[US] Export ABCs: Compliance issues

The following article is excerpted from the 28 June 2005 edition of “The Journal of Commerce”.

… Feedback on the [US] Census Bureau's Feb. 18 proposed Foreign Trade Regulations (FTR) is in. It, along with a copy of the proposed regulations, is available at the Census Foreign Trade Division Web site, at http://www.census.gov/foreign-trade/regulations. Forty-three respondents expressed the views of some very large exporters, forwarders, carriers, trade organizations, lawyers and two other government agencies, Customs and Defense.

Everyone has a horse in the race, which is logical since the penalties for getting it wrong will be substantially higher. Forwarders do not want to be responsible for product information while exporters are concerned about transport information which normally comes from forwarders. The discomfort increases when exporters and forwarders are not familiar with each other, as happens when buyer-appointed forwarders are used (aka, "routed transactions"). It gets even more complicated as carriers acquire forwarders. Once upon a time, forwarders worked for shippers (even against carriers when necessary). Now, one may wonder who is working for whom.

I submitted a comment about calculating the precarriage costs that must be added to the merchandise price to arrive at the reportable value. Exporters and probably forwarders do not necessarily know the precarriage cost with door-to-door transportation. If the shipment is freight collect, and the buyer has a confidential freight agreement, the exporter might never learn any freight costs. Even when precarriage costs are known, they must be prorated over the Schedule B line items included in a shipment.

Think of spreading the precarriage for a 40-foot container with 20 different Schedule B line items, of which 12 are reportable, each taking a different amount of space and separately contributing to the overall net weight. How about insurance to the U.S. port, airport or border? I'll bet it is a minuscule part of the seller's inland marine coverage, or perhaps a small unidentified portion of a warehouse-to-warehouse marine cargo premium.

Longtime readers of this column may recall that Census provided a very practical answer back in October 1997. Simply increase by three percent the EX Works value (FOB Factory for those who haven't yet mastered Incoterms). This works very well, but does drop the reporting threshold in terms of merchandise value from $2500 to 2,427.18 per Schedule B line item (2,427.18 + 3% = 2,500). Remembering this, and reporting the few additional items it causes, is a small price to pay for the convenience of a user-friendly formula.

Given a major regulatory overhaul, I was disappointed that the 3 percent solution was not specifically addressed. This is not to say it can't be used -- it was never included in the Foreign Trade Statistical Regulations in the first place. It was passed along as an administrative procedure. …

Speaking of Census, I learned something new on May 11. Option Four filers who receive authorization form their overseas buyers to report their routed transaction exports must do so pre-departure. This is covered in the proposed Foreign Trade Regulations, but not found in the existing Foreign Trade Statistical Regulations (FTSR). Census admits not having promulgated this, but will likely do so in one of its AES newsletters.

With ever-changing compliance directives coming from all sides, this exporter would like a place where questions and best practices can be anonymously addressed to a group of private sector compliance experts.

Good news -- such a forum exists. The International Compliance Professionals Association (ICPA) covers all kinds of international trade compliance issues and boasts a stellar membership. Dues are nominal for compliance professionals, substantially higher for others but still worthwhile. Check out their website at http://www.icpainc.org. …