The New Year provides an excellent opportunity for US exporters to evaluate their current practices and strategize for the coming year. For SME exporters, part of this annual planning should be to evaluate the company’s overall sales and sourcing plans. Whether planning to expand to a new market or increasing presence in current international markets, every exporting business should consider including the following five resolutions in their plans for 2015:
1. Confirm products are properly classified
Whenever exporting a product, it is essential that it be properly classified according to the World Customs Organization’s Harmonized Schedule and the importing country’s own, more specific, tariff line breakouts. The process of determining the right classification code for any given product can be complicated and time-consuming, and should not be undertaken lightly. The code determines the tariff rate that the exporter will have to pay, and if a product enters classified incorrectly, the exporting company may be subject to audits, challenges by Customs authorities, potential back-duties as well as penalties and interest.
2. Reduce costs by utilizing free trade agreement (FTA) benefits
Did you know that the United States has FTAs with 20 countries, and is in the process of negotiating with 11 countries in the Pacific and the 28 Member States of the European Union? These agreements lower the tariff rates for US exports into foreign markets, and exporters should be certain they are fully utilizing and complying with them in order to lower costs. Compliance with these agreements, however, is not always easy, as many products must be composed of certain amounts of ingredients/parts from either the US or the importing country. It is important that exporters verify that US products are considered U.S. origin for duty purposes. To do so, the product must meet the “preferential rules of origin” which are the criteria required to benefit from lower duties.
3. Ensure your declared customs value is correct and incorporates all necessary costs and adjustments
As customs revenues decrease as a result of lower duties from FTAs, there appears to be a trend in which national Customs authorities are more closely scrutinizing the declared customs value to ensure it is not undervalued for duty purposes. US exporters should review their invoice price to their overseas customer to be sure it includes all relevant costs, including logistics costs, royalties, assists, etc. as necessary. US exporters should be familiar with the WTO Customs Valuation Agreement and those elements that should be included in the customs value.
4. Compile documentation and understand import requirements for target markets
As exporters are aware, not only must their products be properly classified when they arrive at the importing country’s customs authority, but they also must be accompanied by the appropriate shipping documents, certificates, and permits in order to enter the target market. Each country’s import requirements are unique, so the maintenance of country checklists is key to exporting efficiently.
5. Review denied party lists to ensure compliance with sanctions
The US government enforces a variety of economic and trade sanctions against targeted foreign countries and regimes, terrorists, narcotics traffickers, and arms dealers. In order to remain in compliance with US sanctions, exporters must be diligent in ensuring that their international business partners and vendors are not on any denied party lists.
And one more for good measure. Consider how currency movements may affect pricing and sales
The increasing value of the dollar in relation to foreign currencies, especially the euro, causes American exports to be more expensive in foreign markets. Exporters should endeavor to minimize these costs and hedge against the associated risks.
If you need assistance in fulfilling any of the above resolutions, please contact TradeMoves at (240) 389-9001 or firstname.lastname@example.org