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Upcoming Seminars: |
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Air
& Ocean Transportation: Logistics Management for the International
Supply Chain
Atlanta, GA
2/26/10
Louisville, KY
4/16/10
Milwaukee, WI
5/14/10
Minneapolis, MN
4/23/10
Philadelphia, PA
4/30/10
Export
Documentation & Procedures Seminar
Anaheim, CA
4/20/10
Atlanta, GA
2/22/10
Charlotte, NC
3/22/10
Cincinnati, OH
3/15/10
Cleveland, OH
3/23/10
Detroit, MI
2/23/10
Houston, TX
3/16/10
Las Vegas, NV
5/4/10
Louisville, KY
4/12/10
Milwaukee, WI
5/12/10
Minneapolis, MN
4/21/10
New York, NY
5/18/10
Philadelphia, PA
4/26/10
Pittsburgh, PA
5/25/10
San Diego, CA
3/23/10
St. Louis, MO
5/18/10
Letters
of Credit and Alternative International Payment Methods Seminar
Anaheim, CA
4/21/10
Atlanta, GA
2/23/10
Charlotte, NC
3/23/10
Cincinnati, OH
3/16/10
Houston, TX
3/17/10
Louisville, KY
4/13/10
Milwaukee, WI
5/13/10
Minneapolis, MN
4/22/10
New York, NY
5/21/10
Philadelphia, PA
4/27/10
St. Louis, MO
5/21/10
NAFTA
Rules of Origin Seminar
Anaheim, CA
4/16/10
Atlanta, GA
2/25/10
Boston, MA
3/17/10
Charlotte, NC
3/25/10
Chicago, IL
2/24/10
Cincinnati, OH
3/18/10
Cleveland, OH
3/25/10
Detroit, MI
2/25/10
Houston, TX
3/19/10
Las Vegas, NV
5/6/10
Louisville, KY
4/15/10
Milwaukee, WI
5/19/10
Minneapolis, MN
4/27/10
New York, NY
5/20/10
Philadelphia, PA
4/29/10
Pittsburgh, PA
5/27/10
San Diego, CA
3/25/10
St. Louis, MO
5/20/10
Tariff
Classification: Using the Harmonized Tariff Schedule Seminar
Anaheim, CA
4/15/10
Atlanta, GA
2/24/10
Boston, MA
3/16/10
Charlotte, NC
3/24/10
Chicago, IL
2/23/10
Cincinnati, OH
3/17/10
Cleveland, OH
3/24/10
Detroit, MI
2/24/10
Houston, TX
3/18/10
Las Vegas, NV
5/5/10
Louisville, KY
4/14/10
Milwaukee, WI
5/18/10
Minneapolis, MN
4/26/10
New York, NY
5/19/10
Philadelphia, PA
4/28/10
Pittsburgh, PA
5/26/10
San Diego, CA
3/24/10
St. Louis, MO
5/19/10
These one-day seminars are taught by qualified
and knowledgeable instructors in small-group settings. All attendees
receive the corresponding reference book and a Certificate of Completion.
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By Kathryn Toomey email
| bio
My consulting firm is contracted to work with many diverse companies,
both commercial and defense related, to perform compliance risk
assessments and audits in the EAR, ITAR and related regulatory areas.
I applaud those companies for being proactive in their compliance
programs. I also believe every company should conduct a risk assessment
at least once a year or more frequently based on its commodities,
activities and exposures.
While many companies may not share that philosophy, it’s quite
alarming to hear how many companies consider a risk assessment to
be a five-minute activity, and they expect it to be completed over
the phone by simply answering a few questions. Then they’ll
ask, “Can I get that in writing to put in my files?”
Perplexing and amazing, isn’t it?
Listen up folks. In today’s post 9/11 regulatory climate,
if you are operating your exporting and importing business like
that, you are setting yourself up for serious consequences and are
in for a long, hard bumpy ride. It will be a ride that will certainly
have you the benefactor of fines and penalties, or worse, wearing
orange jumpsuits. In addition, the Obama Administration has some
interesting perspectives on suspension, debarment and trade enforcement.
The days of flying under the radar are long gone. No company is
immune from enforcement actions, especially the small to medium-sized
businesses and mom & pop operations.
So how do you avoid fines, penalties, suspension, debarment and
potential imprisonment? You take a proactive approach to compliance
and commit the necessary tools and resources. By doing this, you
are demonstrating intent to willfully abide by the laws and regulations
of the United States while also showing your company’s integrity
and ethics.
There are many ways to achieve a solid and proactive compliance
program that minimizes your risks, helps you manage your compliance
program, and structures your organization to make your assessment
a return on investment.
First, know what the industry compliance best practices are and
implement them (customized to your industry and company) in your
daily practice. Consider the following:
- What are your goals and objectives for the assessment? What
outcomes do you expect?
- What corrective measures are you willing to take?
- What resources will you assign to the assessment?
- Have you obtained management support?
- Do you have internal resources to do the assessment or do you
need to find external help?
- What level of detail and breadth will the assessment/audit cover?
- What business areas or programs will be audited?
- What are the organizational impacts and how will you communicate
internally with employees to achieve the best possible collaboration,
cooperation and results?
- What data gathering processes and techniques for document review
and interviewing will you use?
- What do you need to consider about your business culture and
operational issues to establish how to deal with numerous locations
domestically and internationally?
Once you’ve determined the goals and objectives along with
the assessment plan, it is time to implement and perform the assessment
or audit. Schedule the necessary time to perform the assessment,
ensure employees and documents are available to the auditors, and
be available for follow-up questions as necessary. Encourage employees
to speak openly and honestly. By carving out the appropriate time
in the beginning of the process, you will make the assessment more
efficient and cost effective, not to mention, keep things less complicated.
Next, take the time to evaluate and analyze the assessment findings.
At this point, you will have discovered if there are any systemic
problems, behavioral issues, training needs and any disclosures
that may be necessary. This is your company’s time to reap
the benefits of the assessment or audit and make a positive return
on investment. This is your time to handle the risks uncovered and
improve your operational efficiency. Did I mention this is your
time to reap your return on investment? Wouldn’t it be nice
to know you could correct an error that you found before incurring
a potentially large fine, penalty or suspension of export privileges?
Think ITT’s night vision case. One could presume that had
they performed a regular internal risk assessment and followed their
own internal processes more closely, they may have identified a
weak link in their process and could have avoided some of the $100M
fine, penalties and export suspension. While lack of an assessment
wasn’t the root cause of the ITT case, it certainly could
have helped.
Last, integrate lessons learned from the risk assessment and weave
it into your business's day-to-day activities. Improving your performance
is an ongoing process in minimizing your risk exposure. Compliance
is everyone’s job. Change the high-risk behaviors by providing
adequate, sufficient and regular training and resources to all employees
to ensure ongoing compliance. Create a culture of compliance. Make
employees a part of the process. Listen to your employees’
concerns and take the time to understand the challenges of daily
compliance. Make assessments a part of your regular routine. We
do it with employee performance reviews, so why wouldn’t we
do it with regulatory compliance especially since non-compliance
can have a severe adverse affect on your business?
Take the necessary time to perform a proper risk assessment and
do it with integrity and honesty. Otherwise, you will never see
a return on investment. If you are merely doing it to “color
in a square” on your compliance report or to satisfy senior
management and board members’ check lists, you are truly wasting
your time, money and efforts. By performing a valid risk assessment,
you are demonstrating your proactive approach and intent to willingly
and honestly comply with regulations and meet or exceed government
expectations. You are also helping to ensure your company’s
solvency and future. Handling risks, improving your performance
and integrating lessons learned is a solid return on investment
for any business.
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If you think exporting is all about making a sale,
think again. Getting the order can be just half the battle.
Almost every government agency imaginable has either
recently implemented major changes to their export regulations or
they are about to. And many of the regulatory changes are accompanied
by significant increases in penalties for non-compliance—up
to a million dollars or more for some violations.
It's up to you and your colleagues to stay on top
of this changing landscape. But who's got the time? In these difficult
economic times budgets are being frozen, staffing levels are being
cut, and your workload keeps getting bigger.
That's why International Business Training (IBT) is
offering a series of lunch-time webinars that let you participate
from your desktop computer in live, two-hour presentations on the
topics that are most important to you and your company:
- Export
101: The Basics of Exporting (Monday, March 8, 2010)
- Complying
With the Export Administration Regulations (EAR) (Tuesday,
March 9, 2010)
- Mandatory
AES: Complying With the Foreign Trade Regulations (FTR) (Wednesday,
March 10, 2010)
- Determining
Your Correct Schedule B Code Number (Thursday, March 11, 2010)
- Creating
an Export Management and Compliance Program (Friday, March
12, 2010)
We're hosting each session twice a day so both east
coast and west coast attendees can participate over their lunch
hours. Of course, if you've already got lunch plans, we don't mind
if you register for the other session that day.
Each two-hour webinar is only $150, and you'll receive
a copy of the instructor's PowerPoint presentation prior to the
webinar so you can take notes, and we'll mail you a Certificate
of Completion at the end of each webinar. Additional attendees from
your company can attend on the same internet connection for only
$50 each.
Seats for each webinar are definitely limited, so
don't delay. You can
register online or by calling IBT at
1-800-641-0920. You'll be glad you did!
Top of Page
By Roberto Bergami email
| bio
This is the second of two articles dealing with
"The United Nations Convention on Contracts for the International
Carriage of Goods Wholly or Partly by Sea," which are
commonly known as the Rotterdam Rules. The
first article provided the background to the process of
converting the Rotterdam Rules into an international convention.
This article deals with aspects of the Rotterdam Rules in
the context of their affect on 1) delivery terms (Incoterms
2000) within international sales/purchase contracts, and 2)
documentary requirements of letters of credit where they are
used as the method of payment in international trade transactions.
Delivery terms (Incoterms 2000) within international
sales/purchase contracts
There are 13 Incoterms that sellers and buyers may agree upon.
Four of these, in particular, may be affected by certain applications
of the Rotterdam Rules. The Incoterms in question are:
Sea freight mode only
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Cost Insurance and Freight (CIF)
Multimodal transport (where it includes maritime
carriage)
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Carriage and Insurance Paid To (CIP)
These Incoterms 2000 place the obligation on
the seller to enter into a contract of carriage (and prepay
the freight charges) and, for CIF/CIP contracts, to additionally
insure the cargo and provide evidence of insurance to the
buyer.
This is one of the areas of possible concern because of the
opportunity for the carrier to vary the conditions of carriage
and reduce liability in certain circumstances. Article 80
provides an example of the vagueness of the Rotterdam Rules,
as it states, in part:
… a volume contract to which this
Convention applies may provide for greater or lesser rights,
obligations and liabilities than those imposed by this Convention.
The definition of a "volume contract"
in Article 1 does not provide much clarification as it states:
For the purposes of this Convention …
'Volume contract' means a contract of carriage that provides
for the carriage of a specified quantity of goods in a series
of shipments during an agreed period of time. The specification
of the quantity may include a minimum, a maximum or a certain
range.
It has been claimed that carriers may contract
out of liabilities through inducements—read into this
cheaper freight rates. Saving money may be a good thing, but
in such a circumstance this savings may be more than counterbalanced
by a greater assumption of risk as the carrier has reduced
its liability.
Let us consider this scenario where the seller enters into
a contract of carriage as a result of having agreed to trade
under the four Incoterms 2000 identified earlier: CFR, CIF,
CPT or CIP. The problem that may arise is that while the seller
contracts and pays for carriage, the buyer is responsible
for the risk on the cargo in transit. The risk transfers from
seller to buyer at ship's rail under CFR and CIF terms and
when the cargo is placed at the disposal of the first carrier
under CPT and CIP terms. Some questions need to be asked under
these situations:
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How does the seller cost the sale price?
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Is the sale price based on the presumption
of a "volume contract" making it possible for
the carrier to reduce their liability and offer a cheap
freight rate, and should the seller disclose this fact to
the buyer during the negotiation stage?
-
What if the seller does not contemplate
a special deal with the carrier until after the contract
of sale/purchase has been executed?
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Does the seller, as the shipper, clearly
understand what the reduction in carrier liability actually
means in practice?
-
What if the carrier's liability reduction
cannot be mitigated through insurance cover?
Depending on the answers to the questions above,
the veritable Pandora's Box may indeed be opened. The situation
could arise where the buyer, having agreed to trade on CIF/CIP
terms, may end up with a much more limited liability contract
of carriage and, depending on the insurance coverage provided
by the seller, cargo loss or damage may be excluded from insurance
cover. This may result in financial losses and does not augur
well for the relationship between the seller and the buyer.
As a means of avoiding such a circumstance, the contract of
sale/purchase would need to incorporate appropriate, specific
clauses and, accordingly, expert legal opinion is recommended.
The reader should note that the current Incoterms 2000 are
being reviewed with the intention of an updated set of terms
due to become operational in 2010 and, although a specific
date has not been released, the updated terms are not expected
to apply prior to July 1.
Documentary requirements of letters of credit
The Rotterdam Rules envisage the concurrent use of a number
of transport documents, including:
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Negotiable transport document,
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Non-negotiable transport document,
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Negotiable electronic transport record,
and
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Non-negotiable electronic transport record.
Options 1, 2 and 3 are existing documents and,
therefore, it is presumed that these will not cause any significant
difficulty. However, the same cannot be said for option 4.
To the best of my knowledge, there is no legal equivalence
between a traditional paper based maritime transport negotiable
document, the Bill of Lading, and a negotiable electronic
transport document. Certainly this is not an option under
the UCP 600, which are the rules that govern letter of credit
transactions.
Transferability is also another area of concern. Let us consider
the example of a paper based Bill of Lading consigned to order.
Any endorsement is physically present upon that document.
Yet, how does such an endorsement appear on an electronic
record, and how may this be verified by third parties? The
legal fraternity around the world remains concerned about
this issue.
Although it has been possible for traders and bankers to transact
letters of credit electronically since 2003, pursuant to a
specific set of rules (eUCP), these rules have hardly been
adopted anywhere. The primary reasons for the lack of electronic
documentation under letter of credit transactions are two.
The first reason is that the negotiability and, therefore,
the legal standing of certain documents is not easily replaceable—the
Bill of Lading and the Bill of Exchange provide examples of
such documents. The second reason is that banks have developed
proprietary, not generic, electronic solutions and, consequently,
traders may need to run several parallel software programs
on their systems to deal with the different banks, a process
considered simply too hard and expensive. Electronic trading
is certainly plausible to increase efficiencies in data transfer
between parties, but this has to be in the context of seamlessly
compatible generic systems, not proprietary solutions that
require multiple software installations.
Finally, in relation to the banker's requirements under a
letter of credit demanding a negotiable transport document,
there is the issue of altered carriage terms—the "volume
contract" option. This presents some real difficulties
for the banker and the importer alike. Article 20 (a) (v)
of the UCP 600 specifically states: "Contents of terms
and conditions of carriage will not be examined." Therefore,
the banker will not check the terms and conditions of carriage.
This leaves the buyer exposed to the situation outlined earlier,
where the conditions of carriage may be to the detriment of
the buyer. By the time the documents reach the buyer, the
shipment has, obviously, already been effected and, consequently,
the contract of carriage executed—too late for changes.
It would be difficult to overcome this problem through a variation
of the UCP 600, as this would require the agreement of the
bankers, probably something they would not be interested in
doing because they would not hold themselves liable to check
conditions of carriage as this is not their core expertise.
Article 20 (a) (v) reflects just this. It would not make sense
to try and make the banker the checker of carriage clauses,
just as you would not seek advice about a mechanical problem
from a pharmacist—a knowledgeable person, for sure,
but not an expert in the area in question.
In conclusion, there are a number of issues that the Rotterdam
Rules raise and, to date, total solutions may be difficult.
This article has highlighted some aspects that may be of concern
to traders, in general, and buyers in particular. The degree
to which the Rotterdam Rules will become law in any one country
remains to be seen, and it may well end up with qualified
acceptance by some, or a majority, of the signatory states.
Thousands of successful exporters are using Shipping
Solutions to complete their export documents faster, easier and
less expensively than ever before. Why aren't you?
If you're too busy trying to complete your export
documents by hand to spend some time reviewing the Shipping Solutions
Professional export documentation and compliance software yourself,
let us do it for you! Sign
up for one of our free online demos and let us give you a
one-hour overview of the software.
We'll take you step-by-step through the process
of completing your export forms, filing your SEDs electronically
through AES, and checking your exports against the various government
restricted parties lists and export regulations to make sure your
shipments are in compliance, and you—and your company—stay
out of trouble.
These free online demos are available on Tuesdays
at 1:00 p.m. and Thursdays at 10:00 a.m. Central Time. All you
need is an Internet connection to watch the demo and a phone to
listen in and ask questions about the software. It's the perfect
opportunity to get your first view of Shipping Solutions or to
convince your co-workers and your boss that Shipping Solutions
is the perfect solution for your company.
See why Shipping Solutions is America's #1 export
software. Sign
up for the free online demo today!
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