances are you can manufacture in the United States just as competitively and with a lot less risk and a lot less lead time,” says Meeker. “You have more control over what you are doing.” […]
“Costs are often missed because they are not allocated to product costs,” says Meeker. “Often costs are paid for by the corporation from various budgets,” he writes in his research paper. Inspection, supplier management and customs compliance, expedited shipments, onsite and remote supplier management, supplier development and problem resolution, higher utility costs, costs for skilled maintenance, steep learning curves and training, higher quality control systems and regulatory compliance are only some of the costs that are not tallied by companies.
Read the complete article here.
(World Trade Interactive) U.S. Customs and Border Protection sent to its field offices May 24 guidance on the proper use of CBP Form 28, Request for Information, and CBP Form 29, Notice of Action. This guidance is CBP’s latest effort to address trade community concerns that the use of these two forms to initiate (or [...]
(World Trade Interactive)
U.S. Customs and Border Protection sent to its field offices May 24 guidance on the proper use of CBP Form 28, Request for Information, and CBP Form 29, Notice of Action. This guidance is CBP’s latest effort to address trade community concerns that the use of these two forms to initiate (or appear to initiate) formal investigations is effectively prohibiting or discouraging the filing of prior disclosures, which limit importers’ exposure to penalties.
CBP states that Form 28 is used when there is insufficient information in the entry summary package to determine the admissibility, appraised value or classification of imported merchandise. CBP has advised that the use of Form 28 should be limited to these purposes and not be used as notification that a formal investigation has commenced as a matter of enforcement policy, not a matter of law. Instead, the preferred mechanism to inform an importer of the commencement of an investigation is by correspondence on CBP letterhead or Form 29. CBP has also advised that Form 28 shall not be used to request proof of a properly executed valid power of attorney, which will be done during a broker compliance visit or via an individually drafted letter.
CBP has also advised the field concerning the use of Form 29. Generally, when an entry is entered at a rate or value of merchandise that is too low, or the import quantity exceeds that of the entered quantity, and the estimated aggregate increase in duties exceeds $15, CBP will notify the importer of the specific nature of the difference. If the rate advance is a proposed action, the importer is afforded 20 days from the date CBP mails the Form 29 to furnish CBP with specific reasons why the rate advance should not be issued.
The guidance concludes that it is CBP’s goal to act uniformly in providing legal notification to the appropriate party when proposing or taking certain actions. CBP’s field offices have therefore been advised to avoid using language on these forms such as “failure to provide information could lead to penalties under 19 USC 1592…” or “this office is investigating the classification of…” if in fact an investigation is not already in process. Such language defeats the goal of informed compliance, CBP states, and may dissuade importers from filing valid prior disclosures.
(World Trade Interactive) U.S. Customs and Border Protection sent to its field offices May 24 guidance on the proper use of CBP Form 28, Request for Information, and CBP Form 29, Notice of Action. This guidance is CBP’s latest effort to address trade community concerns that the use of these two forms to initiate (or [...]
(World Trade Interactive)
U.S. Customs and Border Protection sent to its field offices May 24 guidance on the proper use of CBP Form 28, Request for Information, and CBP Form 29, Notice of Action. This guidance is CBP’s latest effort to address trade community concerns that the use of these two forms to initiate (or appear to initiate) formal investigations is effectively prohibiting or discouraging the filing of prior disclosures, which limit importers’ exposure to penalties.
CBP states that Form 28 is used when there is insufficient information in the entry summary package to determine the admissibility, appraised value or classification of imported merchandise. CBP has advised that the use of Form 28 should be limited to these purposes and not be used as notification that a formal investigation has commenced as a matter of enforcement policy, not a matter of law. Instead, the preferred mechanism to inform an importer of the commencement of an investigation is by correspondence on CBP letterhead or Form 29. CBP has also advised that Form 28 shall not be used to request proof of a properly executed valid power of attorney, which will be done during a broker compliance visit or via an individually drafted letter.
CBP has also advised the field concerning the use of Form 29. Generally, when an entry is entered at a rate or value of merchandise that is too low, or the import quantity exceeds that of the entered quantity, and the estimated aggregate increase in duties exceeds $15, CBP will notify the importer of the specific nature of the difference. If the rate advance is a proposed action, the importer is afforded 20 days from the date CBP mails the Form 29 to furnish CBP with specific reasons why the rate advance should not be issued.
The guidance concludes that it is CBP’s goal to act uniformly in providing legal notification to the appropriate party when proposing or taking certain actions. CBP’s field offices have therefore been advised to avoid using language on these forms such as “failure to provide information could lead to penalties under 19 USC 1592…” or “this office is investigating the classification of…” if in fact an investigation is not already in process. Such language defeats the goal of informed compliance, CBP states, and may dissuade importers from filing valid prior disclosures.
The “foundation of Customs compliance hasn’t really changed” — what has though are the various factors now making it a more challenging and complex undertaking than ever before. Aside from the increasingly globalized nature of supply chains in general, foremost amongst these is the comprehensive post 9/11 trade security regime that continues to spawn ever more government regulation affecting all aspects of the logistics and customs process on both sides of the border.
Writing in the January 10, 2011 Journal of Commerce, Robert Pisani, a well-known international trade lawyer who was formerly Senior Attorney at U.S. Customs Headquarters in Washington, outlined some of the compliance challenges facing U.S. importers in 2011. While many of the challenges described are shared by their counterparts here in Canada, considerable differences exist in terms of the regulatory specifics involved. Here then is a similar prescription for Customs compliance to that provided by Mr. Pisani, but one that’s written from a Canadian perspective.
As rightly noted by Mr. Pisani in his article, the “foundation of Customs compliance hasn’t really changed” — what has though are the various factors now making it a more challenging and complex undertaking than ever before. Aside from the increasingly globalized nature of supply chains in general, foremost amongst these is the comprehensive post 9/11 trade security regime that continues to spawn ever more government regulation affecting all aspects of the logistics and customs process on both sides of the border.
The economic downturn also hasn’t made the job of compliance any easier. In a period of downsizing and belt-tightening for many companies, trade managers have been forced to assume additional responsibilities and tackle new regulatory burdens without necessarily having the corresponding staff or resources needed to deal with them effectively.
All this comes at a time when trade compliance expectations have never been higher; not only from government authorities looking at more efficient and targeted approaches to regulatory enforcement, but from companies themselves who increasingly view compliance as way of realizing cost savings while also minimizing their exposure to potential liability.
Given all these highly stressful “symptoms” in the present trade environment, what is the best means of implementing or managing an effective compliance program?
Import Data
The first step on the road to compliance is getting a complete picture of your current import activity. This can be done quite easily by obtaining data from your customs brokerage service provider(s). Most brokers have the ability to provide detailed reports about your imported goods and many can even tailor this information to your individual specifications. Or, they can just provide you with raw data that can then be imported into any database, spreadsheet, or ERP software. This will not only give you an overview of the scope and value of your imports, but also provide you with the foundation needed to begin your trade compliance analysis.
Internal Audit
Once you have the import activity data, you should conduct an internal review with the objective of identifying compliance issues and action items that may be needed. This should encompass areas such as tariff classification, country-of-origin, and valuation. Depending on the volume of entries involved, your review may consist of a statistical sampling or a detailed examination of all transactions.
Whatever audit method is used, if your review process detects errors and compliance problems, these will need to be flagged for voluntary amendment to correct the specific issues involved. Although the notion of voluntarily paying additional duties may seem like a hard pill to swallow, in the long run, such preemptive action could actually help you avoid incurring far more costly fines that could otherwise by assessed by the CBSA through its Administrative Monetary Penalty System (AMPS) for incidents of non-compliance.
Should the problems discovered be systemic in nature, then a more critical assessment of your current systems and internal procedures could well be warranted to help uncover the specific compliance gaps that will need to be addressed with appropriate software upgrades and other investments to minimize risks in future. You should discuss the available alternatives with your customs broker or a trusted trade adviser as their specialized knowledge in this area could be invaluable in terms of implementing the most appropriate solution.
Trade Compliance Program
If your organization doesn’t presently have a trade compliance program with dedicated resources committed to it (which is highly recommended), you should still have adequate internal controls and standard operating procedures (SOPs) related to your customs and trade activities. Key SOPs include the following:
a) A Pre-Entry Checklist to ensure all required documentation is provided to Customs (and any other government departments, if applicable). Key amongst the items covered is the invoice description provided by your vendors. Poor descriptions (i.e., vague, inaccurate, incomplete or incorrect) are a major source of tariff classification errors and clearance delays. Vetting them beforehand will help to avoid compliance problems in these areas. Other items include HS classification, origin, value and any preferential duty treatment that may apply (e.g., NAFTA or other free trade agreements). It is also advisable to establish a process with your customs broker to advise them in advance of new products and/or suppliers coming on stream so this information can be added to their classification database — something that is becoming increasingly important for efficient release processing under the new eManifest system being implemented by the CBSA.
b) A Post-Entry Audit Procedure that monitors the accuracy of Customs entries. Depending on the volume of entries involved, this might entail a periodic review consisting of a representative sampling or the checking of each individual entry. Verification should cover everything from purchase order to proof of payment. Post entry-audits are essential in uncovering discrepancies or non-compliance that may require the filing of voluntary amends.
c) Tariff Classification, Valuation and Country-of-Origin Guidelines establishing the procedures to be followed regarding each of these areas. Following these SOPs should enable you to determine: the most favorable duty rate and tariff treatment; availability of special tariff programs which eliminate, reduce or defer duties; the applicability of import restrictions, quotas or special licensing requirements; whether the merchandise is subject to antidumping duties; the proper dutiable value taking into consideration factors such as whether transfer pricing fairly reflects market value in the case of related-party transactions, the inclusion of intangibles such as royalty payments, and so on.
Other important trade compliance SOPs include training guidelines for individuals both directly and indirectly involved with the import/export process, recordkeeping procedures to ensure the retention of adequate information to support entry, classification, valuation, origin certification, etc.
Preparing for the Road Ahead
The recommendations that have been described here in brief cover only the most basic aspects of implementing a trade compliance program designed to minimize risk within a regulatory environment that itself is in a constant state of flux. Looking forward, importers will be confronting new challenges such as implementation of the final phase of the CBSA’s eManifest program, advanced cargo reporting initiatives of the European Union, several new free trade agreements, sweeping changes to consumer product safety regulations, and a myriad of new regulatory edicts bound to arise from other government departments and federal agencies.
While the specific details of trade compliance may be constantly changing and evolving, the essential principles of risk management and accountability remain the same. Importers that are prepared to invest in getting the fundamentals right should have no problem meeting the new compliance challenges that lay ahead.
