FAQs

Import Compliance:

What is C-TPAT?
C-TPAT is a voluntary government-business initiative to build cooperative relationships that strengthen and improve overall international supply chain and U.S. border security. C-TPAT recognizes that U.S. Customs and Border Protection (CBP) can provide the highest level of cargo security only through close cooperation with the ultimate owners of the international supply chain such as importers, carriers, consolidators, licensed customs brokers, and manufacturers. Through this initiative, CBP is asking businesses to ensure the integrity of their security practices and communicate and verify the security guidelines of their business partners within the supply chain.

What is the Container Security Initiative (CSI)?
CSI addresses the threat to border security and global trade posed by the potential for terrorist use of a maritime container to deliver a weapon. CSI proposes a security regime to ensure all containers that pose a potential risk for terrorism are identified and inspected at foreign ports before they are placed on vessels destined for the United States. CBP has stationed multidisciplinary teams of U.S. officers from both CBP and Immigration and Customs Enforcement (ICE) to work together with our host foreign government counterparts. Their mission is to target and prescreen containers and to develop additional investigative leads related to the terrorist threat to cargo destined to the United States.

What is the 10+2 Importer Security Filing?
The Importer Security Filing (ISF), commonly known as the "10+2" initiative, is a Customs and Border Protection (CBP) regulation that requires importers and vessel operating carriers to provide additional advance trade data to CBP for non-bulk cargo shipments arriving into the United States by vessel. This data must be supplied prior to the vessel leaving the origin port. The party required to submit the Importer Security Filing (ISF) is the party causing the goods to enter the limits of a port in the United States. This party is known as the "ISF Importer".

What is ACE?
The Automated Commercial Environment (ACE) is the US Customs commercial trade processing system designed to automate border processing, to enhance border security and foster our economic security through lawful international trade and travel. ACE will eventually replace the current import processing system for U.S. Customs, the Automated Commercial System (ACS). ACE is part of a multi-year CBP modernization effort that is being deployed in phases. ACE provides a solid technology foundation for all border security initiatives within CBP.

What is ABI?
The Automated Broker Interface (ABI) is a component of the U.S. Customs automated systems that permits qualified participants to electronically file required import data with Customs. ABI is a voluntary program available to brokers, importers, carriers, port authorities, and independent service centers. Currently, over 96% of all entries filed with Customs are filed through ABI.

What is a CBP Bond?
A CBP bond, formerly known as Customs Bond, is a contract that is given to insure the performance of an obligation or obligations imposed by law or regulation. A bond is like an insurance policy that guarantees payment to U.S. Customs and Border Protection (CBP) if a required act is not performed. Bonds have a number of uses in CBP. The most common use allows importers to take possession of their goods before all CBP formalities are completed. Another common use allows a carrier to move goods under bond from one place to another before those goods are actually entered for consumption with duties paid. All parties that import merchandise into the United States for commercial purposes or transport imported merchandise through the United States must have a CBP Bond.

What is a Binding Ruling?
Binding ruling is a method to determine if the HTS number you think your product falls under, is correct. Correct tariff classification is important not only for determining the duty rate, but also for determining whether goods are subject to quotas, antidumping or countervailing duties; review by other governmental agencies (e.g., FDA, EPA); restraints, embargoes, or other restrictions. CBP requires the 10-digit tariff number of each item shipped to be reported at time of importation into the US. If the tariff numbers for your items are not shown on your paperwork, as required by the US Customs regulations, your shipments may be delayed. The act of correctly classifying goods is complex. It requires familiarity with the Harmonized Tariff Schedule of the United States, its 99 chapters, rules of interpretation, and notes. The Customs Modernization Act (Mod Act) requires the importer of record to use "reasonable care" to ensure correct classification of goods. The Binding Ruling can not only validate your tariff classification but also the requirements for import.

What is HTS?
The Harmonized Commodity Description and Coding System (HS) of tariff nomenclature is an internationally standardized system of names and numbers for classifying traded products developed and maintained by the World Customs Organization (WCO). The HS is a six-digit nomenclature. The first four digits are referred to as the heading. The first six digits are known as a subheading. Countries that have adopted the Harmonized System are not permitted to alter in any way the descriptions associated to a heading or a subheading nor can the numerical codes at the four or six digit level be altered. This is what keeps the Harmonized System harmonized. Individual countries may extend a Harmonized System number to eight or ten digits for customs purposes, and to eight or ten digits for export purposes. More than 200 countries, customs and economic unions, representing more than 98% of world trade, use the HS as a basis for customs tariffs, trade statistics, rules of origin, taxes such as VAT and GST and monitoring of controlled goods.

What is VAT and GST?
Value added tax (VAT), or goods and services tax (GST) is a consumption tax levied on imports. In contrast to sales tax, VAT or GST is neutral with respect to the number of passages that there are between the producer and the final consumer; where sales tax is levied on total value at each stage. A VAT or GST is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax.

ITAR Compliance:
What is ITAR?
International Traffic in Arms Regulations (ITAR) is a set of United States government regulations that control the export and import of defense-related articles and services on the United States Munitions List. These regulations implement the provisions of the Arms Export Control Act, and are described in the Code of Federal Regulations (CFR). The Department of State interprets and enforces ITAR. Its goal is to safeguard US national security and further US foreign policy objectives. ITAR regulations dictate that information and material pertaining to defense and military related technologies (for items listed on the US Munitions List) may only be shared with US Persons unless authorization from the Department of State is received or a special exemption is used. US Persons (including organizations) can face heavy fines if they have, without authorization or the use of an exemption, provided foreign (non-US) persons with access to ITAR-protected defense articles, services or technical data.

What is a CJ?
A commodity jurisdiction (CJ) request is used to determine whether an item or service is subject to the export licensing authority of the Department of Commerce, Bureau of Industry and Security (BIS) or the Department of State, Directorate of Defense Trade Controls (DDTC). BIS is the primary licensing agency for dual-use exports, while the DDTC licenses defense articles and services. If you are not completely sure of the export licensing jurisdiction of an item, you should request a CJ determination. You can also submit a CJ request if you believe that jurisdiction of an item has been incorrectly assigned and should be transferred to another agency. A CJ determination will only identify the proper licensing authority for an item, and is not a license or approval to export.

What is a MLA?
An agreement (e.g., contract) whereby a U.S. person grants a foreign person an authorization or a license to manufacture defense articles abroad and which involves or contemplates (a) the export of technical data (as defined in Sec. 120.21) or defense articles or the performance of defense services, or (b) the use by the foreign person of technical data or defense articles previously exported by the U.S. person.

What is a TAA?
An agreement (e.g., contract) for the performance of defense services or the disclosure of technical data, as opposed to an agreement granting a right or license to manufacture defense articles.

Supply Chain Logistics:
What is VMI?
Vendor Managed Inventory (VMI), also called demand pull, is a streamlined approach to inventory management, production and order fulfillment. VMI involves collaboration between suppliers and their customers (e.g. distributor, retailer, OEM, or product end user) which changes the traditional ordering process.

What is Landed Cost?
The total cost of a landed shipment including purchase price, freight, insurance, and other costs from the dock of your supplier up to final delivery at the port of destination. Typically this also includes import fees such as customs duties and other taxes.

What is a Transportation Routing Guide?
A Transportation Routing Guide (RG) is a document or tool that allows Shipper's and Consignee's to manage their inbound and outbound freight movement. A thorough RG defines packaging, shipping terms, require documents and what carriers to use to what location, usually by weight.

What is Reverse Logistics?
Reverse logistics stands for all operations related to the repair and reuse of products and materials. It is the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics. The reverse logistics process includes the management and the sale of surplus as well as returned equipment and machines from the hardware leasing business.

What is Marine Cargo Insurance?
Marine Cargo Insurance covers the loss or damage of cargo via any transport method (ocean, river, air, rail, truck) between the points of origin and final destination.

What are Incoterms?
Incoterms are a series of standard trade definitions or international sales terms, published by International Chamber of Commerce (ICC) and widely used in international commercial transactions. They are used to divide transaction costs and responsibilities between buyer and seller and reflect state-of-the-art transportation practices. Incoterms make international trade easier and help traders in different countries understand one another.

What is a SLI?
Shipper's Letter of Instructions is a document, which provides shipping instructions to the shipper's freight forwarder to ensure accurate and correct movement of their products across borders. Often this document will include billing terms regarding the freight and other charges as well as documentation preparation instructions in cases where the shipper is not providing those documents. In some cases product distribution instructions are also included. The SLI should provide the basic data elements that allow a forwarder to process the export with AES.

What is a Letter of Credit?
Letter of credit (LC) is a document issued by a financial institution and used primarily in trade finance. The LC is the source of payment for a transaction, meaning that redeeming the letter of credit will pay an exporter. Letters of Credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any.

What is a Dangerous Good?
A dangerous good is any solid, liquid, or gas that can harm people, other living organisms, property, or the environment. A nearly equivalent term, used almost exclusively in the United States, is hazardous material (hazmat). Dangerous goods include materials that are radioactive, flammable, explosive or corrosive, oxidizers or asphyxians, biohazardous, toxic, pathogen or allergen substances and organisms, but also physical conditions as compressed gases, including all goods containing such materials or chemicals, or may have other characteristics that render it hazardous in specific circumstances.

What is a Carnet?
Carnets are "Merchandise Passports." They are international customs documents that simplify customs procedures for the temporary importation of various types of goods. In the U.S., the most common Carneet is an ATA Carnet. An ATA Carnets eases the temporary importation of commercial samples, professional equipment, and goods for exhibitions and fairs. They facilitate international business by avoiding extensive customs procedures, eliminating payment of duties and value-added taxes (minimum 20% in Europe, 27% in China), and replacing the purchase of temporary import bonds.

What is a Transportation Management System?
Transportation Management System (TMS) reduces transportation costs and improves customer service by providing shippers with efficient planning and execution of inbound and outbound transportation processes. Transportation planning, shipment execution, financial settlement and tracking are key components of a thorough TMS.

Export Compliance:
What is EAR?
The Export Administration Regulations (EAR) are issued by the United States Department of Commerce, Bureau of Industry & Security (BIS) under laws relating to the control of certain exports, re-exports, and activities. In addition, the EAR implements anti-boycott law provisions requiring regulations to prohibit specified conduct by United States persons that has the effect of furthering or supporting boycotts fostered or imposed by a country against a country friendly to United States. The export control provisions of the EAR are intended to serve the national security, foreign policy, nonproliferation, and short supply interests of the United States and, in some cases, to carry out its international obligations. Some controls are designed to restrict access to dual use items by countries or persons that might apply such items to uses inimical to U.S. interests.

What is the Wassenaar Agreement?
The Wassenaar Arrangement is one of four multilateral export control regimes in which the US participates. The Arrangement's purpose is to contribute to regional and international security and stability by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies to prevent destabilizing accumulations of those items. The Wassenaar Arrangement establishes lists of items for which member countries are to apply export controls. Member governments implement these controls to ensure that transfers of the controlled items do not contribute to the development or enhancement of military capabilities that undermine the goals of the Arrangement, and are not diverted to support such capabilities.

What is the Nuclear Suppliers Group?
The Nuclear Suppliers Group (NSG) is one of the four multilateral export control regimes in which the US participates. NSG is a group of 40 member countries established in 1992 and focused on stemming the proliferation of nuclear weapons.

What is the Australia Group?
The Australia Group (AG) is one of the four multilateral export control regimes in which the US participates. The formation of AG in 1985 was prompted by Iraq's use of chemical weapons during the Iran-Iraq War. Australia, concerned with Iraq's development of chemical weapons, recommended harmonization of international export controls on chemical weapons precursor chemicals. As the AG membership grew, it expanded its focus to include chemical production equipment and technologies and measures to prevent the proliferation of biological weapons. Today the AG is composed of 34 member countries.

What is the Missile Technology Control Regime?
The Missile Technology Control Regime (MTCR) is one of the four multilateral export control regimes in which the US participates. US has been a member of MTCR since the regime's inception in 1987. The focus of the MTCR is to limit the proliferation of missiles capable of delivering weapons of mass destruction. Initially, the MTCR consisted of only seven members. The MTCR has grown to include 33 member countries that have agreed to coordinate their national export controls to stem missile proliferation.

What are Foreign Asset Controls?
The Office of Foreign Asset Controls (OFAC) at the Department of the Treasury, is responsible for: blocking assets of foreign countries subject to economic sanctions; controlling participation by U.S. persons, including foreign subsidiaries, in transactions with specific countries or nationals of such countries; and administering embargoes on certain countries or areas of countries.

What are the Anti-Boycott Regulations?
The anti-boycott laws were adopted to encourage, and in specified cases, require U.S. firms to refuse to participate in foreign boycotts that the United States does not sanction. They have the effect of preventing U.S. firms from being used to implement foreign policies of other nations which run counter to U.S. policy. The Arab League boycott of Israel is the principal foreign economic boycott that U.S. companies must be concerned with today. The antiboycott laws, however, apply to all boycotts imposed by foreign countries that are unsanctioned by the United States.

What are the Transshipment and Re-Export Rules?
The illicit transshipment, re-export, and diversion of goods and technologies in international commerce compromise the effectiveness of U.S. trade agreements and export control laws. In so doing, such illicit transshipments harm U.S. industry, threaten U.S. security, weaken confidence in the international trading regime, and undermine international efforts to liberalize trade. To help combat these threats, the Department of Commerce (DOC) has launched the Transshipment Country Export Control Initiative (TECI).

What is the Destination Control Statement?
The Destination Control Statement is a statement that must be entered on the commercial invoice and on the bill of lading, air waybill or other export control document that accompanies the shipment. It is required for the export of any item on the Commerce Control List. The ITAR also has a Destination Control Statement that is specific to the shipment of goods covered by the ITAR.

What is a Certificate of Origin?
A Certificate of Origin (CO) is a document attesting that goods in a particular export shipment are wholly obtained or produced or manufactured or processed in a particular country (country of origin). Virtually every country in the world considers the origin of imported goods when determining what duty will be assessed on the goods or, in some cases, whether the goods may be legally imported at all. CO's are required when shipping to/from a country that has a Free Trade Agreement with the US (e.g. Israel, Chile, etc.).

What is CCATS?
The Commodity Classification Automated Tracking System (CCATS) is an alpha-numeric code assigned by BIS to products that it has classified against the Export Administration Regulations (EAR). The end result of the CCATS is identification of the ECCN, license exceptions that are available, reasons for control and corresponding section of EAR. Software companies provide the CCATS number because some encryption exports require the exporter to make post-shipment reporting to BIS on a bi-annual basis and the CCATS number is amongst one of the mandatory elements required for reporting.

What is ECCN?
An Export Control Classification Number (ECCN) is a specific alpha-numeric code that identifies the level of export control for articles, technology and software that are exported from member states of the Wassenaar Arrangement, including the United States. The ECCN classification that applies to any specific item is determined by referring to a table that is issued for the United States by the BIS. The ECCN table contains hundreds of ECCN codes that are organized according to the technical parameters and/or end use of the hardware, software or technology that is being exported.

What is a Schedule B number?
Schedule B is the Statistical Classification of Domestic and Foreign Commodities Exported from the United States. The Schedule B contains approximately 8,000 individual 10-digit commodity numbers covering everything from live animals and food products to computers. Every item that is exported is assigned a unique 10-digit identification code called a Schedule B number.

What is a Deemed Export?
An export of technology or source code (except encryption source code) is "deemed" to take place when it is released to a foreign national within the United States. Any foreign national is subject to the "deemed export" rule except a foreign national who (1) is granted permanent residence, as demonstrated by the issuance of a permanent resident visa (i.e., "Green Card"); or (2) is granted U.S. citizenship; or (3) is granted status as a "protected person". This includes all persons in the U.S. as tourists, students, businesspeople, scholars, researchers, technical experts, sailors, airline personnel, salespeople, military personnel, diplomats, etc.

What is Encryption?
Encryption is the process of transforming information using an algorithm to make it unreadable to anyone except those possessing special knowledge, usually referred to as a key. The result of the process is encrypted information. In many contexts, the word encryption also implicitly refers to the reverse process, decryption, to make the encrypted information readable again (i.e. to make it unencrypted). Export and re-export controls on commercial encryption products are administered by BIS. Encryption items specially designed, developed, configured, adapted or modified for military applications are controlled by ITAR as administered by DDTC.

What is Denied Party Screening?
By order of the United States government and its export regulations, U.S. individuals and companies are restricted or prohibited from exporting or providing services of any kind to any party contained in U.S. government export denial, debarment, and blocked persons lists. Failure to comply is a violation of U.S. law, and may result in criminal and/or civil prosecution and jeopardize your export privileges. Non-compliance is simply not an option.

What is NAFTA?
The North American Free Trade Agreement (NAFTA) is a trilateral trade bloc in North America created by the governments of the United States, Canada, and Mexico. The agreement creating the trade bloc came into force on January 1, 1994. It superseded the Canada-United States Free Trade Agreement between the U.S. and Canada. In terms of combined purchasing power parity GDP of its members, as of 2008 the trade block is the largest in the world and second largest by nominal GDP comparison.

What is AES?
The Automated Export System (AES) is a joint venture between the U.S. Customs Service, the Foreign Trade Division of the Bureau of Census (Commerce), the Bureau of Export Administration (Commerce), the Office of Defense Trade Controls (State), other Federal agencies, and the export trade community. AES is a paperless information gateway designed to improve trade statistics, improve customer service, assure compliance with and enforcement of laws relating to exporting and manage Harbor Maintenance Fee collection. Businesses are required to file via AES for any shipment over $2500 and any licensed shipment, whether EAR or ITAR, no matter the value.

What is the SED?
Effective September 30, 2008, all exporters MUST file their export information electronically through Automated AES. Paper Shipper's Export Declarations (SED) cannot be submitted. The new term for the former SED is the Electronic Export Information (EEI). The new Foreign Trade Regulations also increase fines from $1,000 to $10,000 for the following violations: (1) delayed filings; (2) failure to file export information through AES; (3) false filings of export information; and (4) using AES to further any illegal activity.

What is an Export Management System?
As an exporter, you are required to comply with all facets of the Export Administration Regulations (EAR). You are not required to implement an Export Management System (EMS), now called Export Management and Compliance Program (EMCP). An EMCP can help you comply with the EAR, however, and BIS urges exporters to have one, or some other system to ensure compliance. The EMCP addresses the greater emphasis on end-use and end-user concerns that has been in the EAR since the adoption of the Enhanced Proliferation Control Initiative in the early 1990s. Export controls have moved beyond just focusing on whether your product is controlled to a certain country. Now, you must be concerned about whether your product could end up in the hands of a proliferator or proliferation activity. An thorough EMCP helps you lay out many of the EAR requirements to ensure that you stay in compliance with the EAR.