CLX LogisticsAbington Hall, Suite 300
777 Sentry Parkway WestBlue Bell, PA 19422-2207
United States
215.461.3800www.CLXLogistics.com
WHITE PAPER Ensuring Regulatory Compliance on Domestic Import of Goods July 2013
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
2
Contents Introduction ................................................................................... 3I. Compliance Is the Shippers’ Responsibility ........................... 4II. Reasonable Care………............................................................ 5III. Compliance Checklist……….. ................................................ 6 Classification/HarmonizedTariffSchedule(Chapter98) Valuation:Purchasing&Accounting Quantity:Receiving CountryofOrigin(Marking) Recordkeeping FreeTradeAgreementsIV. CBP Best Practices……….. ..................................................13 InformationandCommunication ControlEnvironment InternalControlActivities RiskAssessment MonitoringV. Compliance Manual……….. ...................................................16 ImportProcedures ImportControls RecordkeepingRequirementsVI. Outside Expert Assistance……….. ......................................17 Licensedcustomsbrokers Lawfirms Consultancyfirmsorthird-partylogisticsprovidersVII. Benefits Offered by 3PLs………..........................................18
CLX Logistics White Paper: Ensuring Regulatory Compliance on Domestic Import of GoodsCopyright © 2014 by CLX Logistics. All rights reserved.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
3
Introduction
Importinggoodscanbeacomplicatedbusiness.Ever-changingandtougher importrulesenforcedbytheU.S.CustomsandBorderProtection(CBP)toprotectU.S.portsmeanscompaniesimportinggoodsfrominternationaltradepartnersmustremaincurrentonregulationsandprocessmethodologiesorriskdelaysandevenfinesduetononcompliance.Organizationsfailingtocomply withcurrentcustomrules,eveninignorance,canbedesignatedashighrisk,subjectingthemtomorefrequentcustominspectionsandlongerprocessingtimesinthefuture.EstablishingbestCBPpracticesiskeytoensuring appropriateactionsaretakenduringreceiptofoverseasgoods.
Thiswhitepaperoutlinesspecificcustomrequirementsandresponsibilities pertainingtotheimportofgoodsatU.S.borders,bestcorporatepracticesandthebenefitsofusingthird-partylogisticstoensureimportcomplianceand optimizationofinternallogistics.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
4
Employing a third party consultant does not relieve the shipper of record from compliance responsibility. If an importer is negligent
in meeting compliance requirements, Customs can
assess penalties by as much as $10,000 or 40% of value of
goods or even seize goods.
I. Compliance Is the Shippers’ Responsibility
Theimporterofrecordisresponsibleforensuringthatgoodsenteredwith CustomsadheretoimportregulationssetbytheCBP.TheimporterofrecordisthecompanythatisimportinggoodsintotheStates.SpecificappropriateactionsorreasonablecareisrequiredbyU.S.companiesimportingproductstoensurecorrectentryofmerchandiseintotheStates.Thisinvolvescorrectclassificationofgoods,paymentofappropriateduties,checkingwhatisreceived,maintaining requiredrecordsandothercompliancerequirements(see III. Compliance Checklist).
Inmanagingreasonablecare,importersshouldhaveanexperienced in-houseemployeewithknowledgeofcustomslawsandregulationsoremployanoutsideexpert (see VI. Outside Expert)thatdoes.However,employinga thirdpartyconsultantdoesnotrelievetheshipperofrecordfromcomplianceresponsibility.Ifanimporterisnegligentinmeetingcompliancerequirements,Customscanassesspenaltiesbyasmuchas$10,000or40%ofvalueofgoodsorevenseizegoods.StricterU.S.enforcementmeansmoreauditsandhigherfinesforimportersnotincompliance.Byadheringtoregulationsand documentationprocedures,importersprotectthemselvesagainstpenalties andlossofgoodscommonlyassociatedwithfailedaudits.Maintaininginternalcontrols(see IV. Best Practices)isimperativetoensureongoingcompliance.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
5
II. Reasonable Care
WhiletheModernizationActof1993madeiteasierforimporterstofileentry documentationbyacceptingpaperwork,fees,dutiesandtaxeselectronically,Customsnowrequiresgreaterinsuranceoftheaccuracyofinformationsubmittedtothem.Tothisend,importersmustdemonstratethatreasonablecarewas takenwhenclassifying,valuingandpayingdutiesonimportedmerchandise.OnewayofshowingreasonablecareistoadheretoaCustomscompliancechecklist(outlined below).Documentingin-houseproceduresinacompliancemanual(see V. Compliance Manual)isalsoaneffectivewayforimporterstodemonstratereasonablecaretoCBP.
Failuretoshowreasonablecarecanresultinsignificantpenalties.Toensurereasonablecare,shippersmusthaveadequateknowledgeandapplicationofcustomlawsandregulationswithintheorganizationtoprocessgoodsand documentationtoensureitsaccuracyorcontractanoutsideexpert (see VII. Outside Expert Assistance)foradviceorassistance.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
6
III. Compliance ChecklistThemainareasauditedbyCustomstoensureimport complianceinclude:
• Classification/HarmonizedTariffSchedule(Chapter98)
• Valuation:Purchasing&Accounting
• Quantity:Receiving
• CountryofOrigin(Marking)
• Recordkeeping
• FreeTradeAgreements
Classification / HTS (Chapter 98) TheUnitedStatesutilizesaHarmonizedTariffScheduletocategorizeandassigndomesticimportdutyratestoeveryitemimportedintothecountry.Thefirstsixnumbersaregloballystandardized,whilethelastfourareuniquetotheUnitedStates.Toproperlydeterminethedutyonanygivenitem importedintotheU.S.,itmustbeclassifiedwithintheHTS.
Classificationincludesidentifyingtheproperheadingsandsubheadingoftheharmonizedtariffschedule(HTS)toaspecificproduct.Oncetheheadingandsubheadingarefound,anassociateddutycanbedetermined.
Classificationofgoods,whetheranimportorexport,canbechallengingandoftenfrustrating.Todeterminethemostaccurateclassificationforyourimporteditem,youmusttakeintoaccountthefollowing:
General Rules of Interpretation (GRI):Theserulesleadimportersthrougha hierarchicalprocesstoidentifyasingleclassificationnumberforaspecific product.Shippersshouldgothroughtherulesonebyonetodeterminewhichonebestgovernstheirproducts.TherearesixGRIs.(See:http://www.usitc.gov/publications/docs/tata/hts/bychapter/1000gntoc.htm)
•GRI1:offersguidelineswhengoodscanbeclassifiedjustusing headingsandlegalnotes.Ifthegoodscannotbeclassifiedthisway, classifiersmustapplyoneoftheothergeneralrules.
• GRI2:thisrulecoverstwosituations.GRI2aexplainshowtoclassify unfinishedorunassembledgoodsthatrequireonlysimpleassemblyorusing devicessuchasnuts,bolts,screws,etc.Abicycle-unassembledforlower shippingcosts-wouldbeagoodexample.GRI2bnotesthataheading describingonesubstancecanreferencemixturesorcombinationsofthat materialorsubstancewithothermaterialsofsubstances.Anexamplewould bemilkcontainingvitaminD.Itcanbeclassifiedintheheadingfor milk-0401;orvitamins-2936.
Components of a tariff classification number: 2901.10.10.00
29 Chapter
01 Heading
10 Subhead
10 US Subhead
00 US Statistical Suffix
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
7
•GRI3:helpsclassifygoodsthatappeartobeclassifiedinmorethanone headingbecausetheyaremixturesorcompositegoods,orforanother reason.
•GRI4:helpsclassifynewtomarketorevenobsoletegoodsunderheadings forwhichtheyaremostlike.Forexample,anewhigh-techdevicerecently introducedintothemarketmaybecategorizedintoanelectronicsareaasit ismostlikeanexistingproductinthatcategory.
• GRI5coverscontainers(cameracases,binocularcases,etc.)andnotes thattheyareclassifiedthesameasthearticleforwhichtheywouldcontain.
General Notes: Essentialtothecorrectclassificationofgoods,generalnotesprovidesthebackgroundinformationonhowtodetermineacorrectHTS classificationindifferentscenariosaswellashowtoselectthecorrectdutyrate.GeneralNotesalsoexplainwhichgoodsareexemptfromtheHTS,definesU.S.territoriesandexplainstheramificationsoffreetradeprogramslikeNAFTA, IFTA,GSP.(See:http://www.usitc.gov/publications/docs/tata/hts/bychapter/1300gntoc.htm)
The Legal Notes of the Section & Chapters: Thisisthefirststepin determiningtheclassificationnumberforaproduct.Thelegalnoteshelptodirectaclassifiertoanappropriatesection,chapterorheaderforaparticularproductbylistinggoodsthatarebothincludedandexcludedfromthatcategory.Itdefineswordsorphrasesusedinspecificchapters/sectionsandprovidesotherinformationonthemeaningoftheheadingsandsubheading.Eachchapterhasspecificlegalnotesassociatedwithit.
Forexample,ifyouthinkyourproductshouldbecategorizedasaBasic OrganicChemical,youwouldreference:Chapter29–OrganicChemicals. Then,youwouldreadthelegalnotesinthischaptertoverifyifyourproductshouldbeincludedinthissection.Whendeterminingthatyourproductactuallybelongsinthiscategory,thischapternumberwouldbethefirsttwonumbersoftheclassificationcodeofyourproduct(see example above in subsection on Classification).Tofindalistingoflegalnotesbychapter,pleasereferto:http://usitc.gov/tata/hts/bychapter/index.htm.
The Headings and Subheadings:Thesefurtherclassifytheproductunderthespecificchapterandprovidetheactualdescriptionofgoods.Classifiersmustreadtheheadingsandcomparethedescriptionofthegoodsinthesecategorieswiththegoodsbeingclassified.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
8
Forexample:
Classification Code: 2901.10.1000 (see Harmonized Tariff Schedule below)
29HydrocarbonsandtheirderivativesarefoundinChapter29so29isthechapterdesignationindicationthattheproductbelongsthere.
2901istheheadingwithinchapter29thatfurtherdefineshydrocarbonasanacyclichydrocarbon
2901.10isthesubheadingindicatingthattheacyclichydrocarbonissaturated
2901.10.10isthetariffitem,describingthesaturatedacyclichydrocarbonasanethaneandbutanechemicalcompound
2901.10.1000includesthestatisticalsuffix00thatCustomsusestokeep statisticsonimportedgoodsintothecountry
2901.10.10.00istheclassificationnumber,specifyingtheexacttypeof hydrocarbonwithintheChapter29categoryoforganicchemicals
The Explanatory Notes: OffersinformationaboutthegoodsdescribedintheheadingsandGeneralRulesofInterpretation.Ininterpretingtheheadingsandsubheadings,theCBPreferstotheexplanatorynotesfordirection.
Duty Rate: Onceyoudeterminetheclassificationnumberforyourproduct,theHTSwillshowratesofdutyassociatedwithit.Dutyratesarelistedinoneofthreecolumnsasshowninthechartonthefollowingpage.
GeneralColumn1setsforththegeneralornormaltraderelationsratesofduty.TheSpecialColumn1reflectstheratesofdutyunderspecialtarifftreatmentprograms,suchasNAFTA.ThethirdcolumnlabeledColumn2setsforthratesapplicabletogoodsbeingimportedfromcountriespursuanttosection401ofthetariffClassificationActof1962.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
9
So,accordingtothescheduleabove,ethaneandbutaneclassifiedas2901.10.1000wouldbefreefromanytariffs;however,cyclohexaneclassifiedas 2902.11.1000wouldpayatariffof15.4centsperkg.CalculatedtariffvaluesmustbedocumentedoncustomspaperwithpaymentmadebeforeproductsareacceptedorevenenterU.S.ports.
Heading/ Subheading
Stat.Suffix Article Description
Unit of Quantity 1
General
Rates of Duty1
Special2
29012901.102901.10.102901.10.30
2901.10.40
2901.10.50
2901.21.002901.22.002901.23.002901.242901.24.10
2901.24.20
2901.24.502901.292901.29.10
2901.29.50
2902
2902.11.00
2902.19.00
2902.20.002902.30.00
2902.41.002902.42.002902.43.002902.44.002902.50.00
2902.60.00
2902.70.002902.902902.90.102902.90.20
0000
00
00
000000
00
00
00
10
5000
00
10500000
0000000000
00
00
0000
I. HYDROCARBONS AND THEIR HALONGENATED, SULFONATED, NITRADED OR NITROSATED DERIVATES
Acyclic hydrocarbons: Saturated: Ethane and butane n-Pentane and isopentane Other: Derived in whole or in part from petroleum, shale oil or natural gas
Other: Unsaturated: Ethylene Propane (Propylene) Butane (Butylene) and isomers thereof Buta-1,3-diene and isoprene: Buta-1,3-diene Isoprene: Having a purity of 95 percent or more by weight
Other Other: Derived in whole or in part from petroleum, shale oil or natural gas Linear α-olefins (C6 C30, unmixed
Other Other
Cyclic hydrocarbons: Cyclanes, cyclenes and cycloterpanes: Cyclohexane
Other: Dicyclopentadiene Other Benzene Toluene Xylenes: o-Xylene m-Xylene p-Xylene Mixed xylene isomers Styrene
Ethylbenzen
Cumene Other: Psueudocumene Acenaphihene, chrysene, cymene, dimethyinaphihalenes,fluoranihene, fluorene, indene, mesitylene, methyianihracene, methyinaphihalene, phenanthrene and pyrene
kgkg
kg
kg
kgkgkg
kg
kg
kg
kg
kgkg
kg
kgkg
litersliters
litersliterslitersliters
kg
kg
kg
kg
kg
FreeFree
Free
Free
FreeFreeFree
Free
Free
Free
Free
Free
Free
Free
FreeFree
FreeFreeFreeFreeFree
Free
Free
Free
Free
Free25%
25%
25%
FreeFreeFree
Free
25%
25%
25%
25%
15.4¢/kg+40%
25%
FreeFree
FreeFreeFreeFree
15.4¢/kg+45%
15.4¢/kg+55%
Free
Free
Free
Harmonized Tariff Schedule of the United States (2012) – Supplement 1Annontated for Statistical Reporting Purposes VI
29-5
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
10
Whendeterminingduty,importersmustalsodeclarefullvalueofanycapitalequipmentsuchasdies,molders,etc.providedtothemanufacturertoproducetheirproduct.Evensamplesandprototypesthatcannotbesoldhaveavalue thatwillbebasedonidenticalitemsorthosesimilarinnature.Brandnewandolderproducts,too,haveaspecificvaluethatiscomputedaspecificway. Becauseofthesedifferentvariations,expertiseofcustomsregulations,whetherin-houseorcontracted,isnecessarytoensurecorrectformulationoftariffs.
Valuation Onceproductisclassified,tariffmustbedetermined.Evenwhenitemsare dutyfree,Customswantstoknowthevalueforstatisticalpurposes.Determiningvaluationcanbecomplicatedasmanydifferentfactorsmustbeconsidered. Themethodsofdeterminingcustomsvaluation,indescendingorderof precedence,are:
Transaction value:thepreferredmethodofpayment,thetransactionvalueistheactualpricepaidorpayablebytheimportertotheexporterpluscertainstatutoryadditions:
• Packingcostsbyseller
• Sellingcommissions
• Valueofassists(machinery,parts,componentsorpartsprovidedfreeor suppliedtomanufacturertoproducegoodsmustbeaccountedaspartof productvalue)
• Proceedsofanysubsequentresale,disposaloruseoftheimported merchandise
Thepaidprice,plusadjustmentsforstatutoryadditions,equalsthetransactionvalue.Formoredetails,refertohttp://www.wto.org/english/tratop_e/cusval_e/cusval_info_e.htm#1
Deductive value:whentransactionvaluecannotbeused,deductivevaluewill bedeterminedonthebasisoftheunitpriceatwhichidenticalorsimilargoodsaresoldtoanunrelatedbuyerinthegreatestaggregatequantityinthecountry ofimportation.
Computed value:whentheprevioustwomethodscannotbeused,computedvalueisimplemented,typicallyforprototypesandgifts.Valueisbasedonthesumofcostofmaterials,labor,processing,profitandgeneralexpenses,assistsandpackingcosts.
Other:this“catch-all”areaaddressesanygoodsthatcannotbeappraisedviaothermethods.Thismethoddeterminesvaluebasedonpreviouslydeterminedvaluesandmethodswithsomeflexibilityintheirapplication.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
11
Quantity: ReceivingAllgoodsmustbedescribedintheunitofquantitythatfollowsCustoms descriptions.ThefourthcolumnoftheHarmonizedTariffSchedule(see scheduleundersubsectionDutyRateabove)denotesaquantityforaspecificclassificationofproduct.Forexample,liquidssuchascyclohexane(classificationcode:2902.11.00)wouldbequantifiedaskilosofgoods.
Byquantifyinggoods,thetariffcanbedeterminedbymultiplyingtheperunit customstax(foundinratesofdutycolumn)bythenumberofunitsbeing imported.Forexample,if100kgofcyclohexanewasbeingimported,importerswoulddeterminethetariffbymultiplyingthenumberofunitsbytheunittaxof15.4centsperkg(100kgx.154/kg=$15.40).Thisinformationis,then,notedintheauditschedule.
Sometimes,discrepanciesoccurwheretoomuchortoolittlequantitywas actuallyshippedthanorderedorproductsareactuallyinadifferentclassificationthannotedbytheshipper.Receivingdepartmentsoftenreporttheseerrorswhencheckingpackinglistsagainstorders.AnydiscrepancyinthequantityornatureofgoodsbetweentheCustomsdeclarationandthegoodsactuallyreceivedmayaffectvaluationand/oradmissibilityofthegoods.Importersmaypaymoreorlessdutiesandtaxes.Actionmayberequiredonthepartoftheshipperonrecordtoreconcileorcorrectpaperworkpriortogoodsentry.Ifnot,importersmaybesubjecttofinesorloseimportprivileges.Maintainingin-houseproceduresorhavinganoutsideconsultantverifyreceivablescanensurecomplianceand correcttariffsarepaid.
Country of Origin/MarkingTheoriginofgoodsmustbeproperlydeclaredandmarkedonproductsaspartofcompliancewithimportlaws.Thecountryoforiginisthecountryofmanufacture,production,orgrowth.
Whenanimportedproductincorporatesmaterialsand/orprocessingfrommorethanonecountry,U.S.customsconsidersthecountryoforigintobethelastcountryinwhicha“substantialtransformation”tookplace.
AllimportedproductsofforeignoriginmustbemarkedinaconspicuouslocationinEnglishwiththenameofthecountryoforiginunlessthearticlefallsunderanexceptionsuchasifmarkingscancauseinjurytogoods.TheU.S.requiresthatgoods(and/orcontainers/packaging)bemarkedorlabeledwithcountryoforigin.
Importersmustensuretheyarenotimportingbannedgoodsorfromrestrictedcountries.Refertohttp://www.gpo.gov/fdsys/granule/USCODE-2010-title19/US-CODE-2010-title19-chap4-subtitleII-partI-sec1304/content-detail.htmlfordetailsonMarkingofImportedArticlesandContainers.
Any discrepancy in the quantity or nature of goods between the
Customs declaration and the goods actually received may
affect valuation and/or admissibility of the goods.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
12
RecordkeepingTheCBPrequiresthatentrydocumentsbefiledwithinfiveworkingdaysofthearrivalofgoodsintoaU.S.portofentry.ForgoodsgoingdirectlyintoU.S. commerce,thefollowingdocumentsarenecessary:
• Bill of Lading, Airway Bill or Carrier Certificatedependingonhowgoods arriveintocountry
• Commercial Invoicethatindicatesquantity/descriptionofgoods,loading anddestinationports,modeoftransportation,countryoforigin,priceperunit andtotalcostofthegoods.Whenacommercialinvoiceisnotavailable,such asincaseswhennomoneyisexchangedbetweenthebuyerandseller,a pro-forminvoicemustbecreated.
• Customs Surety Bond:Evenifthegoodsare“dutyfree”,thisbondmustbe submittedbytheimporterasguaranteethatallimportduties,taxes,fines orpenaltieswillbepaid.Theminimumcontinuousimportcustomsbondis for$50,000.
• Entry Manifest(CustomsForm7533orothermerchandiserelease)
• Packing lists:indicatesthenumberofshippingcontainers,contentsofeach containerandtheirindividualweightsanddimensions
Eithertheimporterorbrokerservingastheagentfortheimportercanfile paperwork.U.S.Customsrequiresalldocumentsand/orrecordsberetainedforfiveyearsfromthedatetheproductormerchandiseenteredintotheUnitedStates.Ifcustomsdocumentsarepreparedoutsideanorganization,importersmustensuretheyreceivecopiesandcheckthemforaccuracypriortofilingthem.
Free Trade AgreementsFreetradeagreements(FTAs)existamongcountriestoreducetradebarriers,makingiteasierandmorecosteffectivefortradingpartnersfromthosecountriestoconductbusiness.U.S.importersofgoodsfromFTApartnercountriescantakeadvantageofpreferentialimporttariffsbasedoncertainpurchasedgoods.TotakeadvantageofperksofferedbyFTAs,importersmustremaincurrentonnewandexistingtradeagreementswiththeU.S.,verifythevalidityofFTAstotheirspecificproductandunderstandhoweachworkstotakenecessary compliancestepsorproperapplicationofFTApreferences.
OneofthemostnotableistheNorthAmericanFreeTradeAgreementbetweentheUnitedStates,Canada,andMexico,theworld’slargestfreetradeareathatlinks450millionpeopleproducing$17trillionworthofgoodsandservices.Foracompletelistbycountry,referto:http://www.ustr.gov/trade-agreements/free-trade-agreements.
A third party consultant can help importers better understand FTA advantages and examine which
goods qualify under different agreements. According to the
Office of the United States Trade Representative, The United
States has FTAs in effect with 20 countries. Some are
multi-lateral agreements among multiple countries.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
13
IV. CBP Best Practices
Toensureimportcompliance,importers,regardlessofcompanysizeorvalueofmerchandise,shouldestablishrigorousinternalcontrols,auditsandsystemcheckstoaccuratelymanagetheimportprocess.Also,iftheCBPhasquestionsregardingcomplianceduringarandomaudit,theimporterofrecordmustbeabletosupportitsclaimswiththebestpracticesemployedtoensurecompliance.
TheCBPhasoutlinedthefollowingbestpracticesbasedonthesesegmentsat:http://www.cbp.gov/xp/cgov/trade/trade_programs/importer_self_assessment/
• Information and Communication
• Control Environment
• Internal Control Activities
• Risk Assessment
• Monitoring
Create Customs Group (Information and Communications)
Createaninternalcustomsgroupofemployeeswithinyourorganizationthat willdefineacorporatecomplianceprogram,overseeoperationsrelatedtocomplianceandinterfacewithdifferentdepartmentsinvolvedinthecomplianceprocess(receivables,warehousing,purchasing,logistics,etc.).Aspartof ensuringcompliance,thecustomsgroupshouldberesponsiblefor establishingcontrolactivitiesandself-testingprocessestoverify accuracyofcompany’sinternalcontrolsystem.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
14
Access Executives for Needed Resources (Control Environment)
Involvementbyexecutivesintheactivitiesofthecustomsgroupraisesits importanceandprovidesexposureandauthorityforgroupinteractionwithotherdepartments.Toensurevisibilitybytopmanagement,thecustomsgroupshouldbeorganizedaspartofanotherestablisheddivisionsuchasthelegalortaxdepartment.
Management’s Commitment (Control Environment)
Seniormanagementshouldestablishwrittencompliancestandardsforthe corporationthataddressCBPrequirementsaswellascommittheresourcesto supportacomplianceprogramsuchasdesignatingaseniorexecutivewith responsibilityfortheprogramtoensureongoingcompliancewithintheorganization.
Develop Formal Policies (Internal Control Activities)
Establishformalpoliciesandprocedurestoensureachievementofmanagement’sgoalsandobjectivesaswellasCBPcompliance.Onanongoingbasis,modify controlsthatareineffectiveorinefficientandreportrecommendationsto management.Defineaccountabilityandcontrolsinjobdescriptionswiththecustomsgroup.
Conduct Internal Control Reviews (Monitoring)
Conductperiodicprocessreviewstoassesstheperformanceofinternal controls.Useexternalorinternalauditstoperiodicallyrevieweachbusiness unittoconfirmthatcorporatepoliciesareimplementedandmandatecorrectiveactionwhennecessary.Adjusttestinginresponsetochangingrisk.
Establish Training Programs (Information & Communication)
Trainingemployeesinvolvedintheimportprocesstounderstandtherulesandregulationsassociatedwithproductimportsisimperativetoensurecompliancethroughouttheentiresupplychainprocess.Personnel,whetherawarehouseclerkorsupervisor,shouldbetrainedandcertifiedtothefunctionsassociatedwiththeircomplianceresponsibilities.Onanongoingbasis,conveyupdatestotherightpeopleattheappropriatetime.DisseminateCBPinformationvia company’scommunicationoutlets(i.e.intranet,bulletinboard,mail).
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
15
Develop Compliance Requirements for Suppliers (Internal Control Activities)
Toensureallcompliancerequirementsaremetbysuppliers,importersmust developstandardizedcontractlanguageonpurchaseagreements,then implementcontrolstoensureCBPtransactionsarevalid,properlyauthorizedandaccuratelyprocessed.Suppliersshouldberequiredtoprovideregulatory reportinginformationwhenapplicable(NAFTA,GSP,etc.).Exercising reasonablecareoveroperationsperformedbyserviceprovidersisan importantpartofcompliance.
Establish Recordkeeping Program (Internal Control Activities)
Importersmustestablisharecordkeepingprocessthatverifieswhatwas enteredandactuallyreceivedsoinaccuraciescanbecorrectedwithCustoms.Forexample,if50unitswereenteredusinginvoiceinformationbutonly40 wereactuallyreceived,thenthevarianceshouldbereportedtoCustoms.
Byestablisharecordkeepingprogram,companiescanmaintainanaudittrailfromproductioncontrolthroughpaymenttoCBPentry.Ifcustomsdocuments arepreparedbyaconsultant,importersofrecordmustreceivecopiesand reviewthemforaccuracypriortofiling.Shouldacompanybeaudited,entry declarations,transportdocumentation,certificatesoforigin,paymentoftaxesandotherrecordsmustbeprovidedtotheCBPinatimelymanner.Customsrequiresthatspecificrecordsbekeptforfiveyears.
Partner with CBP (Information and Communications)
Whenestablishingorupdatingcomplianceimportprocedures,importersshouldrefertotheCustomswebsiteatwww.customs.govandCustomsElectronic BulletinBoard.PartnershipscanbeformedwiththeCBPbyparticipatingin voluntaryprogramssuchas:C-TPAT,CSI,ISA,FAST,ACEandotherinitiatives.
State Compliance and Cost Goals (Risk Assessment)
Evenafterproceduresandprocessesareestablished,importersmustconductcontinuousriskassessmenttoidentifyvulnerabilities,analyzerelevantriskanddevelopinternalgoalsonhowtomanagerisk.Byconductingpost-entryreviewsandcomparingresultsagainstestablishedgoals,importerscanresolvecontrolweaknessesinatimelymanner.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
16
V. Compliance ManualAcompliancemanualthatoutlinespoliciesandproceduresassociatedwith theimportofeveryproductwillguideemployeesthroughoutthecompanyin ensuringCustomscompliance.Inadditiontooutliningthedailyresponsibilitiesandactivitiesperformedbydifferentdepartments,aswellasoutsideconsultants,thecompliancemanualshoulddetailthecompany’soverallcompliancestrategiesregarding:
Import ProceduresthataddressallcompliancerequirementstobringproductsthroughU.S.ports.Theseprimarilyinvolveproductclassification,valuationandrequireddocumentation.(See III. Compliance Checklist)
Import ControlsthatprohibitcertainproductsfromenteringtheU.S.suchas Cubancigarsorgoodsmadewithchildlabor,restrictcertainproductsintothecountrywhenquotasaremet,andmandatespecificproductrequirementsimposedbydifferentU.S.governmentagenciespertainingtoproductlabeling,certification,packaginganddocumentationaswellascountryoforiginmarkings.Identifyingimportcontrolsrelevanttoimportedproductswillhelpcompanies determinewhatandhowmuchofaproductcanbeimportedaswellasany specialrequirementsassociatedwithspecificproducts.
Recordkeeping Requirements suchasentrydeclarations,transport/storagedocumentation,taxpaperworkandotherdocumentationassociatedwitheveryimportedproduct.Theserecordsmustbemaintainedintheiroriginalform(paperorelectronic)foraperiodoffiveyearsandmadeavailabletoCBPondemandforexaminationwithinareasonableperiodoftime.Failuretoproducerecordscanresultinsignificantfines.(Thepreciselistofrecordsrequiredcanbefoundat19C.F.R.Section163(a)(1)(A),commonlyreferredtoasthe“(a)(1)(A)”list).
Many books and templates can be purchased online to
guide companies in creating a compliance manual. A third
party consultant can also conduct an audit on your
import processes and create a compliance manual that
addresses your specific product compliance requirements.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
17
VI. Outside Expert Assistance Importingproductscanbeadauntingtask,especiallyforsmall-tomid-sized companieswithminimallogisticresourcesandoutdatedprocessingsystemsthat areerrorproneandtime-consuming.Toensurecompliance,manyshippersrely onoutsideexpertswhopossessthein-depthknowledgeofcompliance regulationsandprocessesaswellasthesystemsandtoolstoefficiently managecompliancerequirements,reduceerrorsandexpediteinformation exchangeamongtradepartners.
Different third party resources are available to shippers:
Licensed customs broker:Contractedtoassistwithcustomsdocuments, rulesandregulationsassociatedwithreasonablecareandfeesrelatedto importedgoods,customsbrokershelpensuregoodsareclearedthrough customsinacompliantandtimelymanner.Whileshipperscancontractother outsideexpertstopreparedocumentation,customsbrokersaretheonlythird partythatcanfileentrydocumentationonbehalfofanimportingclient.As notallbrokerscanprocessentriesateveryU.S.customports,importers mustensuretheyhiretherightcustomsbrokertomeettheirrequirements bycheckingtheirlicense,permittoimportcertaingoodsandother paperwork.
Law firmsofferadviceonavarietyofcustomtopicsincludingallaspects ofreasonablecare,negotiatebrokercontractsandmanagebrokeractivities, conducttrainingclassesandguideshippersincreationofimportpolicyand proceduremanuals.Somelawfirmsspecializeinprovidinglegalservices associatedwithseizuresandforfeituresrelatedtoimportedproducts.
Consultancy firms or third-party logistics providers(3PLs)offerarange ofmanagedservicesfromassessmentsofcurrentcomplianceprograms, establishmentorupdateofbestpractices,brokermanagement, recordkeeping,processsystemsandinternalcontrols,regularaudits aswellasimportcompliancetraining.Theseconsultantsofferhands-on serviceinmanagingspecificaspectsofcomplianceforashipperorcan handleanentirecomplianceprogram.
Whenusinganytypeofoutsideexpertise,importersshoulddiscusstheirimportprogramindetail,providingcompleteandaccurateinformationaboutimporttransactions.Itisimportanttoestablishwhataconsultantcandoandwhois goingtomanagespecifictaskstoformasuccessfulpartnership.
Large multinational corporations often hire a licensed customs
broker or trade compliance consultant as part of their own staff. Smaller companies with limited budgets often turn to
import consultancy firms or third party logistic companies (3PL) to
contract managed services.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
18
VII. Benefits Offered by 3PLs
A3PLcancombinecomplianceexpertisewiththelatestweb-basedtechnologytohelpimportersavoidtheriskofnon-complianceandreducelogisticscosts.Acompliancesolution,supportedbyanweb-orSaaS-basedTransportation ManagementSystem(TMS),candramaticallyimproveprocesses,accuracy andefficiencyrelatedtoimportcompliancewithoutrequiringanysoftwareorhardwareinvestmentsbycompanies.Inadditiontostreamliningoperationsbyintegratingmultiplelocations,theTMScanautomatecommunicationswithtradepartners,recordkeepingandothertasksassociatedwithcomplianceso companiescanoperatemoreeffectivelyandefficientlytoreducecosts,improveoperationalmethodologiesandenhancerelationshipswithCustoms.
Dependinguponanimporterslevelofneed,a3PLcanmanagedifferent compliancetasksfromclassifyingproducts,ensuringreasonablecareanddeterminingbenefitsfromFreeTreeAgreementstocustomsclearances,auditsandbrokermanagement.A3PLgoesastepfurtherthanjustprovidingadvicebyofferinginternationalsupplychainmanagementsolutionsthatreduceexpensesandimproveregulatoryandsecurityprogramcompliance.
Services offered by a 3PL can be very comprehensive and include:
•Classificationandmaintenanceofproductdatabase
•Valuationandreconciliationofentries
• Updatesoncompliancerules
•AutomatedBrokerInterface
•Determininglandedcostsandidentifyingdutysavingsopportunities
•EstablishComplianceChecklist
•Trainingalldepartments–receiving,purchasing,warehousing
•Choosingbrokers/agents
•Obtaininglicenses
•Audit:reviewestablishsystemsaswellascompliancemanual
•Dataanddocumentmanagementandreporting
•ImportComplianceManuals
•Daytodayassistance
While virtually every 3PL touts expertise in import
compliance, those that specialize in an importer’s
specific industry can provide the most benefits.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
19
Importingchemicalsisverydifferentfromimporting20electronics.Theprovider’soperationalstaffshouldpossesssignificantexperienceandtraininginthe properandsafemanagementofanimporter’stypeofproduct.Forchemicaltransportation,forexample,thestaffshouldhaveknowledgeofbulkand/or hazardousshipping.
AnoutsourceshouldunderstandcomplianceregulationspertainingtospecificproductimportationwithdifferentcountriesaswellastheUnitedStatestoassureasmoothtransportofproductintothecountry.Theyshouldassistinidentifyingproductcategoriestoensureproperlabelingandcontainmentduringshipment.Thisisespeciallycriticalforproductsidentifiedashazardous.
While many good 3PLs exist in the market, not all are primarily
transportation experts, offer state-of-theart technology,
and/or hire, train and retain operations staff with significant
industry experience.
Virtually no 3PL is an expert in every single industry. And only the very best are ready or willing to adjust and adapt their solution to best fit customers’ needs, with an eye toward doing it even better tomorrow.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
20
References:By Chapter, Harmonized Tariff Schedule of the United States — UnitedStatesInternationalTradeCommission Retrievedfromhttp://www.usitc.gov/tata/hts/bychapter/index.htm
Importing into the United States, A Guide for Commercial Importers — CustomsandBorderProtection Retrievedfromhttp://www.cbp.gov/linkhandler/cgov/newsroom/publications/trade/iius.ctt/iius.pdf
Export Classification and Tariff Code — MITOfficeofSponsoredPrograms Retrievedfromhttp://osp.mit.edu/compliance/export-controls/shipping/export-checklist/export-classification-and-tariff-code
Harmonized Tariff Solutions — GlobalTariff Retrievedfromhttp://www.globaltariff.com/LegalNotes.cfm
The Duty of Reasonable Care Under the Customs Modernization Act of 1993 — WilliamKovatch Retrievedfromhttp://kovatchlegalservices.com/Publications/Reasonable%20Care.pdf
U.S. Customs and Border Protection Best Practices Of Compliant Companies — CustomsandBorder ProtectionRetrievedfrom:www.cbp.gov/linkhandler/cgov/trade/.../best.../best_companies.doc
Why We Care About Reasonable Care? — ImportTradeLaw Retrievedfromhttp://importtradelaw.com/2012/07/10/why-we-care-about-reason-able-care/
21
About CLX LogisticsCLXLogisticsisaninternationalproviderofcomprehensivelogisticsmanagementandtechnologyservicesthattogetherwithitssupplychainconsultingresourcesenableitsclientstoimproveperformanceanddriveeconomicvalue.CLXLogisticsiscommittedtosolvingourcustomers’logisticschallengesthroughprovenexpertise,best-of-breedtechnologyandahigh-touch,service-orientedapproachtodelivervaluethatisbothmeasurableandsustainable.Formoreinformation,[email protected],orcall215-461-3800.
CLX Logistics | Abington Hall, Suite 300 | 1777 Sentry Parkway West | Blue Bell, PA 19422-2207 | 215.461.3800 | www.clxlogistics.comCopyright © 2014 by CLX Logistics. All rights reserved.
The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry
Top Related