Importing Basics

By Catherine J. Petersen    8/11/2017

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:

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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?"

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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.

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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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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

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The Explanatory Notes ~ A Good Read!

by Catherine J. Petersen           2/14/2016

The short cold days of winter are when I pick up the Explanatory Notes (EN), get a cup of hot cocoa, snuggle in my favorite chair, and reread certain sections. Today, I am focused on the notes associated with "Parts."

Why review "Parts?" If you are responsible for classifying the items known as parts in your item master, you know that classifying those items can take more time than classifying a finished product. The EN advises that parts are suitable for use solely or principally with particular machines or apparatus. That was the argument that the Container Store put forth to U.S. Customs and Border Protection (CBP), and subsequently the Court of International Trade (CIT). Neither CBP nor CIT agreed with the Container Store, see as well as the analysis information provided by DrinkerBiddle at

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SOLAS – Container Weight Verification

by Catherine J. Petersen           1/12/2016

SOLAS – Container Weight Verification

There have been several articles during the past 12 months about the Safety of Life at Sea or SOLAS rules that will be effective July 1, 2016. The question has been asked, but not answered: how will the rules be implemented?

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An Export Management Compliance Policy

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.

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Dealing with Under Report Value Requests

by Catherine J. Petersen           6/12/2014

Dear Cathy:

We have a distributor in Italy to whom we occasionally need to ship warranty replacement parts, with the understanding that the defective parts must be returned to us here in the US. The parts are all serialized and are manufactured in the USA. These parts are valued as high as $10,000 each. Since these are no charge shipments (under warranty), the declared value is for customs use only.

The person in charge of such transactions on the Italian side has repeatedly requested that we under-report the customs value on the pro forma invoice and commercial invoice forms – requesting that we declare the value at $10 instead of $10,000. This person claims that this is the “Italian way” and stated that it is the “pizza, mandolino and many kisses” way to arrange business (direct quotes!).

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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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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.

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The Commercial Invoice Value of Samples

by Catherine J. Petersen           8/29/2011

Dear Cathy:

I found an article online that you wrote regarding the value on a commercial invoice titled Repaired Goods: Import and Re-Export. I am a Transportation Coordinator for my current employer, and there has always been a question in my mind that I'm not sure how to answer.
Many times we ship items to customers free of charge as an incentive for a bulk order or just as samples for them to try out. I've always thought that their actual value must be listed on the Commercial Invoice whether we charge the customer or not. Usually when I do that, however, I always make a notation on the Commercial Invoice stating there was no charge to the customer. The value was for customs use only. Is that the correct approach to a shipment of this nature? Thanks in advance for your assistance.
All the best,
Storm Clouds in Minnesota

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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

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Tools for Finding Proper Classifications

by Catherine J. Petersen           4/4/2011

Dear Cathy:

I have a question regarding the use of Schedule B Codes relating to spare parts. We manufacture compressor systems and sell a majority of them with accessories that enable the system to perform. These accessories could be stainless steel 90° elbows or a rubber drive belt. When we export an entire system with parts we classify it under Schedule B Code [8414.30.1080] with the accessories included under the same code since it is an item that has been dissembled under GRI 2a. We've never had a question about these classifications.
When we sell just a drive belt alone, we've been classifying it under the code identified as parts [8414.90]. Is this correct?
Much Appreciated,
Confused About Our Code

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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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The Introduction of Incoterms 2010

by Catherine J. Petersen           9/20/2010

Dear Cathy:

We are trying to understand what the new Incoterms mean for our customers and us. The past two years, we have worked diligently to add the Incoterms 2000 terms that we selected for our company into our SAP order entry system. Then we trained all of our sales personnel and customer service team. This was a big project for us and quite costly. We begged, borrowed and stole time from IT to get the updates in our system. Now what?! Do we have to start all over again? When do we have to have all the new updates in place for the terms that become effective January 2011?

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The Israeli Certificate of Origin

by Catherine J. Petersen           8/2/2010

Dear Cathy:

Our customer in Israel insists that we provide them with a U.S. Certificate of Origin (COO) each time we make a shipment to them. So, we prepared a certificate of origin using the same template we use for all of our customers and signed and dated the form. We even had a notary public sign and stamp the form.

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Incoterms vs. Domestic Terms

by Catherine J. Petersen       5/24/10

Dear Cathy:
We are confused about Incoterms. I know the Incoterms are for international transactions, but my company tries to use them for domestic transactions.
Our sales team tells our domestic customers that the terms are:
  • FCA Des Moines = Customer accepts Risk/Liability or
  • FOB Destination = We accept Risk/Liability.
When we use FCA Des Moines, IA for domestic sales, we use our trucks but the customer takes all risk from the time it leaves our plant. I do not think this is right. Are the two terms that we are using correct?

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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,

Payment Options for International Transactions

by Catherine J. Petersen         11/30/2009  

You and your customer will assess many factors as you negotiate the payment term that will be used for your international transaction. They include, but are not limited to:

  • Value of the transaction;
  • Your relationship with your customer, new or long-standing;
  • The country where the goods are destined;
  • The buyer’s country’s rules about how money will be released to you, the seller; and
  • Whether the product being shipped is customized, built to specification, or off the shelf.

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