Transcript Common Pitfalls in International Trade

Common Pitfalls in
International Trade
Janie Tuchon
Senior Export Consultant
Hewlett Packard Company
Pitfall #1 – Customs
 Need to develop and maintain a good business
relationship with Customs
 Never assume that you know more than they do
Pitfall #2 – Change – (Your cheese has moved
)
Expect it, changes in national security, foreign policy and
short supply spark changes in the regulations, “subject to
change”
Violations can have serious consequences, fines,
imprisonment, and seizure of goods.
Pitfall #3 – Agents (Freight Forwarders and Customs
Brokers)
 You are responsible for compliance with all US import
and export laws including violations that your agents
commit while carrying out import and export operations
on your behalf.
 Entrustment of goods to unscrupulous/local freight
forwarders, i.e., customer designated freight forwarders
(routed export transactions 15 CFR Part 758.3(b)) or
trade show designated freight forwarders.
Pitfall #4 – Unintentional violation of Foreign Corrupt
Practice Act
 U.S. firms seeking to do business in foreign markets
must be familiar with the FCPA.
 The FCPA prohibits American companies from making
corrupt payments to foreign officials for the purpose of
obtaining or keeping business.
 The FCPA's antibribery provisions basically cover two
types of behavior. The fundamental prohibition is against
making bribes directly; a second prohibition covers the
responsibility of a domestic concern and its officials for
bribes paid by intermediaries.
 More information at:
http://www.usdoj.gov/criminal/fraud/fcpa.html
Pitfall #5 – Ensnarement by local Boycott laws
which are in conflict with U.S. Antiboycott
Laws
 Under U.S. "antiboycott laws" it is unlawful for any U.S. person to
participate in another nation's boycotts or embargoes of third
countries.
 The definition of "boycott" is very broad and can consist of such
seemingly unsuspecting activity as furnishing information about the
nationality of past or present business partners to an inquiring
government.
 Examples of boycott request:
–
–
A certificate of origin must be provided stating the products contain no {boycotted country}
origin product.
A certificate must be provided stating that YOUR COMPANY does not have facilities in a
{boycotted country}
– A declaration by YOUR COMPANY that goods will not go via {boycotted country}
flagged vessel or {boycotted country} owned airline.
More information can be found in 15 CFR 760 Restrictive Trade Practices or Boycotts or
http://www.bxa.doc.gov/AntiboycottCompliance/OACRequirements.html
Pitfall #6 – Attempted import of “banned or
prohibitive articles and materials”
 Be educated on Import restrictions or controls on your
product, i.e., quotas, visas, import licensing
requirements, encrypted software, clothing, food
products, chemicals
 Prohibited goods, i.e., liquor, x-rated reading material,
certain prescription medicine, endanger animal articles,
food products… Know before you go..
http://www.customs.ustreas.gov/xp/cgov/travel/leavingarrivinginUS/vacation/know_br
ochure//
 Resulting in victimization by harsh and punitive Foreign
Customs Seizures Laws
Pitfall #7 – Failure to conform to Foreign
Packaging, Labeling, and “Localization” Laws
Verify with your customer and/or your freight forwarder of
any special requirements listed below for the country of
you are shipping to:
 Marking requirements;
 Labeling requirements;
 Product specifications, product testing requirements
required to accompany shipment;
 Packaging requirements;
 Trade documentation requirements
 Foreign authentications and certification laws/regulations
Pitfall # 8 – Failure to properly classify the
product – one classification does not fit all
products
Classification determines how the regulations treats your product so do
it right.
 Export - determination of Export Control Classification Number
(ECCN)
 Guidelines for Requesting an Export Commodity Classification at
http://www.bxa.doc.gov/licensing/cclrequestguidance.html
 Import – HTS impacts the duty rate that will be applied against the
product
 Template for Electronic Request for Import Binding Ruling ("eRuling") at
http://www.cbp.gov/ImageCache/cgov/content/laws/legal_5fprecedent_5fretrieval_5fsystem/e
ruling_2edoc/v1/eruling.doc
Pitfall # 9 – Failure to “Screen” Foreign parties
to ensure not in conflict with U.S. Export
Prohibitions (15 CFR 736)
 Know your Customer - “end – user” & “end – use”
 http://w3.access.gpo.gov/bis/ear/pdf/732.pdf
 Proliferation Screening
 Sanctioned Parties (Denied Parties, Special Designated
Nationals, etc)
 Diversion Risk
 Embargoed Countries
Results in the failure to obtain required U.S. Export or reexport authorizations
Pit # 10 – Misuse or Misinterpretation of
Incoterms
 Fully understand the costs, responsibilities, obligations
that accompany the use of a specific Incoterm
 Could leads to over or underpayment, over or under
customs declarations possible legal ramifications…
 Note - Refrain from under-invoicing request from
customers on an Export
 Reporting incorrect export value on SED or AES is a violation of the US export
 Importing countries – the under-valued goods may be seized, perhaps causing your
company to be put on the bad boys list in the importing country
 Many importing countries have import law prohibiting, you become a co-conspirator
subjecting you to fines and possible imprisonment, if the country can exercise
jurisdiction over you.
 Insurance is based on the invoice value, if lost or damaged, claim will be based on
the low value shown
Pitfall # 11 – Contractual Language
 Language designated as the definitive and official version of the
agreement
 Choice of law provision – different laws in different countries could
be very different to how the law would be applied in a western legal
system.
 Dispute settlement provisions
 Product related issues – description, price, currency, validity period
of the purchase price
 Procedural issues – inspections, payment method, documentation
requirements, risk of loss, responsibility of transportation and
insurance cost, and delivery terms
 Legal issues – non-performance under the agreement, excuses,
results, and amendments
 Intellectual Property Protection Issues
Pitfall # 12 – Running afoul of Foreign
“Commercial Disparagement” Laws
 Mostly in Europe, no similar laws here in the US, dealing
with selection of local partners, agents
Pitfall #13 – Flawed and Unenforceable
(uncollectible) Letters of Credit
The letter of credit deals with the payment and the documents that must
be presented to obtain payment –
Many contain built in discrepancies, contradictions or terms that can not
be met, i.e. presentation of documents in 5 days after on board,
contradiction in preparation of documents or revocable, or payable in
another foreign country.
Pitfall # 14 – Record Retention Requirements
 All records required to be kept by the EAR must be retained for five
years from the latest of the four following times:
(1) financing, transporting, or other service
(2) reexport, transshipment or diversion
(3) termination of the transaction whether in writing or by any other
means
(4) for restrictive trade practices or boycotts, the date the regulated
person receives the boycott-related request or requirement
However, should any government agency makes a formal or
informal request for a certain record or records, the record or record
can not be destroyed without written authorization by the BIS or
other government agency. Additionally, this applies to voluntary
disclosures to the BIS or other government agency in accordance
with 765.5(c)(4)(ii) and other records, even if these records have
been retained for longer than the five years.