Articles

6 Versus 10 Schedule B Digits

by Catherine J. Petersen            6/21/2010

Dear Cathy:

During the past year, we have been working diligently to ensure that our documents clearly reflect all the details and information needed for export and import clearance. This has included a project to ensure that our classifications for export are accurate. We are stymied now. The question that we are trying to resolve at this moment is whether we should report the six-digit portion of the Schedule B code number or the full 10-digit number on our commercial invoices. Which is best? What questions do we need to ask to make the decision that is best for us and our customers?
 
Confidentially signed,

Alternatives to the FOB Term

by Catherine J. Petersen           3/7/2011

Dear Cathy:

Since FOB is no longer recommended to be used for container shipments under the Incoterms® 2010 Rules, what term would be used in the following scenario?

 The seller wishes to ship a container from Long Beach, California, and pay for all origin port costs including loading onto the vessel. But the buyer is responsible for ocean freight charges to destination and costs beyond. Would we say FCA Vessel Long Beach, CA, or would it be CIP Vessel Long Beach, CA?

We export many items under the same scenario above. Normally, we would have used FOB.

Many thanks,
Concerned in California
 

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Amending Export Paperwork After the Shipment

by Catherine J. Petersen           10/3/2011

Dear Cathy,

I am stressed and need advice.
Our company received a very high value letter of credit from our customer in Dubai. Our sales and contract team were very involved in negotiating the bid, developing the contract and reviewing the letter of credit with the customer. All parties (our team of engineers, sales, contracts and legal and the customer) agreed that the payment under the letter of credit would be in two parts. We agreed that 80% would be paid upon shipment of the goods from the USA with submission of the documentation required under the letter of credit by the bank. The remaining 20% will be paid upon successful installation at the buyer's facility in Dubai. The buyer's inspection agent is to issue an inspection certificate for us to present to the bank with our draft for this balance.
 
Here's the problem. The sales and engineering team negotiated with the buyer to have one part ship directly from Italy to Dubai. The buyer said that was just fine, since it would save money for everyone on the project. The problem comes from the next decision that was made: They did not amend the letter of credit! Instead, it was a "handshake" amendment; the buyer said this would be just fine.
 
It gets worse. We issued documentation for the value of the order as stated within the letter of credit (this included the value of the item from Italy), and we stated in the documentation that the country of origin of all the merchandise was the USA. We provided all the documentation to our freight forwarder in the USA who submitted the documents to the bank for reimbursement.
 
The shipment from Italy is being held by customs in Dubai; it is critical to the installation of our product at the plant in Dubai and obtaining the balance of payment under the letter of credit. Help—ideas are needed!
 
Yours,
Stressed and in need of advice!
 

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An Export Management Compliance Policy (EMCP)

by Catherine J. Petersen 9/15/2015

At one of the first U.S. Bureau of Industry and Security (BIS) seminars I attended, someone said that "exporting is a privilege, not a right." At the same seminar, all of the attendees were encouraged to prepare an Export Management Compliance Policy (EMCP). An EMCP was promoted as a tool and policy to assist a firm in developing and implementing procedures to stay in compliance with the Export Administration Regulations (EAR).

If I were to now ask those who attended; "Did you proceed with preparing an EMCP?" their answer is likely to be: "No not yet. An EMCP is a priority for our firm, but we are too busy to tackle that project. We are in the midst of ____." You and I can fill in the blank with any number of answers.

An EMCP benefits an exporter by identifying where and when they have exposure to risk and liability. An EMCP does not need to be a hefty document; it needs to be a document that reflects the scale and scope of your export program. It can be succinct, and it can borrow from and reference other compliance activities being completed within your organization.

Read more: An Export Management Compliance Policy (EMCP)

Certificate of Origin Required?

by Catherine J. Petersen           1/9/2012

Dear Cathy,

We took a few training sessions with you some time ago. Since our sessions with you, the people in Customer Service raised a question about certificates of origin. I was wondering if you could help us.
 
Most of our goods come from Asia, and we do not further manufacture or assemble any of the goods. Upon receipt at our distribution center, we complete an inspection, audit our import documentation, and notify our customs broker when there are any overages, under-reporting or damaged goods received. The customs broker sends us the corrected paper work.
 
We have customers in Latin America; our imported goods are shipped to Latin America. Our customers in Latin America ask us to provide them with a certificate of origin (COO) regarding the goods we are selling. Depending on where the customer is located, they might ask for a NAFTA Certificate of Origin or CAFTA Certificate of Origin.
The question is: Are we obligated to provide the customer with a certificate of origin covering the goods we're selling?
 
Thank you,
Perplexed on Origination
 

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Containerized Shipping – The Movie

By Catherine J. Petersen       4/10/2017

It was 1987, and I was excited about my new job. I made a call to my family to let them know I just landed a job with Maersk Lines! First question: Who is that? The answer: It is a Danish shipping company. Second question: Will you be able to get free vacations with them -- - it is a cruise line right?

As you can guess, it was a longer conversation than I expected!

Fast forward to today; when I say I worked with Maersk Lines, most people know which firm I'm talking about.

Read more: Containerized Shipping – The Movie

Expired NAFTA Certificate of Origin?

by Catherine J. Petersen       12/1/2016

Expired NAFTA Certificate of Origin?

I was recently asked whether the NAFTA Certificate of Origin, Form 434 (CoO) that has an expiration date of October 31, 2016 was updated by U.S. Customs and Border Protection (CBP).

My initial response was: no change. However, I did a search to ensure I hadn’t missed an update notice from CBP regarding the CoO, which is posted at  https://www.cbp.gov/document/forms/form-434-north-american-free-trade-agreement-nafta-certificate-origin.

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F.O.B. vs. FOB

by Catherine J. Petersen           2/7/2017

Each time I make a presentation on Incoterms® rules, there is a question about Free on Board (FOB) and how it is interpreted in international trade. Often, there is confusion because the term FOB is used in both Incoterms® 2010 (published by the International Chamber of Commerce or ICC), and in U.S. domestic trade. The fact is, this single term has significantly different meaning depending on its application to international or domestic trade.

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How to Correct Errors in Shipment Paperwork

by Catherine J. Petersen           7/20/2011

Dear Cathy:

We have an export customer who placed a telephone order for a shipment of goods they needed quickly. They gave us a purchase order number and instructed us to bill one of their subsidiaries. We processed the order quickly and shipped with all the documents showing the customer as the subsidiary company as requested.

When we received a hard copy of the purchase order it was actually from the parent company and not the subsidiary. Now they are telling us that the parent company IS the customer and that all paperwork should match the purchase order. All documents, including the commercial invoice, ocean bill of lading, AES filing etc. show the subsidiary company as the customer. The shipment is on the water and due to arrive in port tomorrow or the next day. The customer is asking us to correct the paperwork before the shipment clears customs. Is there any way we can correct the documents to show the correct customer at this point before it clears customs overseas?

Our paperwork essentially shows the wrong customer! Any advice would be greatly appreciated.

Thanks in advance,

L. Luckless

 

Read more: How to Correct Errors in Shipment Paperwork

HTSUS Classification and the Letter of Credit Description

By Catherine J. Petersen    5/5/2017

During the Q&A at the end of a recent Letter of Credit presentation, I fielded a question on descriptions in letters of credit. I was focused on letters of credit and the details of the UCP 600 during the Q&A, which requires the description on the commercial invoice to match that in the letter of credit.

After the fact, the question stayed in my head, and I realized that the question encompassed more than letters of credit. Here's a brief synopsis of the question:

"Our company sells systems to firms in the Kingdom of Saudi Arabia (KSA). When the quotation is prepared the description is of a system, but when the merchandise is being shipped, it is disassembled for shipping and packaging. When the items are removed from the system, they no longer qualify as the finished item and the items are of multiple countries of origin. The Saudi customer is upset when we request an amendment to the description in the LC from a system to an item with several separate components attached of various countries of origin. How do we deal with this with our customer?"

Read more: HTSUS Classification and the Letter of Credit Description

Importing Basics

It is summer in Minnesota—the land of sky blue waters with 10,000 lakes—or so we like to claim; there may be a few mud puddles in the mix too!

When it's summer in Minnesota, it’s construction season. We've just watched 7 winter months of inspirational HGTV's DIY programs, and we've decided to expand the old homestead and spiff up the place a bit. Uff da!

As an importer thinking of expanding its foreign sourcing, it is necessary to audit your house's abilities to ensure a smooth and profitable expansion. This includes paying attention to the basics of “measuring twice and cutting once!” As an importer, those measurements are of your:

  1. HTSUS Classification:
    • They're updated to the most recent publication issued by the U.S. International Trade Commission (www.usitc.gov).
    • The ruling letters you received a while back will provide the number for the year that they were issued, but is the importer's job to ensure the most current number and the associated description are still valid.
    • You have been providing a spreadsheet or letter to your customs broker with the associated item number (yours or your suppliers') to them to ensure your entry is accurate.
    • You have been auditing an appropriate number of entries to ensure YOUR classifications have been assigned.
  2. Country of Origin:
    • The markings on the product and the packaging are accurate.
    • You have supporting documentation to prove the country of origin.
    • You have been checking the boxes and products as you received them to ensure there aren't any issues.
    • You have been auditing an appropriate number of entries to ensure the country of origin is accurately stated.
  3. Valuation:
  4. Records:

If you have not yet signed up for the Automated Customs Environment (ACE), it is a must for every importer regardless of size. You will find the data reported by your customs broker through https://www.cbp.gov/trade/automated/getting-started/portal-introduction. In addition, identify the Centers of Excellence and Expertise that is your contact within CBP, see https://www.cbp.gov/trade/centers-excellence-and-expertise-information.

Measure twice and cut once when thinking about adding to your importing responsibilities. Do your due diligence before adding onto your importing house. Those special programs are quite tempting; for example, duty drawback, free trade agreements, use of HTSUS Chapter 98 duty exemption classifications, and many more—but they come with additional responsibilities. 

Again: measure twice and cut once when thinking about adding to your importing responsibilities!