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Entering the world
 of Global Trade
Presenter: LISA VICTORIA WALLER, CHB
           VICE PRESIDENT

        BDG International, Inc.

        840 Tollgate Road
        Elgin, IL 60123

        Tel: 847-760-0014
        lisaw@bdginternational.com
Credentials:

    Bachelors of Science- Illinois State University
       (International Business, emphasis of Eastern Studies)
    Licensed Customs Broker
    Certified Customs Specialist
    Certified Export Specialist
    IATA (International Air Transportation Association) Certified
    DG (Dangerous Goods) Certified
    Committee co-chair for Export Compliance of the CBFFAC
    Active Member of the NCBFFA
Current Events / Going Global

Importance of understanding how the world
around us effects each and every shipment
coming in and out of the USA.
Overview

Overview:
  The role of Government agencies

  Duty Preferences

  Cargo Security

  Export issues

  Sample documents
Government Agencies
U.S. Senate / Congress
Department of Homeland Security (DHS)
  U.S. Customs Border Protection (CBP)
United States Department of Agriculture (USDA)
  Animal Plant Health Inspection Service (APHIS)
Department of Health and Human Services
  Food And Drug Administration (FDA)
Department of Commerce (DOC)
Environmental Protection Agency (EPA)
Department of Interior (DOI)
U.S. Treasury,
  Office of Foreign Assets Control (OFAC)
Department of State (State)
Department of Defense (DOD)
Connection between
                U.S. Government
                      and
             Foreign Governments?
  For every U.S. Government Department, Office or governing body
There is an equal governing body in each country that we import from
                             or export to.

Thus to understand your own country first will allow you to know what
                    to look for in other countries.

Commodity Specific – you will know quickly which governing bodies
will effect your commodity and industry.
Who brings the world
     together?
World Trade Organization
  The World Trade Organization (WTO) is the only global international organization
        dealing with the rules of trade between nations. At its heart are the WTO
   agreements, negotiated and signed by the bulk of the world’s trading nations and
   ratified in their parliaments. The goal is to help producers of goods and services,
                      exporters, and importers conduct their business.

The WTO and main Parliments of each country come together to decide on countries
  with special needs, and economies that need to be promoted.

   The U.S. Congress / Senate approve Trade Agreements, Trade Acts, Global
  Trade Decisions, and requests for specific Industry or Commodity duty preferences.

    The WTO is in charge of the Harmonize Tariff
   System. Each country belonging to the program
    will share the first 6 digits of the HTS system.
DUTY PREFERENCES


     The Office of U.S. Trade Agreements
The U.S. trade strategy is to pursue multiple market-opening initiatives
  on a global, regional and bilateral basis, establishing models of
  success that can be used throughout all negotiations.

What prevents a free trade agreement (FTR) from being passed:
 - local Lobbyist afraid that duty preferences will hurt the USA
 economy
 - Labor laws in the foreign country
FTA
Singapore FTA (SG)
Australia FTA (AU)
Oman FTA (OM)
Morocco FTA (MA)
Bahrain FTA (BH)
Israel FTA (IL)

Central America FTA various
North American FTA (MX or CA)
Jordon FTA (JO)
Chile FTA (CL)
Peru Trade Promotion Agreement (PE)
Colombia FTA
Panama FTA
Korea FTA
Harmonize Tariff System


  Each product has its code
Classification
The duty will be based on a product as per the General Rules of Interpretation
              from the U.S. Regulations & Harmonize Tariff System

            http://www.usitc.gov/tata/hts/index.htm

           Sections, Chapters, Headings, Subheadings
                         Chapters: 1-99

               Living or Raw = beginning of the tariff

      Manufactured = at the end of each section and tariff


EXPORT CODE IS CALLED: SCHEDULE B NUMBER
http://www.census.gov/foreign-trade/schedules/b/index.html
Classification

                  CUPS, PLASTIC
                   3924.10.2000
        PLASTIC,PLATES, CUPS, SAUCERS......
                      6.5%


     3924.10.2000
         39 = Chapter 39 covers plastics
               (there are 1-99 chapters)
            24 = Tableware / Kitchenware or other house
hold articles made of plastic
               .10 = Tableware or Kitchen ware
                   20 = Plates, cups saucers, soup bowls
                      etc.
EXPORT COMPLIANCE
Export Compliance

How is the data gathered?

CBP regulates the data and reports to Census. Census
organizes and analyzes the data and gives it to Commerce.

- EEI – Electronic Export Information
- AES – Automated Export System

2009 versus years before?

- Informed compliance vs. Enforced Compliance
Export Enforcement Act of 2007
 http://www.bis.doc.gov/enforcement/eaarenewalbillfactsheet.pdf


Criminal Max: Corporate Greater of $5
millions or ten times value of the exports
                 involved.

Individual Max: Greater of $1 million(s)
     and 10 years of imprisonment
Export Compliance
What is the commodity?
        Commerce Control List
Can it be used for some other purpose?
        Dual usage
Who are you selling it to?
        Embargoed countries (Cuba – for example)
        Denied parties
Where are you shipping it?
        Do you know the end user?
        Will it be sold to another party?
        Do you have knowledge?
Is your loading process secure?
        Illegal activity within your company?
THREE COMPLIANCE MUSTS
      FOR EXPORT
1. SCREEN FOR DENIED
        PARTIES

   Background check on all parties
involved in the transaction.

http://www.bis.doc.gov/complianceand
enforcement/liststocheck.htm
2. KNOW YOUR ECCN
         NUMBER

 (EXPORT   CONTROL CLASSIFICATION
  NUMBER)
 Checks for controlled products versus
  countries and parties


http://www.bis.doc.gov/licensing/do_i_needa
  neccn.html
3. DESTINATION CONTROL
          STATEMENT
  15 CFR 758.6
The Destination Control Statement (DCS) must be entered on
  the invoice and on the bill of lading, air waybill, or other
  export control document that accompanies the shipment
  from its point of origin in the United States to the ultimate
  consignee or end-user abroad. The person responsible for
  preparation of those documents is responsible for entry of
  the DCS. The DCS is required for all exports from the
  United States of items on the Commerce Control List that
  are not classified as EAR99, unless the export may be
  made under License Exception BAG or GFT (see part 740
  of the EAR). At a minimum, the DCS must state
DCS
“These commodities, technology or
 software were exported from the
 United States in accordance with the
 Export Administration Regulations.
 Diversion contrary to U.S. law is
 prohibited.”
     (licensable goods may have an
 alternative statement)
TERMS OF SALE
Terms of Sale

When will you be paid for your goods?

        How will you be paid?

What method of payment will be used?
Terms of Sale

Open Account
– 30 days, 60 days, etc.

Sight Draft
– Funds transferred upon sight of documents at the
  applicant bank.

Time Draft
– Funds transferred upon # days after sight of
  documents at the applicant bank
Terms of Sale
               Letter of Credit

 Contractual agreement between Shipper
 (Beneficiary), Consignee (Applicant), Beneficiary
 Bank and Applicant Bank

– Confirmed - Guaranteed to be paid by the
 advising bank

– Advised- Guaranteed to be paid the
 opening bank.
INCOTERMS

 www.iccwbo.org
www.commerce.gov
What are INCOTERMS?
International Commercial Terms
   ICC (International Chamber of Commerce)
        1936

To simplify creation of international
agreements, contracts.

To develop a standardized way to speak
global and define the words used equally
across all cultures and languages
Incoterms assist:
Understanding who is responsible to
pay for transportation to a certain point.

Define who is responsible for payment
of documentation, packing and other
charges.
Incoterms
Who will pay for the transportation?
 Global rules for a global sale !!

 EXW EX WORKS (named place)*
 FCA FREE CARRIER (named place)
 FAS FREE ALONGSIDE SHIP (named port of shipment)*
 FOB FREE ON BOARD (named port of shipment)
 CFR COST AND FREIGHT (named port of destination)
 CIF COST, INSURANCE AND FREIGHT (named port of destination)*
 CPT CARRIAGE PAID TO (named place of destination)
 CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)*
 DAT DELIVERED at TERMINAL (named place of destination)
 DAP DELIVERED at PLACE (named place of destination)*
 DDP DELIVERED DUTY PAID (named place of destination)*
Incoterms
Who will pay for the transportation?
 Global rules for a global sale !!

  EXW                =        E term (collect)/ least control for shipper
  FCA, FAS, FOB      =        F term (collect)/ less control for shipper
  CFR, CPT, CIP, CIF =        C term (prepaid)/ more control for the shipper
  DAT, DAP, DDP      =        D term (prepaid) / most control for the shipper

  CIP and CIF         =        are the only terms that discuss insurance
                          All other terms would require insurance to be
                          discussed separately.

Having less control does not automatically mean you have less liability.
Incoterms are not:
They are not law

They are not recognized by
government entities

They do not take the place of having a
proper purchase agreement, sales
agreement or order.
International document flow
FORMAL AGREEMENT
PURCHASE ORDER
PROFORMA INVOICE
COMMERCIAL INVOICE
Purchase/Sales Agreement


Between the buyer and the seller there must be a
              formal Agreement.
Purchase Agreement
The Purchase Agreement documents the standard terms and
conditions where you, the buyer, are contracting w /a seller in
the course of a business to business transaction, and includes
the following basic items
 payment and price                       warranty
origin and destination                   sub-contracting
samples                                  title and risk
packaging                         inspection
testing                                  indemnity
confidentiality                          termination
terms of shipping                 government regs
Liablity and title                       Incoterms
Purchase Order

 ISSUE A PURCHASE ORDER

           or

REQUIRE A PURCHASE ORDER
Proforma Invoices


Proforma Invoice (purpose)
 FINAL DOCUMENT prior to actual documents

 Used to source funds

 Used to buy foreign currency in controlled markets

 Opening Banks use this document to open L/C's.

 This document can not be used for customs clearance.
Proforma v. Commercial Invoices


 Commercial Invoices

  Importer will pay off this invoice.

  Customs clears freight using commercial
   invoices.

  Banks transfer money using the Commercial
   Invoice.
Transportation

Who can assist with understanding
how to ship cargo and questions on
         the transaction?
International Freight Forwarders
     An agent for the exporter in moving cargo to an overseas.
                      “Travel Agent for Cargo”

Specializing in:

- the import rules and regs of foreign countries

- the export regulations of the U.S. government

- the methods of shipping, and the docs related to foreign trade

- Foreign to foreign moves

- Pricing and rate negotiation via all modes of transportation

- Agent for the Department of Homeland Security

- Track and trace cargo

- Resolve Challenges
Documentation
                     (Export)
•
    Shipper's Letter of Instruction (SLI) or Shipper

        Transmittal Letter

               Power of Attorney
     Detailed Instructions to the forwarder
                SED Completion

• Letter of Credit (if issued)

• Hazardous Declaration (only used if cargo is
     a hazardous substance)

• Pre-Shipment Inspection Certificate (e.g. SGS)
Customs Brokers
Customs brokers are organizations licensed, regulated and
empowered by U.S. Customs and Border Protection (CBP)
   to assist importers and exporters in meeting Federal
       requirements governing imports and exports.


Specializing in:
- The import regulations of the U.S. government
- Classification of commodities / trade agreements
- All other government agencies that may be involved in
the import shipment
- Releasing cargo at the warehouses
- Deliveries of the cargo Domestically in the USA
- Post entry processing
- Government research
Documentation
                         (Import)
                   Power of Attorney
                   Continuous Bond
                  Classified Products

 The Customs Broker you designate must have a
  signed Power of Attorney, signed by an officer of the
  company.

 The Corporation must be Bonded under a Customs
  Continuous Bond.

 All products being imported should be classified in
  advance in order to ensure a smooth shipping
  process.
Liability and Insurance
Floating Containers
Fire on board
Crushed
Crash Landing
Liability
RISKS:
 As the importer/exporter you are liable to follow the U.S.
 Regulations. You must ensure that your forwarder / broker
 are concerned about compliance.

 Customs Liability
  -Reasonable Care       -Record Keeping -Correct
    Classification

 Risks of International Business
    Additional Fees not quoted
    Storage for Inspection
    Penalties and Fines
    Delays
    Loss            - Damage - Missing Cargo
  
    Non-Payment by client
Consulting
Advise, Audit and Planning
Develop your compliance program
   Classification of merchandise
   Valuation of merchandise
   Country of origin Markings
   Export licensing issues
   Export licensing exemption
   Deemed Exports
   Embargoed country issues
   Compliance and Training
Thank you for attending
   today’s seminar.


BDG INTERNATIONAL, INC

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BDG International - Global Trade

  • 1. Entering the world of Global Trade
  • 2. Presenter: LISA VICTORIA WALLER, CHB VICE PRESIDENT BDG International, Inc. 840 Tollgate Road Elgin, IL 60123 Tel: 847-760-0014 lisaw@bdginternational.com
  • 3. Credentials:  Bachelors of Science- Illinois State University  (International Business, emphasis of Eastern Studies)  Licensed Customs Broker  Certified Customs Specialist  Certified Export Specialist  IATA (International Air Transportation Association) Certified  DG (Dangerous Goods) Certified  Committee co-chair for Export Compliance of the CBFFAC  Active Member of the NCBFFA
  • 4. Current Events / Going Global Importance of understanding how the world around us effects each and every shipment coming in and out of the USA.
  • 5. Overview Overview: The role of Government agencies Duty Preferences Cargo Security Export issues Sample documents
  • 6. Government Agencies U.S. Senate / Congress Department of Homeland Security (DHS) U.S. Customs Border Protection (CBP) United States Department of Agriculture (USDA) Animal Plant Health Inspection Service (APHIS) Department of Health and Human Services Food And Drug Administration (FDA) Department of Commerce (DOC) Environmental Protection Agency (EPA) Department of Interior (DOI) U.S. Treasury, Office of Foreign Assets Control (OFAC) Department of State (State) Department of Defense (DOD)
  • 7. Connection between U.S. Government and Foreign Governments? For every U.S. Government Department, Office or governing body There is an equal governing body in each country that we import from or export to. Thus to understand your own country first will allow you to know what to look for in other countries. Commodity Specific – you will know quickly which governing bodies will effect your commodity and industry.
  • 8. Who brings the world together?
  • 9. World Trade Organization The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. The WTO and main Parliments of each country come together to decide on countries with special needs, and economies that need to be promoted. The U.S. Congress / Senate approve Trade Agreements, Trade Acts, Global Trade Decisions, and requests for specific Industry or Commodity duty preferences. The WTO is in charge of the Harmonize Tariff System. Each country belonging to the program will share the first 6 digits of the HTS system.
  • 10. DUTY PREFERENCES The Office of U.S. Trade Agreements The U.S. trade strategy is to pursue multiple market-opening initiatives on a global, regional and bilateral basis, establishing models of success that can be used throughout all negotiations. What prevents a free trade agreement (FTR) from being passed: - local Lobbyist afraid that duty preferences will hurt the USA economy - Labor laws in the foreign country
  • 11. FTA Singapore FTA (SG) Australia FTA (AU) Oman FTA (OM) Morocco FTA (MA) Bahrain FTA (BH) Israel FTA (IL) Central America FTA various North American FTA (MX or CA) Jordon FTA (JO) Chile FTA (CL) Peru Trade Promotion Agreement (PE) Colombia FTA Panama FTA Korea FTA
  • 12. Harmonize Tariff System Each product has its code
  • 13. Classification The duty will be based on a product as per the General Rules of Interpretation from the U.S. Regulations & Harmonize Tariff System http://www.usitc.gov/tata/hts/index.htm Sections, Chapters, Headings, Subheadings Chapters: 1-99 Living or Raw = beginning of the tariff Manufactured = at the end of each section and tariff EXPORT CODE IS CALLED: SCHEDULE B NUMBER http://www.census.gov/foreign-trade/schedules/b/index.html
  • 14. Classification CUPS, PLASTIC 3924.10.2000 PLASTIC,PLATES, CUPS, SAUCERS...... 6.5% 3924.10.2000 39 = Chapter 39 covers plastics (there are 1-99 chapters) 24 = Tableware / Kitchenware or other house hold articles made of plastic .10 = Tableware or Kitchen ware 20 = Plates, cups saucers, soup bowls etc.
  • 16. Export Compliance How is the data gathered? CBP regulates the data and reports to Census. Census organizes and analyzes the data and gives it to Commerce. - EEI – Electronic Export Information - AES – Automated Export System 2009 versus years before? - Informed compliance vs. Enforced Compliance
  • 17. Export Enforcement Act of 2007 http://www.bis.doc.gov/enforcement/eaarenewalbillfactsheet.pdf Criminal Max: Corporate Greater of $5 millions or ten times value of the exports involved. Individual Max: Greater of $1 million(s) and 10 years of imprisonment
  • 18. Export Compliance What is the commodity?  Commerce Control List Can it be used for some other purpose?  Dual usage Who are you selling it to?  Embargoed countries (Cuba – for example)  Denied parties Where are you shipping it?  Do you know the end user?  Will it be sold to another party?  Do you have knowledge? Is your loading process secure?  Illegal activity within your company?
  • 20. 1. SCREEN FOR DENIED PARTIES Background check on all parties involved in the transaction. http://www.bis.doc.gov/complianceand enforcement/liststocheck.htm
  • 21. 2. KNOW YOUR ECCN NUMBER  (EXPORT CONTROL CLASSIFICATION NUMBER)  Checks for controlled products versus countries and parties http://www.bis.doc.gov/licensing/do_i_needa neccn.html
  • 22. 3. DESTINATION CONTROL STATEMENT 15 CFR 758.6 The Destination Control Statement (DCS) must be entered on the invoice and on the bill of lading, air waybill, or other export control document that accompanies the shipment from its point of origin in the United States to the ultimate consignee or end-user abroad. The person responsible for preparation of those documents is responsible for entry of the DCS. The DCS is required for all exports from the United States of items on the Commerce Control List that are not classified as EAR99, unless the export may be made under License Exception BAG or GFT (see part 740 of the EAR). At a minimum, the DCS must state
  • 23. DCS “These commodities, technology or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited.” (licensable goods may have an alternative statement)
  • 25. Terms of Sale When will you be paid for your goods? How will you be paid? What method of payment will be used?
  • 26. Terms of Sale Open Account – 30 days, 60 days, etc. Sight Draft – Funds transferred upon sight of documents at the applicant bank. Time Draft – Funds transferred upon # days after sight of documents at the applicant bank
  • 27. Terms of Sale Letter of Credit Contractual agreement between Shipper (Beneficiary), Consignee (Applicant), Beneficiary Bank and Applicant Bank – Confirmed - Guaranteed to be paid by the advising bank – Advised- Guaranteed to be paid the opening bank.
  • 29. What are INCOTERMS? International Commercial Terms  ICC (International Chamber of Commerce)  1936 To simplify creation of international agreements, contracts. To develop a standardized way to speak global and define the words used equally across all cultures and languages
  • 30. Incoterms assist: Understanding who is responsible to pay for transportation to a certain point. Define who is responsible for payment of documentation, packing and other charges.
  • 31. Incoterms Who will pay for the transportation? Global rules for a global sale !! EXW EX WORKS (named place)* FCA FREE CARRIER (named place) FAS FREE ALONGSIDE SHIP (named port of shipment)* FOB FREE ON BOARD (named port of shipment) CFR COST AND FREIGHT (named port of destination) CIF COST, INSURANCE AND FREIGHT (named port of destination)* CPT CARRIAGE PAID TO (named place of destination) CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)* DAT DELIVERED at TERMINAL (named place of destination) DAP DELIVERED at PLACE (named place of destination)* DDP DELIVERED DUTY PAID (named place of destination)*
  • 32. Incoterms Who will pay for the transportation? Global rules for a global sale !! EXW = E term (collect)/ least control for shipper FCA, FAS, FOB = F term (collect)/ less control for shipper CFR, CPT, CIP, CIF = C term (prepaid)/ more control for the shipper DAT, DAP, DDP = D term (prepaid) / most control for the shipper CIP and CIF = are the only terms that discuss insurance All other terms would require insurance to be discussed separately. Having less control does not automatically mean you have less liability.
  • 33. Incoterms are not: They are not law They are not recognized by government entities They do not take the place of having a proper purchase agreement, sales agreement or order.
  • 35. FORMAL AGREEMENT PURCHASE ORDER PROFORMA INVOICE COMMERCIAL INVOICE
  • 36. Purchase/Sales Agreement Between the buyer and the seller there must be a formal Agreement.
  • 37. Purchase Agreement The Purchase Agreement documents the standard terms and conditions where you, the buyer, are contracting w /a seller in the course of a business to business transaction, and includes the following basic items payment and price warranty origin and destination sub-contracting samples title and risk packaging inspection testing indemnity confidentiality termination terms of shipping government regs Liablity and title Incoterms
  • 38. Purchase Order ISSUE A PURCHASE ORDER or REQUIRE A PURCHASE ORDER
  • 39. Proforma Invoices Proforma Invoice (purpose) FINAL DOCUMENT prior to actual documents Used to source funds Used to buy foreign currency in controlled markets Opening Banks use this document to open L/C's. This document can not be used for customs clearance.
  • 40. Proforma v. Commercial Invoices  Commercial Invoices Importer will pay off this invoice. Customs clears freight using commercial invoices. Banks transfer money using the Commercial Invoice.
  • 41. Transportation Who can assist with understanding how to ship cargo and questions on the transaction?
  • 42. International Freight Forwarders An agent for the exporter in moving cargo to an overseas. “Travel Agent for Cargo” Specializing in: - the import rules and regs of foreign countries - the export regulations of the U.S. government - the methods of shipping, and the docs related to foreign trade - Foreign to foreign moves - Pricing and rate negotiation via all modes of transportation - Agent for the Department of Homeland Security - Track and trace cargo - Resolve Challenges
  • 43. Documentation (Export) • Shipper's Letter of Instruction (SLI) or Shipper Transmittal Letter Power of Attorney Detailed Instructions to the forwarder SED Completion • Letter of Credit (if issued) • Hazardous Declaration (only used if cargo is a hazardous substance) • Pre-Shipment Inspection Certificate (e.g. SGS)
  • 44. Customs Brokers Customs brokers are organizations licensed, regulated and empowered by U.S. Customs and Border Protection (CBP) to assist importers and exporters in meeting Federal requirements governing imports and exports. Specializing in: - The import regulations of the U.S. government - Classification of commodities / trade agreements - All other government agencies that may be involved in the import shipment - Releasing cargo at the warehouses - Deliveries of the cargo Domestically in the USA - Post entry processing - Government research
  • 45. Documentation (Import) Power of Attorney Continuous Bond Classified Products  The Customs Broker you designate must have a signed Power of Attorney, signed by an officer of the company.  The Corporation must be Bonded under a Customs Continuous Bond.  All products being imported should be classified in advance in order to ensure a smooth shipping process.
  • 51. Liability RISKS: As the importer/exporter you are liable to follow the U.S. Regulations. You must ensure that your forwarder / broker are concerned about compliance. Customs Liability -Reasonable Care -Record Keeping -Correct Classification Risks of International Business Additional Fees not quoted Storage for Inspection Penalties and Fines Delays Loss - Damage - Missing Cargo  Non-Payment by client
  • 53. Advise, Audit and Planning Develop your compliance program  Classification of merchandise  Valuation of merchandise  Country of origin Markings  Export licensing issues  Export licensing exemption  Deemed Exports  Embargoed country issues  Compliance and Training
  • 54. Thank you for attending today’s seminar. BDG INTERNATIONAL, INC

Editor's Notes

  1. Show Terms of Sale Sheet
  2. Show Terms of Sale Sheet
  3. Show Proforma, Go over it.
  4. Show SLI
  5. Show SLI