Imports from China

Dear Friends,

As you may have seen in the press, last month, the People’s Bank of China (PBOC) took unprecedented steps to devalue the Chinese currency (the yuan renminbi).  The PBOC’s moves were widely seen as an attempt by the Chinese government to boost exports and support a flagging economy (by making Chinese products cheaper and, hence, more attractive to foreign purchasers).

Now, the other shoe is dropping.  It is being reported that a number of large U.S. retailers are pressuring their Chinese suppliers to lower their prices.  These companies have realized that the devaluation of the yuan means that the products they buy are cheaper to produce, and they want the producers to share those savings.

With the yuan down several points this year, all companies that purchase substantial volumes/values from suppliers in China should be mindful of this development and negotiate accordingly.

We hope this is helpful.  If you have any questions, please let us know.

Best regards,

Ted

Confidential Treatment for Manifest Data

Dear Friends:

As many of you know, U.S. Customs and Border Protection makes available to the public manifest data for import and export shipments.  The manifest data includes information such as the name and address of the foreign shipper & U.S. consignee/notify party, the ports of lading and unlading, the carrier, a description of the goods, weight, etc.  This data is obtained by private companies that repackage it (and often add their best guess at classification, entered value, etc.) and then sell it to the public for a fee.  These fee-based services are often used by companies to learn more information about competitors’ supply chains, to identify importer of counterfeit or infringing products, etc.

You may also know that CBP allows companies to request confidential treatment for their manifest data.  Under the regulations, if a company requests confidential treatment, CBP will not disclose the names and addresses of the importer/consignee, foreign shipper or notify party and any other identifying marks.  While the process to obtain confidential treatment is pretty straight-forward (it involves submitting a letter to CBP HQ), companies need to be aware that (i) CBP will only grant confidential treatment to an exact name match and (ii) these requests expire after 2 years.

Given that company names are often garbled when reported on the manifest (e.g., a company such as ABC Importing, Inc. may be identified on the manifest, and thus, in CBP’s system, as ABC Importing, Inc., ABC Importing, ABC Inc., etc.), it is important that the request for confidential treatment identify the most likely variations for both the foreign shipper and the U.S. consignee/notify party.  CBP will generally allow companies to submit up to 10 different name variations for the same entity.

Also, since the requests for confidential treatment automatically expire after two years, it is important that companies set a calendar reminder 60-90-days before the previous request is set to expire.

We hope that this is helpful.  If you have any questions, or if you would like any assistance requesting confidential treatment for your data, please let us know.

Best regards,
Ted

C-TPAT for Exporters

Dear Friends:

As some of you may already know, US Customs has decided to open its Customs-Trade Partnership Against Terrorism (C-TPAT) program to eligible exporters.   While US Customs has not yet specified how participating exporters would benefit from this program, the expectation is that participants will have fewer export shipments examined by US Customs and will be provided a US Customs account manager (i.e., a “go-to” person in the event a problem arises with a shipment).  Another potential selling point is that participating exporters will  enjoy the benefits of reciprocal “trusted trader” programs around the world, such as AEO in the EU.  (In theory, exports from a C-TPAT-approved company are less likely to be scrutinized when imported into countries with whom the United States has signed a mutual recognition agreement.)

US Customs recently released the exporter eligibility requirements for participation in C-TPAT.  The source document is available here.

In short, in order to qualify for the program, the exporter must meet certain eligibility requirements.

First, the entity must be an “Exporter,” as that term is defined by the program, and comply with the following requirements:

  1. Be an active U.S. Exporter.
  2. Have a business office staffed in the U.S.
  3. Have an Employer Identification Number (EIN), or Dun & Bradstreet (DUNS) number.
  4. Have a documented export security program and a designated officer or manager who will act as the C-TPAT program main point of contact. Additionally the participant should have an alternate point of contact should the designated point of contact be unavailable.
  5. Commit to maintaining the C-TPAT supply chain security criteria as outlined in the C- TPAT Exporter agreement.
  6. Create and provide US Customs with a C-TPAT supply chain security profile that identifies how the Exporter will meet, maintain, and enhance internal policy to meet the C-TPAT Exporter security criteria.
  7. Have an acceptable level of compliance for export reporting for the latest 12-month period and be in good standing with U.S. regulatory bodies such as:  Department of Commerce, Department of State, Department of Treasury, Nuclear Regulatory Commission, Drug Enforcement Administration, and Department of Defense.

Second, the entity must comply with certain minimum security criteria requirements (e.g.,  container inspection and storage protocols; conveyance tracking and monitoring procedures; physical access controls to cargo facilities; etc.).

Should You Join?

As we have advised in the past, all importers/exporters should take steps to secure their international supply chains.  Doing so is the right thing to do and often provides meaningful benefits to the business.  That being said, we have a number of concerns with the C-TPAT program, which also apply to this new exporter-focused variation of the program.

The fact that there is no legislation, or even regulation, governing the program means US Customs is more or less free to modify the program at will.  As a result, the requirements imposed on importers participating in the program have steadily increased over the years; while the tangible benefits US Customs has promised have failed to materialize for most participants.  The same is likely to be true on the export side.  Indeed, the benefits that US Customs will likely offer participating exporters appear to be even less tangible than those offered to importers (e.g., US Customs cannot guarantee that the shipments of a participating exporter will be subject to less scrutiny abroad).  As a result, based on our experience with the import program, participating in the export program will subject exporters to US Customs supply chain security “validations” (they do not want to call them audits) which will often produce unrealistic security “recommendations” in exchange for some potential benefit to a shipment’s targeting score.

In sum, while securing your international supply chain is the right thing to do for a variety of reasons, whether to join a voluntary supply chain security program like C-TPAT is a separate determination.  It is important to understand the costs involved in participating in such a program and to weigh those costs against the potential benefits.  To date with the import version of C-TPAT, the costs have been real (and constantly evolving); whereas the benefits have been ethereal.  We expect the same to be the case with the export variation of the program.

If you have any questions about participating (or withdrawing) from the C-TPAT program, please let us know.

We hope this is helpful.

Best regards,

Ted

Navigating Supply Chain Compliance Issues in the Global Market – Tues, March 4, 2014 – ACC Breakfast Seminar

Dear Friends:

Attached is the flier for an international trade compliance-focused breakfast briefing we are hosting in conjunction with the Houston Chapter of the Association of Corporate Counsel on March 4, 2014.  We will be joined on the panel by in-house trade compliance professionals from Halliburton and Baker Hughes.  We are looking forward to an interesting session and hope you can join us.  If you can, please click on the register button in the attached (if that does not work, try http://bakerxchange.com/rv/ff0014d836e76735df10a7273647800ab33439c6), or feel free to let me know.

Best regards,

Ted

2013 ITRAC Data

Dear Friends:

Just a quick note to let you know that the Importer Trade Activity (ITRAC) data for all of 2013 will soon be available from U.S. Customs and Border Protection (CBP) Headquarters.

As many of you know, the ITRAC data contains company-specific import data going back up to 5 years.  It includes general entry information, such as tariff classifications, values, preferential tariff programs used, etc.; as well as information regarding CBP’s review of a company’s import shipments (e.g., whether a CF-28 or CF-29 was issued).  It also identifies each of the links in the company’s international supply chain (i.e., foreign manufacturers, carriers, customs brokers and sureties).  In short, the ITRAC data is a useful tool for monitoring the effectiveness of your import compliance program, identifying areas of potential cost and duty savings, and identifying links in the international supply chain for security purposes (i.e., C-TPAT-related information).

Given how useful the information is, the low cost of acquiring it (i.e., CBP generally charges ~$250 per request), the fact that it is still more reliable than ACE, and that CBP uses the same info for their audits, we generally recommend that all companies request their ITRAC data at least once a year and incorporate its review into their compliance programs.

The downside to the data has always been the format in which CBP provides it (basically, a data dump from their system in Microsoft Access format).  Over the years, we have developed simple macros that can extract the most relevant data from the Microsoft Access tables and convert it to Excel for ease of use.  We also have a developed a template report the summarizes the data so trends, issues and opportunities can be more easily identified.

If you’d like to see the template, or discuss requesting your ITRAC data from CBP HQ, please let us know.

Best regards,

Ted