ensuring regulatory compliance on domestic import of goods … · the benefits of using third-party...

CLX LogisticsAbington Hall, Suite 300

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WHITE PAPER Ensuring Regulatory Compliance on Domestic Import of Goods July 2013

The Leading Provider of Logistics Strategy and Solutions to the Chemical Industry

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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.


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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.


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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.


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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.


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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


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•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.


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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.


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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


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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.


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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.


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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.


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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.


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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).


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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.


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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.


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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.


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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.


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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.


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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/

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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.


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