Finally, you don’t want to assume that just because your customs broker is handling much of the paperwork, he or she will fix any problems that arise. That’s not quite how it works, Pomerantz notes. To Customs, the broker is acting on the importer’s behalf. If the broker makes a mistake, it’s up to your firm to set things straight. “Final responsibility lies with the importer,” she says.
Operating under any one of these assumptions and misperceptions can cost your firm time and money. It’s much more cost-effective to manage the process correctly from the get-go. ###
While the value of goods and services imported to the U.S. fell from $217 billion in April 2008 to $150.3 billion in April 2009 according to the Bureau of Economic Analysis, corporate finance managers can’t assume that their firms are sitting pretty when it comes to complying with the myriad regulations that govern import transactions. After all, many companies are running on barebones staff, which can mean that pesky details, like import regs, get pushed to the back burner. “Companies are focused on what they absolutely have to do to get goods into the country, versus looking at overall compliance Big Fat Finance,” says Susan Pomerantz, vice president of global trade management consulting with JPMorgan.
Another misperception: the idea that once Customs releases the shipment, you’re sitting pretty. Not so fast, Pomerantz says. A number of regulations, such as those relating to product safety, can come into play even after the goods have been released. “These absolutely carry past the time of Customs clearance,” she says. Any violations can be subject to recalls and penalties.
To avoid such punishment, financial executives need a good grasp of import regulation. Pomerantz outlines several misperceptions that can get in the way. First is the notion that the firm’s exposure is limited to the duties imposed by Customs. Often, these seem immaterial. As a result, double-checking the documentation may seem like a pointless clerical exercise. However, a firm’s exposure for many goods actually is the value of the imported goods, plus the duty. It pays to make sure this info is accurate.
That could prove troublesome down the road, Pomerantz adds. If U.S. Customs and Border Protection later determines that a company hasn’t fulfilled its obligation to document and manage the transaction, the agency could take any of several unwanted actions, she says. These include yanking the firm’s trade privileges, boosting the frequency of audits and inspections, or zapping the firm with penalties. None are any fun.
It’s easy to think that if your firm’s broker is keeping records of the import transactions, your firm itself is off the hook. That may work for a while Big Fat Finance, but you’re taking a chance, Pomerantz says. If the broker goes out of business or is acquired, your firm will need to get the backup records. It’s the same story if your firm decides to switch to another brokerage firm. The upshot? Your firm needs to retain copies of all records related to the transactions for five years. That includes everything from the purchase order to verification of payment.
At the same time, some importers assume that because their seller handled the invoice, they are not responsible for errors. Guess again. “It’s the importer’s responsibility to make sure documents are accurate,” Pomerantz says. A case in point: Under most free trade agreements, the importer typically is responsible for proving that the goods qualify under the agreement and for providing records to support this. That’s difficult to do, since few manufacturers in their right minds will release information that shows how the good qualify. So, many importers roll the dice and assume they’ll be able to get the backup if they’re ever questioned. That may work … or it may not. If it doesn’t, the penalties can be tough.
A little work up front can save time and money down the road.
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