Thursday, February 13, 2014


In a LinkedIN group an individual asked what group within a company should be responsible for managing import. That gave me the idea to do a post about import from a contract’s perspective.

The delivery terms that you agree upon in the contract determines which contract party is responsible for export and corresponding import. Any term that has title transferred to the Buyer before the exporting country frontier where customs clearance is required would make the buyer responsible for export customs clearance. If title is transferred to the Buyer after that point, but before the importing country frontier, the Buyer would be responsible for import clearance. If title is not transferred to the buyer until after customs clearance such as with DDP terms, the buyer has no responsibility for import.

If the Buyer is responsible for export, they will need an export license from the country of export. In situations where you buy with a ex-works deliver term, FOB or FAS terms where the point of delivery is prior to the customs frontier, the contract should include two terms. One should be the right to terminate the agreement and get a full refund of any payments made in the event the Buyer is unable to secure the export license. The second thing to include in an agreement is a requirement for the supplier to provide you all information necessary to get the export license. To assist you in getting that export license you would normally hire a local customs broker. Being a Customs Broker is a profession that involves the "clearing" of goods through customs barrier. This involves the preparation of documents and/or electronic submissions, the calculation and payment of fees, taxes, duties and excises (if any are required for export), and facilitating communication between government authorities and the exporter. To better understand responsibilities of the parties for each of the different delivery terms you should read the current INCOTERMS published by the International Chamber of Commerce.

In addition to the required licenses, export/import required two key documents – the supplier invoice and the bill of lading.
Buyers will normally establish specific requirements for the information that must be included on the invoice. For example:
“Invoices to Buyer must include, at a minimum, the following: (i) applicable P.O line item numbers; (ii) Agreement and Purchase Order numbers; (iii) terms of payment; (iv) billing period dates; (v) applicable Product unit Prices; (vi) total amount invoiced; (vii) the Harmonized Tariff Code of the importing country for every Product; and, (viii) Product descriptions with sufficient detail to enable verification of associated Product categorical classifications. Of these the unit prices, total amount invoiced, Harmonized Tariff Code for the importing company and the Product Descriptions will be used for customs clearance and in determining what, if any, duty rate will apply. Each country establishes their own duty rates based upon three things. The type of material being imported, the country it is being imported from (as difference countries have different rates) and the cost of what is being imported as duties are usually a percentage of the cost. For readers that are not familiar with a Harmonized Tariff Code, in the U.S. the U.S. International Trade Commission create a unique tariff code for every possible type of goods you could think of (see Duties are established by specific code by export country. For goods that are trans-shipped, the original country’s duty will apply unless value add was provided in the other country.

The second document required for import is the Bill of Lading. The bill of lading includes:
Information about the shipper: Name, Address, City, State/Province, Country, Zip,
Bill of Lading Number
Information about consignee: Name, Address, City, State/Province, Country, Zip
Information about freight charges: Entity that is paying the freight and amount.
Description of Items shipped: Handling units, package type, pieces, whether they include hazardous materials, written description of what is being shipped, weight, NMFC freight Code, Class, Cube,
Description of Carrier responsibility for loss and any insurance required
EEI / SED Exemptions
Name of Customs Broker for import
Shipper certification that goods are in proper condition for transportation, and are properly classified, marked, described, packaged
Carrier certification that they received the packages and required placards. Both the commercial invoice and the bill of
Lading will be provided with the shipment
Note: EEI / SED in a bill of lading is used when goods are being exported from the U.S, SED stands for Shipper’s Export Declaration and has been replaced by EEI (Electronic Export Information) which is an on-line advance notification that the goods will be exported.

The importer must provide a “declared cost” for the import. The declared cost includes:
•The seller’s price which is listed on the commercial invoice).
If the following items are not included in the price, you must also add:
•The costs of delivery to the import border. Those costs are listed on the bill of lading.
•Any selling commissions paid.
•Royalties and license fees paid by you on the imported goods as a condition of sale
•Cost of containers and packing. For example, the cost of any special containers for ocean shipment.
•Any other proceeds of resale the seller will receive.
•Any goods and services you provide to the seller for free or at a reduced cost (referred to as an “assist”)

From the Bill of Lading, Custom’s will contract Customs Broker to arrange for clearance.

The actual duties to be paid for import will be calculated based upon the declared cost, the harmonized tariff code, and the applicable duty rate for that specific tariff code for that specific exporting country.

The importer can be subject to fines and penalties if either of the documents fail to provide correct information about the declared cost or the correct harmonized tariff code. or if they fail to provide information needed to correctly determine what code should apply. If the buyer is the exporter you need they supplier to provide you with a correct invoice, and consider making them liable to pay for any fines or penalties for failing to provide you with that correct information. If the supplier is the exporter you need the supplier to also provide you with correct information on the bill of lading and possibly make them liable for any fines or penalties that were cause by either document being incorrect.

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