International Trade Compliance - a thought

I have noticed that compliance has been raising its head recently, what with all the goings-on in Iran and Syria. I am continually emailed information from both the US and UK authorities advising me of new regulations which, if I fail to comply, will result in fines, prosecutions and even jail.

Experience tells us that there are many UK exporters who don’t take compliance seriously, or in some instances, don’t really understand what it is all about it. This is particularly the case where someone has decided to start exporting without any previous experience or training. I wouldn’t be at all surprised if some of them don’t even know there are embargoes and/or sanctions for certain countries they are selling to. And when it comes to the “less serious” issues like correct tariff classification and checking Customs entries for accuracy, how many exporters, or indeed importers, take the time, or even have the time, to perform this task? I would suggest that the number is fairly low; firstly because they possibly assume this is their forwarder’s responsibility (it isn’t!), and secondly because perhaps they don’t even know they should ask their forwarders to provide them with the information. And even if they do receive a copy of the entries, how many comprehend all the information contained on them?

Of course, none of this becomes an issue… until the company gets a Customs audit; and how often does that happen?

But perhaps things are changing. A more positive slant to international trade compliance is being championed - selling the benefits.

The flip side of all the perceived hassle of compliance is that if you do take the time to get things right then costs, delays and “the aggro factor” can all go down, and consequently customer satisfaction goes up. And don’t forget, if you are an importer, you are the customer! But as an exporter, think of the benefits for your customers. Their goods arrive on time, documentation is correct, accurate and appropriate, they clear Customs without any fuss, and the import costs are unambiguous and can be known in advance. What’s not to like?

If exporters, and in particular export sales staff were to adopt this positive mentality and see compliance as an opportunity and even a unique selling point rather than a burden, the benefits could far outweigh the perceived negatives. Your company reputation would be enhanced, your knowledge valued and your business could gain an advantage as customers see the benefits of working with a professional, well organised company who care about the customer; all leading to an increase in business.

There are benefits in having people with specialist knowledge working in this area. Many companies have done away with the good old fashioned Shipping Manager who had the time to do the “shipping” job properly; looking at the details in depth, and with a good understanding of compliance requirements. Maybe the current preference for wrapping up the shipping function into the “Logistics Manager” or “Supply Chain Manager” role means that these individuals just have too many strings to their bow, too many other pressures, to treat compliance as a core function and get best advantage from it.

Dave Heaver

Preference: Supplier Declarations - do you know your responsibilities?

Supplier Declarations are more commonly used to support the issuing of preference documents, eg EUR1 Forms, invoice declarations (approved or low value) and ATR Forms (Turkey).

As the Preferential Trade Agreements (PTA) are governed by specific rules, relating to the manufacturing origin of the goods and often the percentage of components or materials bought in from a country not covered by the PTA, anyone issuing preference statements must ensure they know the status of any bought in finished goods or components/materials BEFORE issuing the preference declaration.

Companies can be asked to provide “Supplier Declarations” to customers in other EU countries, including the UK, so they can establish if the goods qualify for preference when shipping them out to other countries. These statements have the same legal responsibility as issuing the EUR1 Forms or preference statements therefore companies must have a clear procedure and control over this activity.

Any company buying goods from UK or EU suppliers cannot assume these goods meet preference conditions UNLESS they have a Supplier Declaration. These declarations are to be obtained on an annual basis and must be used when assessing if export shipments meet the rules of preference origin. Any goods, components or raw materials bought in NOT supported a Supplier Declaration must be declared as NOT QUALIFYING.

The use of these Supplier Declarations are now been extended by companies to include a statement from the supplier as to the ORIGIN (ie where it was made) and commodity code applicable to the goods.

What are your experiences of issuing or obtaining Supplier Declarations?
Do your sales people understand the importance of these forms if requested by customers?
Is issuing invoice declarations, EUR1 Form or ATR Forms treated as just another documentary requirement without management understanding there could be 5 years imprisonment in the background!

Also see article: EU Preference System: Overview
Training: The Export Course
Understanding Origin and Preference
Preference and Origin Rules Explained
Essential Guide to Customs Procedures

Be positive about Exporting!

I’m starting this blog after a great Twitter discussion. It followed a tweet about how the CBI seeks £20bn state boost for UK exports to BRIC economies (http://t.co/pWXxkrzz). Was this announcement good news? Surely it has to be good news, to quote from the statement:

CBI study finds UK's share of global exports has declined to 4.1% from 5.3% in 2000.

The CBI has urged the government to provide a £20bn boost to the economy over the next decade through a radical overhaul of Britain's export strategy focusing on providing the right products for the world's high-growth markets.

John Cridland, CBI director general, said: "We need to capitalise on the booming success of the Bric countries, and look to future high-growth markets such as Indonesia, Mexico and Turkey. The middle classes in emerging economies will have needs that our producers are more than able to fulfil."

How could this not be good news … but there are always things to be aware of, be cautious of – but that shouldn’t stop the fact that getting on with EXPORTING is GOOD. We hear too many stories of companies who got into trouble because their goods got delayed in customs and it cost them loads of money, they didn’t do the paperwork right and they got fined, they didn’t understand international payment issues so they didn’t get their money, etc, etc, etc.

Though I know we need to temper enthusiasm with reasoned words of advice and caution can’t we be more positive with the public perception of EXPORTING? It's profitable! It’s fun! Companies are 34% more likely to survive a recession if they export! Here’s some more good news:
Taking your products (or indeed your services) to beyond the shores of the United Kingdom opens up almost limitless opportunities for expansion and growth. Why sell to 70 million people when you have a global market of 7 billion?

But you may argue: Isn’t it expensive to begin exporting and there are lots of the risks? Of course we can't ignore this. Companies can get caught out if they don’t do the homework but that's always been the case and it doesn't just affect UK exporters, other countries do it and the UK is still the 13th largest exporting country of merchandise in the world. Export/ import regulations are many and varied – but isn’t that part of the fun, the challenge, the reason I’m still involved in and excited by international trade. Companies make more money exporting than they can in home markets and it encourages growth and sustainability. We should be positive about exporting, encouraging them to try, and if there is a problem, try again.

Come on people …. Comment and Encourage!!

THE ATA CARNET SYSTEM: What if something goes wrong?

ATA Carnets are marvellous documents (for further information see Article ATA CARNET SYSTEM) but don't let anything go wrong. An ATA Carnet allows goods to enter and leave overseas countries without special paperwork or the payment of customs duties so treat it with respect. Used mainly for taking goods to overseas exhibitions, demonstrations, to ease the customs paperwork when professional equipment (ie commissioning or test equipment) is needed overseas or for sales people to carry around valuable commercial samples. In situations like those just described you don't want to have to worry about customs issues, documents, paying duties - that's why the ATA Carnet was invented. A good way of thinking an ATA Carnet is to call it "a passport for goods" - an just think what problems you'd have if you lost your passport while overseas!

I don't want to put you off using ATA Carnets but sometimes things do go wrong and, if you plan to avoid the following happening, you should have a very happy time with your Carnets. So here are a few things that could go wrong and some guidance on what to do if it happens.

a) An export voucher has not been stamped by the relevant customs authority.
Ensure the goods are stamped into the UK. Return the carnet to the chamber with a letter of explanation (i.e. flight departed at 2am, no customs available) and ask them to "regularise" the carnet.

b) The carnet is not stamped back into the UK.
Contact your local customs office and request a "Certificate of Location". The carnet and all the goods covered by the carnet must be available for the customs officer to inspect - if this is at your premises there will be a call-out charge; if they are small enough to take to a local office it is free. Once the "Certificate of Location" has been raised return it with the carnet and a letter of explanation to the issuing chamber. Again there may be a regularisation fee.

c) The goods and carnet return after the validity period.
Firstly UK customs will not allow you to enter the goods using the Carnet documents. The import will have to be made under a different customs procedure = Return Goods Relief, duty/vat free. Ensure to ask the customs to still stamp the counterfoil of the carnet to evidence import - this may take some persuasion but they will do it. Then, lodge an appeal through the issuing chamber. The appeal must have evidence that the goods have returned to the UK (e.g. the import carnet vouchers duly stamped or certificate of location) and a letter of explanation. You cannot reclaim your guarantee amount and if any fines/penalties are incurred you have to pay them immediately. The appeal takes time but could result in a repayment of all or part of the guarantee/fines.

d) Suddenly the goods have to remain overseas, i.e. they've been sold.
This has to be negotiated with customs in the relevant overseas country. The temporary import entry that has been made against the carnet voucher needs to be amended to a permanent import with full payment of import duties and taxes. You will need assistance from a company registered in that country to succeed. On payment of full duty/tax a "Duty receipt docket" should be issued and the re-export voucher of the carnet duly stamped and endorsed by customs. The carnet should then be returned to the issuing chamber with a letter of explanation. You could be charged a fine or penalised, e.g. the chamber refuses to grant further carnet to the company, because this is a serious mis-use of a carnet.

e) Goods are lost or stolen.
It is advisable that the goods are insured for their value plus the guarantee amount so, if they are lost or stolen the insurance claim will repay the penalties/fines incurred.

f) The carnet is lost.
You then have to revert back to standard export and import procedures. The goods should be exported from the overseas country with a "Shipping Invoice" quoting the carnet number, a copy of this invoice must be stamped and endorsed by the export customs authority in the same way he would have stamped the carnet. On return to the UK the goods will have to be entered with payment of import duties/VAT on deposit (unless you have some other form of evidence to support the original export in which case enter them to RGR). A Certificate of Location can then be asked for from your local office, a copy of this, with an explanation letter, should be sent to the UK customs point from where the goods were originally exported. This customs office will have their copy of the carnet export voucher. Ask them to certify in writing that the goods were originally exported under that Carnet and on what date, this letter plus a copy of the carnet voucher should be sent to you. The stamped export shipping invoice, the Certificate of location and a copy of customs letter and export voucher should be sent to the issuing chamber to cancel your obligations under the ATA carnet regulations. To reclaim the import duty paid, a copy of the stamped export invoice, the original export voucher, the original of the customs letter and your request for repayment should be submitted to your local customs office.

g) An engineer wants to visit a country not already allowed by the carnet.
First check it is a carnet signatory country, if not revert to normal temporary import bond procedures. If it is a carnet country and you know well in advance, you may request from the issuing chamber an addition to the carnet countries. As long as the guarantee amount is sufficient or additional funds are paid and it is within the validity period of the carnet this is usually arranged, though additional vouchers will have to be couriered out to the engineer.

We would love to hear your comments or ATA Carnet experiences , please comment

First written as an article published 19th February 2011 by Sandra Strong MIEx (Grad) CITA, Managing Partner Strong & Herd LLP HERE

WCO announces HS code changes for 2012

Doesn’t it seem like we just went through this? Well, actually that was back in January 2007! Yes, it is time for the 5-year changes to the Harmonized Tariff Codes.

The WCO has published a paper describing (at the 6 digit levels) the changes that are being implemented and each WCO member state will make changes to their tariffs accordingly. As you may remember from the last go around, depending on what you are shipping, this may have a minimal impact to your parts database or a radical one. There seems to be a lot of changes in Chapter 3 (Fish) and 29 (Chemicals) and then a smattering of other changes throughout the tariff. It definitely doesn’t seem to be as huge in apparel and other retail areas as the last time but more focus on foodstuffs.

If you do have to make changes to your classifications on a grand(ish) scale, make sure all your service providers or systems get these updates to ensure you maintain the highest levels of Customs Compliance.

Since this is only a year or so away, it would be best to do an analysis to make sure you don’t have to go through such a review/reclassification exercise. You don’t want to go down to the wire and find that you not only have to reclassify your goods but then you have to distribute to all your providers to ensure you don’t put yourself into an error and thus penalty situation.

Freight companies and Customs Compliance

Though I know this doesn't apply to all freight forwarders and clearing agents but why are so many still getting import declarations and export declarations to customs wrong - even when they have been given clear instructions. What can we do about it? HM Revenue & Customs and the Export Control Organisation expect exporters and importers to control their freight companies - you given them written instructions with key information: EORI (VAT Number), Customs Procedure Code (CPC), commodity code (tariff number), export licence number, customs authorisation numbers, eg for IPR, OPR, Warehousing, etc. The import or export customs declaration comes back from the freight forwarder (if you are lucky) and one or most of the details are wrong. Perhaps with the increase in AEO approved companies this problem will fade but it seems that training for both companies exporting from the UK and companies importing into the EU is essential. In the meantime customs compliance takes up a lot of time in our office - instructing, checking, double checking, chasing forms, reporting errors and chasing amendments. Any comments?

Customs Duty Guarantees

The rules and regulations for international trade procedures in the European Union, as you are aware, are being re-written (full implementation 2013). One of the things within the Modernised Customs Code (MCC) is the introduction of guarantees...

Read more about Customs Duty Guarantees