Entering the world of Global Trade

Presenter: LISA VICTORIA WALLER, CHB VICE PRESIDENT

BDG International, Inc.

840 Tollgate RoadElgin, IL 60123

Tel: 847-760-0014lisaw@bdginternational.com

Credentials:

Bachelors of Science- Illinois State University (International Business, emphasis of Eastern Studies) Licensed Customs Broker Certified Customs Specialist Certified Export Specialist IATA (International Air Transportation Association) Certified DG (Dangerous Goods) Certified Committee co-chair for Export Compliance of the CBFFAC Active Member of the NCBFFA

Current Events / Going Global

Importance of understanding how the world around us effects each and every shipment coming in and out of the USA.

Overview

Overview: The role of Government agencies

Duty Preferences

Cargo Security

Export issues

Sample documents

Government AgenciesU.S. Senate / CongressU.S. Senate / CongressDepartment of Homeland Security (DHS)Department of Homeland Security (DHS)

U.S. Customs Border Protection (CBP)U.S. Customs Border Protection (CBP)United States Department of Agriculture (USDA)United States Department of Agriculture (USDA)

Animal Plant Health Inspection Service (APHIS)Animal Plant Health Inspection Service (APHIS)Department of Health and Human Services Department of Health and Human Services

Food And Drug Administration (FDA)Food And Drug Administration (FDA)Department of Commerce (DOC)Department of Commerce (DOC)Environmental Protection Agency (EPA)Environmental Protection Agency (EPA)Department of Interior (DOI)Department of Interior (DOI)U.S. Treasury, U.S. Treasury,

Office of Foreign Assets Control (OFAC)Office of Foreign Assets Control (OFAC)Department of State (State)Department of State (State)Department of Defense (DOD)Department of Defense (DOD)

Connection between Connection between U.S. Government U.S. Government

and and Foreign Governments? Foreign Governments?

For every U.S. Government Department, Office or governing bodyThere is an equal governing body in each country that we import from

or export to.

Thus to understand your own country first will allow you to know what to look for in other countries.

Commodity Specific – you will know quickly which governing bodies will effect your commodity and industry.

Who brings the world Who brings the world together?together?

World Trade OrganizationWorld Trade OrganizationThe World Trade Organization (WTO) is the only global international organization

dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services,

exporters, and importers conduct their business.

The WTO and main Parliments of each country come together to decide on countries with special needs, and economies that need to be promoted.

The U.S. Congress / Senate approve Trade Agreements, Trade Acts, Global Trade Decisions, and requests for specific Industry or Commodity duty preferences.

The WTO is in charge of the Harmonize Tariff System. Each country belonging to the program

will share the first 6 digits of the HTS system.

DUTY PREFERENCESDUTY PREFERENCES

The Office of U.S. Trade AgreementsThe Office of U.S. Trade Agreements

The U.S. trade strategy is to pursue multiple market-opening initiatives on a global, regional and bilateral basis, establishing models of success that can be used throughout all negotiations.

What prevents a free trade agreement (FTR) from being passed: - local Lobbyist afraid that duty preferences will hurt the USA economy- Labor laws in the foreign country

FTASingapore FTA (SG)Australia FTA (AU)Oman FTA (OM)Morocco FTA (MA)Bahrain FTA (BH)Israel FTA (IL)

Central America FTA variousNorth American FTA (MX or CA)Jordon FTA (JO)Chile FTA (CL)Peru Trade Promotion Agreement (PE)Colombia FTAPanama FTAKorea FTA

Harmonize Tariff System

Each product has its code

ClassificationClassification

The duty will be based on a product as per the General Rules of Interpretation from the U.S. Regulations & Harmonize Tariff System

http://www.usitc.gov/tata/hts/index.htm

Sections, Chapters, Headings, SubheadingsChapters: 1-99

Living or Raw = beginning of the tariff

Manufactured = at the end of each section and tariff

EXPORT CODE IS CALLED: SCHEDULE B NUMBERhttp://www.census.gov/foreign-trade/schedules/b/index.html

ClassificationClassification

CUPS, PLASTIC3924.10.2000

PLASTIC,PLATES, CUPS, SAUCERS......6.5%

3924.10.2000 39 = Chapter 39 covers plastics

(there are 1-99 chapters)24 = Tableware / Kitchenware or other house

hold articles made of plastic.10 = Tableware or Kitchen ware

20 = Plates, cups saucers, soup bowlsetc.

EXPORT COMPLIANCE

Export ComplianceExport Compliance

How is the data gathered?

CBP regulates the data and reports to Census. Census organizes and analyzes the data and gives it to Commerce.

- EEI – Electronic Export Information - AES – Automated Export System

2009 versus years before?

- Informed compliance vs. Enforced Compliance

Export Enforcement Act of 2007Export Enforcement Act of 2007

http://www.bis.doc.gov/enforcement/eaarenewalbillfactsheet.pdf

Criminal Max: Corporate Greater of $5 Criminal Max: Corporate Greater of $5 millions or ten times value of the exports millions or ten times value of the exports

involved. involved.

Individual Max: Greater of $1 million(s) Individual Max: Greater of $1 million(s) and 10 years of imprisonmentand 10 years of imprisonment

Export Compliance

What is the commodity? Commerce Control List

Can it be used for some other purpose? Dual usage

Who are you selling it to? Embargoed countries (Cuba – for example) Denied parties

Where are you shipping it? Do you know the end user? Will it be sold to another party? Do you have knowledge?

Is your loading process secure? Illegal activity within your company?

THREE COMPLIANCE MUSTS FOR EXPORT

1. SCREEN FOR DENIED PARTIES

Background check on all parties

involved in the transaction.

http://www.bis.doc.gov/complianceandenforcement/liststocheck.htm

2. KNOW YOUR ECCN NUMBER

(EXPORT CONTROL CLASSIFICATION NUMBER)

Checks for controlled products versus countries and parties

http://www.bis.doc.gov/licensing/do_i_needaneccn.html

3. DESTINATION CONTROL STATEMENT

15 CFR 758.6 The Destination Control Statement (DCS) must be entered on

the invoice and on the bill of lading, air waybill, or other export control document that accompanies the shipment from its point of origin in the United States to the ultimate consignee or end-user abroad. The person responsible for preparation of those documents is responsible for entry of the DCS. The DCS is required for all exports from the United States of items on the Commerce Control List that are not classified as EAR99, unless the export may be made under License Exception BAG or GFT (see part 740 of the EAR). At a minimum, the DCS must state

DCS

“These commodities, technology or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited.”

(licensable goods may have an alternative statement)

TERMS OF SALE

Terms of Sale

When will you be paid for your goods?

How will you be paid?

What method of payment will be used?

Terms of Sale

Open Account –30 days, 60 days, etc.

Sight Draft –Funds transferred upon sight of documents at the

applicant bank.

Time Draft–Funds transferred upon # days after sight of

documents at the applicant bank

Terms of Sale

Letter of Credit

Contractual agreement between Shipper (Beneficiary), Consignee (Applicant), Beneficiary Bank and Applicant Bank

– Confirmed - Guaranteed to be paid by the advising bank

– Advised - Guaranteed to be paid the opening bank.

INCOTERMS

www.iccwbo.orgwww.commerce.gov

What are INCOTERMS?

International Commercial Terms ICC (International Chamber of Commerce)

1936

To simplify creation of international agreements, contracts.

To develop a standardized way to speak global and define the words used equally across all cultures and languages

Incoterms assist:

Understanding who is responsible to pay for transportation to a certain point.

Define who is responsible for payment of documentation, packing and other charges.

Incoterms

Who will pay for the transportation?Global rules for a global sale !!

EXW EX WORKS (named place)*FCA FREE CARRIER (named place)FAS FREE ALONGSIDE SHIP (named port of shipment)*FOB FREE ON BOARD (named port of shipment)CFR COST AND FREIGHT (named port of destination)CIF COST, INSURANCE AND FREIGHT (named port of destination)*CPT CARRIAGE PAID TO (named place of destination)CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)*DAT DELIVERED at TERMINAL (named place of destination)DAP DELIVERED at PLACE (named place of destination)*DDP DELIVERED DUTY PAID (named place of destination)*

Incoterms

Who will pay for the transportation?Global rules for a global sale !!

EXW = E term (collect)/ least control for shipperFCA, FAS, FOB = F term (collect)/ less control for shipperCFR, CPT, CIP, CIF = C term (prepaid)/ more control for the shipperDAT, DAP, DDP = D term (prepaid) / most control for the shipper

CIP and CIF = are the only terms that discuss insuranceAll other terms would require insurance to be

discussed separately.

Having less control does not automatically mean you have less liability.

Incoterms are not:

They are not law

They are not recognized by government entities

They do not take the place of having a proper purchase agreement, sales agreement or order.

International document flow

FORMAL AGREEMENTPURCHASE ORDERPROFORMA INVOICECOMMERCIAL INVOICE

Purchase/Sales Agreement

Between the buyer and the seller there must be a formal Agreement.

Purchase Agreement

The Purchase Agreement documents the standard terms and conditions where you, the buyer, are contracting w /a seller in the course of a business to business transaction, and includes the following basic items

payment and price warranty origin and destination sub-contracting samples title and risk packaging inspection testing indemnity confidentiality terminationterms of shipping government regsLiablity and title Incoterms

Purchase Order

ISSUE A PURCHASE ORDER

or

REQUIRE A PURCHASE ORDER

Proforma Invoices

Proforma Invoice (purpose)

FINAL DOCUMENT prior to actual documents

Used to source funds

Used to buy foreign currency in controlled markets

Opening Banks use this document to open L/C's.

This document can not be used for customs clearance.

Proforma v. Commercial Invoices

Commercial Invoices

Importer will pay off this invoice.

Customs clears freight using commercial invoices.

Banks transfer money using the Commercial Invoice.

Transportation

Who can assist with understanding how to ship cargo and questions on

the transaction?

International Freight ForwardersInternational Freight ForwardersAn agent for the exporter in moving cargo to an overseas.

“Travel Agent for Cargo”

Specializing in:

- the import rules and regs of foreign countries

- the export regulations of the U.S. government

- the methods of shipping, and the docs related to foreign trade

- Foreign to foreign moves

- Pricing and rate negotiation via all modes of transportation

- Agent for the Department of Homeland Security

- Track and trace cargo

- Resolve Challenges

Documentation(Export)

• Shipper's Letter of Instruction (SLI) or Shipper Transmittal Letter

Power of AttorneyDetailed Instructions to the forwarder

SED Completion

• Letter of Credit (if issued)

• Hazardous Declaration (only used if cargo is a hazardous substance)

• Pre-Shipment Inspection Certificate (e.g. SGS)

Customs BrokersCustoms BrokersCustoms brokers are organizations licensed, regulated and empowered by U.S. Customs and Border Protection

(CBP) to assist importers and exporters in meeting Federal requirements governing imports and exports.

Specializing in:- The import regulations of the U.S. government- Classification of commodities / trade agreements- All other government agencies that may be involved in the import shipment- Releasing cargo at the warehouses- Deliveries of the cargo Domestically in the USA- Post entry processing- Government research

Documentation(Import)

Power of AttorneyContinuous Bond

Classified Products

The Customs Broker you designate must have a signed Power of Attorney, signed by an officer of the company.

The Corporation must be Bonded under a Customs Continuous Bond.

All products being imported should be classified in advance in order to ensure a smooth shipping process.

Liability and Insurance

Floating Containers

Fire on board

Crushed

Crash Landing

LiabilityRISKS:

As the importer/exporter you are liable to follow the U.S. Regulations. You must ensure that your forwarder / broker are concerned about compliance.

Customs Liability-Reasonable Care -Record Keeping -Correct

Classification

Risks of International Business Additional Fees not quoted Storage for Inspection Penalties and Fines Delays Loss - Damage - Missing Cargo Non-Payment by client

Consulting

Advise, Audit and Planning

Develop your compliance program Classification of merchandise Valuation of merchandise Country of origin Markings Export licensing issues Export licensing exemption Deemed Exports Embargoed country issues Compliance and Training

Thank you for attending today’s seminar.

BDG INTERNATIONAL, INC