The global marketplace presents a multitude of opportunities for shippers that pay close attention to the intricacies of global trade compliance.
Technology may have “flattened” out our world and opened up brand new opportunities to do business with foreign trading partners—to the tune of $5.80 billion in total U.S. exports alone in 2018—but there remain some major hurdles to overcome when doing business at a global level.
On the transportation front, customs can be a particularly challenging hill to climb. Responsible for border security, including counterterrorism, customs, immigration, trade, and agriculture, U.S. Customs and Border Protection (CBP) enforces U.S. trade laws through its trade enforcement efforts.
6 Success Steps for 2020
To avoid potential problems with CBP or other regulatory agencies, importers and exporters must pay attention to the specific requirements related to their shipments. Here are six areas that all shippers should be paying attention to in 2020.
- Know your Incoterms. Originally published by the International Chamber of Commerce (ICC) in 1936, Incoterms are a set of rules establishing the simple, 3-letter acronyms that importers, exporters, insurers, and other supply chain partners use to “talk” to one another. Updated every 10 years by the ICC, Incoterms include common abbreviations like FOB (“Free on Board”), DAP (“Delivered at Place”), EXW (“Ex Works”), CIP (“Carriage and Insurance Paid To”). Over the last few decades, Incoterms rules revisions have coincided with the first year of each decade (i.e., 1990, 2000, 2010, 2020, etc.). The latter is the latest version and currently in force.
- Check your shipments for hazardous and restricted materials. Have a solid understanding of exactly what’s going into the products that your shipping and the necessary certification required to handle those dangerous goods. Understand the potential dangers, and then mark, label, package, and document everything properly, and take all of the necessary precautions before you place your goods on a plane, boat, or truck. The International Air Transport Association (IATA) defines dangerous goods as items that may endanger the safety of an aircraft or persons on board the aircraft). Many common items found in today’s households can be considered dangerous goods for the purpose of air transport, including carcinogens, toxic agents, and combustible liquids.
- Use the right product classifications. The Harmonized Tariff System (HTS) provides duty rates for virtually every item that exists based on its material composition, product name, and/or intended function. Through the system, all products are assigned their own HTS codes, which are universal in nature and applicable across all countries, time zones, languages, and cultures. For instance, you might want to know the rate of duty of a wool suit. A classification specialist will need to know, does it have darts? Did the wool come from Israel or another country that qualifies for duty-free treatment for certain of its products? Where was the suit assembled, does it have any synthetic fibers in the lining? Using the HTS—which groups items into broad categories and then narrows those categories down into specific groups—shippers can correctly classify their products for duty and clearance.
- Don’t forget the Schedule B. A 10-digit number used only for export shipments, the Schedule B helps customs properly identify your product. Exporters need to know their product’s Schedule B and HS numbers to determine applicable import tariff rates and whether a product qualifies for a preferential tariff under a Free Trade Agreement. The Schedule B number is also needed to complete the Shipper’s Export Declaration, Certificates of Origin, and other shipping documents; and the HS number may be needed on shipping documents, such as certificates of origin. The Schedule B number is used by the Bureau of Census to collect trade statistics.
- Know the Export Control Classification Number (ECCN). A key in determining whether an export license is needed from the Department of Commerce is finding out if the item you intend to export has a specific Export Control Classification Number (ECCN). ECCNs are five-character alphanumeric designations used on the Commerce Control List (CCL) to identify dual-use items for export control purposes. According to the Bureau of Industry and Security, ECCN categorizes items based on the nature of the product (i.e., type of commodity, software, or technology and its respective technical parameters).
- Put the right customs bond in place. If you import products to the U.S., you need a customs bond as protection from the unexpected costs that result from a wide range of customs issues. Also known as a U.S. Surety Bond, a customs bond assures the CBP that the importer will fulfill any financial responsibilities for customs duties, penalties, and other obligations. The right Customs Bond provides a buffer between CBP and the importer, reducing hassles and delays, and is required by CBP for nearly all imports. They are also required for property brokers that want to store or perform any activity (i.e., cartage) while in bond, in accordance with the rules and regulations of the Federal Motor Carrier Safety Administration (FMCSA).
As you prepare your imports and exports during the coming months, be sure to factor all of these key points into your plan of action. Working with a reliable logistics provider that understands the intricacies of global trade, you’ll be able to avoid any delays or penalties associated with non-compliance while ensuring a streamlined shipping process. Michael Anderson, Area Customs Director, USA adds, “International trade processes and regulations are complicated. Those companies that depend on a global supply chain want to get it right. DB Schenker can help.”
