Session Title: Mitigating the Financial and Compliance Risks Associated with International Shipments Supporting Global Collaborations

Transcription

1 Session Title: Mitigating the Financial and Compliance Risks Associated with International Shipments Supporting Global Collaborations Presented by: Norm Hebert, Director, International Research Administration, Brown University and Marie Hladikova, Export Control Director, Boston University

2 Why Going Global Makes Sense Broad emphasis by funders to increase collaborations into international and multidisciplinary arenas Solve broad global problems requiring interdisciplinary approaches and interinstitutional collaborations (e.g., energy, climate, computing, etc.) Expand appeal to international students and increase student exchanges Diversify research ideas and increase global buyin for results

3 Risk Mitigation Strategies

4 Strategies to Mitigate Risk International activities should be managed to avoid assuming liabilities, financial burdens and other compliance risks not necessary for the project often implemented through international agreements Establish policies and procedures consistent with relationships created by the activity Establish procedures and practices to identify, manage, reduce, and eliminate risk for foreign entities

5 Ways to Mitigate Compliance Risks Export controls and sanction and embargo compliance analyzed Human and animal subject participation complies with US and international protocols Biological and chemical material exchanges are done in full compliance with laws and safety procedures COI, RCR, and other ethical considerations carefully analyzed for compliance Review for FCPA and Antiboycott issues

6 Ways to Mitigate Financial Risks Use care in defining relationship to avoid accepting other party s liability Dispute Resolution and Termination procedures developed to minimize risk Define or restrict (limit) monetary exchanges Recovery of full costs including F&A Costs for health insurance, audits, and taxes defined Funding for equipment and research materials provided through agreement or other mechanism

7 Cost Mitigating Strategies

8 Examples of Shipping Mistakes Principal Investigator (PI) imports component necessary for his research from Japan and Forwarder needs an updated Power of Attorney form before the new form is signed, the shipment is RETURNED to the shipper in Japan. Laboratory sends equipment to France for repair and is charged with VAT payment of over 5,000 Euro on $20,000 shipment. Laboratory receives materials from abroad and doesn t process paperwork via customs on time resulting in daily penalties and storage fees.

9 International Shipping International logistics and shipment processing is complex and there are no broad exemptions for Universities Mistakes can be costly in delayed shipments, custom penalties, seizures and damaged materials among other consequences

10 Role of the Freight Forwarder Freight forwarders move freight across borders and process customs forms. It is not their role to do the following: Classify items and determine licensing; Complete shipping paperwork; Coordinate shipments with other Universities; Find foreign import requirements; And be your international shipping department. Tip: Develop working process for quotes and delegate a person familiar with logistics to act as the link between the lab and the forwarder if possible. Connect your international collaborators with your forwarder s foreign office to engage in direct communication.

11 Role of the Customs Broker Assists with customs clearance Operates as an agent for the importer Advises the importer on Harmonized Tariff Schedule (HTS) classification and customs entry Can provide advise on import permits, preferential duty programs, shipping documents IF contacted in advance of your shipments Tip: Engage your Customs Broker in advance of import purchases to help you review shipping documents, advise on duty programs, import permits etc.

12 Landed (Total) Cost Calculation Value of the exported product/material Import duties (CROSS Database) Import clearance charges Taxes such as the VAT, GST Freight and handling charges Insurance (air vs. ocean shipments) Warehouse, port charges, loading fees Currency conversion charges

13 Import Cost Mitigation Tools

14 Free Trade Agreements Free Trade Agreements (FTAs) allow for dutyfree entry of goods that are considered to originate in the FTA territory. Each FTA has its own rule of origin to determine which goods qualify for duty-free preference. There are special origin documentary requirements that must be met in order to take advantage of the duty-free provisions afforded under the FTA. Certificate of Origin is typically required with the shipment.

15 Free Trade Agreements NAFTA Australia Bahrain CAFTA-DR Chile Columbia Israel Jordan Morocco Oman Panama Peru Singapore South Korea * European Union currently in negotiations * Free Trade Agreement will only save money on import duties, NOT on taxes or other fees.

16 Scientific Equipment Exemption Certain type of scientific equipment is exempt from duty requirements You must follow the process outlined in the form ITA-338P to avoid that your claim will be denied Coordinate with the Customs Broker in advance if the equipment is delivered while your claim is pending Tip: Do not assume that your claim will be approved. It can save thousands on import duties.

17 Temporary Shipment Cost Mitigation Tools

18 Temporary Import Bonds (TIB) Procedure for temporary entry into U.S. Custom's territory free of duty for a limited time (typically 1 year). Instead of duty, the importer posts a bond for twice the amount of duty, taxes etc. The item must be re-exported or destroyed. Only certain classes of merchandise can be entered under TIB. Must be properly documented and processed by a Customs Broker This is a complex process and would be difficult to set up abroad!

19 Carnets Merchandise Passport which allows for dutyfree temporary entry of equipment/material Great for samples, tools of trade, research equipment that will be returned within 1 year Recognized in around 80 customs territories Penalties assessed if product isn t returned, is returned late, or if the carnet is lost Security deposit is typically 40 % Companies that issue carnets can also file AES Some Forwarders do not accept Carnets

20 Duty Drawback Program Program administered by U.S. Customs and Border Protection which allows the importer to waive or reduce import duty payment upon the export of the merchandise Rarely used outside of manufacturing Documentation is complex and you should hire a freight forwarder to handle duty drawback

21 Shipping Documents

22 Shipping Documents Commercial Invoice Shipper s Letter of Instructions Pro-Forma Invoice Certificate of Origin Packing List Air Waybill/ Bill of Lading Health Certificate/Sanitary Certificate Certificate of Free Sale Other product/country specific documents

23 Commercial Invoice A complete record of the transaction between the exporter and importer Reports the content of the shipment and serves as the basis for all other documents about the shipment Important document for Customs authorities and is used for duty determination purposes

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25 Common Errors in Invoicing Descriptions of goods are vague, listing only parts of numbers, truncated or coded descriptions, or lumping various articles together as one when several items are included A shipper who sells goods at list price, less a discount, invoices them at the net price and fails to show the discount A foreign shipper who purchases goods and sells them to a US importer at a delivered price shows on the invoice the cost of the goods to him instead of the delivered price A manufacturer ships replacement goods to this customer but invoices the goods at the net price without showing the full price less the allowance for defective goods previously shipped or returned The shipper assumes that a commission, royalty, or other charge against the goods is so called nondutiable and omits it from the invoice A shipper sells goods at a delivered price but invoices them at a price FOB the place of shipment and omits the subsequent charges

26 Certificate of Origin General Form is used for many countries worldwide, when requested, especially in the Middle East Often requires authentication by chambers of commerce Specific Certificates of Origin: US-Israel Certificate of Origin NAFTA Certificate of Origin Tip: If you are relying on a statement of origin provided by a manufacturer, get it in writing.

27 Air Waybill Serves as a transportation document Carrier s receipt of goods Evidence of contract of carriage Non-negotiable A House airwaybill is issued by a freight forwarder for consolidated air shipments

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29 Shipper s Letter of Instruction The Shipper's Letter of Instruction (SLI) provides shipping instructions to your freight forwarder This form is often used as the basis for the forwarder generate other forms, such as the AES. Be sure to provide the forwarder correct classification, ECCN, HTS codes etc.

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31 University Best Practices Boston University

32 Developing University Processes Develop relationships with offices that work with vendors and research laboratories (Sourcing, OSP, OTD, Global Programs, Mail Services, EHS, Legal etc.) to field import/export requests/questions to export compliance. Develop resources and guidelines easily accessible and visible to researchers and departments. Examples: Training Work Process Description Basic Guide to International Shipping

33 Developing University Processes Develop process with your freight forwarder and customs broker for resolving shipping issues. At BU, all import issues flagged by the University Customs Broker are automatically forwarded to me so that we can quickly resolve these without packages ending up in customs warehouse and incurring penalties and storage fees. Tip: Always verify how many days you have to clear Customs if your broker calls.

34 Developing University Processes Define the role of the Freight Forwarder for university departments your customs broker/forwarder is typically not your logistics or export compliance department Automated export system filings Recordkeeping requirements our customs broker attaches import entry documents to invoices sent to A/P Tip: When providing advise on export control requirements, ask if the department verified import requirements in the importing country.