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Minimizing Your Import / Export Risks

Minimizing Your Import / Export Risks
September 05
23:18 2017

When it comes to imports, people often say “we’ve always done things this way,” but it’s only a matter of time before U.S. Customs catches up with them, according to licensed customs broker Danielle Riggs of Würth Industry of North America.

The U.S. Customs code of regulations has been around since 1800s and hasn’t been altered that much, Riggs told members of the Pacific-West Fastener Association during the association’s fall conference in Whistler, British Columbia.

“Everything from dead bodies to UFOs is covered in that book.”

Every company is 100% responsible for all information provided to customs, Riggs emphasized. Since 1994, a customs broker cannot be held responsible for misinformation.

Now Customs has the money and resources, and officers are out there to enforce the rules.

Currently “steel threaded rod in the U.S. is the devil,” with 206% tariff levied after dumping from China was discovered, Riggs noted.

It’s estimated there is $3 billion in unpaid tariffs that Customs officials are actively looking for.

Customs has the ability to look back 5 years,” Riggs warned.

“Finding all those mill certs from years ago is literally impossible.”

When U.S. Customs comes calling, the burden of proof is on the importer.

If your import value reaches a certain level that looks significant, Customs will come looking to ensure the rules were followed.

Violation of property rights and forced labor are other areas Customs investigates.

“They have people, they have resources, and they have the President’s approval to pursue this.”

About 60% of companies audited by Customs cannot prove they comply with the rules, according to Riggs.

Why should fastener companies care?

Company image, for one thing. Do you want your company name associated with violations? There is also the possibility of a government audit.

“It’s a big reason to care, because it comes at a high cost for companies,” Riggs explained.

Fines and penalties are also possible. For negligence, a fine is double the cost of goods; for gross negligence and/or fraud, the fine climbs to four times the cost of goods.

“That’s huge; that’s crippling.”

There is also the possibility of having Import/export privileges revoked.

“People can be held personally responsible for violations.”

The best thing fastener importers can do is know the product they’re importing, Riggs advised. By that she means the Customs classification.

“It’s not something you’re Googling or randomly picking out of the harmonized schedule,” she noted. “They don’t care if you call it a flange screw or threaded rod; they care about precise classification.”

“Every part you import must have a classification,” Riggs emphasized.

Just using an invoice to import is not enough to satisfy Customs. The description must be thorough enough for Customs to determine what product you’re describing.

“Description is a really important way of knowing your product.”

Ultimately the burden of proof is on a company.

“Customs is never wrong,” Riggs stated.

Other risks abound, according to Riggs.

The country of origin is not where the shipping started. It’s determined by the rules of origin, an entirely different set of regulations. In order to prove the country of origin, you need mill certs.

“Most of the time we don’t know what suppliers are doing across the pond.”

Valuation is another issue.

“The value of product is so tricky when it crosses the border,” Riggs noted.

U.S. Customs determines value in 5 ways: price paid or payable; price paid or payable of identical goods; deducted value; computed value; and/or a specific agreement with Customs.

Another way to avoid conflict with U.S. Customs is for companies to know their non-U.S. supply chain.

“If you have 19 customs agents with powers of attorneys you’re doing something wrong.”

Too many brokers is a red flag telling Customs you don’t know what you’re doing.

Also, A U.S. company cannot file export from China, just as a Chinese company cannot file export from another country.

This makes documentation crucial.

“‘Steel fasteners’ is not a description accepted by Customs.”

Whatever a fastener company may think, it’s important to pay up.

“If in doubt, pay the duties; it will save you so many problems.”

Riggs also recommended a fastener company focus on compliance.

“Don’t wait until you have violations to focus on compliance.”

It’s important to take a top-down approach to compliance, she said.

If you don’t have a Customs manual, go get one. It’s the first question Customs will ask when they contact you.”

And it’s not just managers who should be informed; employees need to know about that manual, Riggs said.

Training is also key.

“Customs touches every one of your departments.”

Your broker cannot keep all the records needed to prove compliance with Customs.

Export authorization use must be monitored and tracked. A hard copy is the standard requirement for everything.

How to avoid U.S. Customs pitfalls?

“‘The broker did it’ does not work with Customs. Your broker didn’t do anything.”

Your broker’s record is not your company record. Brokers can be culpable if they deliberately provide false info; otherwise, the responsibility falls on the company importing fasteners.

Riggs advised that companies realize the importance of creating partnership; customers, suppliers and government.

“We often look at government as a hinderance, but they’ve been trying to make the process consistent for years.”

Operating off of spreadsheets is not sustainable in the long run, according to Riggs.

Regarding exports, the situation is different.

Export is import but ruled by two different Customs books of rules, Riggs explained.

Exports involve more rules. The departments of Commerce State, U.S. Customs & ICE, and Census all influence exports.

Jurisdiction and control (Commerce & State Depts.) include anti-boycott; illegal trade; theft of trade secrets; embargoes (“You are not allowed to do business in Iran, or do business with Iranian nationals.”); and proliferations (U.S. has extraterritorial controls to go into countries that have illegally exported goods to illegal countries).

“It’s your responsibility to know where product is going and inform your customers what the export limitations are.” Web: Pac-West.org

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