(BQ) Part 1 book Export/import procedures and documentation has contents: Organizing for export and import operations, exporting - preliminary considerations, exporting - sales documentation, exporting - other export documentation, export controls and licenses, importing - preliminary considerations, importing - purchase documentation,... and other content.
EXPORT/IMPORT PROCEDURES and DOCUMENTATION FIFTH EDITIO N DONNA L BADE American Management Association New York • Atlanta • Brussels • Chicago • Mexico City • San Francisco Shanghai • Tokyo • Toronto • Washington, D.C Bulk discounts available For details visit: www.amacombooks.org/go/specialsales Or contact special sales: Phone: 800-250-5308 E-mail: specialsls@amanet.org View all the AMACOM titles at: www.amacombooks.org American Management Association: www.amanet.org This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service If legal advice or other expert assistance is required, the services of a competent professional person should be sought Library of Congress Cataloging-in-Publication Data Bade, Donna L Export/import procedures and documentation / Donna L Bade — Fifth edition pages cm Revised edition of Thomas E Johnson’s and Donna L Bade’s Export/import procedures and documentation, 4th edition, published in 2010 Includes bibliographical references and index ISBN 978-0-8144-3475-8 (hardcover : alk paper) ISBN 0-8144-3475-4 (hardcover : alk paper) ISBN 978-0-8144-3476-5 (ebook) ISBN 0-8144-3476-2 (ebook) Export marketing—United States Exports—United States—Forms Imports—United States—Forms Foreign trade regulation International trade I Johnson, Thomas E., 1948-Export/import procedures and documentation II Title HF1416.5.J64 2015 658.8’4—dc23 2014033738 © 2015 Donna L Bade All rights reserved Printed in the United States of America This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019 The scanning, 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number 10 3 Contents Preface Acknowledgments About the Author Part I Organizing for Export and Import Operations Chapter Organizing for Export and Import Operations A Export Compliance Department B Import Department C Combined Export and Import Departments D Manuals of Procedures and Documentation E Record-Keeping Compliance F Software G Federal, State, International, and Foreign Law Part II Exporting: Procedures and Documentation Chapter Exporting: Preliminary Considerations A Products B Volume C Country Market and Product Competitiveness Research D Identification of Customers: End Users, Distributors, and Sales Agents E Compliance With Foreign Law Industry Standards Foreign Customs Laws Government Contracting Exchange Controls and Import Licenses 5.Value-Added Taxes 6.Specialized Laws F Export Controls and Licenses G Patent, Trademark, and Copyright Registrations and Infringements H Confidentiality and Non-Disclosure Agreements I Antiboycott Compliance J Employee Sales Visits to Foreign Countries—Immigration and Customs Compliance Carnets K Utilization of Freight Forwarders and Foreign Customs Brokers L Export Packing and Labeling (Hazardous Materials) M Terms of Sale N Consignments O Leases P Marine and Air Casualty Insurance Q Methods of Transportation; Booking Transportation R Country of Origin Marking S Foreign Warehousing and Free Trade Zones T Export Financing and Payment Insurance U Tax Incentives V Export Trading Companies, Export Trade Certificates of Review, and Export Management Companies W Translation X Foreign Branch Operations, Subsidiaries, Joint Ventures, and Licensing Y Electronic Commerce Chapter Exporting: Sales Documentation A Isolated Sales Transactions Importance of Written Agreements Email Orders The Formation of Sales Agreements Common Forms for the Formation of Sales Agreements a Price Lists b Requests for Quotations c Quotations and Costing Sheets d Purchase Orders e Purchase Order Acknowledgments, Acceptances, and Sales Confirmations f Pro Forma Invoices g Commercial Invoices h Conflicting Provisions in Seller and Buyer Sales Documentation i Side Agreements B Ongoing Sales Transactions Correlation with Documentation for Isolated Sales Transactions Important Provisions in International Sales Agreements a Selling and Purchasing Entities b Quantity c Pricing d Currency Fluctuations e Payment Methods f Export Financing g Security Interest h Passage of Title, Delivery, and Risk of Loss i Warranties and Product Defects j Preshipment Inspections k Export Licenses l Import Licenses and Foreign Government Filings m Governing Law n Dispute Resolution o Termination C Export Distributor and Sales Agent Agreements Distinction Between Distributor and Sales Agent Export Distributor Agreements a Territory and Exclusivity b Pricing c Minimum Purchase Quantities d Handling Competing Products e Effective Date and Government Review f Appointment of Subdistributors g Use of Trade Names, Trademarks, and Copyrights h Warranties and Product Liability Export Sales Agent Agreements a Commissions b Pricing c Shipment d Warranties e Relationship of the Parties D Foreign Corrupt Practices Act Compliance E U.S Export Control Laws Chapter Exporting: Other Export Documentation A Freight Forwarders B Shipper’s Letters of Instructions C Commercial Invoices D Bills of Lading E VOCCs and NVOCCs F Packing Lists G Inspection Certificates H Marine and Air Casualty Insurance Policies and Certificates I Dock and Warehouse Receipts J Consular Invoices K Certificates of Origin L Certificates of Free Sale M Delivery Instructions and Delivery Orders N Special Customs Invoices O Shipper’s Declarations for Dangerous Goods P Precursor and Essential Chemical Exports Q Animal, Plant, and Food Export Certificates R Drafts for Payment S Letters of Credit T Electronic Export Information U Freight Forwarder’s Invoices V Air Cargo Security and C-TPAT Air Cargo Security Customs and Trade Partnership Against Terrorism (C-TPAT) Chapter Export Controls and Licenses A Introduction B Scope of the EAR C Commerce Control List D Export Destinations E Customers, End Users, and End Uses F Ten General Prohibitions G License Exemptions and Exceptions H License Applications and Procedures Documentation From Buyer License Application Form Procedures I Re-Exports J Export Documentation and Record-Keeping K Special Comprehensive Licenses L Technology, Software, and Technical Assistance Exports M Validated End-User Program N Antiboycott Regulations O Violations and Penalties P Embargoes and Trade Sanctions Programs R U.S Munitions and Arms Exports S Enforcement Part III Importing: Procedures and Documentation Chapter Importing: Preliminary Considerations A Products B Volume C Country Sourcing D Identification of Suppliers E Compliance With Foreign Law Foreign Export Controls Exchange Control Licenses Export Quotas F U.S Customs Considerations Utilization of Customs Brokers Importation Bonds Importer’s Liability and Reasonable Care Application for Importer’s Number Ports of Entry Import Quotas Antidumping, Countervailing, and Other Special Duties Classification Valuation 10 Duty-Free and Reduced Duty Programs 11 Column Imports 12 Deferred Duty Programs (Bonded Warehousing and Foreign Trade Zones) 13 Record-Keeping Requirements 14 Customs Rulings G Import Packing and Labeling H U.S Commercial Considerations Prevailing Market Price Buy American Policies U.S Industry Standards I Terms of Purchase J Consignments K Leases L Marine and Air Casualty Insurance M Method of Transportation; Booking Transportation N Import Financing O Patent, Trademark, and Copyright Registrations and Infringements P Confidentiality and Non-Disclosure Agreements Q Payment R Translation S Foreign Branch Operations, Subsidiaries, Joint Ventures, and Licensing T Electronic Commerce Chapter Importing: Purchase Documentation A Isolated Purchase Transactions Importance of Written Agreements Email or Internet Orders The Formation of Purchase Agreements Common Forms for the Formation of Purchase Agreements a Price Lists b Requests for Quotations and Offers to Purchase c Quotations d Purchase Orders e Purchase Order Acknowledgments, Acceptances, and Sales Confirmations f Commercial Invoices g Conflicting Provisions in Seller and Buyer Sales Documentation h Side Agreements B Ongoing Purchase Transactions Correlation With Documentation for Isolated Purchase Transactions Important Provisions in International Purchase Agreements a Purchasing and Selling Entities b Quantity c Pricing d Currency Fluctuations e Payment Methods f Import Financing g Security Interest h Passage of Title, Delivery, and Risk of Loss i Warranties and Product Defects j Preshipment Inspections k Export Licenses l Governing Law m Dispute Resolution n Termination C Import Distributor and Sales Agent Agreements Distinction Between Distributor and Sales Agent Import Distributor Agreements a Territory and Exclusivity b Pricing c Minimum Purchase Quantities d Handling Competing Products e Appointment of Subdistributors f Use of Trade Names, Trademarks, and Copyrights g Warranties and Product Liability Import Sales Agent Agreements a Commissions b Pricing c Shipment Chapter Import Process and Documentation A Importer Security Filing and the 10+2 Program B Bills of Lading C Commercial Invoices D Pro Forma Invoices E Packing Lists F Inspection Certificates G Drafts for Payment H Arrival Notices I Pickup and Delivery Orders J Automated Commercial Environment (ACE) K Entry/Immediate Delivery L Entry Summary M Other Entries N Reconciliation O GSP, AGOA—Special Programs P NAFTA/Other FTA Certificates of Origin Q Specialized Products Import Entry Forms R Examination and Detention S Liquidation Notices T Notices of Redelivery U Post Entry Amendment V Requests for Information W Notices of Action X Protests Y Record-Keeping Z Administrative Summons AA Search Warrants BB Grand Jury Subpoenas CC Seizure Notices DD Prepenalty Notices EE Penalty Notices FF Customs Audits GG Penalties HH Prior Disclosure II JJ Court of International Trade Appeals KK Offers of Compromise LL ITC and Commerce Questionnaires Part IV Global Customs Considerations Chapter Determining the Proper Classification of a Product A The Organization of the Tariff Schedules B The General Rules of Interpretation C Duty Rates Chapter 10 Determining the Proper Value to Declare A Transaction Value Additions to the Transaction Value Deductions from the Transaction Value Related Parties B Transaction Value of Identical Merchandise C Transaction Value of Similar Goods D Deductive Value E Computed Value F Fall-Back Methodology Unacceptable Methods G First-Sale Transactions Chapter 11 Determining the Proper Country of Origin A Preferential Duty Laws Substantial Transformation The 35 Percent Agreements a GSP: Generalized System of Preferences b CBERA: Caribbean Basin Economic Recovery Act c AGOA: African Growth and Opportunity Act d United States–Israel Free Trade Agreement The Free Trade Agreement Tariff-Shift or Tariff-Shift Plus Regional Value Content Rules a North American Free Trade Agreement (NAFTA) 1) Preference Criterion A 2) Preference Criterion B 3) De Minimis 4) Regional Value Content 5) Preference Criterion C 6) Preference Criterion D 7) Preference Criterion E 8) Preference Criterion F 9) Accumulation/Cumulation 10) Fungibility 11) Certificates of Origin b The Other Free Trade Agreements B Country of Origin Marking Laws Country of Origin for Marking Purposes NAFTA Country of Origin Marking Rules Other Free Trade Agreement Marking Rules C Federal Trade Commission Rules on “Made in the USA” Marking D Government Procurement The Buy American Act The Trade Agreements Act and the WTO Agreement on Government Procurement Other Buy American–Type Requirements a Buy America b The Berry Amendment Part V Specialized Exporting and Importing Chapter 12 Specialized Exporting and Importing A Drawback Unused Drawback Rejected Merchandise Drawback Manufacturing Drawback B Foreign Processing and Assembly Operations C Barter and Countertrade Transactions Appendix A Incoterms Diagram Appendix B International Sales Agreement (Export) Appendix C Department of Defense – Compliance Program Guidelines Appendix D Informed Compliance: Reasonable Care Appendix E USITC Harmonized Tariff Schedule Contents Appendix F International Purchase Agreement (Import) Appendix G ACE Program and Standard Reports Appendix H Guidance on Internet Purchases Appendix I Regulatory Audit Questionnaires Appendix J Export/Import–Related Web Sites Glossary of International Trade Terms Index 10 Figure 5–17 IRS Form 5713 201 202 203 O Vio latio ns and Penalties The Export Administration Act expired many years ago and to date has not been renewed; however, the president annually authorizes application of the EAA regulations under the International Emergency Economic Powers Act (IEEPA) Penalties under IEEPA were raised in 2007 to $250,000 per violation or twice the amount of the transaction in question In addition, export privileges can be denied for up to ten years Since these are extremely serious penalties, it is important to make every effort not to violate the law, even accidentally Exports in violation of the law may be seized by the U.S Customs and Border Protection If the exporter, its freight forwarder, or any other of the exporter’s agents receives such a subpoena or even an informal inquiry from Customs or the Office of Export Enforcement, Bureau of Industry and Security, the exporter should take it very seriously and make sure that it is in compliance with the law before responding It is possible to file a voluntary disclosure to the BIS and self-report An initial disclosure letter may be filed if the exporter determines it may 204 have made some mistakes The company has 180 days to complete its internal review and submit the final disclosure While the disclosure will not eliminate the penalties, it is given great weight in the mitigation of any potential penalties Likewise, having an export compliance program is a significant mitigation factor in the disclosure An attorney should be consulted prior to filing any prior disclosure to discuss the company’s options P E mbargo es and T rade Sanctio ns Pro grams The Office of Foreign Assets Control (OFAC) Department of Treasury is responsible for the administrating and enforcing economic and trade sanctions based on U.S foreign policy This includes blocking the assets of individuals and companies that are in the United States or coming to the United States OFAC has established the Specially Designated Nationals (SDN) list of individuals as well as businesses, partnerships, organizations, banks and vessels that are owned or controlled by targeted countries or individuals The assets are blocked and trade is prohibited with any party on the SDN list In addition, it has created the Foreign Sanctions Evaders list of foreign individuals and entities determined to have violated, attempted to violate, conspired to violate, facilitated or caused a violation of U.S sanctions on Syria or Iran Similarly the assets of these parties are frozen and trade is restricted to any party on the list The OFAC sanction are either country-based sanctions, such as the broad embargoes against Cuba, Iran, Sudan, and Syria or they are targeted sanctions against individuals engaged in narcotics trafficking, terrorism, or weapons of mass destruction proliferation Each program is different and each country has different general licenses (otherwise known as license exceptions) that may be for food, medicine, medical supplies, certain telecommunications, etc OFAC also issues some specific licenses for exports of other products OFAC license is in a written letter form at this time and must provide complete details regarding the transaction including payment mechanisms, since only certain payment mechanisms may be allowed R U S M unitio ns and Arms E xpo rts Under the Arms Export Control Act, exports and imports of defense articles and services without a license are prohibited Export licenses are issued by the Department of State, Directorate of Defense Trade Controls (DDTC), under the International Traffic in Arms Regulations Import licenses are issued by the Department of Justice, Bureau of Alcohol, Tobacco and Firearms The Export Control Reform charged the State Department with created a positive list of items that require license as opposed a list of all potential items and their components in various categories that were designed or modified for military applications The result has been the transfer of defense articles of a lesser sensitivity to the Commerce Control List It has been a gradual process of reviewing the items in the individual categories to create the positive list of controlled items As of the publication of this book, approximately one half of the categories have become positive lists, with the balance of the items transferring to the CCL It is anticipated that all of the revised categories will become effective by 2016-2017 One of the first changes was the addition of a new category XIX for diesel engines, whereas previously they would have been categorized with the type of equipment on which they were used The U.S Munitions List is comprised of 20 categories (Figure 5–18) The next step is to determine if an exporter’s products are defense articles and controlled by USML Articles that “specially designed” as defense articles are controlled The Export Control Reform changed the definition of “specially designed” and now it is a two-part analysis; a “catch and release” definition The first part is inclusive and reads as follows: (a) Except for commodities or software described in paragraph (b) of this section, a commodity or software (see § 121.8(f) of this subchapter) is “specially designed” if it: (1) As a result of development, has properties peculiarly responsible for achieving or exceeding the controlled performance levels, characteristics, or functions described in the relevant U.S Munitions List paragraph; 205 Figure 5–18 U.S Munitions List (2) Is a part (see § 121.8(d) of this subchapter), component (see § 121.8(b) of this subchapter), accessory(see § 121.8(c) of this subchapter), attachment (see §121.8(c)of this subchapter), or software for use in or with a defense article The second part “releases” or excludes items that were “caught” in the first part as follows: (a) A part, component, accessory, attachment, or software is not controlled by a U.S Munitions List “catch-all” or technical data control paragraph if it: (1) Is subject to the EAR pursuant to a commodity jurisdiction determination; (2) Is, regardless of form or fit, a fastener (e.g., screws, bolts, nuts, nut plates, studs, inserts, clips, rivets, pins), washer, spacer, insulator, grommet, bushing, spring, wire, or solder; (3) Has the same function, performance capabilities, and the same or “equivalent” form and fit as a commodity or software used in or with a commodity that: (i) Is or was in production (i.e., not in development); and (ii) Is not enumerated on the U.S Munitions List (4) Was or is being developed with knowledge that it is or would be for use in or with both defense articles enumerated on the U.S Munitions List and also commodities not on the U.S Munitions List (5) Was or is being developed as a general purpose commodity or software, i.e., with no knowledge for use in or with a particular commodity (e.g., a F/A–18 or HMMWV) or type of commodity (e.g., an aircraft or machine tool) 206 While this definition is quite confusing there are several tools on the DDTC web site to assist exporters in making the determination First there is a Commodity Control List order of review interactive tool at http://www.bis.doc.gov/index.php/export-control-classificationinteractive-tool Second, there is a “specially designed” interactive tool to walk the exporter through the definition above at http://www.bis.doc.gov/index.php/specially-designed-tool It is also possible to obtain a Commodity Jurisdiction through the DDTC’s online request form at http://www.bis.doc.gov/index.php/specially-designed-tool Once the exporter knows its products are defense articles, then the next step is registration with the DDTC on Form DS-2032 See http://www.pmddtc.state.gov/registration/crp.html The Form must be submitted through the electronic DTAS system at https://dtasonline.pmddtc.state.gov/ Even if the manufacturer is not exporting, if it manufactures any article that is found on the U.S Munitions List, it must be registered with the DDTC as a Defense Manufacturer Defense brokers, parties that arrange for the sourcing of defense articles on behalf of a government entity must also register with the DDTC Once registered, an exporter must enroll in the D-Trade electronic licensing system in order to obtain a license for the permanent export, temporary export, or temporary import of U.S Munitions List items This requires the user to access to the D-Trade system and purchase software which will allow for individual digital certificates The application for permanent export of U.S Munitions List items is filed through D-Trade on a DSP-5 (see Figure 5–19) For some items, specified as “significant military equipment,” the applicant must obtain a signed Nontransfer and Use Certificate (DSP-83) from the consignee and end user prior to making application (See Figure 5–20.) In some cases, as a condition of granting the license, the DDTC may require that the applicant obtain an import certificate signed by the government of the foreign country and/or provide verification of delivery of the item to the foreign country Different procedures and license forms apply to classified articles and technical data Additionally, there are separate forms that apply to direct, commercial sales and to sales to the U.S Department of Defense for resale to foreign countries under the Foreign Military Assistance program Before appointing any foreign distributors who are authorized to resell the products, the exporter must submit the Distributorship Agreement to the DDTC for approval Agreements to grant manufacturing licenses or provide technical assistance to any parties outside of the United States, including related parties, must be approved in advance through Technical Assistance Agreements and Manufacturing License Agreements Not all countries are eligible for licenses from the DDTC In fact, there is a list of countries that are prohibited by the U.S in Section 126.1 of the International Traffic in Arms Regulations To obtain the most recent information on the specific countries DDTC has provided a link which provides the details on a country basis at https://www.pmddtc.state.gov/embargoed_countries/index.html An area of particular sensitivity is the requirement that if the amount of the export sale is $500,000 or more, the license applicant must disclose to the DDTC the names and detailed payment information on any fees or commissions of $1,000 or more paid to any person to promote or secure the sale of a defense article or service to the armed forces of a foreign country The applicant must also report any political contributions of $1,000 or more to any government employee, political party, or candidate These requirements are required as part of the Foreign Corrupt Practices Act (See Chapter 3, Section D for more information.) The applicant must also survey its suppliers, subcontractors, and agents to ascertain whether they have paid or agreed to make any such payments In addition to the disclosure to the DDTC, such payments may violate foreign law as many foreign jurisdictions have enacted similar anti-bribery provisions 207 Figure 5–19 Application/license for permanent export 208 209 210 211 212 Figure 5–20 Nontransfer and Use Certificate 213 The DDTC’s policy is that persons engaged in the export of defense articles and services should maintain an export procedures manual containing DDTC-specified policies and procedures to reduce the risk of violations The DDTC also has a voluntary disclosure program which will mitigate potential fines Once a voluntary disclosure is filed, the exporter has 180 days to “perfect” the disclosure, so that the final disclosure gives details on all violations including commodities, all parties involved, dates, whether licenses would have been allowed, what steps the exporter has taken to ensure future compliance, etc It is wise to consult with an attorney before filing the disclosure Persons who violate the Arms Export Control Act are subject to the civil and criminal penalties and can be debarred from exporting for a period of up to three years S E nfo rcement With the implementation of the Export Control Reform Act, the President created the Export Enforcement Coordination Center (E2C2) 214 This group is charged with coordinating and enhancing criminal, administrative, and related export enforcement activities It is a multi-agency center with representation from eight U.S governmental departments and fifteen federal agencies Its goal is to create a whole-government approach with an eye to eliminating the duplication of efforts while ensuring that there is communication between intelligence efforts, law enforcement and all of the various export licensing agencies 215 ... regulation International trade I Johnson, Thomas E., 19 48 -Export/import procedures and documentation II Title HF1 416 .5.J64 2 015 658.8’4—dc23 2 014 033738 © 2 015 Donna L Bade All rights reserved Printed... Bade, Donna L Export/import procedures and documentation / Donna L Bade — Fifth edition pages cm Revised edition of Thomas E Johnson’s and Donna L Bade’s Export/import procedures and documentation, ... 2 010 Includes bibliographical references and index ISBN 978-0- 814 4-3475-8 (hardcover : alk paper) ISBN 0- 814 4-3475-4 (hardcover : alk paper) ISBN 978-0- 814 4-3476-5 (ebook) ISBN 0- 814 4-3476-2 (ebook)