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Import Question on Triangular Shipments

A question comes in from a reader prompted by the Triangular Shipments video, except it is more import related while the video was from a U.S. export perspective.

There is a website representing artists and artworks in Switzerland. (Not registered as a company)
The goods are of course artworks
The artworks are located in each artist country.
People who would like to buy artworks from the web will have to purchase from the website, EXW basis.
so the buyer(A) pays to Switzerland(B), then to pay the artist(C) then the artist(C) will send the goods to the buyer(A)

It’s like a triangle shipment
Please advise following

1: does the swiss website have to register as a company? if they want to deal the artworks
2: how should we do the customs invoice, the shipper should be the artist or the swiss web?
3 is there any easy way to solve this? Basically the artists are (they are in japan, korea, and european countries) friends of the swiss web owner so, if there is any easy way, it would be possible to change the way.
4: or would be easier for the buyer to send the money to the artist directly thereafter the artist to pay whatever the comission for the swiss web?


In this situation, Switzerland would be country A in the video; the buyers are in the video’s country B, although actually in multiple countries; the artists are in the video’s USA, conceivably, again, in multiple countries.  This is not unlike a company using that famous online-retailer-named-for-a-river-in-Brazil as a marketing channel.

Unfortunately, I don’t believe I have a simple answer.

1: does the swiss website have to register as a company? if they want to deal the artworks

I am not an expert in Swiss business law, and don’t know the Swiss requirements.  I would not think it would matter to the buyers’ importing countries.

2: how should we do the customs invoice, the shipper should be the artist or the swiss web?

This largely depends on the buyers’ countries’ import laws.  And whether the Swiss web site takes ownership of the goods will likely influence this.  In other words, if the artist sells to the Swiss web site, then the web site sells to the buyer, I believe the Swiss web site would be the appropriate seller on the import invoice.  But if the web site never takes ownership, and is acting only as a broker, then I believe the artist would be the appropriate seller.

3 is there any easy way to solve this? Basically the artists are (they are in japan, korea, and european countries) friends of the swiss web owner so, if there is any easy way, it would be possible to change the way.

Refer to the response to question 2.

4: or would be easier for the buyer to send the money to the artist directly thereafter the artist to pay whatever the comission for the swiss web?

This would be the second scenario in the response to question 2.  I don’t believe there are any hard and fast rules requiring one scenario versus the other.  Rather, just do what is more practical, then invoice accordingly.

I’m sorry I cannot be of more help in this matter.  Perhaps another reader might be able to assist?

Amazon River map in public domain.

Exporter's Liability for Abandoned Cargo

Interesting question from a reader:

In October 2011, my company sent a cargo of copper samples from the port of Callao, Peru to the port of Odessa, Ukraine. We used a local customs agents for the paper work and loading of the cargo, and the Freight Carrier is XXXXXXXXX.

The cargo arrived in January to Odessa, and since then, it has not been claimed by the buyer, who is a Ukrainian company.

We paid all the freight charges (Freight Prepaid) to the local customs agents, so we understand that once shipped and delivered, we dont have any more liability for the cargo, as we are not the owners.

It has been months the cargo is unclaimed, and the local customs agent is demanding us to pay storage and demurrage fees for all this time. They say that according to Ukrainian legislation, it is not possible to leave a cargo without a buyer, so the “solutions” they give us are to get a new buyer at destination to claim the cargo, or return the cargo to Callao, Peru.

My question is if in Ukraine the institution of the “legal abandonment” of cargo exists or not? In Peru, for example, if cargo isn’t claimed within 30 days of arrival to port, it falls into legal abandonment, and the State owns it, and can sell it or destroy it.

Isn’t there an Incoterms or other ICC rule that establishes the abandonment of cargo, or excludes liability for the exporter in those cases?

I’ll start by saying that my expertise is in United States import and export regulations.  I am not an expert in Ukrainian customs regulations.  That said, I would volunteer the view that I don’t believe this is a customs issue.  If the entry is appropriately filed, the duties fully paid, and customs is blessed it with a release, I don’t believe the customs authorities would care one way or another what becomes of the cargo.  But as I said, I am not an expert, but I am insanely curious, so I invite other readers to comment.

Now, if not a customs matter, I would think that the pressure is being applied by either the carrier and/or the local port authorities.  Either one would be tired of looking at this cargo lying around, grateful that it wasn’t a load of perishable seafood, but still thinking they are owed something for having it take up space for so long in their facilities.  I would think this would be addressed in their terms and conditions on the back of the bill of lading, and I would suspect that there are provisions for their assuming ownership after a period of time at which point they can auction it off to the highest bidder in an effort to reclaim some of the storage revenue to which they are entitled.  But again, I am not an export in international contract law, so again I invite comment.

I would caution about assuming too much from Incoterms or the ICC.  Neither of these fine institutions are regulatorily binding, but only recommend processes to assist in international transactions, and provide shorthand terminology to ease communications.

I’m sorry I cannot offer a more profound response.  Not even a Geek has all the answers all the time.  Hopefully some of our viewing audience can.

Working with the Freight Forwarder

I recently presented on working with the freight forwarder at the Export Controls: Awareness and Application seminar held at the Microsoft Conference Center in Redmond, WA on 31 July 2012.  Good crowd, good speakers.  All presentations were made available on CD for seminar attendees.  If you know my presentation style, you know my slides alone would not convey a lot of information without my talk, so I “pre-recorded” the presentation in a video to put on the CD.  This also lets me make it available for you to enjoy.  By the way, Lynden is my day job.

Broker as Importer

A question from a reader:

When a customs broker is the importer of record, for liability purposes, how is that different from that of the actual importer? In other words is there a difference between the importer and the importer of record?

For example, for surety purposes, customs would go to the importer of record, but what about if there’s an issue such as a trademark violation/infringement? Would that liability lie with the importer of record (a customs broker) or with the actual importer?

When a customs broker is the importer of record, he is essentially clearing the import shipment in his own name instead of that of the consignee.   In that role, the broker is liable for all of the Customs regulations as if he were the importer.  Any additional duties, liquidated damages, or penalties would be the Customs broker’s liability.  In short, there is no difference as far as the Customs regulations go.

That may or may not be true for other agency regulations, such as the Food and Drug Administration, or the Consumer Protection Safety Commission.  Some agencies may still hold the consignee liable, regardless of who might be the importer of record.

In the particular case of trademark violation, Customs regulations has provisions for Customs to enforce this on imports.  So if the broker is the importer of record, Customs will go after the broker.

It is always my advice that a customs broker should not put them self as the importer of record.  The risk is just too high for a product or transaction that the broker actually knows little about.  Other than for imports of the customs broker’s own property, this should be very rare and carefully thought out.

Ironically, even when the consignee is shown as the importer of record, some agencies may pursue the broker for the consignee’s violations.  This can be simply poor legislation from Congress, or the agencies poor interpretation of the law.

PapayaWorks

As if I haven’t enough to do.

Geek watchers know that, in addition to the elearning, I’ve been dabbling in some web video.  Well I started doing odd jobs for others here and there, and have been encouraged to branch out.  “Import/export compliance training is too small of a niche.”  “Do custom development on a contract basis in other industries.”

So, I’ve re-branded the business as PapayaWorks.  Import Export Geeks is still around and will continue to function as always, but only as a division, a trade name.  If you’re interested, click on the logo below.

Shipper's Responsibility for Abandoned Cargo

This question in from a reader.

My friend recently shipped Bananas from the Philippines to the middle east by CNF. The middle east buyer has not shown up to pick up the goods from Customs. The container of Bananas is presently being held by Customs. The goods have not been “Seized” by customs. Since he shipped CNF does he bear any legal responsibility? If the buyer does not pick up the goods (which have been fully paid for) what happens to the goods? Are they sent back to the Phillipines and destroyed? I suspect that the buyer has not paid the import tax, so customs is holding the container.

Unfortunately, I am an expert in U.S. regulations, not so much Middle East nation’s import regulations.  If someone reading this is, please feel free to comment.

I would say, however, that one should not necessarily equate Incoterms with responsibilities to Customs authorities.  Incoterms help establish at what point in the shipment the responsibility for shipping cost and liability for loss passes from the shipper to the consignee.  They do not, as some mistakenly believe, establish at what point title passes.  Nor do they, as in our reader’s case, establish who is responsible to Customs at destination.

Even in the case of DDP, where the shipper pays for transport, insurance, Customs formalities, and delivery all the way to the consignee’s door, some nations do not allow the shipper to be a non-resident importer, as is allowed in the U.S.

So, not knowing which Middle East county is involved, nor being an expert in that as yet unknown country’s import laws, here are my thoughts.  If the terms are CFR (superseded CNF recently), then the seller’s responsibility for loss ended when the bananas were off-loaded from the importing carrier, which they obviously have if Customs is holding them.  It’s not the shipper’s problem, unless Customs there as laws to the contrary.  Furthermore, I would argue that the seller has fulfilled their obligation to the buyer and deserves to be paid, even if bananas rot.

Image by Martin Wiesheu

Simplified Entry

Is it the new Immediate Delivery?

Anyone that knows me knows that I like to play a little devil’s advocate.  Here I go again.

Simplified Entry has me scratching my head.  Pull up a CBP form 3461.  What’s it say near the top?  “ENTRY/IMMEDIATE DELIVERY”.  Ever wonder what Immediate Delivery is?

Long ago, shipments arriving in the U.S. required the full Customs entry and duties paid before the cargo would be released into the commerce of the U.S.  Obviously, this slowed things down a bit, as Customs had to review the entry documentation in detail.  But what about perishables?  Like bananas?

The Immediate Delivery process came about for fruits and vegetables arriving from contiguous countries – Canada and Mexico.  Before the days of the airplane, perishables weren’t shipped from anywhere else.  Immediate Delivery provided for the filing of just some basic information, and required posting a bond to guarantee the filing the actual entry and pay the duties within ten days.  It also allowed the importer to examine his goods, removing and disposing of any that were of no commercial value – which had perished – before filing the final entry.  The Immediate Delivery application and permit was the form 3461, and the actual entry was the form 7501.

Over time, and with the arrival of air freight, Immediate Delivery was made available to nearly all classes of goods.  It expedited commerce, and it afforded Customs the luxury of more time to examine the entry documents in greater detail, and to ask picky questions, long after the actual importation, what is now known as the liquidation period.

Customs brokers (they used to be called customhouse brokers, and at cocktail parties, everyone assumed they worked in real estate) would typically prepare the 3461, then on the old green form, about 4″ high x 8″ wide.  (Does anyone have an image of one of these?  I’m really showing my age here.  This was pre-ABI, before William von Raab decreed that customs brokers, “automate or die”.)  Anyway, customs brokers would typically prepare and file the 3461, and obtain cargo release from Customs.  Then they would prepare and file the 7501 with a check for the duties, within ten days.  It was a two step process, inefficient by today’s standards, but when the forms had to be hand-typed (does anyone remember typewriters?), it did allow for faster release of cargo on 3461 information only.

With automation came efficiencies.  Now a lot of the data that used to be hand typed could automatically populate the fields on a computer screen.  Customs brokers quickly learned that they could more efficiently put all the data for the 3461 and the 7501 in up front, then transmit both forms simultaneously, so they wouldn’t have to touch the file a second time for the 7501.  And that is where we are today, leaving new brokerage employees to wonder why we have two forms.

Now along comes Simplified Entry, supposedly to expedite cargo release, just like the old Immediate Delivery back in the typewriter days.  But with the efficiencies of automation and the ability to receive data electronically from overseas, any customs broker worth his salt is getting the cargo released, with both 3461 and 7501, prior to the cargo being made available by the carrier – heck, even prior to the carrier arriving in the U.S.!  So what is the point of Simplified Entry?

Maybe if we looked at the supposed benefits of Simplified Entry:

  • Streamlined data submission – only 12 required data elements.  Why not just reduce the required data elements on the 3461.  But as I said above, customs brokers striving for efficiencies will want to input all data, including the 7501 data, at the same time.  So no streamlining happening here.
  • Filer can update the data.  Can’t we do that for the 3461 now?
  • It can be filed earlier in the import process, allowing Customs to identify potential risks earlier.  We can already file the 3461 earlier in the process; Customs just won’t issue a release until five days from arrival on ocean, or “wheels up” at origin for air.  So if earlier release is supposed to be a benefit, just release the 3461 earlier in the process.  Besides, this is really only a benefit for Customs, because if the 3461 is filed earlier, with or without earlier release, Customs is getting their targeting data earlier in the process.
  • Reduces transaction costs by requesting filing data once.  Huh?  With Simplified Entry, a 7501 must still be filed, just like when we filed the old 3461 in advance.  And as I’ve already said, efficiencies today demand that customs brokers already file data once by simultaneously transmitting 3461 and 7501.
  • Greater predictability, allowing importers to make logistical arrangements in advance of arrival.  Like I said, any customs broker worth his salt is already getting cargo release in advance of arrival.  If this really is important, then just allow for cargo release earlier than five days out for ocean and “wheels up” for air.
  • Reduces “exceptions” needing special processing after arrival.  Huh?  With less information than on the current 3461?
  • Expedites data submission and cargo release decision.  I believe I’ve already addressed this one.

OK, let’s look at the Simplified Entry data elements:

  • Required:
    • Importer of record number.  That’s the EIN.  Already on the 3461.
    • Buyer name and address.  Assuming the ultimate consignee, already on the 3461.
    • Buyer EIN.  Assuming the ultimate consignee, already on the 3461.
    • Seller name and address.  Potentially new, as the 3461 currently only has a manufacturer’s/seller’s identification number, which has long been problematic.  So why not just expand this on the 3461?
    • HTS 10-digit number.  Already on the 3461.
    • Country of origin.  Already on the 3461.
    • Bill of lading/house airway bill number.  Already on the 3461.
    • Bill of lading issuer code.  Assuming the SCAC, already on the 3461.
    • Entry number.  Already on the 3461.
    • Entry type.  Already on the 3461.
    • Estimated shipment value.  Already on 3461.
  • Optional:
    • Ship to party name and address.  For ocean, already on the Importer Security Filing.
    • Consolidator name and address.  For ocean, already on the Importer Security Filing.
    • Container stuffing location.  For ocean, already on the Importer Security Filing.  For air, not applicable.

Simplified entry may provide benefits to CBP, but what’s in it for the trade?

Oh, wait.  To participate, the importer and the broker must be members of C-TPAT.  Aha!  Simplified Entry is yet another benefit whose existence is not measurable and thus questionable, and yet another way for Customs to sell C-TPAT.

So, Simplified Entry is the new Immediate Delivery, which really isn’t necessary in this millennium.  And C-TPAT is the new BASC, which is a topic for another blog post.  And your tax dollars are hard at work.

Gorilla image by Steven Straiton.  Selectric II typewriter image by Etan J. Tal.

More Blind Mules

A while back, I talked about Blind Mules, where SENTRI card holders with expedited, supposedly trusted, Customs processing privileges on the southern border, were being targeted by drug smugglers to transport their wares.  I posed the question of whether C-TPAT members might similarly be targeted for nefarious activities.

Apparently, I was correct.  Click on the link below:

Trucker Program Attracts Drug Smugglers

And I was correct before I knew it, because this story came out in 2009.

So, again, is a C-TPAT importer’s ocean container a more attractive target for a terrorist’s dirty bomb?  Are you effectively monitoring your container movement from stuffing location to the pier?

Photo credit: Eric Gay / AP Photo

Trade Compliance Irony

Sorry, I’ve been off the grid for a while.  But I came across this today that was too good not to share, so I’m back on the wagon.

Those of you familiar with filing Electronic Export Information (EEI) with the Bureau of the Census’ Automated Export System (AES) will recognize this as an error when AES finds that you have provided conflicting data.  (You can click on the image to enlarge it.)

The shipment is for goods being exported on a DSP-73, which is a license issued by the State Department for the temporary export of defense articles.  The Export Code is a data field that Census uses to, I don’t know, determine to exclude(?) this from trade statistics, because it will be returning, because it is a temporary export.  The “error” is that the Export Code is not valid for the License Type selected. 

So, Mr. Census, please tell us just when a temporary export is a temporary export, and when it’s not.

Want some import irony?  On the Customs and Border Protection (CBP) website, you can download CBP Form 214, Application for Foreign-Trade Zone Admission and/or Status Designation.  Better yet, just click on http://forms.cbp.gov/pdf/CBP_Form_214.pdf.  It’s a two page form.  Examine closely to what the entire second page of the form is dedicated.

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