Export/Import Procedures and Documentation

DONNA L. BADE is a managing partner of the Chicago office of the international trade law firm, Sandler, Travis Rosenberg, P.A. She is past President of the Chicago Brokers Freight Forwarders Association, and of the Customs Committee of the Chicago Bar Association.

Contents

Prefacexiii

Acknowledgmentsxv

About the Authorxvii



Part I

Organizing for Export and Import Operations

Chapter 1.Organizing for Export and Import Operations3

A.Export Compliance Department3

B.Import Department5

C.Combined Export and Import Departments9

D.Manuals of Procedures and Documentation10

E.Record-Keeping Compliance12

F.Software17

G.Federal, State, International, and Foreign Law17



Part II

Exporting: Procedures and Documentation

Chapter 2.Exporting: Preliminary Considerations21

A.Products21

B.Volume22

C.Country Market and Product Competitiveness Research22

D.Identification of Customers: End Users, Distributors,

and Sales Agents23

E.Compliance With Foreign Law24

1.Industry Standards24

2.Foreign Customs Laws26

3.Government Contracting27

4.Exchange Controls and Import Licenses27

5.Value-Added Taxes28

6.Specialized Laws28

F.Export Controls and Licenses28

G.Patent, Trademark, and Copyright Registrations

and Infringements29

H.Confidentiality and Non-Disclosure Agreements30

I.Antiboycott Compliance30

J.Employee Sales Visits to Foreign Countries—Immigration

and Customs Compliance30

1.Carnets31

K.Utilization of Freight Forwarders and Foreign

Customs Brokers31

L.Export Packing and Labeling (Hazardous Materials)37

M.Terms of Sale38

N.Consignments42

O.Leases43

P.Marine and Air Casualty Insurance43

Q.Methods of Transportation; Booking Transportation45

R.Country of Origin Marking47

S.Foreign Warehousing and Free Trade Zones47

T.Export Financing and Payment Insurance47

U.Tax Incentives48

V.Export Trading Companies, Export Trade Certificates

of Review, and Export Management Companies48

W.Translation49

X.Foreign Branch Operations, Subsidiaries, Joint Ventures,

and Licensing49

Y.Electronic Commerce50

Chapter 3.Exporting: Sales Documentation53

A.Isolated Sales Transactions53

1.Importance of Written Agreements53

2.Email Orders54

3.The Formation of Sales Agreements54

4.Common Forms for the Formation of

Sales Agreements57

a.Price Lists57

b.Requests for Quotations57

c.Quotations and Costing Sheets59

d.Purchase Orders59

e.Purchase Order Acknowledgments,

Acceptances, and Sales Confirmations64

f.Pro Forma Invoices64

g.Commercial Invoices73

h.Conflicting Provisions in Seller and Buyer Sales Documentation73

i.Side Agreements76

B.Ongoing Sales Transactions76

1.Correlation with Documentation for Isolated Sales Transactions77

2.Important Provisions in International Sales Agreements78

a.Selling and Purchasing Entities79

b.Quantity79

c.Pricing80

d.Currency Fluctuations83

e.Payment Methods83

f.Export Financing86

g.Security Interest86

h.Passage of Title, Delivery, and Risk of Loss89

i.Warranties and Product Defects89

j.Preshipment Inspections90

k.Export Licenses91

l.Import Licenses and Foreign Government Filings91

m.Governing Law92

n.Dispute Resolution94

o.Termination96

C.Export Distributor and Sales Agent Agreements97

1.Distinction Between Distributor and Sales Agent97

2.Export Distributor Agreements97

a.Territory and Exclusivity99

b.Pricing99

c.Minimum Purchase Quantities102

d.Handling Competing Products102

e.Effective Date and Government Review103

f.Appointment of Subdistributors103

g.Use of Trade Names, Trademarks, and Copyrights103

h.Warranties and Product Liability104

3.Export Sales Agent Agreements105

a.Commissions105

b.Pricing105

c.Shipment105

d.Warranties108

e.Relationship of the Parties108

D.Foreign Corrupt Practices Act Compliance108

E.U.S. Export Control Laws109

Chapter 4.Exporting: Other Export Documentation111

A.Freight Forwarders111

B.Shipper’s Letters of Instructions112

C.Commercial Invoices115

D.Bills of Lading117

E.VOCCs and NVOCCs120

F.Packing Lists120

G.Inspection Certificates126

H.Marine and Air Casualty Insurance Policies

and Certificates129

I.Dock and Warehouse Receipts130

J.Consular Invoices130

K.Certificates of Origin153

L.Certificates of Free Sale153

M.Delivery Instructions and Delivery Orders155

N.Special Customs Invoices155

O.Shipper’s Declarations for Dangerous Goods155

P.Precursor and Essential Chemical Exports168

Q.Animal, Plant, and Food Export Certificates168

R.Drafts for Payment175

S.Letters of Credit175

T.Electronic Export Information179

U.Freight Forwarder’s Invoices194

V.Air Cargo Security and C-TPAT194

1.Air Cargo Security194

2.Customs and Trade Partnership Against

Terrorism (C-TPAT)195

Chapter 5.Export Controls and Licenses197

A.Introduction197

B.Scope of the EAR199

C.Commerce Control List200

D.Export Destinations204

E.Customers, End Users, and End Uses213

F.Ten General Prohibitions214

G.License Exemptions and Exceptions216

H.License Applications and Procedures219

1.Documentation From Buyer219

2.License Application Form222

3.Procedures228

I.Re-Exports231

J.Export Documentation and Record-Keeping231

K.Special Comprehensive Licenses234

L.Technology, Software, and Technical Assistance

Exports236

M.Validated End-User Program238

N.Antiboycott Regulations239

O.Violations and Penalties246

P.Embargoes and Trade Sanctions Programs246

R.U.S. Munitions and Arms Exports247

S.Enforcement258



Part III

Importing: Procedures and Documentation

Chapter 6.Importing: Preliminary Considerations261

A.Products261

B.Volume262

C.Country Sourcing263

D.Identification of Suppliers264

E.Compliance With Foreign Law264

1.Foreign Export Controls265

2.Exchange Control Licenses266

3.Export Quotas266

F.U.S. Customs Considerations267

1.Utilization of Customs Brokers268

2.Importation Bonds269

3.Importer’s Liability and Reasonable Care272

4.Application for Importer’s Number275

5.Ports of Entry275

6.Import Quotas280

7.Antidumping, Countervailing, and Other Special Duties281

8.Classification282

9.Valuation283

10.Duty-Free and Reduced Duty Programs284

11.Column 2 Imports285

12.Deferred Duty Programs (Bonded Warehousing

and Foreign Trade Zones)285

13.Record-Keeping Requirements293

14.Customs Rulings293

G.Import Packing and Labeling296

H.U.S. Commercial Considerations297

1.Prevailing Market Price297

2.Buy American Policies297

3.U.S. Industry Standards301

I.Terms of Purchase301

J.Consignments304

K.Leases304

L.Marine and Air Casualty Insurance305

M.Method of Transportation; Booking Transportation305

N.Import Financing306

O.Patent, Trademark, and Copyright Registrations

and Infringements306

P.Confidentiality and Non-Disclosure Agreements308

Q.Payment308

R.Translation309

S.Foreign Branch Operations, Subsidiaries, Joint Ventures,

and Licensing309

T.Electronic Commerce310

Chapter 7.Importing: Purchase Documentation313

A.Isolated Purchase Transactions313

1.Importance of Written Agreements314

2.Email or Internet Orders314

3.The Formation of Purchase Agreements315

4.Common Forms for the Formation of Purchase Agreements317

a.Price Lists317

b.Requests for Quotations and Offers to Purchase317

c.Quotations317

d.Purchase Orders318

e.Purchase Order Acknowledgments, Acceptances,

and Sales Confirmations319

f.Commercial Invoices319

g.Conflicting Provisions in Seller and Buyer Sales

Documentation320

h.Side Agreements321

B.Ongoing Purchase Transactions321

1.Correlation With Documentation for Isolated Purchase Transactions 322

2.Important Provisions in International Purchase Agreements323

a.Purchasing and Selling Entities323

b.Quantity324

c.Pricing324

d.Currency Fluctuations327

e.Payment Methods328

f.Import Financing330

g.Security Interest330

h.Passage of Title, Delivery, and Risk of Loss331

i.Warranties and Product Defects331

j.Preshipment Inspections332

k.Export Licenses332

l.Governing Law333

m.Dispute Resolution334

n.Termination336

C.Import Distributor and Sales Agent Agreements336

1.Distinction Between Distributor and Sales Agent336

2.Import Distributor Agreements337

a.Territory and Exclusivity337

b.Pricing338

c.Minimum Purchase Quantities338

d.Handling Competing Products339

e.Appointment of Subdistributors339

f.Use of Trade Names, Trademarks, and Copyrights339

g.Warranties and Product Liability340

3.Import Sales Agent Agreements340

a.Commissions340

b.Pricing341

c.Shipment341

Chapter 8.Import Process and Documentation343

A.Importer Security Filing and the 10+2 Program345

B.Bills of Lading345

C.Commercial Invoices346

D.Pro Forma Invoices347

E.Packing Lists347

F.Inspection Certificates347

G.Drafts for Payment349

H.Arrival Notices349

I.Pickup and Delivery Orders349

J.Automated Commercial Environment (ACE)350

K.Entry/Immediate Delivery350

L.Entry Summary352

M.Other Entries358

N.Reconciliation361

O.GSP, AGOA—Special Programs362

P.NAFTA/Other FTA Certificates of Origin363

Q.Specialized Products Import Entry Forms364

R.Examination and Detention369

S.Liquidation Notices379

T.Notices of Redelivery380

U.Post Entry Amendment380

V.Requests for Information383

W.Notices of Action383

X.Protests387

Y.Record-Keeping387

Z.Administrative Summons391

AA.Search Warrants391

BB.Grand Jury Subpoenas391

CC.Seizure Notices395

DD.Prepenalty Notices395

EE.Penalty Notices395

FF.Customs Audits399

GG.Penalties401

HH.Prior Disclosure402

II.Court of International Trade403

JJ.Appeals403

KK.Offers of Compromise404

LL.ITC and Commerce Questionnaires404



Part IV

Global Customs Considerations

Chapter 9.Determining the Proper Classification

of a Product407

A.The Organization of the Tariff Schedules408

B.The General Rules of Interpretation410

C.Duty Rates418

Chapter 10.Determining the Proper Value to Declare425

A.Transaction Value426

1.Additions to the Transaction Value426

2.Deductions from the Transaction Value428

3.Related Parties429

B.Transaction Value of Identical Merchandise429

C.Transaction Value of Similar Goods430

D.Deductive Value430

E.Computed Value430

F.Fall-Back Methodology431

1.Unacceptable Methods431

G.First-Sale Transactions432

Chapter 11.Determining the Proper Country of Origin435

A.Preferential Duty Laws436

1.Substantial Transformation437

2.The 35 Percent Agreements437

a.GSP: Generalized System of Preferences438

b.CBERA: Caribbean Basin Economic Recovery Act439

c.AGOA: African Growth and Opportunity Act440

d.United States–Israel Free Trade Agreement441

3.The Free Trade Agreement Tariff-Shift
or Tariff-Shift

Plus Regional Value Content Rules441

a.North American Free Trade Agreement (NAFTA)441

1)Preference Criterion A443

2)Preference Criterion B443

3)De Minimis444

4)Regional Value Content444

5)Preference Criterion C446

6)Preference Criterion D446

7)Preference Criterion E446

8)Preference Criterion F447

9)Accumulation/Cumulation447

10)Fungibility447

11)Certificates of Origin447

b.The Other Free Trade Agreements450

B.Country of Origin Marking Laws455

1.Country of Origin for Marking Purposes456

2.NAFTA Country of Origin Marking Rules457

3.Other Free Trade Agreement Marking Rules458

C.Federal Trade Commission Rules on “Made in the

USA” Marking458

D.Government Procurement459

1.The Buy American Act459

2.The Trade Agreements Act and the WTO Agreement

on Government Procurement461

3.Other Buy American–Type Requirements464

a.Buy America464

b.The Berry Amendment465



Part V

Specialized Exporting and Importing

Chapter 12.Specialized Exporting and Importing469

A.Drawback469

1.Unused Drawback469

2.Rejected Merchandise Drawback470

3.Manufacturing Drawback476

B.Foreign Processing and Assembly Operations477

C.Barter and Countertrade Transactions482



Appendix A.Incoterms Diagram483

Appendix B.International Sales Agreement (Export)485

Appendix C.Department of Defense – Compliance Program

Guidelines491

Appendix D.Informed Compliance: Reasonable Care497

Appendix E.USITC Harmonized Tariff Schedule Contents515

Appendix F.International Purchase Agreement (Import)521

Appendix G.ACE Program and Standard Reports527

Appendix H.Guidance on Internet Purchases537

Appendix I.Regulatory Audit Questionnaires547

Appendix J.Export/Import–Related Web Sites555

Glossary of International Trade Terms561

Index591