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About the Author

Ty Bordner
Vice President, Solutions Consulting
Amber Road


Ty Bordner, Vice President of Solutions Consulting, has over 19 years of experience in the Global Trade Management software market. At Amber Road, he is responsible for customer and prospect focused solution creation.

Prior to joining Amber Road, Ty spent 10 years with JPMorgan Chase Vastera in various leadership roles, including oversight for Engineering, Solutions Consulting and Product Management. During his tenure he helped manage the company through multiple growth stages from startup, through IPO, to achieving annual revenues in excess of $80 million. Prior to joining Vastera, Ty worked for GXS (formerly GE Information Services).

Ty holds a bachelor's degree in mathematics from Longwood University, and a master's degree in computer science from Johns Hopkins University.

For more information, please visit www.amberroad.com
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Supply Chain Comment

By Ty Bordner, Vice President, Solutions Consulting, Amber Road

August 14, 2014



Missed Import Compliance Opportunities

A Few Ways Companies can Sabotage their Compliance Efforts



Trade related controls must be a part of any relationship between a company and its supply chain partners. Importers must collaborate with extended trading partners (suppliers, customs brokers, carriers, etc.) to ensure complete and accurate information accompanies inbound shipments and documents, and that other information is readily available to the parties that need it. Companies must also stay abreast of dynamic country-specific import regulations to avoid regulatory violations and penalties. Poor planning and execution leads to delays at Customs and increased costs.

Below are a few ways companies can sabotage their compliance efforts:

Bordner Says:

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1.
Not sharing product classification numbers with your customs broker

Accurate product classifications are essential to all aspects of international trade and to the way duties are assessed. Managing product information can mean handling thousands of items, multiple languages and complex relationships. Product information can quickly become inaccurate, incomplete or redundant without adequate controls in place.

Classification can often be a strategic advantage – a company may have a ruling that assigns its product into a lower duty classification, for example. At the same time, customs brokers are not expected to be experts in a company’s strategy or corporate objective.

Most importantly, accurate product classification is the shipper’s – not the broker’s – responsibility. Under the law, an importer must demonstrate “reasonable care” to classify and determine the value of imported merchandise. Product classification errors can result in shipment delays or monetary penalties for each violation. Plus, if you had inaccurate product classifications that result in overpaid duties you will not receive a refund.

However, it can be difficult even for the shipper to have accurate product classification numbers. Shippers face many challenges in trying to maintain accurate and efficient product classification records.  Some of the more prevalent challenges include sourcing the same product from multiple suppliers and effectively dealing with product variants, like style, color, and/or size. Other issues relate to handling products with multiple effective HS classifications, whereby the HS classification varies depending on elements such as free trade agreements, quotas, weight, and transaction value. These issues can lead to inaccuracies, confusion, and more work than is necessary, and could affect the amount of duty paid and the corporate compliance record.  

Given that properly classifying goods can be a moving target, you may want to consider automation to help with the process. Having an automated system allows you to leverage a single view of product information throughout the supply chain; integrate product information from heterogeneous systems; propagate accurate product data from the centralized data repository; and perform initial compliance checks at the product level to ensure all the necessary information needed to clear customs is known well before the time of importation.



2.
Not utilizing an automated system

Access to information about shipments, orders, customs entries and document images is critical to a thorough auditing strategy. An in house automated system offers several benefits to importers: visibility into the import process; the ability to proactively manage the import process; reduce inbound cycle times and decrease supply chain costs; improve regulatory data accuracy and errors; automate time consuming entry processes; intelligently screen suppliers, countries and other entities; improve landed cost accuracy; and ensure adherence to import compliance regulations.


Smaller companies – those with fewer shipments and new to the importing space, should also take advantage of automated solutions via a cloud based solution, which saves both time and money. A cloud based solution enables smaller companies to take advantage of automation technology without the need to invest in hardware, software or IT personnel. It is also easily accessible 24/7 via a web browser. A subscription-based payment module means a company only pays for what it needs, and can expand its usage as the company grows.

 

3. Not creating your own commercial invoice

 

Companies that don’t create their own invoices are increasing their risk of exposure to fines, penalties and delays as the information compiled by a third party and placed on a commercial invoice may be incorrect. The commercial invoice is the primary document Customs uses to ascertain classification, valuation and duty payments on each shipment, and Customs may demand to review the invoice prior to clearing cargo for entry into the United States. Best-in-class importers take steps to ensure their vendors’ commercial invoices comply with Customs’ invoice requirements. Delivery documents, shipping invoices and proforma invoices cannot be substituted for a commercial invoice.

The following information must be noted on the invoice: total value of goods; currency of purchase; country of origin (of manufacture); shipper and consignee full name and address as well as a piece count; detailed description of the product(s) and the Federal ID for the Consignee of the product in the United States. A free trade certificate is required to take advantage of preferential duty rates when applicable.

 

Submission of a commercial invoice is a condition of importation, and that the failure to provide a commercial invoice is a breach of condition of their import bond, for which liquidated damages can be assessed. Importers or their brokers are also required to sign a declaration that the invoice is true and correct, and if the company later learns that this is not true, that it will notify Customs of the inaccuracy. 

A GTM system can provide complete, accurate and automated generation of the commercial invoice and other shipping documents by leveraging the clean and accurate data stored within the importer’s centralized repository.  This includes business transactions with a related party or external supplier.  

 

4. Not retaining appropriate trade-related documentation

 

Under Customs’ “reasonable care” standard, importers are expected to have documented and demonstrable internal controls that are routinely audited. Note that Customs’ idea of reasonable care may not be your idea of reasonable care. The best way to protect yourself from fines and penalties is to not only have documented proof to support your claims, but also internal controls that reflect your business practice and operations. These internal controls should be specific to your business – one size does not fit all. Secondly, you should test your internal controls on a regular basis, and document and maintain those results so that if CBP does audit you, your company can demonstrate the steps involved in making compliance decisions.  

In addition to appropriate controls and procedures, A CBP best practice is to use automated systems to demonstrate reasonable care. Using an automated system enables you to quickly and accurately manage documentation related to imports and provide a comprehensive view of your company’s import management system.


In conclusion, the appeal of sourcing low cost goods from foreign markets and balancing supplier risk has bolstered imports around the world. Along with these advantages, however, come a host of challenges, including the need to have information flows faster than the physical movement of cargo and increased rules, regulations and reporting requirements. Companies engaged in global trade must manage a tremendous amount of information to establish and maintain compliance with regulations. They also must demonstrate proof of this compliance as it is ultimately the importer’s job to ensure accurate records.


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