Understanding Incoterms® 2010 & NAFTA Audit Workshops – Western Canada, November

• November 15, 2010 - Winnipeg - Delta Winnipeg Hotel
• November 16, 2010 - Calgary - Delta Calgary South Hotel
• November 17, 2010 - Vancouver - Blake, Cassels and Graydon LLP, 595 Burrand Street
AM Session - Incoterms® 2010: Both the New Changes and the Existing Terms

Effective January 1, 2011, Incoterms® 2000 will be replaced by Incoterms® 2010.

Incoterms® are extensively used in international sales contracts as they are widely recognized and understood commercially. They determine critical issues such as who will pay for the carriage of the goods, who will be responsible for customs clearance, and the point at which risk passes between the parties.

This hands-on workshop will cover topics such as: overview of the Incoterms rules, including the new changes; term-by-term analysis; useful definitions; and role in sales/purchasing contracts.
If you are sometimes presented with contracts that contain Incoterms® and you do not understand the full meaning of them, this is your chance to get up to speed on this important trade topic so you can minimize your company’s risks and obligations.

PM Session - NAFTA Audit

Most importers and exporters are eager to take advantage of the duty relief granted under the North American Free Trade Agreement (NAFTA), but remain unaware of the risks and liabilities associated with claiming the NAFTA tariff treatment. Many still do not know that more than 50% of NAFTA Certificates of Origin either contain errors which render them invalid or are not supported with the necessary documentary evidence. With NAFTA origin audit activity on the rise, more importers are being shocked by assessments of financial penalties and/or retroactive duty and GST, while some Canadian manufacturers and exporters are losing their competitive advantage in the North American market.

In this down to earth, easy to understand session, we’ll cover the following:

• What importers and exporters should expect during a NAFTA audit conducted by either the Canada or U.S. Customs Agencies.
• Learn from the mistakes of others – Common errors made on Certificates / Statements of Origin, and during NAFTA audits.
• Sharing NAFTA strategies used by manufacturers, exporters and importers.
• Do you really know how your Customs Broker is handling this issue? Are you at greater risk than you thought?

For agenda and registration please click here.

‘Blood Minerals’ in the Supply Chain

(Supply Demand Chain Executive – Andrew K. Reese)

Compliance to the new financial reform bill will pose unique challenges

The 848-page financial reform bill signed into law in the U.S. on July 21 (the “Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010”) contains a six-page section, starting on page 838, that addresses the issue of “Conflict Minerals” coming into the supply chain from the Democratic Republic of the Congo (DRC). The goal of Section 1502 is to ensure that certain minerals coming from the DRC are “conflict-free” – that is, not fueling the ongoing violence that has left more than 5 million people dead, and not funding the armed parties that have employed forced labor, child slavery and sexual terror as standard practice to control the minerals trade.

The minerals covered in the law – coltan (columbite-tantalite, a source of tantalum), cassiterite (tin), wolframite (tungsten) and gold – are used extensively in a variety of industrial, consumer and electronics products. Tin is used as a solder on circuit boards. Tantalum capacitors are used widely in the technology supply chain. Tungsten is used as tungsten carbide in applications like turning tools and milling, but it’s also used in cell phones to make them vibrate. Gold is used in jewelry, of course, but also used for the gold plating, printed circuit boards, connectors, switches and other electronic components. Collectively the minerals are referred to as the “3Ts, plus gold.” Read more here.

U.S. Producers of Plastic Grocery and Shopping Bags Applaud Investigation and Conviction of Importers Engaged in Illegal Circumvention of Antidumping

(KansasCity.com)

Owners of a Chicago-area importer, S&P Plastics, Inc., were sentenced last month for their role in defrauding U.S. Customs and failing to pay antidumping duties on imports of plastic grocery and shopping bags (referred to as polyethylene retail carrier bags, or “PRCBs”) from China. Young Seung Shin and Peili Ding admitted to falsely declaring certain entries of shopping bags as not subject to an antidumping order on PRCBs from China. The two were sentenced to prison terms of six months and twelve months, respectively, and are subject to additional fines and forfeiture of $182,871 attributable to the lost duties. In addition, the government seized all containers of the bags at issue that had not yet cleared Customs.

These convictions arose out of a joint investigation by U.S. Immigration and Customs Enforcement (“ICE”) and U.S. Customs and Border Protection (“Customs”), and were conducted in conjunction with the U.S. Attorney’s Office for the Northern District of Illinois.

Joe Dorn, a partner at the law firm of King & Spalding and counsel to the PRCB Committee, an ad hoc coalition of U.S. plastic bag manufacturers, applauded the government’s enforcement efforts. “We greatly appreciate the dedication and hard work of ICE, Customs, and the U.S. Attorney in Chicago which resulted in these convictions and which demonstrate that illegal circumvention of antidumping orders on plastic bags will not be tolerated,” said Mr. Dorn. Read more here.

10+2 Rule Scores 80% Compliance

(Journal of Commerce Online – R.G.Edmonson)

Nearly 1,000 unmanifested containers identified since January

Customs and Border Protection said 80 percent of importer filings comply with the Importer Security Filing, or 10+2 rule, since enforcement began in January. The agency also identified approximately 1,000 unmanifested containers from vessel stow plans that carriers file. Such containers present the highest security risk.

The findings were noted in a report Tuesday from the Government Accountability Office, which added the comment that Customs needs to integrate the data it collects into its overall targeting strategy. GAO also said that under White House Office of Management and Budget rules, Customs should be more transparent in assessing how it put the ISF rule into effect. Read more here.

CBSA Trade Compliance Verification Priorities

(Baker McKenzie LLP)

The Canada Border Services Agency (CBSA) recently published a list of products that will be the focus of the CBSA’s post-entry compliance verification programs (commonly referred to as audits) for the federal government’s 2010-2011 fiscal year. The areas of increased audit activity for each compliance verification program are as follows:

Tariff classification:
• Furniture parts
• Gloves
• Organic surface-active agents – soap and other than soap
• Stone vs. articles of stone
• Reclaimed rubber

Origin verification:
• Juice products
• Mattress upholstery
• Electric Generators
• Tools, implements, cutlery, spoons, and forks, of base metal; and parts

Valuation verification:
• Light-duty automotive goods

Under the Customs Act, the CBSA may conduct post-entry verification reviews of importers to ensure compliance with respect to the determination and reporting of the proper value, origin, and tariff classification of imported goods.

The CBSA conducts different types of audits for different purposes. The areas identified above were selected due to a perceived risk in an industry or by commodity as determined by the CBSA. Importers of goods in other sectors should not feel complacent, since the CBSA also conducts verification audits to measure compliance rates to determine industry or sectors that will be targeted in the future. Consequently, importers of goods other than those identified above may still be subject to audits in the current government fiscal year.

The CBSA conducts many post-entry verifications by way of a “desk audit”, whereby the importer is asked to supply customs accounting documents for a sample of importation transactions, as chosen by the CBSA, that have occurred during a selected audit period. Under certain circumstances, the CBSA may arrange an on-site visit to the importer’s premises, if needed.

In a typical desk audit where no site visit is required, the CBSA will generally provide the importer with 30 days in which to supply the requisite accounting documents. Once the CBSA officer begins conducting the audit, it is not uncommon for importers to receive additional requests for further information or clarification regarding the transactions chosen for review. Once the audit is complete, the CBSA will typically issue an interim finding letter and provide the importer with an opportunity to respond to the CBSA’s initial findings. The CBSA will then issue a final letter indicating its findings and will also issue formal determinations, known as Detailed Adjustment Statements, for any transactions determined by the CBSA to be in error. Under section 60 of the Customs Act, importers have a legal right to appeal the CBSA’s value, origin, and tariff classification determinations they believe are incorrect.

Source: Baker McKenzie LLP

The Case for an Integrated Trade Compliance Strategy – October 19

79th Annual Conference & Trade Show – October 18-20, 2010
Delta Meadowvale Conference Centre, 6750 Mississauga Rd., Toronto Airport

The Case for an Integrated Trade Compliance Strategy – October 19, 2:00 p.m.

Canadian importers and exporters are rapidly diversifying their global supply chains and markets in search of a competitive edge and increased margins. The new trade reality is a complex mix of origins, production locations, and destinations for finished goods. A pro-active and diligent approach to managing regulatory obligations is necessary to ensure the enterprise is compliant at all stages of the sourcing, production, and sales cycles. This session will unpack the case for involvement and visibility of trade activities across the operations, finance, business development, executive, and board levels, and provide ideas on how to make such an integrated approach a reality.

Speaker:
Reynold Martens, Executive Vice President, GHY International

For more information on the program or to register, please click here: here.

CBP Continues to Ramp Up Enforcement with NAFTA-Related Audits

(Lexology – Arent Fox LLP)

Canada and Mexico are still account for a huge amount of imports ? over 25% of all imports entering the United States last year. And of course a large proportion of those imports are processed with claims that the product is eligible for NAFTA duty preference (zero or reduced duty rates and no mpf fees). Based on activity levels over the past year, it appears that Customs and Border Protection (CBP) is now more aggressively probing to see if those NAFTA claims are valid. For U.S. importers, this can mean some level of disruption to gather and present paperwork acceptable to CBP for past entries, as well as the potential for loss of NAFTA benefits (higher duty rates and mpf), enforcement actions, and penalties if NAFTA claims turn out to be incorrect or cannot be supported with sufficient backup to satisfy CBP.

Over the past few years, we have heard several pronouncements from CBP (as well as the Canadian and Mexican customs authorities) that more attention would be paid to verifying NAFTA origin claims. Anecdotal evidence indicates this has indeed occurred, with increased emphasis on validating NAFTA origin claims in a variety of ways. Read more here.

EU Suspends WTO Sanction Bid Against U.S. in Dumping Dispute

(Industry Week – Agence France-Presse)

U.S. provides reassurances it will bring measures into compliance with global trade rules

The European Union said Wednesday it had suspended a request at the World Trade Organization for the right to impose sanctions on Washington over a controversial U.S. anti-dumping calculation.

"Yesterday the European Union and the United States asked the arbitration panel deciding on the level of sanctions that the EU is entitled to impose on the United States in the zeroing dispute to suspend its work," said John Clancy, spokesman of the European bloc. Read more here.

Bringing Compliance into the Boardroom – Webinar, Sept 15

(American Shipper)

American Shipper is pleased to invite you to attend Bringing Compliance into the Boardroom, hosted by associate editor Eric Kulisch. This free webinar will broadcast live on September 15th at 2 PM ET. Please register here.

This 60 minute roundtable discussion will include the following expert panelists:

• Beth Peterson, President of BPE

• Nathan Pieri, SVP of Marketing & Product Management for Management Dynamics

• Virginia Thompson, Director of Import/Export Operations and Int. Trade Compliance for Crate and Barrel

Our panel will discuss the best strategies for compliance professionals to get executive level cooperation and sponsorship of their initiatives. Our focus will include:

• The pain points of each member in the boardroom and how they relate to compliance issues - Key messaging to use when speaking to each board member

• Tools to use in your presentation, such as quantifying compliance and its effect on the bottom line

• How automation can contribute to your efforts by adding value and saving money

This webinar, sponsored by Management Dynamics, is a must-attend event to help you learn how to get the attention your compliance department deserves from your C-level executives.

Please feel free to reach out to our help desk if you have any questions at HelpDesk@shippers.com

CFIA Statistics on Wood Packaging Non-Compliance (Imports)

(CIFFA eBulletin)

The CFIA has provided the following statistical information on Wood Packaging Non-compliance for Imports, for the period January 1 to March 31, 2010.

The CFIA said twenty-four (24) countries received a notice of non-compliance for this period. A total of 1657 shipments with wood packaging material (WPM) were inspected during that period (data includes shipments inspected at the ports of Halifax, Montreal, Vancouver, Prince Rupert). Data collected by the CBSA during that period has been analyzed by the CFIA to determine that compliance is about 93.4% with regards to presence of a IPPC mark or a Phytosanitary Certificate and with no live pests or signs of living pests.

Approximately 2.2% (37/1657) of shipments were infested. Most of these infested shipments were from China. The remaining non-compliant shipments had no mark and no Phytosanitary Certificate and no live pests or signs of living pests. No fraudulent phytosanitary certificates were intercepted during this period. Pest identification has been included in the notices sent to exporting countries.

CIFFA would like to remind Members that Canada strictly regulates the entry of wood packaging from all countries of the world. The entry requirements for wood packaging from all areas except the continental United States are specified in policy D-98-08. You should also be aware that non-compliant wood packaging may be refused entry into Canada. Members can help prevent the introduction and spread within Canada of pests by staying vigilant and ensure that the overseas agents used are reputable. For more visit here.

CBP Urged to Provide Benefits for ISF Highly Compliant Importers

(World Trade Interactive)

The Import Security Filing Subcommittee of the Advisory Committee on Commercial Operations of U.S. Customs and Border Protection (COAC) recommended at the Aug. 4 COAC meeting in Detroit that CBP provide the following benefits to importers that are highly compliant with ISF requirements.

• For importers who are certified Customs-Trade Partnership Against Terrorism members, high compliance with ISF requirements should be deemed a best practice and considered with respect to elevating the importer’s C-TPAT status to the Tier 3 level.

• In cases where stratified compliance exams are undertaken by CBP (where multiple shipments are under one bill of lading) and the importer is a C-TPAT member, CBP should allow sealed containers not being examined to not only move to destination but to be released by CBP.

• CBP should also consider the option of releasing for distribution other bills of lading on the same entry (where the importer is a C-TPAT member). As with the above recommendation, the released containers in question would be those not designated for exam. To address potential CBP concerns, this benefit would not include containers stuffed by the same party that stuffed the container(s) designated for exam.

• For small and medium-size importers that are highly compliant, CBP should consider a streamlined process for application to C-TPAT.

• In the case of unified ISF filings, conditional release in the system at time of vessel departure should be provided.

• Consideration of mitigation for other penalties (outside those associated with ISF compliance) should be given for highly compliant importers.

• For continuous, highly compliant importers, there may be a situation where CBP identifies a problem that is very low frequency (e.g., one out of a thousand). CBP should take this into consideration with respect to penalties.

The subcommittee also included information on the collateral benefits of ISF that have been identified by highly compliant importers. One such benefit is that importers have better visibility into their global supply chains since they now have a CBP process at origin. Companies can identify non-standard shipments earlier in the process, allowing them more time to address the issue prior to arrival and potential delay. In addition, because importers provide data earlier, there are fewer delays at destination. Working through the ISF requirements has also highlighted that import compliance teams need to be folded into the procurement process earlier. Finally, importers have become more engaged with parties not typically communicated with in the past, which provides more visibility and improvement in data availability and accuracy.

Export and Import Controls and Compliance Programs

(Lexology – Ronald C. Cheng and Drew Tyler, Osler Hoskin & Harcourt LLP )

Canadian businesses engaged in international trade always have been less diligent on compliance with import and export controls imposed by the Export and Import Permits and Controlled Goods Acts and similar legislation, than on other regulation. Often compliance did not occur until due diligence requirements on financings or at the sale of the business focussed attention on required inquiry and compliance “with all applicable laws”.

Since a significant and essential aspect of Canadian import and export controls covers the re-export from Canada of goods of U.S. origin, Canadian business should take note that increased surveillance and compliance as well as controls generally, have received much recent attention in the U.S. […]

Export and import controls compliance programs have been developed by many U.S. companies. What the U.S. enforcement agencies recommend for such programs should be of particular interest to Canadians faced with (remedial) compliance since Canadian authorities are fully familiar with U.S. requirements. Also, the creation or improvement of such programs often has been required by Canadian authorities when approached to rule on possible contraventions, particularly when requests are made for expedited consideration in view of an impending “closing”.

Read more here. Earlier this year, the U.S. Department of Commerce published “How to Develop An Effective Export Management And Compliance Program And Manual“. The U.S. Department of State similarly has published guidelines for compliance programs in this area. Although no one “template” will suffice for all companies, the Canadianized version of the U.S. government’s guidelines provides an effective starting point from which to develop a compliance program acceptable to Canadian regulators. The original article with footnotes, and the template for a Canadian compliance program can be downloaded here.

FDA Affirmation of Compliance for Electronic Products

(CBP)

The FDA has created a new Affirmation of Compliance (AofC) code for use in identifying manufacturers of electronic product components that will be incorporated into finished products. Use of this code is important to expedite our automated database look-up for components transmitted to FDA using product codes for a finished product. Failure to transmit this code will result in entries being held for manual review.

AofC Code: CCM
AofC Description: EPRC Certifying Component Manufacturer

This affirmation and qualifier should be used to name the certifying component manufacturer (CCM) of the certified Electronic Product Radiation Control (EPRC) component incorporated in the finished product being imported. The name of the CCM manufacturer must be the one that appears in the referenced product (ACC) and/or annual report (ANC) affirmations. This affirmation is only used when the name of the manufacturer of the finished product is different that the name of the certifying component manufacturer.

Companies Seek Ways Out of the Regulatory Compliance Money Pit

(Logistics Today)

Nearly half (45%) of supply chain professionals recently surveyed by global logistics firm BDP International and its Centrx consulting unit say they are supporting their internal regulatory compliance departments with external resources, especially those with under $1 billion in annual revenues and those doing business in emerging markets.

Growing global concern over environmental and safety issues is spinning a global web of trade and security programs that impact both importers and exporters, and both products and their movement. Compliance with new regulations such as the EU REACH and U.S. Importer’s Security Filing 10+2 programs can be complex and costly. To better understand how companies are dealing with these issues, BDP and Centrx surveyed 184 logistics executives from a range of industries. […]

When queried about where they expect to secure compliance support in the future, nearly 80% (77%) indicate in-house resources, but fully 65% note they will also work with freight forwarding/customs brokerage firms.

“Today more than ever it is critical for global traders to understand the vagaries of the regulatory landscape and the speed with which it is changing,” Ford notes. “Going forward, the challenge will be staying ahead of the regulatory curve with its growing trade, security and environmental rules.”

Read more here.

U.S. BIS Publishes Export Compliance Guidelines

(CIFFA eBulletin)

The Department of Commerce’s (Commerce) Bureau of Industry and Security (BIS) has published on its website a document titled Compliance Guidelines: How to Develop an Effective Export Management Compliance Program and Manual. According to the document, the guidelines were developed in order to provide assistance with the establishment or enhancement of an Export Management and Compliance Program (EMCP). The guidelines aim to help companies develop both an operational and written EMCP in order to ensure that export decisions and transactions comply with the Export Administration Regulations (EAR).

The guidelines cover nine “key elements” of an effective EMCP, which include (but are not limited to): Risk assessment, the written EMCP, Compliance training, Recordkeeping, Compliance auditing.

The full text of the guidelines can be accessed online here.

ACI Highway eManifest Preparation & Compliance Workshop

(IE Canada)

Trans-Canada Series: March 29 – April
Locations: Moncton, Montreal, Markham, Cambridge, Winnipeg, Edmonton, Vancouver

In June 2010, the Canada Border Services Agency (CBSA) will begin accepting electronic manifests containing cargo and conveyance data from highway carriers. Unprecedented cooperation amongst all parties in the supply chain will be critical to ensuring that the right information gets to the right place at the right time to avoid delays crossing the border.

I.E.Canada, the Canadian Trucking Alliance and provincial trucking associations are partnering in this series of hands on workshops across Canada. Led by Oryst Dydynsky of The Descartes Systems Group Inc., an industry leader and Co-Chair of I.E.Canada’s Customs and Legislation Committee, and Jason Proceviat of CBSA, each workshop will include an overview of the eManifest highway initiative and the new requirements, as well as an interactive walk-through exercise to highlight the process changes that will be required of carriers, freight forwarders, importers and their brokers.

For further details or to register contact: Jesse Arsenault, 416-595-5333 ext. 37

9 Steps to Perfecting the Global Trade Balance

(Logistics Today – Carmen Yunker, J.P.Morgan)

U.S. export compliance enforcement continues to escalate. The recent $9.4 million export compliance and economic sanction penalty violation levied against DHL is a good indication that the U.S. government has no problem issuing costly penalties, even in these difficult times. Inexplicably, with an increasingly active compliance enforcement environment, some companies continue to scale back financial and workforce resources related to export compliance. That isn’t consistent with basic corporate risk mitigation policies.

Corporate executives are best served by balancing the risk of violating basic trade regulations with the need to keep an effective export compliance program. Having a compliance program on “paper” is not enough to prevent a company from being subject to penalties and operational risk. The challenge is creating the right compliance environment for each business.

An effective compliance program can be maintained on a reduced budget if the essential core practices are clearly defined and followed. Read more here.

2010 CBSA Compliance Verification Priorities

(GHY International)

The Canada Border Services Agency, Compliance Management Division has released its list of national priorities for verification in the coming year.

The selection of post-release verification priorities for trade programs is intended to support the CBSA’s risk-based approach that allows the Agency to ensure compliance with trade legislation and regulations while helping to provide a level playing field for Canadian businesses by ensuring the accuracy of trade data and the proper assessment, collection, relief and deferral of duties and taxes.

As outlined in this Powerpoint presentation, the CBSA has identified 14 national verification priorities so far for 2010:

Valuation verification

• Plastic household goods

Tariff Classification verification

• Magnesium sulphates
• Cotton yarn
• Copper and articles thereof
• Stone vs. articles of stone
• Reclaimed rubber
• Furniture parts
• Gloves
• Soap

Origin verification

• Vegetable fats and oils
• Articles of bedding and similar furnishings
• Perfume and toilet water industry
• Mattress upholstery
• Electric generators

Importers of the foregoing commodities that are being targeted by the CBSA in 2010 would be well-advised to immediately begin reviewing all aspects of their compliance procedures, especially as they relate to the applicable areas of concern (i.e., valuation, tariff classification, and origin determination) in order to minimize potential risk exposure.

If assistance is needed in this regard, GHY has extensive experience in conducting pre-audit verifications and compliance risk assessments. To find out more about how we can help, contact can be Alan Dewar toll-free (1-800-667-0771) or by email.

Note: Although we are proactively contacting as many clients as possible that we reasonably believe may potentially be impacted by the CBSA’s 2011 verification agenda, this effort may be somewhat impaired due to the fact that a list of specific HS tariff items being targeted by the Agency has not yet been released. Therefore, if we haven’t managed to reach out to you as yet in this regard, please consider the commodities under review with respect to your imports and let us know if you feel there may be potential exposure to risk that may need to be addressed.

How to Get Buy-In for Trade Compliance

(Materials Management & Distribution News – Deborah Aarts)

Get the right people on board and funding will be yours, experts say

Trade compliance errors cause significant headaches among international shippers, and they are almost completely preventable.

With the right training programs, staff can be taught to avoid the problems that interfere with successful international shipments. The trick, according to a panel at I.E.Canada’s recent annual conference, is convincing the C-suite to invest in that training.

It’s a tough job, but it’s not impossible, according to Farley Genge, Americas regional Customs leader for General Electric Canada Inc. He helped develop a comprehensive trade compliance instruction program that has dramatically reduced the company’s mistakes. The program – which includes an array of new standard operating procedures, risk assessment procedures, audits and metrics – has saved the company more than $10 million.

Before those savings were achieved, however, Genge had to convince his superiors to invest. To do that, he created a sales pitch.

He promised his bosses that the new program would reduce brokerage rates and increase the company’s price competitiveness. It would help the company proactively mitigate penalties and therefore thwart unwanted fines and protect its brand image. And, of course, it would improve cash flow – the costs of training would be more than offset by the savings generated by a compliant workforce. Read more here.

Mushroom Importer Gets Prison for Evading Customs

(Fresh Plaza)

The president of a San Marcos mushroom-importing company has been sentenced to 13 months in prison after pleading guilty to evading customs duties on the mushrooms his firm imported from Japan.

Craig Robert Anderson, president of Golden Gourmet Mushrooms Inc., was also ordered Friday to pay a $6,000 fine and serve a year of home detention after his time in custody. The company was also found guilty and fined $460,000, and must pay restitution of $546,757 to U.S. Customs.

Anderson, 57, a Rancho Santa Fe resident, pleaded guilty in June to using dual invoices to avoid customs duty when his company imported fresh mushrooms from Japan.

Between May 2005 and August 2007, the company submitted invoices for lower prices to customs agents while using a higher price for business transactions, prosecutors said. The company also falsely labeled imported mushrooms as products of the United States, authorities said. Read more here.