Bureau of Industry and Security (U.S. Department of Commerce) – Firth Rixson Inc

On July 6, 2009, an industry leading organization specializing in the manufacturing of metal products faced a penalty of $85,000. Unbeknownst to the company, they had failed to obtain the correct licensing and classification while exporting 1,055 pounds of Titanium to the People’s Republic of China. A settlement agreement yielded an $85,000 fine for the organization; 11% of the maximum fine for this type of violation. The average fine for companies with this same violation is $28,333.33.

Link to original article here.

Again we see the disconnect between sourcing (imports) and selling (exports) as the lines of communication are not connected as suggested by an Integrated Trade Compliance Strategy.

For those not aware the countries who have adopted the Harmonized Tariff (HS Code), including Canada and United States, share in common the first 6 digits as a universal definition of a product.  So if the known import HS Tariff is correct, as a starting point the first six digits can be used to guide the classification of a product for export. While this is not 100% true, it is a good starting point to begin investigation. If the channels fo communication were in place, then sourcing could have communicated that with sales.

The other disconnect here is that of not ensuring the proper licensing. The key issue here that an Integrated Trade Compliance Strategy address’ is the connections between those responsible for business development, trade compliance, and  Exporting within an organization. This may be one area, or multiple areas for an organization but the key is to ensure that as new markets are explored for growth, that compliance and trade conditions with that country/region are understand both from a domestic as well as the foreign compliance and regulatory perspective.

The scenario happens often in our experience, imports are usually a function of purchasing/operations/manufacturing, while exports are usually a function of sales/business development/shipping, the key is to integrate the common knowledge from end to end.