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Agenda
• Welcome • Who is Livingston? • Level Setting…… • What has been said about Automation? • Best Practices • Automating Exports • Automating Imports • Cost Justification • Q&A
LIVINGSTON INTERNATIONAL
GLOBAL TRADE MANAGEMENT
FREIGHT SERVICES
TRADE CONSULTING
MANAGED SERVICES
TRADE AUTOMATION
BROKERAGE SERVICES
How do we transform Trade Management and minimize the RISK?
Trade Transformation
• Trade is transforming around us so we must be ready. • Change is inevitable. • We can’t think the same way we thought in the past. • We don’t know what next year will bring? Hillary Clinton? Donald Trump?
• No matter which one comes to power our norm will change.
How Do I Look at Things Differently?
Trade is not always as it appears…..
Global Trade Management
On the surface…….
Under the surface!!
Trade is a Moving Target
Trade Compliance Encompasses All Functions External
Operations
Sales & Marketing, Engineering
Finance, Tax & IT
Human Resources
Legal & Trade Compliance
Executive
Value End Use
End User Destination
Preferential Treatment Quantity License Origin
Sales & Marketing Pricing
Rebates Discounts
End User Info Promotions
Samples After Sales Support
Returns Customer Service
Order Entry
Engineering Technical Specs Design Intent
R&D End Use
Prototypes Samples
Finance/Tax Invoicing Records
Cost Royalties
License Fees Transfer Pricing
Valuation Adjustments
Tone Control Support
Objectives Resources
Risk Assessment
Visa Status Nationalities
Denied Parties
Shipping & Receiving Marking
Quantities
Sourcing MSAs
Pricing
Purchasing Suppliers Records
Manufacturing Raw Materials
Indirect Materials Machinery & Equip Sub-components
Origin Assists
Logistics Inco-terms
Goods Movements
Oversight Special Programs
Classification Certificates for Origin
Suppliers Invoice Origin
Security
Customs Brokers Data
Records Admin Present.
Carriers & Agents Shipping Docs
Security Commissions
Trade Compliance Responsibilities
Typical Supply Chain Flow
Numbers represent transaction change Text represents security touch point.
World Customs Organization (WCO)
• Stands at 180 countries representing 98% of global trade. • WCO declares 2016 to be the year of Digital Customs.
Automated clearance systems. Single Window
• Did you know you can subscribe to their magazine? http://www.wcoomd.org/en/media/wco-news-magazine/subscriptions.aspx
• Take Away? Recent US marking for Beef from Canada was taken to the WTO where they approved
retaliatory acts if the US did not repeal. Just published "Guide for the technical update of Preferential Rules of Origin” As global borders continue to shrink they will have a greater impact.
Wassenar Arrangement
• The Wassenar Arrangement is an agreement on export controls for conventional arms and dual-use technology.
• Often referred to as Multinational Export Control Regime (MECR) • Currently has 41 participating countries. • Program established export controls around dual use and ITAR items. • Mexico recently joined. • More countries have expressed interest in joining.
To Automate or Not?
What Has Been Said?
• “Automate or Perish!” – William Von Raab, Commissioner of Customs
under Ronald Reagan.
• Here is where ACE started.
• “Goods will only travel as fast as the information that controls them” –
Tom Butterly, UN Head of Trade Facilitation
Best Practices
Best Practice - Export • Management Commitment: Senior management must establish written export compliance standards for the
organization, commit sufficient resources for the export compliance program, and ensure appropriate senior organizational official(s) are designated with the overall responsibility for the export compliance program to ensure adherence to export control laws and regulations.
• Continuous Risk Assessment of the Export Program.
• Formal Written Export Management and Compliance Program.
• Ongoing Compliance Training and Awareness.
• Pre/Post Export Compliance Security and Screening: Screening of employees, contractors, customers, products, and transactions and implementation of compliance safeguards throughout the export life cycle including product development, jurisdiction, classification, sales, license decisions, supply chain, servicing channels, and post-shipment activity.
• Adherence to Recordkeeping Regulatory Requirements.
• Internal and External Compliance Monitoring and Periodic Audits.
• Maintaining a Program for Handling Compliance Problems including Reporting Export Violations.
• Completing Appropriate Corrective Actions in Response to Export Violations.
Reference: Bureau of Industry and Security: Don’t Let this Happen to You, Actual Investigations of Export Control and Antiboycott Violations; July 2014 Edition
Best Practice - Export • Management Commitment: Senior management must establish written export compliance standards for the
organization, commit sufficient resources for the export compliance program, and ensure appropriate senior organizational official(s) are designated with the overall responsibility for the export compliance program to ensure adherence to export control laws and regulations.
• Continuous Risk Assessment of the Export Program.
• Formal Written Export Management and Compliance Program.
• Ongoing Compliance Training and Awareness.
• Pre/Post Export Compliance Security and Screening: Screening of employees, contractors, customers, products, and transactions and implementation of compliance safeguards throughout the export life cycle including product development, jurisdiction, classification, sales, license decisions, supply chain, servicing channels, and post-shipment activity.
• Adherence to Recordkeeping Regulatory Requirements.
• Internal and External Compliance Monitoring and Periodic Audits.
• Maintaining a Program for Handling Compliance Problems including Reporting Export Violations.
• Completing Appropriate Corrective Actions in Response to Export Violations.
Reference: Bureau of Industry and Security: Don’t Let this Happen to You, Actual Investigations of Export Control and Antiboycott Violations; July 2014 Edition
Best Practice - Imports • Does your company have documented internal controls? • Does your company maintain an internal CBP department dedicated to maintaining and updating regulations, laws, and procedures
that will affect your CBP operations? • Do you have other business units/subsidiaries/IOR numbers that may apply for participation in the ISA program at a later date? • Do all of your company’s business units/subsidiaries, OIR numbers operate under a centralized CBP compliance policy? • Do you have a system in place to ensure that all elements of costs associated with imported products are declared to Customs?
Also, do you have an audit trail to verify this? • Are your CBP internal control processes consistent with the five interrelated components of internal control as defined by COSO’s
published report entitled “Internal Control-Integrated Framework”: • Are the CBP internal control procedures implemented in the divisions that participate in or effect importation of merchandise? • Do you have documented compliance requirements in place for suppliers and Customs brokers? • Have you identified CBP risks related to your company’s import operations? • Does your company have procedures to monitor and correct compliance deficiencies? • Has your organization set up a plan to perform self-testing (at least an annual review of significant risk areas) in the company’s
divisions that have an effect on imported merchandise? • Do you have meetings to discuss and coordinate changes to your CBP internal control system when tests or other information show
a need for compliance improvement? • Do you have an assigned officer who will initiate appropriate disclosures to CBP when indicated through system testing? • Do you have a recordkeeping program in place and are you able to submit documents in a timely manner to CBP upon request? • Is your internal control documentation, including tests and test results, maintained for three years and available for CBP review?
Reference: US Customs and Border Protection – Importer Self-Assessment Handbook
Best Practice - Imports • Does your company have documented internal controls? • Does your company maintain an internal CBP department dedicated to maintaining and updating regulations, laws, and procedures
that will affect your CBP operations? • Do you have other business units/subsidiaries/IOR numbers that may apply for participation in the ISA program at a later date? • Do all of your company’s business units/subsidiaries, OIR numbers operate under a centralized CBP compliance policy? • Do you have a system in place to ensure that all elements of costs associated with imported products are declared to Customs?
Also, do you have an audit trail to verify this? • Are your CBP internal control processes consistent with the five interrelated components of internal control as defined by COSO’s
published report entitled “Internal Control-Integrated Framework”? • Are the CBP internal control procedures implemented in the divisions that participate in or effect importation of merchandise? • Do you have documented compliance requirements in place for suppliers and Customs brokers? • Have you identified CBP risks related to your company’s import operations? • Does your company have procedures to monitor and correct compliance deficiencies? • Has your organization set up a plan to perform self-testing (at least an annual review of significant risk areas) in the company’s
divisions that have an effect on imported merchandise? • Do you have meetings to discuss and coordinate changes to your CBP internal control system when tests or other information show
a need for compliance improvement? • Do you have an assigned officer who will initiate appropriate disclosures to CBP when indicated through system testing? • Do you have a recordkeeping program in place and are you able to submit documents in a timely manner to CBP upon request? • Is your internal control documentation, including tests and test results, maintained for three years and available for CBP review?
Reference: US Customs and Border Protection – Importer Self-Assessment Handbook
Export Automation
Do You Have A Control Tower?
Prepare all parties in the international supply chain.
Get passports for your products.
Enable smooth screening and documentation for transactions.
Five Silver Bullets of Export Compliance Automation
• Restricted party screening • Transaction screening • Re-export screening • Trade documents • Audit trail
Export compliance software gives you tools to manage your compliance more efficiently, and deliver more value to your
business
How Much Time Do You Spend on Restricted Party Screening?
• Software provides many benefits: Integrated global lists (not just US focused)
• Fuzzy logic used to look for misspelling or names that may sound similar. C and K can sound alike.
• Logical process flow to manage work load.
• Record keeping and reporting!
Screening engines take the burden off your team
What Do You Screen?
• Do you screen suppliers/vendors? If you purchase from a restricted party you may not be able to
pay?
• How many times do you screen customers? Entry into ERP? How about at order time? Do you screen at shipment?
• What happens when you “Drop Ship”? Are you screening the updated address?
Why Should You Use Restricted Party Screening!
• University of Massachusetts Charged for violating export control laws after exporting an atmospheric testing device, along with
related cables and antennae, to a research facility in Pakistan that is listed on the entity list. The goods were EAR99 The university was given a $100,000 civil penalty, which was suspended for a two-year period
provided that the university does not engage in export violations during this period.
• A company purchased cleaning supplies from a sanctioned company for their office in Dubai. Since the supplier of the cleaning supplies was sanctioned a payment to them could not be made. Goods had already been delivered.
Compliant Shipping Documents
• Little or no effort to produce. • Missing data is alerted BEFORE the
transaction is completed. System will alert you to missing HTS and
other compliance data before the shipment is created.
• Documents can be retained electronically.
• Documents can be emailed to forwarder and customer.
Accurate and timely international shipping documents with no incremental effort
Simplify Your Record Keeping
• Export software becomes your filing cabinet. Commodity Jurisdiction. Classification Restricted Party Screening history. Shipping Documents
o A good system will also retain version levels!! Export Declarations or filings
Keeping Track of Expatriated Products
• Required under ITAR. • Can you spell
“Extraterritorial Reach”? • Can you track the products
you sold to your overseas customer?
• Automation can greatly increase your success in tracking goods.
Thoughts?
When you start to implement automation: • Automate a good process – no software can fix a bad one. • Get your IT staff involved early and form a complete working group for your
evaluation process. • Survey current vendors online for what they offer. • Use your network and find out what others are doing! • Ask questions about cost, technical considerations, currency, customer
service and overall satisfaction. • Do phone interviews with potential vendors and make a “short list” • Get proposals for your business, see demos and choose the best for your
requirements
Import Automation
Do You Have A Control Tower?
Prepare all parties in the international supply chain.
Get passports for your products.
Enable smooth screening and documentation for transactions.
What is required to make entry?
• Invoice, Packing List and Bill of Lading
• Easy right?
• Not so fast!
Documents required for entry.
• While it seems straight forward that Invoice, packing slip and BOL are all that is required but: • The terms of the agreement may change what is required?
• Incoterms can change the value. • Are you using a Free Trade Agreement?
• Must have document at time of entry. • What about First Sale for Export?
• Do you have the documents to support the First Sale transaction? • Do you have a customer agreement that requires additional documents
to be included?
How Does Automation Help?
• A system will retain all the data to make entry. • Systems will retain all master data required to
file an entry with Customs and Border Protection. Most people don’t know the location of the goods which is
required for entry.
• You can electronically pull in Advance Shipment Notices (ASN’s) or EDI invoice.
• System will match against master data and inform you of missing data.
What Makes Sense?
Another Alternative
• Are you Importer Self Assessment certified or want to be? Auditing requirements can be daunting.
• A good trade system can pull in ACE data and compare to actual broker data. • Using automation you can audit against:
Value (Three way match) Quantity Received vs Quantity Entered HTS Manufacture’s Identification Number And another element required for Entry
• System can match all elements and produce a compliance report. Great scorecard on your brokers!
Don’t Forget Trade Preference Agreements!
• Not just NAFTA but GSP and all other preference agreements. • Flags set on master file can be pulled into the transactions. • A good system can perform all the steps necessary. Solicitation – Making the request for information from a supplier. Determination – Using BOM’s to determine if it meets the requirements of the
appropriate agreement. Certificate Issuance – This step is often missed. If a good no longer qualifies for
an agreement you have the obligation to notify all parties of the change in status. o In fact it is mandatory under most agreements.
Recordkeeping
• Don’t forget about record keeping! • All records must be kept for 5 years.
• Not shorter and not longer!
• Government publication on record keeping. • http://www.cbp.gov/sites/default/files/documents/icp027.pdf
• A1A list • 19 CFR Part 163 – Interim (a)(1)(A) list. – 5 pages! • Basically any document involved in the import.
• Includes but not limited to Purchase Req, Purchase Order, Invoices, bills of lading and Payments
• Anti-Dumping/Countervailing and Drawback require longer periods. • Any good software system can help you maintain these records!
Thoughts?
When you start to implement automation: • Automate a good process – no software can fix a bad one. • Get your IT staff involved early and form a complete working group for your
evaluation process. • Survey current vendors online for what they offer. • Use your network and find out what others are doing! • Ask questions about cost, technical considerations, currency, customer
service and overall satisfaction. • Do phone interviews with potential vendors and make a “short list” • Get proposals for your business, see demos and choose the best for your
requirements
Cost Justification
Cost Savings for Exports
• AES Filing is the largest opportunity to save costs. By using automation you can minimize or eliminate
paying a forwarder/broker to file AES.
• Printing (or not printing) is the second largest cost savings. People are amazed at how much money is spent on
paper and toner for printing.
• Automating the Restricted Party Screening reduces time over manual screening. Every software requires tuning to ensure you are
ExportComplete Content One stop shop for all conent. You don't need to
subscribe to additional content.Number of RPS lists subscribed to 15
Cost per list $ 2,500.00 Total savings $ 37,500.00
Reduced Freight Costs (Consolidation) Consildating shipments avoids minimum charges on smaller shipments.
Risk Reduction Don't need to research where the records are stored. Everything can be stored in the system and attached to a transaction.
Hourly Rate $ 12.00 Total spent researching records 2000
Cost avoidance $ 2,000.20
RPS Patented Algorythm reducing time on screening
Average hit rate of 1% reduces time over competitors
Number of hits 3000Hourly Rate $ 12.00
Time to resolve hits (minutes) $ 2.00 Cost Savings $ 1,200.00
Document creation time savings Document profile allows for all documents for any given transaction to be generated reducing the amount of time needed to generate documents
Number of documents generated 2000Time to generate each (estimated minutes) 7
Hourly labor rate $ 12.00 Labor Savings $ 2,800.00
AES Filing With TSE there is no cost to file AES while a typical cost charged by a forwarder is about $35.00
Cost per filing AES or similar filings 42Total Shipments 2000
Savings 84000
Electronic Documents to Destination Save a tree. Paper copies are not required to be printed and then faxed to your customer. Electronic documents can be sent.
Cost per copy $0.12Total number of pages per shipment 7
Total shipments per year 2000Total Cost Savings $1,680.00
Cost Savings for Imports
• Classification Portal for all your brokers. Brokers can look up HTS You can also perform daily electronic push to brokers.
• Electronic feed to broker reduced entry fee’s. Creating a 7501 ready document for your broker
reduces their entry costs which is passed on to you. Also increases compliance as you use YOUR data!
• Combining entries? Sure. You can write an entry per arriving vessel. Save on entry costs. Save on MPF as it is maxed out at $485 per entry.
Cost Avoidance How?Classification portal for brokers, suppliers, etc. Reduced phone calls/emails from forwarders and brokers.
Enter average time(minutes) spent on phone calls 70Enter your hourly rate $ 12.00
Savings $ 3,570.00
Record keeping No offsite storage required. Reduction of internal space required as well.
Cost per square foot(meter) 35Square foot(meter) used 120
Total cost savings for space $ 4,200.00 Cost for external storage $ 420.00
Automation of assists and recon Reduction in time spent calculating and reporting reconciliation
Hourly Rate $ 12.00 Total Hours 60
Total Savings $ 720.00
Complete Content One stop shop for all conent. You don't need to subscribe to additional content.
Cost for content $ 2,500.00 Number of files purchased 6
Total savings $ 15,000.00
Risk Reduction No need to research where the records are stored. Everything can be stored in the system and attached to a transaction.
Hourly Rate $ 12.00 Total spent researching records (minutes) 2000
Cost avoidance $ 2,000.20
Electronic feed to brokers for lower brokerage costs
Typical example is the rate could be reduced by half.
Enter current brokerage rate $ 68.00 Enter estimate rate using TradeShere $ 35.00
Enter the number of entries 2000Total cost savings $ 66,000.00
MPF by entry consolidation Regulations read that entry can be made per arriving vessel. Consolidating shipments can reduce the MPF.
Number of multiple shipments arriving at the same time
5
Estimated MPF per entry $ 385.00 Esitmated brokerage fee $ 68.00 Non-Consolidated Totals $ 2,265.00
Consolidate Totals $ 553.00 Cost Savings $ 1,712.00
Import
Questions?
