You’ve just hired a brilliant engineer! She has 2 degrees from Cal Tech and can run circles around your current staff. She’s applied for her green card and can remain in the U.S. on her H-1B visa until the green card comes through. She has made it through all of your background checks and signed your standard employment agreements.
Your company has not been able to gain any overseas customers. However, a potential large customer in China is sending a representative to your plant in Colorado to evaluate your operations and products. You are ready to roll out the red carpet and show him your modern technology.
You take the specifications for your latest product to Canada to meet with potential customers at an international trade show in Toronto.
The common factor in each of these scenarios is that they put your company at risk of violating U.S. export laws.
Does your company export?
Before you say “no” and quickly flip to the next article, consider the following truisms:
Merely talking to a customer in your office or at a trade show may be an export.
Simply providing a drawing or print to an employee in the U.S. may be an export.
Giving a tour to a visitor at your U.S. location can result in an export.
Then consider that exporting controlled technology (or any technology to certain destinations) without a license can get you fined and/or land you in jail. …click to continue reading
(Source: The White House, Office of the Press Secretary)
Below are remarks by the President that will be delivered via videotape t August 31, at the Department of Commerce’s Annual Export Controls Update Conference in Washington, D.C.
Update, 1 September: The video of President Obama’s remarks is now available following the text of his speech below.
Photo by Pete Souza
Hello everyone. I’m sorry I’m not able to be with you in person today, but I’m pleased to have the chance to join you by video to talk about our export control reform initiative.
About a year ago, we launched a comprehensive review of our export controls and determined that we need fundamental reform in all four areas of our current system – in what we control, how we control it, how we enforce those controls, and how we manage our controls. I want to thank Secretary Locke, Secretary Gates, Secretary Clinton and many others for their work on this initiative. And today I want to highlight the key elements of our new approach and the first steps toward its implementation.
For too long, we’ve had two very different control lists, with agencies fighting over who has jurisdiction. Decisions were delayed, sometimes for years, and industries lost their edge or moved abroad. Going forward, we will have a single, tiered, positive list – one which will allow us to build higher walls around the export of our most sensitive items while allowing the export of less critical ones under less restrictive conditions.
In the past, there was a lot of confusion about when a license was required. It depended on which agency you asked. Now, we will have a single set of licensing policies that will apply to each tier of control, bringing clarity and consistency across our system.
In addition, I plan to sign an Executive Order that creates an Export Enforcement Coordination Center to coordinate and strengthen our enforcement efforts – and eliminate gaps and duplication – across all relevant departments and agencies.
Finally, right now, export control licenses are managed by multiple, different IT systems or, in some cases, even on paper. Going forward, all agencies will transition to a single IT system, making it easier for exporters to seek licenses and ensuring that the government has the full information needed to make informed decisions.
While there is still more work to be done, taken together, these reforms will focus our resources on the threats that matter most, and help us work more effectively with our allies in the field. They’ll bring transparency and coherence to a field of regulation which has long been lacking both. And by enhancing the competitiveness of our manufacturing and technology sectors, they’ll help us not just increase exports and create jobs, but strengthen our national security as well.
All of this represents significant progress. And as we implement these reforms and take further steps – including working to create a single licensing agency – I look forward to working with both Congress and the export control community to ensure their success. Thank you.
As we all know, the Importer Security Filing (a.k.a. ISF or 10+2) with all its threats of enforcement, went into effect on 26 January 2010. Or did we know? Since CBP hasn’t been issuing any liquidated damages, it hasn’t really seemed any different from the prior “voluntary” filing period.
However, CBP has recently announced that they will step up enforcement in the 2nd and 3rd quarters of this year. They will be issuing liquidated damages against repeat offenders right away, and everyone else by the end of the year.
Now CBP may have put themselves into a “Boy Who Cried ‘Wolf’” scenario, but don’t think that the wolf isn’t real. If you’ve been putting this off, you or your customs broker had better start. Now!
Other ISF news: CBP is working to allow importers to file their own ISF through an ISF web portal. Currently, filing is pretty much limited to customs brokers and importers that file their own customs entries, as well as freight forwarder that file AMS manifests, and these have required specialized software, testing, and maintaining high levels of error-free entry or manifest filing. Filing through a web portal should remove these hurdles.
But here’s the irony: For “qualified users”, CBP will limit filing to 2 ISFs per day with a maximum of 12 per year. But ISF filing is complicated enough that it will probably be only the larger importers would bother, importers with far more than 12 shipments per year. So it will likely be that ISF filing will remain the work of your customs broker.
My question relates to how the shipments between either subsidiaries and parent companies, or between different branches of the same company are treated with regards to import duties.
Do they receive the normal duties based on the stated value of the merchandise, or are there ways for exemptions? For example, suppose an EU-based company opens a subsidiary in the US (I’m not sure if a secondary establishment like a branch would be allowed). Does the subsidiary pay import tax for the goods send to it by the parent company, or are there any loopholes there?
Sorry, no loopholes. U.S. import duties are based on the price paid or payable. It does not matter if the shipper and consignee are related or not.
In fact, being related will attract more scruteny of U.S. Customs. This is because an unrelated seller is assumed to sell at a price that covers his costs and provides a decent profit. But a related seller will not go to so much trouble to assure his costs are covered, and may even intentionally undervalue the goods.
OK, I am not going as far out on a limb as it sounds. In his TED talk, “When Ideas Have Sex”, Matt Ridley demonstrates of how cultural evolution is not unlike biological evolution. And it’s a very good argument in favor of trade – trade between people – trade between cultures – trade between nations.
Pay attention to his talk of Comparative Advantage. Pay attention, too, to his talk of what happened to the ancient people of Tasmania when they were cut off from trade with the rest of Australia.
Whatever your political persuasion, we need international trade, without which, we would be no more advanced than Neanderthals or Bonobos.
In recent years, have you ever felt that U.S. Customs and Border Protection has been moving in too many different directions? First there was C-TPAT, then CSI, then 10+2… And whatever happened to ACE?
This question comes from a reader who wishes to remain anonymous:
Gibraltar and the Cayman meet all of the criteria spelled out in 738.3 of the EAR to be treated like the UK for export licensing purposes. Neither is listed on the Commerce Country Chart (15CFR Part 738 Supp.1) and the CIA fact books list both as territories of the UK.
How would these be treated for license exception purposes? GBS, for example, is only allowed for ultimate destinations in Country Group B. The UK is on the list but Gibraltar and the Cayman Island are not. The UK is also listed on Supplement No. 3 to Part 740. Does the inclusion of UK on a list extend to its territories?
There has been much talk in the last year about reforms to U.S. export control regulations. It has long been argued that our system is confusing and outdated in our current geo-political world. I agree. Some exporters might see this as a loosening of all controls making their products easier to export to various parts of the world. I don’t think I would agree.
U.S. Secretary of Defense Robert Gates recently spoke on this to the Business Executives for National Security on this topic. In a very general sense, I see this as taking a look at the export control walls we have around products and technology, lowering some, while raising others, and patching a few holes in the process. But more specifically, and importantly, Gates recommends of simplification in the form of:
A single licensing and enforcement agency
A single export control list (products and technologies)
A single end user control list (restricted parties)
Combat du Scipion contre le London, credited to Rossel de Crecy
Cannons. Cast in the mid-1700s. Went down with the ship in the later 1700s. Had lain on the ocean bottom for over 200 years. Resurrected. Lovingly restored, but inoperable. Now they’re going on tour, to a museum abroad.
You’d think that would be a great thing.
You’d think that nobody would have a problem with that.
Suppose you live in Yourtown. And right next door is Nexttown.
Yourtown is big. Developed. The real estate is expensive. The cost of living is high. The businesses in Yourtown charge high prices on their goods and services. On top of that, Yourtown has a 10% sales tax rate.
Nexttown is small. Real estate less expensive. Cost of living is low. The businesses in Nexttown sell their goods and services for less than the businesses in Yourtown. And the sales tax rate there is ony 5%.
Where are you going to shop? That’s what I thought.
Should Yourtown charge you an “import” tax on the stuff you buy in Nexttown? That’s what I thought.
What’s the point? Free trade. Does that hurt Yourtown businesses? Will Nexttown benefit? Is this good? Bad?
Nexttown benefits through sales revenues and a stronger tax base. The town will grow. Improve. That’s good. Because no one wants a dump right next door.
But in the long run, I believe that Yourtown benefits, too. It forces businesses to compete on quality and price with Nexttown’s. And it forces government think about that sales tax rate. If not – if Yourtown charged that “import” tax – it would be a government supported monopoly. And monopoly just leads to higher prices and lower quality goods and services.
The information provided on the Import Export Geeks web site is for general information about our products and should not be considered legal or professional advice. Access and use of this web site does not create, nor does it intend to create, a client-consultant relationship. Should such services be desired, please contact Import Export Geeks directly.
Sorry, no loopholes. U.S. import duties are based on the price paid or payable. It does not matter if the shipper and consignee are related or not.
