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The Changing Landscape of Importing and Exporting

By: Felix Pekar, QuestaWeb
Posted: February 11, 2008, from the February 2008 issue of GCI Magazine.

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Exporting is just as complex, even though a whole different set of issues apply. As each order is received, manufacturers must determine if the ordering company or individual appears on any denied party or convicted factory list. Making this determination requires screening against multiple lists. If the order can be shipped immediately, then one scan may suffice; however, production time typically necessitates multiple scans to ensure there has been no change in vendor status between order receipt and shipping time. Exporting, too, creates its own sea of documentation in the form of exporter declarations, among other things.

A recent ruling by a U.S. district in Texas sent out shock waves of a different sort. It held that importers are responsible for providing customs country-of-origin documents under the North American Free Trade Agreement to justify preferential treatment. The company in that case was assessed a $41.9 million penalty even though it argued its suppliers in Mexico and Canada bore all documentation responsibility.

How Do Firms Get into Trouble?
Being compliant is a huge undertaking. There are ever-changing requirements. There is documentation to prepare. There are security checks to perform. There are records to maintain. Companies must maintain accurate files for every transaction against the possibility of an inspection or focused assessment. As the court case mentioned above indicates, other documentation requirements apparently loom as well.

So what are the trouble spots? Perception is part of the problem. Many companies mistakenly believe they don’t have liability: “Our broker or freight forwarder does this for us” or “We only buy packages. I’m not the importer of record.” The world has changed. Legal liability rests with the importer of record even if a firm is purchasing in a package environment.

Some companies still believe the process is manageable with staff and manual processes. In fact, Aberdeen Research Group estimates that the international supply chains of many large companies are, at best, only 50% automated. Why? Some are willing to pay the steep costs to maintain a staff of the size and expertise required; others simply don’t know that the technology exists to help them. Some fear the process of integrating with back-end systems is too complex. Still others are content to patch homegrown systems together to meet each new requirement as it occurs.