A complex international shipment delivered exactly on time, intact, and to the right address can still be a major failure if not properly documented as both an export in the country of origin and as an import in the destination country. Not only can there be civil penalties (fines plus loss of import/export privileges) for incorrect product classification, there are severe corporate and personal criminal penalties for certain violations such as exporting from the U.S. to a country on the Treasury Department’s “Sanctioned List” (e.g., Iraq or North Korea), or to prohibited individuals or companies on the “Specially Designated Nationals List” (usually people or companies in sanctioned countries, or those known to sell to sanctioned countries). In addition, there is the “Munitions List” maintained by the U.S. State Department with its even longer string of prohibited exports. That particular list, by the way, contains a number of things you might think are non-military in nature, such as computers, chemicals, electronics, metals, software, and more, but they are tightly controlled because they can be used in weapons development, deployment, and/or operation. Also, the same severe penalties can apply to you and your company if your export shipment is correctly and legally made to an apparently legitimate customer in a non-sanctioned country, but then gets diverted to a prohibited entity. How do you avoid these international pitfalls, and also stay in compliance with all of the other, more mainstream regulations which govern your shipments? Use a licensed Customs Broker. It’s cheap insurance against expensive problems.

The right U.S. Customs Brokers really can make the difference between the success or failure of your international supply chain. They know how to legally and lawfully facilitate exports from, and imports into, the U.S. Other countries also have their own import and export documentation requirements, so it’s important that your customs brokerage provider has expertise in plus meaningful peer and official connections to any other countries you deal with. Getting caught in violations can result in the aforementioned fines and imprisonment, as well as loss of import and/or export privileges. In addition to avoiding these severe penalties, your Customs Broker is also your best bet for achieving accuracy in the paperwork governing your imports and exports. This assures that the proper duty rates are applied and paid, government reporting, origin, and quota regulations are satisfied, and all transactions (plus their associated records) will pass any post-shipment Customs audits. 

In most situations, importers sign a customs power of attorney which permits their outside Customs Broker to act as their agent. This can apply to either a single or multiple shipments, or for a fixed period of time, or for an indefinite period. And no matter what the parties might agree to verbally or in writing, the importer is still legally and financially liable for all of that Custom Broker’s actions taken on the importer’s behalf. The same goes for illegal exports to those prohibited countries, companies, and individuals mentioned above - the shipper will incur the consequences, and a Customs Broker who knowingly violates the law or aids in violation would also face penalties and jail time.

As a concluding note, you should be aware that in the ever-growing movement to provide more complete service packages to their customers, many carriers and freight forwarders offer Customs Brokerage services, either through a division, a sister company, or a partnership affiliation with an established brokerage house. Also, some Customs Brokerage companies provide freight forwarding as well as warehousing and other logistics services. While it is therefore possible to completely outsource the management of your entire international supply chain, please remember that the legal responsibilities for every transaction remains with the owner, exporter of record, and importer of record of each shipment. So before moving any international cargo, make sure you know exactly who will be representing your company to customs and other government officials throughout your supply chain. Your success (and perhaps even your criminal record) will depend on your selection.

This article is part of the monthly series authored by ISM’s Logistics & Transportation Group Board Members, who are current practitioners, consultants, trainers, and educators. In future columns, they will continue sharing their views on a number of Supply Chain topics.

George Yarusavage, CTL, C.P.M., CICSM, is a principal in Fortress Consulting, LLC, specializing in Transportation, Logistics, and Sourcing issues and training. He is also the Treasurer of ISM’s Logistics & Transportation Group and can be reached at gyarusavage@yahoo.com, or (203) 984-4957. Membership in the L&T Group is open to all ISM members who are responsible for or have an interest in Logistics & Transportation.