This article originally appeared in the November/December, 2017 issue of PARCEL.
Knock, knock. In case you didn’t recognize it, that’s the sound of one of your most promising sales opportunities — international e-commerce.
But unfortunately for your workload, opportunity isn’t the only thing that’s knocking. So are many legal, regulatory, and financial requirements that your company is obligated to comply with each time it ships to a global customer.
Allow me to introduce you to eight key players your company should get to know — or get to know better — as you grow the supply chain side of your global sales business.
Need to Know
Bureau of Industry and Security (BIS): This US government organization oversees export control licenses for goods that are sold to end users overseas. Although chances are good that your products won’t require these licenses, it’s important to study this organization’s Export Administration Regulations (EAR) before making that determination. In particular, you’ll want to look at whether or not any of your products have an Export Control Classification Number, also known as an ECCN (which could indicate the need for a license) rather than an EAR99 classification (which usually means no license is required).
Customs: The fluidity of your products’ border crossings will ultimately come down to how well your company makes the grade with the many “local” versions of this organization throughout the world. Each country’s Customs Department has its own distinctive set of rules and restrictions, and many of their nuances can be difficult to decipher. There can also be notable customs-related differences from port to port (or from airport to airport), particularly in terms of how various rules are interpreted and enforced. Make sure your company cultivates cordial, professional, and arm’s length business relationships with customs officials in your global markets and at every international port or airport you’ll frequently be shipping through. Equally important, don’t automatically believe everything you read on any of these organizations’ websites because their contents (particularly for translated sites) may not be complete or up-to-date.
Restricted Parties/Denied Parties: There are some individuals, countries, or businesses that you shouldn’t know, but must know about because it is against the law to deal with or sell to them. Numerous countries and global organizations maintain lists of these individuals, countries, or businesses, and it’s important for your company to frequently scrutinize the most up-to-date versions to make sure none of your overseas buyers are on them. Even one shipment to a restricted or denied party could put your company at risk for everything from six-figure fines to criminal penalties.
World Customs Organization (WCO): This independent global organization is responsible for maintaining the Harmonized Commodity Description and Coding System (HS), the universally recognized means of classifying every raw material or finished goods for duty payment and statistical recording purposes. There are thousands of HS classifications, and many products could potentially fall under several different ones, so don’t hesitate to ask for outside help or hire one of the experts mentioned in the next section if you’re in doubt. Misclassification could result in fines or missed duty reduction opportunities.
Good to Know
Consultants: The expertise of these big-picture experts is often invaluable. Most are very well-connected to the partners, providers, and vendors your company will need to work with in order to establish efficient and compliant international delivery flows. And many can help arrange the introductions to customs and other officials that you’ll require. Consultants can also help your company create, refine, or validate strategic plans for international expansion — including advising your company about viable and legal options for duty reduction or deferment, and whether setting up entities overseas would be an advantage from a tax and customs duty perspective.
Freight Forwarders: While there’s an undeniable ease associated with direct shipping international orders from the United States, your global customers’ high delivery expectations may require you to fulfill orders from within their countries. That’s where the services of these experienced go-betweens come into play. Freight forwarders take responsibility for arranging and overseeing the particulars of bulk overseas transits (including insurance and documentation). Some also conduct Denied Party/Restricted Party screening, so that your company won’t have to develop these areas of expertise itself.
Bonded or FTZ-Based Warehouses: Once goods arrive from overseas, these international distribution centers will enable your company to store products duty-free until they’re ordered and paid for by customers, giving you a huge potential financial advantage. There are numerous reputable bonded or foreign trade zone (FTZ)-domiciled warehouses throughout the world, including many that are operated by large global 3PLs. However, it’s important to note that you’ll need to factor the fees of these or any other outside providers’ services into the final sales price of your product before making your final duty calculation. You’ll also have to familiarize yourself with the types of operations allowed in any FTZ in any country you’re considering as well as any conditions that might be attached.
Customs Brokers: These entities specialize in helping companies like yours jump through the necessary hoops that are associated with fully customs-compliant international shipments, including assigning proper HS codes, completing myriad pieces of international documentation, and assisting with long-term recordkeeping requirements. Using their services is legally required in some countries and recommended in others. While it is possible for your company to perform these functions itself in the countries that allow it, it can be difficult to do unless you’re using licensed professionals who have full access to the necessary technologies, connections, and resources. For this reason, most companies usually elect to work with external customs brokerage companies or with carriers, freight forwarders, or 3PLs who have reputable customs brokerage divisions.
Just So You Know
These are by no means the only important players your company will want or need to become acquainted with as you begin to grow sales across the world.
To learn about others, consider accessing the U.S. Customs and Border Protection’s Informed Compliance series. Reach out to professional organizations such as the International Compliance Professionals’ Association or the Professional Association of Exporters and Importers. Consult with local chambers of commerce in the areas where you plan to expand. Or schedule a meeting with your trade compliance organization or professional of choice. They’ll be glad you asked, and so will you because as many international trade professionals frequently say, successful global trade isn’t just a matter of know-how, it’s a matter of know-who.
Raphael Madarang is Director of Global Trade Compliance and Management for APL Logistics.