We’ve been busy over the holidays, making a few changes around here.

Note to self:  Wear only solid shirts in videos.  Stripes cause too much strobing.

In November, I had the distinct pleasure of attending TEDxRainier in Seattle.  These are kind of like mini-TED conferences.  (I would have posted sooner, but they were a little slow in making them available.)

Entertaining, yes.  Enlightening, yes.

In the afternoon session, not on the program, in walks our own local celebrity, holding a map, and looking lost.  He tells the moderator he’s looking for Red Square and, motioning to the trademark red carpet, asks if this is it.  Here is Rick Steves‘ talk:

Death to ethnocentricity!

The first reader to spot the Geek in the audience and email me the time mark in the video wins their choice of one of the two current Import Export Geeks course offerings.  OK, the first two readers.

More TEDxRainier talks here.

TEDx.  Been there.  Done that.  Do it again?  You bet!

When you import goods into the U.S., the tariff classification is important as it sets the rate of import duty.  When duty rates range from free to 10% or more, this can make a big difference in your landed cost.  So you don’t want U.S. Customs and Border Protection (CBP) “correcting” the classification after you’ve already sold your product to customers.

CBP has a formal process where importers may obtain administrative rulings on various matters.  When it comes to classification, these are often referred to as binding rulings, because they are binding on all ports of entry.  But these can also be binding on you, the importer.

Yes, CBP will tell you that it is a good idea to seek a binding classification ruling.  After all, the government is always more than happy to peek into your affairs.  Customs brokers, consultants and attorneys will also encourage binding rulings because – and some of my professional friends will hate me for this – they can make a lot of money charging you for doing it for you.

So why might you not want to get a binding ruling?

First of all, you might not end up with the ruling you were hoping for.  Suppose you are shooting for a classification with a duty rate of, say, 2.2%, and CBP rejects your suggestion, giving you instead a classification with a rate of 3.5%.  That classification and duty rate will now be binding on both Customs and you at all ports of entry.

Suppose CBP was wrong; perhaps you failed to provide them with enough detail in your request.  The way to fix it is with another ruling, by filing a protest on an entry subject to that ruling.  You still have to pay the higher rate of duty and won’t get your refund until the protest is finalized and the new ruling overturns the original.  If you have hundreds of entries in the meantime, you have to file protests on all of those other entries.  You can have a lot of entries, and a lot of money in duties, tied up for a very long time.

Second, when you’ve been granted a binding ruling, the regulations require that ruling to be referenced on all entries of that commodity.  But the customs broker filing the entry needs to know about the ruling.  Too often, that information is not conveyed to a new employee of the broker, to a branch office of the broker in another port, or to your new customs broker should you change brokers.  Failure to reference the ruling on an entry of that product is a violation.  This is a common mistake, and CBP knows it, so it’s their low hanging fruit in an audit.

So what’s an importer to do?  Here’s my suggestion.

To properly do a ruling request – to be absolutely sure CBP fully understands the product and gives you the correct classification – you must provide a considerable amount of information – technical details, references to other rulings to support your position, even product samples.  When you get all of that information together, stop.  Don’t submit the request.  At that point, you have fulfilled you Reasonable Care standard.  Keep in a safe place.  If CBP ever challenges the classification, it should be enough to prove your case, without the need for a binding ruling.  Only if find yourself at an impasse, should you actually seek a binding ruling, because at that point, you have nothing to lose.

You should always keep good records to back up your decisions on import matters.  I just don’t think you always need to volunteer that information to CBP.

You’re a distributor of firearms.  You’ve just landed your first international sale of sub-machine guns to the Austrian Bundespolizei.  They have their authorization from their government.  You’ve got your DSP-5 from the U.S. State Department, even naming your favorite freight forwarder.  And that forwarder has just quoted you a great rate on a reliable German airline.  Shipment is on the way.  Time to celebrate!

At about the second round of drinks, your cell phone rings.  The German Federal Office of Economics and Export Control has just detained your shipment at Frankfurt.  Seems they require a permit for munitions to transit Germany.  Delays.  Penalties. Legal fees.  Unhappy customer.  Potential loss of sale.  Better not order that third round of drinks.

Your freight forwarder, always looking out for the best deal for you, found a better price on an airline that required a change of planes in Germany.  You should have required a non-stop flight.  Yes, that would have cost more.  Or would it?

Could you have violated U.S. laws?

22 CFR 123.9(d), the International Traffic in Arms Regulations (ITAR), says:

The written approval of the Directorate of Defense Trade Controls must be obtained before reselling, transferring, transshipping on a non-continuous voyage, or disposing of a defense article in any country other than the country of ultimate destination, or anyone other than the authorized enduser, as stated on the Shipper’s Export Declaration in cases where an exemption is claimed under this subchapter.

Emphasis is mine, as I believe our above scenario would be a non-continuous voyage.  Still, you should review the Conditions and Provisos of your State Department license.

For non-ITAR commodities, take a look at 15 CFR 736.2(b)(8), from the Export Administration Regulations (EAR):

General Prohibition Eight—In transit shipments and items to be unladen from vessels or aircraft (Intransit) —(i) Unlading and shipping in transit. You may not export or reexport an item through or transit through a country listed in paragraph (b)(8)(ii) of this section unless a License Exception or license authorizes such an export or reexport directly to such a country of transit, or unless such an export or reexport is eligible to such a country of transit without a license.

(ii) Country scope. This General Prohibition Eight applies to Armenia, Azerbaijan, Belarus, Cambodia, Cuba, Georgia, Kazakhstan, Kyrgyzstan, Laos, Mongolia, North Korea, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Vietnam.

Always remember to review your routings with your freight forwarder, particularly for controlled commodities.  Sometimes, the safest distance between two points is a straight line.

Entrepreneur.  Innovator. Visionary. Designer.

Those of us who aspire to great design in eLearning and presentation (and they are connected at the hip) know that presentation was one of his arts.  Witness any Apple product release:

Did you ever wonder what this pocket was for:

The world’s thinnest notebook:

Apple reinvents the phone:

See any bullet points?

He got John Skully to leave Pepsi for Apple by offering him the choice to “sell sugar water for the rest of your life or come with me and change the world”.

Steve Jobs changed the world.  Now go change yours.

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It was the most peculiar job interview I’d ever had.  People coming to and going from the conference room, whispering, their thoughts clearly somewhere else.  In the car earlier, I’d had the radio off, focusing on what I wanted to say, so I was completely unaware.  I didn’t get the job.  Did they think I was insensitive?  I believe they’d lost some people that day.

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Life changing moments.  Like Pearl Harbor.  Or the Kennedy assignation.  Even the lives of the most cold hearted have changed, and we take our shoes off at the airport.

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Those of us who work in international trade know the changes.  Tighter security.  More scrutiny.  Increased penalties – BIS export penalties by 2,500%, from $10,000 to $250,000.

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The Customs-Trade Partnership Against Terrorism.  The Container Security Initiative.  The Importer Security Filing.  Are these things working?  Are we safer?  Are these effective preventative measures?  Or expensive Band-Aids?

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After the billions that have been spent, by both the Federal Government and private industry, and in the end, from our own pocketbooks, are we winning this War on Terror?  Or are the terrorists winning, as our business and our lifestyle bleeds from our own collateral damage?

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We may never know.  But, we will never forget.

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• Tribute in Light, Public Domain

• Fragment from one of the airplanes that struck the World Trade Center.  Courtesy New York State Museum.  Photograph by Ira Block.

• Helmet belonging to deceased FDNY member Kevin M. Prior. (Reuters/Lucas Jackson)

Last month, I posted a video blog on David Ricardo’s Law of Comparative Advantage.  A good friend pointed me toward an argument against Ricardo, “Fatal Flaws in the theory of Comparative Advantage”, by Ian Fletcher of the Educational Foundation of the U.S. Business and Industrial Council.  It’s worth noting that the USBIC is a lobbying group largely advocating Conservative causes and can be expected to oppose any free trade agreement that comes along.

Fletcher is obviously more astute in economics than me.  However, I believe that his opinions are governed by his politics.  Then again, so are mine.  So here are my brief layman’s reactions to Fletcher’s arguments.

1. Ricardo ignores externalities

Fletcher points out that air pollution, due to lax environmental standards, knows no borders, and can impact other nations, including the importing nation.  I agree.  There’s more that goes into purchase decisions than price.  We consider the manufacturer’s, or even a particular retailer’s, impact on society.  We also consider things like brand association and peer pressure.  Otherwise, we’d all be driving the equivalent of a Yugo, or a ‘highpollutin’ Trabant.

Fletcher mentions technological spillover, where an industry’s technology finds application in other industries.  After all, we can thank the space program for many things, from freeze-dried foods in our backpacks, to CAT and MRI scanners in hospitals.  I agree.  But he asserts that foreign competition wipes out technological spillover, retarding progress.  I disagree.  Technological spillover, like air pollution, knows no borders.    … read more

I came across this Venn Diagram at Mashable titled “What Type of Nerd Are You?”

I think we can all happily agree with that!

Which reminded me of another just-for-fun project that’s been sitting on my back burner.  No time like now to finish it up.

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With utmost admiration for Nat King Cole, here’s his original version of “LOVE”.

And here he is at his best in “When I Fall in Love”.

If I had that resonant baritone voice with that kind of control – if I could sing even half as well – I wouldn’t be in this crazy compliance business!

It’s been a while since I’ve posted.  Busy, busy.  And I don’t usually dabble in export violation exposé; you can read stuff like this yourself at the BIS web site.  But a recent case of PPG Industries and a certain Mr. Curtis Hickcox raises observations worth noting.

Last December, the BIS published the cases involving PPG Industries, and their Chinese sales subsidiary, PPG Paints Trading.  PPG Paints Trading landed a contract for PPG Industries to ship epoxy paint to China Nuclear Engineering Huaxing Construction Company, a subcontractor in the construction of a nuclear power plant for the Pakistan Atomic Energy Commission (PAEC).  The paint is not on the BIS Commerce Control List – it is designated EAR99.  Unfortunately, PAEC happens to be on the BIS Entity List, which means it is deemed to have a high potential for diverting items exported from the U.S. into programs of developing weapons of mass destruction.    … read more