How to Strengthen Trade and Labor Compliance with Technology Amid Increasing Customs Enforcement

Supply chain constraints, both expected and unexpected, continue to disrupt global trade and appear to be the new normal for the foreseeable future. As the world is slowly recovering from the pandemic and constraints in both materials and labor are creating unprecedented supply chain challenges, recent government actions are also generating often unexpected hurdles in the “last mile” such as unexpected delays and merchandise detentions.

The U.S., [1] Australia[2] and Germany[3] have recently proposed or enacted regulations or legislation aimed at ensuring companies take affirmative steps to prevent and eliminate forced labor in both their direct and indirect supply chains. As supply chains have grown more complex with additional tiers, the risk of exposure to potential human rights issues has grown as well. Importers subject to withhold release orders (WROs) often lack complete visibility into their full supply chain and regulators might not specify where their forced labor suspicions lie. This heightened risk is also driven, in part, by geopolitical tensions and global focus on environmental, social and governance (ESG) initiatives. A forced labor investigation may originate internally within the organization wanting to ensure a compliant supply chain, through non-governmental organization (NGO) reporting, or from a regulatory inquiry.

In the U.S., if Customs and Border Protection (CBP) receives information that “reasonably indicates” merchandise intended for importation contains any components that are the result of forced labor, the agency may detain the suspected merchandise at the port of entry under the authority of a WRO. While the specter of forced labor is a legitimate threat, the lack of a transparent process and ongoing trade disputes have led to concerns that WROs could be also used as political tools.

To combat allegations of the use of forced labor with regards to U.S. imported merchandise, the burden of proof is on the importer. If the importer can affirmatively demonstrate that the goods were not produced with forced labor, CBP may deem the merchandise admissible and release it. Importers must provide proof of admissibility, including a certificate of origin conforming to the template set out in 19 CFR §12.43(a), within three months of the importation.[4] While CBP provides scant guidance or information as to why merchandise is detained or how evidence of admissibility is evaluated, practical experience suggests that merely complying with the basic requirements for a certificate of origin and attestation as described in Part 12.43 will likely be an inadequate defense against the agency’s assertions.

To determine if a supply chain is plagued by forced labor activity, CBP uses the International Labor Organization’s 11 indicators of forced labor.[5] After determining that there is sufficient evidence to suggest the presence of these factors, CBP allows evidence to refute the allegations and demonstrate admissibility. CBP suggests four general kinds of evidence that support admissibility to allow release of detained merchandise:[6]

1. Evidence refuting each identified indicator of forced labor;

2. Evidence that policies, procedures, and controls are in place to ensure that forced labor conditions are remediated;

3. Evidence of implementation and subsequent verification by an unannounced and independent third party auditor; and

4. Supply chain maps that specify locations of manufacturers, factories, farms, and processing centers.

However, CBP does not offer specific examples of the types of documents, records, reports or other due diligence that meet or exceed the subjective standard for release from detention. In the absence of sufficient examples of successful release in the public record, importers may struggle to develop appropriate or adequate compliance measures.

Further, despite the regulatory requirement for a “reasonable indication” that the subject merchandise contains forced labor, CBP has a history of issuing WROs covering broadly defined products, including finished goods and raw materials, originating from entire countries and regions, such as the palm oil industry in Malaysia, which has been the subject of labor compliance allegations for several years.[7]^,[8]

The number of CBP cargo detentions related to WROs increased by a factor of 27 in FY 2020 over FY 2019, from 12 to 324. Those detentions amounted to a total cargo value in excess of $55.5 million. The steep, upward trend in WRO enforcement has continued thus far in FY 2021 with year-to-date figures indicating 967 cargo detentions representing a total value of over $367 million, a three-fold increase in detentions and six times the import value over last fiscal year (with two months remaining in FY 2021).[9]

Importers caught unprepared have been unable to rebut the presumption of forced labor absent the appropriate evidence and compliance controls attentive to forced labor factors. Given the significant burden to prove the negative, coupled with increasing concerns over supply chain endurance, global companies should be highly motivated to engage with supply chain business partners that can support the required due diligence to defend against forced labor allegations.

Developing or improving trade and labor compliance procedures often requires a multifaceted and customized approach, especially when faced with an ever-changing enforcement landscape. In addition to traditional trade compliance measures such as documentation, due diligence and reasonable care, a robust labor compliance process will also benefit from a more modern, technology-based approach.

For example, blockchain and digital token technology can provide immutable certification throughout the supply chain, which can be independently verified by regulators or a credible third party to trace and validate the origin of materials and labor in addition to real-time logistics tracing. Blockchain solutions have been successfully implemented in similar contexts for supply chain and origin audits and inspections, cradle-to-grave supply chain tracing and global, product tracking to improve regulatory compliance as well as achieve time and cost efficiencies. A combined technology and regulatory approach to compliance can be tailored to improve the traceability of all aspects of the supply chain and designed to create an irrefutable, digital record of compliance. In addition to the regulatory compliance benefits of a traceable supply chain, blockchain demonstrates a company’s efforts to maintain transparency and accountability to its business partners, customers and other stakeholders.

Blockchain technology is often misunderstood. By engaging blockchain experts, organizations can overcome technical challenges and ensure the technology is developed as a unique solution fit for purpose, scale and cost benefits. Companies in an array of industries are implementing blockchain within their supply chains to increase efficiency and transparency.

For example, a global food and beverage company adopted blockchain technology to track its coffee products from bean to cup.[10] Another company implemented a blockchain solution built to trace a product’s travels across the supply chain—achieving insights within seconds, as compared its previous seven-day tracking cycle.[11] Similar applications of blockchain technology can be used to verify and document compliance throughout the supply chain, including validation of workforce compliance, and presented as evidence rebutting underlying allegations of a WRO or in support of the admissibility of merchandise.

Given increasing scrutiny of supply chains and in particular the focus on complete transparency with regards to eliminating forced labor, in addition to importers operating in industries already impacted by existing WROs, all companies should be evaluating their risk and exposure to commodities, regions and countries with a heightened risk of future action. Those who are proactive will maintain a competitive commercial advantage over those who chose to wait until their merchandise is detained and are forced to react to either agency action or public scrutiny over non-compliance.

Without implementing a combination of traceability technology throughout the supply chain and other tools such as third-party audits to ensure compliance, merchandise detained by CBP will not have sufficient documentation to rebut the presumption of a “reasonable indication” of forced labor, which could lead to devastating losses of merchandise, exorbitant storage fees while admissibility is assessed, forced export to non-U.S. markets or costly and protracted litigation. An innovative approach to proactive compliance, including modern technology-based solutions, could be the key to creating an objective record of due diligence in an otherwise subjective space.

________________________________________________________________

Nick Baker is a Senior Director within FTI Consulting. He assists clients with international trade matters including customs, import compliance, export controls and sanctions.

Steve McNew is a Senior Managing Director within FTI Consulting’s Technology segment, where he leads the Blockchain and Cryptocurrency practice. He provides strategic advice and expert services for companies looking to innovate with crypto assets and blockchain technology.

[1] For example, Chapter 23 of the United States-Mexico-Canada Agreement addresses forced labor rights and compliance in the context of the trade agreement.

[2] https://www.theguardian.com/australia-news/2021/aug/23/australian-senate-poised-to-pass-bill-banning-imports-made-using-forced-labour, last visited August 23, 2021.

[3] https://www.dw.com/en/german-bundestag-passes-new-law-on-supply-chain-ethics/a-57855174, last visited August 23, 2021.

[4] 19 C.F.R. §12.43(a)

[5] ILO Indicators of Forced Labour, International Labour Organization, October 1, 2012. Available at, https://www.ilo.org/wcmsp5/groups/public/—ed_norm/—declaration/documents/publication/wcms_203832.pdf

[6] CBP Publication #1394-0321 “WRO Modification/Revocation Process Overview,” U.S. Customs and Border Protection. Available at https://www.cbp.gov/sites/default/files/assets/documents/2021-Mar/Final_Modification%20Revocation%20Process%5B5%5D.pdf

[7] CBP Issues Detention Order on Palm Oil Produced with Forced Labor in Malaysia, U.S. Customs and Border Protection, September 30, 2020. Available at https://www.cbp.gov/newsroom/national-media-release/cbp-issues-detention-order-palm-oil-produced-forced-labor-malaysia?_ga=2.188633131.201625649.1629736705-456710946.1628017266

[8] CBP Issues Detention Order on Palm Oil Produced with Forced Labor in Malaysia, U.S. Customs and Border Protection, December 30, 2020. Available at https://www.cbp.gov/newsroom/national-media-release/cbp-issues-withhold-release-order-palm-oil-produced-forced-labor?_ga=2.201299117.201625649.1629736705-456710946.1628017266

[9] CBP Trade Statistics, published at https://www.cbp.gov/newsroom/stats/trade (last visited August 18, 2021). FY 2021 statistics current as of August 6, 2021.

[10] https://www.supplychainbrain.com/articles/31800-starbucks-customers-farmers-can-now-trace-their-coffee-with-blockchain

[11] https://www.hyperledger.org/learn/publications/walmart-case-study

Archives, Global Logistics, Global Trade Daily, Imports/Exports

Eliminating Non-Dutiable Charges from Customs Value

July 26th, 2021 Andrew Siciliano and Elizabeth Shingler, KPMG LLP Leave a comment

Similar to how taxable income is a primary element to determining income tax, the customs value is used to calculate duty liability. To determine an accurate customs value, companies must factor in certain dutiable additions and non-dutiable deductions. In today’s high-tariff environment, maximizing every deduction is critical and many importers are leaving money on the table.

For U.S. importers using transaction value, which is “the price actually paid or payable for the merchandise when sold for exportation to the United States,” the focus is often on validating that the enumerated additions to the price are properly declared to U.S. Customs & Border Protection (CPB). While this is a necessary step for maintaining compliance, trade teams should also consider whether they may appropriately deduct or exclude certain charges.

Historically, these savings opportunities have not been fully explored because the resources required to sustain some of these programs exceeded the savings. However, with the Section 301 tariffs in place for China-origin products, many companies are paying significantly more in duties. Removing these non-dutiable costs can provide substantial savings–making it worth taking a second look at them for many importers.

Eight Overlooked Non-Dutiable Charges

For importers using transaction value, the following savings opportunities should be considered. While some of these programs provide ongoing savings and some are only used in specific circumstances, they all may play a role in reducing the tariff spend.

1. Freight and Insurance

Foreign inland freight, international freight and insurance costs may be deducted from the transaction value if you meet certain requirements. More specifically, with accurate incoterms and supporting costs and documentation, this can provide long-term cost savings. Importantly, importers must verify that they are deducting the actual, not estimated costs, and that the supporting documentation is adequate. While the requirements around deducting these costs may be daunting, the advances in technology make freight deductions more approachable than ever.

Further, insurance costs may be deducted from the entered value when they are separately itemized and the actual costs (not estimated) are claimed. It is important to verify with sellers that they are providing actual costs because CBP will reject deductions based on estimates, even in cases where the importer paid more than it claimed on the entry.

2. Supply Chain (“Origin”) Costs

International transportation costs typically include certain other fees, often referred to as “origin costs.” In many cases, CBP considers these origin costs to be “incident to the international shipment of merchandise” and, therefore, possibly excluded from the customs value. Examples of these charges include security charges, documentation fees, and logistics fees.

On a per-shipment basis, these miscellaneous fees may appear insignificant. However, on an annual basis, they can result in a significant expense for the company by driving up duty payments. As a general rule, the importer must deduct the actual costs, validate that commercial documentation meets all requirements and understand where services are being provided. However, once these steps have been taken, it is likely that little additional work will be required to realize ongoing savings.

3. Warehousing Costs

CBP has found that warehousing costs paid by the buyer to third parties are not included in the price actually paid or payable of the imported merchandise. However, CBP has distinguished this scenario from instances where the seller, or a party related to the seller, provided this same service and the warehousing costs are included in the price actually paid or payable. In that case, those payments were found to be dutiable and may not be deducted.

For importers interested in using this opportunity, a careful review of payments and terms of sale should be conducted to validate that the transaction meets all of CBP’s criteria prior to taking this deduction.

4. Inspection or Testing Fees

Often before shipment, an importer will arrange for products to be inspected or tested to validate it satisfies a buyer’s quality standards. Under certain conditions, these fees may be excluded from the dutiable value in instances when they are made to third parties unrelated to the seller of the goods.

It’s also important to understand that testing that is “essential to the production of that merchandise” is dutiable. In such cases, CBP would consider payments to unrelated third parties for these services as assists that are part of the transaction value. For importers who rely on the seller to perform inspection or testing services, an analysis should be conducted to assess the ROI for engaging a third party to perform these services.

5. Latent Defect Allowances

In certain circumstances, importers may be able to reduce dutiable value post-importation based on repair costs attributable to manufacturing or design defects. For importers with high-value products, such as those in the automotive industry, repair costs can be substantial and this allowance in value provides an opportunity to manage those costs by reclaiming duty.

With proper planning, a program can be implemented to help ensure the importer does not overpay duty on goods that were defective at the time of import. While there are a number of requirements that must be satisfied to receive a duty refund, high-value importers should explore whether this may be an opportunity for them.

6. Instruments of International Traffic – Reclassification of Packaging

In certain cases, pallets, cartons, hangers and other packaging material may be considered instruments of international traffic (IIT), exempting them from duty. To qualify as an IIT, CBP has determined that the article must meet criteria, including that it is “substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic.” Further, the article must be used in commercial shipping or transportation more than twice to qualify as an IIT.

For importers whose supply chains include the reuse of certain containers or other materials used to transport international goods, it may be valuable to assess whether these goods qualify as IIT and are, therefore, duty-free.

7. Post Importation Price Adjustments

When companies make post-importation price adjustments they may be entitled to a duty-refund on the amount adjusted. This typically occurs when downward transfer pricing (“TP”) adjustments are made between related parties, causing a reduction in the products’ customs value.

For companies that routinely make retroactive transfer pricing adjustments, having in place the documentation to support a refund can have a powerful impact on duty spend.

8. Taxes and Other Fees

Companies may be entitled to deduct Value Added Tax (“VAT”) or Goods and Services Taxes (“GST”) from the declared value of the imports when these payments are refunded. Not only should importers maximize their refunds where possible, but in doing so they open another opportunity for savings. When VAT is remitted by the U.S. importer to the foreign seller, separately identified and refunded to the importer, then the refunded amount is not included in transaction value.

Importers should team with their tax departments and foreign suppliers to understand if VAT refunds are obtained and create documentation that reflects separate itemization of the refunded VAT.

The Big Picture

Potential cost savings through the reduction of non-dutiable charges from the dutiable cost basis of imported goods are often overlooked. However, in this high-tariff environment, these programs can help companies easily achieve cost savings.

Additionally, with advancements in technology, managing these programs is more straightforward than it used to be.

Of course, like with any duty-savings program, strong controls must be implemented to preserve compliance. However, as it is likely that steep tariffs will be in place for some time, companies should evaluate which of these programs can help reduce costs, potentially improve the return on investment and then develop an implementation roadmap.

_____________________________________________________________

Andrew Siciliano is a Partner and U.S. Trade & Customs Leader at KPMG LLP. and Elizabeth Shingler is a manager at KPMG’s Trade & Customs Practice.

Archives, Global Trade Daily, Imports/Exports, News

LATEST: CBP Issues Marking Guidance for Goods Produced in Hong Kong

August 14th, 2020 Stephen Brophy, Robert Stang, Turner Kim, and Camron Greer Leave a comment

On August 10, 2020, U.S. Customs & Border Protection (CBP) issued a notice that goods produced in Hong Kong will need to be marked as a product of China starting on September 25, 2020. The marking changes are the result of the July 14, 2020 Executive Order on Hong Kong Normalization that ended Hong Kong’s special trade status.

CBP is allowing for a 45-day transition period after the date of publication in the Federal Register to implement the requirements due to the “commercial realities.” The notice does not specify how the changes affect tariff treatment of Hong Kong goods.

An administration official has stated that the Executive Order does not “provide for new U.S. tariffs on goods from Hong Kong”, but that the Administration is continuing to evaluate its policies. Therefore, at this time, it remains unclear whether goods originating in Hong Kong will be subject to the same tariffs as Chinese origin goods, including antidumping duties, countervailing duties and Section 301 duties.

Additional guidance from CBP, USTR and the U.S. Department of Commerce is expected.

__________________________________________________________________

Stephen Brophy is an attorney in Husch Blackwell LLP’s Washington, D.C. office focusing on international trade.

Robert Stang is a Washington, D.C.-based partner with the law firm Husch Blackwell LLP. He leads the firm’s Customs group.

Turner Kim is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington, D.C. office.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington, D.C. office.

Archives, Global Trade Daily, International Trade

U.S. Regulators Focus on Compliance Efforts in Enforcement Decisions Involving International Companies

March 24th, 2020 Doreen M. Edelman, Zarema A. Jaramillo, and Tamar Satterwhite Leave a comment

Over the past few years, U.S. regulators have made it clear that having comprehensive and effective compliance policies covering trade is a must, regardless of the company size, location or industry. The government’s move to formalize the importance of compliance programs is a clear signal of what it expects and a harbinger of what is to come.

Why Is Trade Compliance Important Regardless of the Company’s Location?

Trade compliance should be the goal of every global company, in particular as a risk mitigation measure and a positive value proposition. A compliance program serves as a security blanket for large financial institutions accustomed to dealing with regulations, small startups with a cloud-based platform, and even companies with no physical presence in the United States. A trade compliance program lays the groundwork for international companies on how to conduct business in or with the United States.

With changing industry regulations, it is critical to keep up to date and have a compliance program that is effective. Failure to have a strong compliance program could result in increased legal exposure, potentially leading to fines and penalties as well as negative publicity associated with an enforcement action. Maintaining an effective trade compliance program could help companies mitigate penalties for potential violations, and is ultimately cost-effective. For example, last year, the U.S. government imposed $1.3 billion in penalties on cargo firms, penalties that could have been mitigated with robust compliance programs.

Avoiding U.S. Sanctions

Engaging in the complex global supply chain may be a financial win, but it requires formalized diligence procedures to ensure your company does not run afoul of the law. The Department of Treasury’s Office of Foreign Assets Control (OFAC) has released guidance encouraging organizations to employ a risk-based approach to sanctions compliance and focus on five essential components: senior management commitment, risk assessments, internal controls, testing and auditing, and training. To incentivize companies to engage in international transactions, OFAC also provides that in the case of a violation, it will give favorable consideration to companies with effective sanctions compliance programs and that the existence of such a program may mitigate a civil monetary penalty.

OFAC is not just issuing guidance, it is increasing its enforcement efforts involving both U.S. and foreign entities. It continues to designate more non-U.S. entities that have helped evade U.S. sanctions. For example, several Chinese shipping companies were found to have violated North Korean sanctions, and as a result, were blocked from doing business in the U.S. or with U.S. parties. In January 2020, Eagle Shipping, a Marshall Islands ship management company with headquarters in Stamford, Connecticut, agreed to pay $1,125,000 to settle its potential civil liability for 36 apparent violations of the Burmese Sanctions Regulations. The violations involved Eagle Shipping’s affiliate in Singapore entering into a chartering agreement with Myawaddy—an entity identified on OFAC’s List of Specially Designated Nationals and Blocked Persons. Eagle filed an application with OFAC requesting a license authorizing it to carry sand cargoes purchased from Myawaddy but continued its dealings while the OFAC application was pending. OFAC ultimately denied the license, but Eagle resumed its dealings with Myawaddy, carrying cargo from Burma to Singapore.

Among the aggravating factors, OFAC considered Eagle’s status as a sophisticated shipping company, which should have had expertise in international trade and global shipping transactions. Among the mitigating factors, OFAC considered Eagle’s efforts to develop and implement a formal sanctions compliance program with specific policies and procedures for compliance screening, transaction checklists, and red-flag identification tools.

Compliance Under Commercial Export Laws

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS), which administers U.S. commercial export control regulations, also has published comprehensive guidance for companies working to develop or shore up compliance materials. In its guidance, BIS identified the following elements as foundational in creating an effective Export Compliance Program (ECP): management commitment, completing regular risk assessments, obtaining proper export authorization, record-keeping, training, compliance audits, addressing export violations and taking corrective actions, and maintaining your ECP. Like OFAC, BIS emphasizes the importance of tailoring your ECP to your organization and business based on size, volume of exports, geographic location, and other relevant factors. Companies that fail to comply with regulations that govern export controls have experienced significant penalties.

The U.S. export control laws govern not only U.S. companies, but also certain export activities of foreign companies dealing with the export of certain products, technology, or services from the United States to a foreign country. For example, most recently, BIS imposed substantial export and reexport restrictions on Huawei, a Chinese company, and its 68 non-U.S. affiliates in connection with Huawei’s violations of U.S. export laws specific to the Iranian Transactions and Sanctions Regulations. As part of that action, BIS restricted any export, re-export, or transfer of U.S.-origin technology, commodity, or software to Huawei and its entities without an export license.

This enforcement action ultimately impacted both the U.S. and non-U.S. businesses, including big and small tech companies, suppliers, importers, shippers, and financial institutions. Separately, in 2017, the U.S. government imposed a $1.2 billion criminal fine against ZTE, a Chinese telecom equipment company, for shipping U.S.-origin telecommunications equipment to Iran and North Korea. These two cases have affected how U.S. and foreign companies view their compliance programs; they also have incentivized the development and implementation of more robust compliance programs, including vetting procedures and sanctions checks that ensure adherence to the U.S. export control regulations.

Recommended Steps for Ensuring Compliance and Mitigating Risk

-The benefits of having a compliance program in place when a mistake happens are significant. When creating your tailored trade compliance policies and procedures, remember the following:

-Compliance programs should include a comprehensive, independent, and objective testing or audit function to ensure that your business is aware of how its programs are performing.

-Programs should be updated regularly in light of constantly changing regulatory and business environments.

-Ensure that your compliance program has comprehensive coverage to track all parties involved in import and export transactions.

-Even products that seem harmless can be used in ways that companies do not intend. As an organization, you are responsible for knowing how your products will be used and for avoiding government-prohibited end uses.

-Watch for red flags on BIS’s published list.

-Watch for “deemed” exports, which are released in the United States of technology or source code to a foreign person. Such a release is deemed to be an export to the foreign person’s most recent country of citizenship or permanent residency, which may require a license or even be prohibited.

Now more than ever, government offices and agencies are providing the industry with guidance on how best to comply with trade regulations. However, this also means that companies can no longer claim ignorance of trade regulations. Today, companies participating in the global marketplace must take proactive preventive measures to ensure compliance, mitigate risk, and minimize potential penalties.

_______________________________________________________________

Doreen Edelman and Zarema Jaramillo are attorneys at Lowenstein Sandler.

Archives, EU Trade, Global Trade Daily

Is Your Supply Chain Prepared for Potential U.S. Tariffs on EU Goods?

September 26th, 2019 Ben Bidwell Leave a comment

Transatlantic tariffs came closer to reality in recent months after the United States Trade Representative (USTR) proposed tariffs on a list of products from the European Union (EU).

Unfortunately, even if you’ve already gone through something similar with goods imported from China, the same strategy may not be effective for the tariffs on EU goods. This is due in large part to the types of proposed commodities from the EU.

The good news is there are things you can do today to adjust your import strategy to maintain compliance while insulating your company from the proposed tariffs.

Up to $25 billion worth of EU goods at stake

The USTR announcements in April and July proposed tariffs targeting up to $25 billion worth of goods. This includes items such as new aircraft and aircraft parts, foods ranging from seafood and meat to cheese and pasta, wine and whiskey, and even ceramics and cleaning chemicals.

To date, the USTR has only provided a preliminary commodity list for the proposed U.S. tariffs on EU goods. No percentages have been announced, leaving many to wonder if the tariffs will be manageable—in the 5-10% range—or more substantial, like the 25% tariffs applied to China imports.

On top of the tariffs, when the French Senate announced a 3% tax on revenue from digital services earned in France, President Trump threatened a counter-tax on French wine. But it’s unclear if this tax will come to fruition or fizzle out—especially since the USTR’s tariff list already includes many types of wine.

5 key questions to insulate your supply chain

Looking for the best way to prepare your business from the potential tariff increases? Answering these key questions may help you adapt and insulate your company.

-Do you have a plan to cover the costs?

You may not be able to avoid paying the tariffs, but there are various strategies you may consider to help cover their costs.

While not ideal, you could increase prices to end consumers. It may not be feasible to recover the entire cost of an added tariff, but you can at least offset a small portion of the tariff this way.

You can also adjust the cost of the goods with suppliers and manufacturers to cover a portion of the tariff. Just remember: pricing changes still need to meet the valuation regulations with U.S. Customs and Border Protection (CBP).

-Will you need to increase your customs bond?

The smallest customs bond an importer can hold is $50,000. That used to be enough for many importers to cover generally 10% of the duties and taxes you expect to pay CBP.

Unfortunately, as many importers from China are learning, a 25% tariff on products can quickly exceed your bond amount. And bond insufficiency can shut down all your imports while resulting in delays and added expenses.

To help avoid bond insufficiency, consider any increased duty amounts in advance of your next bond renewal period. And don’t wait to do this until the last minute, because raising your customs bond with your surety company can take up to four weeks.

-Do you re-export goods brought into the U.S.?

Duty drawback programs can’t be used by every importer. But if you can take advantage of them, they can result in big savings for your company.

In fact, you can get back 99% of certain import duties, taxes, and fees on imported goods that you re-export out of the U.S. Just be aware that you still need to pay the duties up front. And you might need to wait up to two years to get your refund.

-Are your product classifications current and accurate?

With potential tariffs looming, consider reviewing your product classifications and make sure they’re accurate. If you find an issue, discuss it with your broker or customs counsel to discuss how you can properly rectify the issue, and avoid penalties from doing it incorrectly.

And while we’re on the topic of product classifications, never change them to evade tariffs. CBP will be on the lookout for this kind of activity, and the penalties for noncompliance can be steep.

-Do you have the support you need?

Changing your customs brokers may not sound appealing, but ensuring they provide all the services you need to stay compliant should be your top priority when working with them.

Your provider should help make sure you pay the appropriate duty rates for your products. And they should have people and services available globally to support your freight wherever it is located throughout the world.

Also, consider simplifying your support by working with one provider that offers not only customs brokerage and trade compliance services but also global ocean and air freight logistics services.

If you only employ one strategy…

Discuss your import strategy with your customs attorney or customs compliance expert. Bringing in specialized expertise is the most effective way to analyze how these tariffs could affect your products, your supply chain, and your business.

If you don’t yet have a customs broker who can meet all your needs in today’s changing environment, consider C.H. Robinson’s customs compliance services. With over 100 licensed customs brokers in North America, and a Trusted Advisor® approach, our experts are ready to help.

____________________________________________________________

Ben Bidwell serves as the Director of U.S. Customs at C.H. Robinson