What purchasers need to know about import/export compliance
By Staff -- Purchasing, 10/7/1999
The days when purchasing managers could source overseas while leaving the intricacies of import and export compliance to their shipping departments are long over.Since the mid-1990s, both the United States Customs Service and the Bureau of Export Administration (BXA) have undergone major overhauls. Both agencies have moved from spot checks to a documentation auditing system akin to how the Internal Revenue Service operates.
Under this system, the burden of proof falls on many more parties to an import or export transaction. And companies must keep documentation current and accurate for a period of at least five years or face stiff fines and/or penalties for non-compliance.
Purchasing managers have key roles to play in this documentation chain, especially in import transactions that now call for proof of country of origin of raw materials, parts, or components coming into the U.S. Although a purchasing department is less likely to get involved in an export transaction, there are cases where a company imports parts and/or materials to re-export. When export compliance regulations come into play, a purchasing manager will be required to know the end use of a product.
"Purchasing managers will be wise to work with their suppliers to make sure invoice data meets U.S. Customs requirements," explains Ray Janiszewski, chief of the Cargo Control Branch of the U.S. Customs Service. Since passage of the U.S. Customs Modification Act, responsibility for classification and pricing of merchandise is with the importer. So the importer needs to know exactly what it is they are getting and meet all the Customs requirements for invoicing in that area," says Janiszewski.
"The traditional concerns that a purchasing manager can control--domestic market changes, style, demands for technology--should be things a purchasing manager is pretty much tuned into. Compliance is very important compared to three or four years ago," adds Eugene Milosh, president of the New York City-based American Association of Exporters and Importers.
Milosh adds: "The government is through with the educational phase and is now into the penalties, which are severe. These are things a company should have under its belt by now. If they don't have a Customs compliance program, they're behind the eight ball. Anyone who's responsible for the import functions should be familiar with the new regulations."
Switch means emphasis on electronics
Purchasing managers also have to work with an array of electronic programs that government agencies have been promoting as part of the switchover from a spot check to a documentation auditing approach. Obviously, paperwork involved in this approach is enormous and, in some cases, too voluminous to handle.
That's one of many reasons both U.S. Customs and the BXA have been developing and promoting electronic compliance programs, but they've had mixed results. Not only have companies balked at working electronically, there also have been ongoing public debates over funding of these electronic programs.
In particular, U.S. Customs is concerned with how to fund development of an Automated Commercial Environment (ACE) program, which would replace the current Automated Commercial System (ACS). Congress has been reluctant to fund ACE. The BXA, on the other hand, is trying to sort out what to do about the lagging Automated Export System (AES), which faces potential shutdown on Dec. 31.
"We're trying to keep ACS alive," explains Janiszewski of U.S. Customs. Because of Congressional dickering, he says this program is very much in jeopardy. "We haven't been appropriated funds to build a successor, which is ACE. The Clinton Administration wants a user fee to help fund the ACE system. During the senate hearings, the senators came out against such a fee."
Other hot-button issues
While both U.S. Customs and the BXA sort out what to do about electronic compliance programs, there are a number of other issues brewing that can affect how purchasing managers cope with import/export regulations. Here are a few of the hot-button issues:
- Currency devaluations: Milosh considers currency devaluations a major concern in markets like Asia and Latin America "because there is uncertainty and the possibilities of devaluation. You could wipe out your profits." He suggests companies that can't focus heavily on currency best go elsewhere to source goods or raw materials.
- Transport/logistics: Purchasing managers, who now are involved in the paper trail of an import/export transaction, have to keep abreast of how shippers, transport companies, and/or third-party logistics companies are handling the paper trail that documents an import/export deal. Any errors can mean future liability.
- Y2K: Janiszewski says the Y2K computer problem is an issue facing U.S. Customs, which has become so heavily reliant on electronic transmissions. This problem may affect import managers more directly than purchasing managers, but all parties to a transaction should be aware that U.S. Customs is trying to ensure it will continue functioning on Jan. 1, 2000. The ACS program is apparently vulnerable.
"Customs' systems are Y2K compliant, and we also have contingency plans in the event we experience a problem with our automated system," Janiszewski explains. "We have found some problems that we will be advising our field officers about."
According to Janiszewski, U.S. Customs has also been working with international organizations to ensure that developing countries are Y2K compliant.
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