Five Questions All Exporters Should Ask

International sales are a great way to grow a company, especially during slow economic times in the United States. Companies of all sizes can benefit from export sales.

But like many aspects of citizenship, exporting is a privilege and not a right. Done properly, it is an excellent opportunity to increase your company’s revenues and profits. Done incorrectly or with disregard to international business practices and U.S. export regulations, you could not only lose a lot of money, you and your company could be found criminally negligent and face financial penalties, loss of export privileges, and even jail time.

Before you plunge too deep into exporting, you and your company should review and answer the following five questions:

1. Have you properly classified your products?

Before you can export, you must first determine if any of your products require an export license. Although only a small percentage of items do require an export license, you must make this determination or face substantial civil and criminal penalties for violating U.S. Export Administration Regulations (EAR). The EAR bases license requirements on the technical specifications of your products, where you are exporting, to whom, and how they will be used.

Export regulations also require that all exporters classify their products based on the Schedule B Commodity Classification Codes or the Harmonized Tariff Schedule. This classification affects the amount of tariff your customer must pay to import the goods into his or her country.

2. Do you know your customer?

You are responsible for the final destination and use of your products. A variety of U.S. departments including Commerce, State and Treasury publish lists of countries and individuals (called restricted parties) that U.S. companies cannot export to either directly or indirectly. It is your responsibility as an exporter to check each and every shipment against these lists.

Your responsibility doesn’t end when your goods reach their initial destination. You must be reasonably assured that your customer won’t forward the goods to another person or country that is a member of these lists. The U.S. Bureau of Industry and Security publishes a list of “red flags” that will help achieve this threshold of assuredness.

After the United States entered Iraq, U.S. investigators examining Iraqi bank and government records found that at least 30 U.S. companies had sold high-tech hardware to Iraq despite the United Nations embargo and U.S. export regulations banning such exports. It doesn’t matter whether these shipments were made directly to Iraq. If these U.S. exporters knew—or should have known—that the goods were going to be forwarded to Iraq from another country, they will face substantial criminal and civil penalties.

3. How will you get paid?

What’s the point of making a sale if you don’t get the money? International transactions bring up a host of new payment issues. Talk to the international department of your local bank to investigate the various international payment options.

4. Are you using the right Incoterms?

International terms of sale are different than the domestic terms of sale. The International Chamber of Commerce has created an internationally recognized set of terms called Incoterms that determine who is responsible for the cost of shipping and insuring your goods and up to what point.

Most U.S. companies understand their responsibilities when they use “FOB factory” for their domestic shipments. But use FOB for your international shipments, and you may be surprised about the additional freight and insurance costs your company is responsible for.

5. Have you completed the appropriate export documents?

Depending on what you are shipping, its value, the mode of transport, and its final destination, you must supply the proper documentation along with your goods. Your freight forwarder can help you determine what these documents are and even, for a fee, prepare the documents for you.

Don’t take the documentation requirements lightly. The U.S. Census Bureau has announced a 10-fold increase in civil and criminal penalties for incorrect documentation that could cost you or your company $10,000 per violation. That’s why many exporters keep the documentation responsibilities in-house. Even if you rely on your freight forwarder to complete your documents, your company is legally liable for the accuracy of the information that appears on these documents.

Export assistance

While all U.S. companies should take their export responsibilities seriously, these requirements shouldn't impede your entry into or expansion of the export game. Shipping Solutions software is just one of the tools available that can help you meet your documentation and compliance requirements quickly and affordably. Download or request a free demo version of the software or register for a free online tour of the software.

It doesn’t matter if your company has made a conscious decision to enter international markets in a strategic manner or if you are simply responding to unsolicited inquiries for your company’s products. Before you dive into the export waters its important that everyone at your company—from the top level of management to your sales people to your shipping department—understands their obligations as exporters.

By taking the time to familiarize yourself with U.S. export regulations, international sales procedures, and your potential customers, you can make exporting an enriching—and profitable—part of your company’s business.

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U.S.—Chile FTA Certificate of Origin

By Sue Senger email | bio

U.S. exporters whose products qualify under the new U.S.-Chile Free Trade Agreement (FTA) Rules of Origin may provide their Chilean customers considerable savings. This article addresses the written declaration necessary for the Chilean buyer to claim free or reduced rates of duty.

Certificate of Origin

A written declaration of origin can take many forms including a statement on company letterhead, a statement on a commercial invoice, or a formal certificate of origin. While no official form is required in order to declare origin under the U.S.-Chile FTA, the National Customs Service of Chile has issued a list of required data elements. These data elements, as well as a sample certificate of origin, can be found at the U.S. Trade Information Center website.

Shipments under $2,500 in value do not require a written declaration of U.S. or Chilean origin.

Declaring Goods as Originating

The Chilean importer is responsible for claiming preferential treatment for a given shipment at the time the goods are cleared through Customs. (Under the U.S.-Chile FTA, the ultimate responsibility for the validity of the claim lies with the importer, not the exporter, as it is under NAFTA.) In order to claim the preferential duty rate, the importer must provide to Chilean Customs a written declaration, which may or may not be in the form of a certificate of origin.

Despite the fact that the ultimate responsibility for making the declaration lies with the importer, the information needed to support the declaration will have to be provided by the producer. The written declaration that the goods are originating may be produced by the exporter, importer or producer of the goods.

If someone other than the producer (i.e., the exporter or importer) issues the declaration, it must be based upon either:

The importer is heavily dependent upon the assistance and cooperation of its U.S. suppliers in producing accurate and well-documented declarations of origin.

Special Cases

In some cases, a considerable amount of research into the inputs in the production of the goods is required in order to determine origin. Many exporters and importers believe that the only time that the declaration of origin can be provided is at the time the shipment clears Customs, creating a sense of urgency in determining the origin of the goods.

To obtain the reduced duty rate immediately, this is true. The importer, however, has another option. The importer may pay the non-preferential duties at the time the goods clear Customs and then has up to a year from the import date to apply for a refund of excess duties. This may happen in cases where the information required to determine that the goods are originating is not available at the time of shipment.

When the importer applies for a refund of the excess duties, they are required to supply a written declaration of the goods’ originating status.

In some situations, an exporter may find that multiple shipments of identical goods are being sent to the same Chilean importer. In these cases, the exporter doesn’t need to create new written declarations of origin for each individual shipment. Instead, the importer may maintain a "blanket" declaration or certificate of origin to be presented to Customs at the acceptance of each shipment. Chilean Customs suggests that the "blanket period" not exceed one year.

Supporting Documentation

The company that issues the written declaration of origin is required to maintain a copy of the declaration for five years from the date of importation of the goods. In addition, that company must also save a copy of all the supporting documentation used to demonstrate that the goods qualify as originating under the U.S.-Chile FTA rules of origin.

Filing a Correction

If, after a declaration of origin has been filed with Chilean Customs, one of the parties to the transaction realizes that the declaration or certificate was prepared based on incorrect information or it contains some type of error, the issuer of the declaration of origin must immediately notify, in writing, every person to whom it was originally issued.

While the importer will have to pay the Customs authority unpaid duties, Chilean Customs may not impose penalties on the issuer of the certificate of origin if notification of such an error was provided in a timely fashion, as defined by the U.S.-Chile FTA.

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