Exporting 102 Logistics Ups


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  • Good morning, my name is Ted Ley. Over the past ten years I’ve been focusing specifically on the various aspects of global customs compliance – even more so since the many changes brought about by the events of September 11, 2001. Today we will present you with a broad, general overview of this topic as it relates to exporting or are just now contemplating how best to enter the lucrative and rapidly expanding global marketplace. We will take some of the guesswork out of the procedures, discuss some of the basic processes required to attain strong compliance levels and talk a little bit about what can happen if you don’t. Our goal today will be to provide you with a sampling of proven compliance practices that will supply you with ideas and resources on how best to minimize exposure, liability and risk to your shipments, to your organization and to yourself while maximizing the potential impact that solid compliance can have when engaging those emerging new world markets.
  • Exporting 102 Logistics Ups

    1. 1. Exporting 102 Ohio Global Summit Columbus, Ohio – May 8, 2008 Solving the Global Puzzle
    2. 3. Today’s Overview <ul><li>What are the functions of “Customs”? </li></ul><ul><li>U.S. Export Controls / Denied Parties </li></ul><ul><li>Shipper’s Export Declarations/AES Filings </li></ul><ul><li>Power of Attorney / Records Management </li></ul><ul><li>Export Management System (EMS) </li></ul><ul><li>Harmonized Tariff System </li></ul><ul><li>Customs Clearance Essentials </li></ul><ul><li>Free Trade Agreements </li></ul>
    3. 4. Traditional and Evolving Roles of Customs Globally <ul><li>Collecting duties </li></ul><ul><li>Regulating trade </li></ul><ul><li>Enforcing trade laws </li></ul><ul><li>Interdicting illegal drugs, contraband and pirated and counterfeited goods </li></ul><ul><li>Imposing penalties for fraud regarding country of origin, etc. </li></ul><ul><li>Frontline of immigration controls </li></ul><ul><li>Agricultural protection </li></ul><ul><li>Ensuring anti-terrorism security </li></ul><ul><li>… and all this while still facilitating legitimate trade </li></ul>
    4. 5. United States Export Controls
    5. 6. Why Does the U.S. Have Export Controls? <ul><li>Export Licensing Controls of the United States arise from a number of federal statutes and regulations administered and enforced by various departments of the federal government depending on the nature of the product to be exported </li></ul><ul><li>License requirements usually involve political considerations like: </li></ul><ul><ul><li>-- Foreign Policy -- Nuclear Proliferation </li></ul></ul><ul><ul><li>-- Shortages -- Weapons & Terrorist Concerns </li></ul></ul><ul><li>And other factors such as: </li></ul><ul><ul><li>-- End-user -- Destination </li></ul></ul><ul><ul><li>-- End-use -- Product Characteristics </li></ul></ul>
    6. 7. U.S. Government Agencies Exercising Export Controls <ul><li>Primary agencies: </li></ul><ul><li>Department of Commerce (BIS) </li></ul><ul><li>Department of State (DDTC) </li></ul><ul><li>Department of the Treasury (OFAC) </li></ul><ul><li>Some of the other agencies: </li></ul><ul><li>Dept. of Justice, Drug Enforcement Administration (DEA) </li></ul><ul><li>Nuclear Regulatory Commission (NRC) </li></ul><ul><li>Dept. of the Interior, U.S. Fish & Wildlife Service (F&W) </li></ul><ul><li>Dept. of Energy (DOE) </li></ul><ul><li>Food and Drug Administration (FDA) </li></ul>
    7. 8. Denied Party Screening
    8. 9. Denied Party Screening <ul><li>When should you screen parties? </li></ul><ul><li>Any time an order is received from a potential customer. </li></ul><ul><li>Prior to arranging finance </li></ul><ul><li>Upon completion of production </li></ul><ul><li>Prior to turn over to transportation company for export </li></ul>
    9. 10. Shipper’s Export Declarations (SEDs) and the Automated Export System (AES)
    10. 11. <ul><li>The Two Power of Attorney (POA) Parties </li></ul><ul><ul><li>Principal Party-in-Interest (PPI) </li></ul></ul><ul><ul><li>Freight Forwarder </li></ul></ul>The Power of an Export Power of Attorney (POA) PPI Freight Forwarder
    11. 12. <ul><ul><li>Blanket Use (multi-shipment use) </li></ul></ul><ul><ul><ul><ul><li>Unlimited Duration (no ending date) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Limited Duration (stated ending date) </li></ul></ul></ul></ul><ul><ul><li>Single Shipment Use </li></ul></ul><ul><ul><ul><ul><li>Shipper’s Letter of Instruction/SLI </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Transportation Provider’s bill of lading </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Signed statement on Invoice </li></ul></ul></ul></ul>Export POA Types Every export shipment to be handled by a freight forwarder requires one of these forms of Power of Attorney
    12. 13. Records Management
    13. 14. Records Management <ul><li>The following items must be kept for 5 years: </li></ul><ul><li>All documentation related to the export transaction (invoices, sales orders, etc.) </li></ul><ul><li>SEDs or Automated Export System (AES) filing </li></ul><ul><li>Export licenses or authorizations </li></ul><ul><li>Denied Party Screening files </li></ul><ul><li>(Air)waybills of Lading </li></ul>
    14. 15. Export Management System <ul><li>Reinforces senior management commitment </li></ul><ul><li>Establishes procedures for export processing </li></ul><ul><li>Provides checks and safeguards </li></ul><ul><li>Incorporates training and awareness programs </li></ul><ul><li>Helps ensure compliance to U.S. export laws </li></ul><ul><li>Comprehensive and detailed U.S. Dept. of Commerce website on creating EMS: http://www.bis.doc.gov/exportmanagementsystems/emsguidelines.html </li></ul>
    15. 16. Harmonized Tariff System <ul><li>Used by almost 200 countries, representing about 98% of world trade as a basis for: </li></ul><ul><ul><li>Customs tariffs </li></ul></ul><ul><ul><li>Collection of international trade statistics </li></ul></ul><ul><ul><li>Collection of duties and taxes </li></ul></ul><ul><ul><li>Trade negotiations </li></ul></ul><ul><ul><li>Monitoring of controlled goods </li></ul></ul>
    16. 17. Commercial Invoice <ul><li>Key Elements: </li></ul><ul><li>Company letterhead </li></ul><ul><li>Full details of shipper, consignee and any intermediate consignee </li></ul><ul><li>Dated and includes pertinent reference numbers (Inv#/SO/PO) </li></ul><ul><li>Terms of Sale/Origin Country </li></ul><ul><li>Accurate description of items including individual quantities and values </li></ul><ul><li>Unit and extended prices </li></ul><ul><li>Destination Control Statement (US Exports) </li></ul><ul><li>Commodity classification code (if known or provided) </li></ul><ul><li>Certification/Signature </li></ul>
    17. 18. Poor invoice descriptions often result in: <ul><li>Holds and delays to clarify commodities with the customer </li></ul><ul><li>Wrong duties and taxes charged to the importer </li></ul><ul><li>Brokerage/Carrier/Customer fines and penalties </li></ul><ul><li>Excessive cost to process held shipments </li></ul>
    18. 19. Other Important Invoice Details <ul><li>Monetary unit/currency code </li></ul><ul><ul><li>Example: USD, EUR, JPY, GBP </li></ul></ul><ul><li>Shipment type/Reason for export </li></ul><ul><ul><li>Ex: Sale, Gift, Return for repair, Temporary Import, etc </li></ul></ul><ul><li>Any other additional comments to assist clearance: </li></ul><ul><ul><li>Ex: “Not for resale”, “Mutilated samples”, “Value for customs only”, etc </li></ul></ul><ul><li>Shipping charges (for CIF countries) </li></ul>
    19. 20. Duty and VAT Calculation Exercise <ul><li>Acme Suitcase company sends $2100 worth of briefcases to Germany, invoiced as described below: </li></ul>Qty U/M Description C/O Unit Total Value 30 Ea Briefcases MY $70.00 $2,100.00
    20. 21. Trunks, suitcases, vanity cases, executive-cases, briefcases, school satchels and similar containers: 4202 11 - - With outer surface of leather, of composition leather or of patent leather: 4202 11 10 - - - Executive-cases, briefcases, school satchels and similar containers . . . . . . . . .3.0% duty To correctly classify this shipment, the customs house broker must make a decision … is it a leather briefcase assessed at 3% duty as shown below?
    21. 22. Or ... is it a briefcase of plastic or of textile materials dutiable at a 9.7% rate? Trunks, suitcases, vanity cases, executive-cases, briefcases, school satchels and similar containers: 4202 12 - - - - With outer surface of plastics or of textile materials: 4202 12 11 - - - - Executive-cases, briefcases, school satchels and similar containers . . . . 9.7% duty
    22. 23. <ul><li>Broker holds the shipment for “inadequate description” resulting in: </li></ul><ul><ul><ul><li>Delayed delivery – minimum 1 day </li></ul></ul></ul><ul><ul><ul><li>Extra cost: phone calls, warehousing, etc </li></ul></ul></ul><ul><ul><ul><li>Buyer dissatisfaction </li></ul></ul></ul><ul><li>Broker assumes briefcases are plastic covered, resulting in: </li></ul><ul><ul><ul><li>Assessment of higher 9.7% duty rate (highest rate usually required by Customs) </li></ul></ul></ul>Possible Scenarios
    23. 24. Preferred Scenario: Commodity clearly described as: 100% cowhide leather bound briefcases, resulting in: <ul><li>Correct application of lower 3.0% duty rate </li></ul><ul><li>Elimination of possible error – Customer savings would be: $183.00 ! </li></ul>
    24. 25. Free Trade Agreements
    25. 26. Summary <ul><li>Functions of “Customs” </li></ul><ul><li>U.S. Export Controls </li></ul><ul><li>Shipper’s Export Declarations </li></ul><ul><li>Power of Attorney </li></ul><ul><li>Export Management System (EMS) </li></ul><ul><li>Harmonized Tariff System </li></ul><ul><li>Customs Clearance Essentials </li></ul><ul><li>Free Trade Agreements </li></ul>