Three reasons to have a Customs compliance program.

Customs compliance should be a key element of every importer’s operational structure. For many legacy companies, their sourcing may have begun with domestic companies. The need to ensure compliance with import regulations from multiple government agencies may not have been necessary for what they were buying. However, as companies took steps to remove cost and layers from their supply chains, they became importers of record and subject to regulations from multiple government agencies. Here are three reasons that importers should have a Customs compliance program.

A proactive compliance program saves money and reduces risk.

Importers are businesses. As such, there are already investments made for accounting, insurance, human resources and other proactive steps which protect the health of the business and ensures continuity and protection. A Customs compliance program is no different.

  • Are classifications reviewed before entry for duty rate and trade program eligibility?
  • Are the goods or their packaging marked correctly with the country of origin?
  • If an agricultural commodity, is it permitted entry into the United States?
  • If potentially subject to antidumping, has a scope determination been obtained to avoid unnecessary risk?

These are reasonable questions that if an importer has a process in place can ensure that goods are brought in at the lowest possible duty rate with the fewest possible delays because of the due diligence done prior to entry to ensure complete admissibility.

It is never too late to undertake a review and implement corrective actions and take proactive steps.

Importers who have not had a compliance program may ask themselves, “Our company has been importing for years. It’s too late to try to institute these processes today.” At Zarach, we emphatically deny this and caution importers that it is never too late to implement a compliance program. A proactive analysis of an importer’s records could yield examples where there are issues of non-compliance which could be declared to Customs using a prior disclosure, limiting financial exposure to penalty multipliers within the regulations.

Non-compliance is expensive. Just ask this Texas importer ordered to pay more than a quarter million dollars.

An importer in Texas made a business decision to bring in furniture for use in university dormitories. They told Customs that it was not wooden bedroom furniture which was subject to antidumping duties of well over 200%. Customs disagreed, and the Justice Department levied a civil fine of $275,000 against the company for evading the regulations.

Trust Edward J. Zarach & Associates to craft your Customs compliance program.

As Customs brokers, we understand the regulations that govern the activities of importers. For decades we have helped importers operate their businesses profitably and within the scope of U.S. law. For more information how we can do it for your company, contact us today.

The changing shape of ocean alliances

On April 1, 2017, which was the start of the contract season, the four ocean carrier alliances reorganized to form three alliances, making up more than 77% of global container capacity and 96% of trans-Pacific container capacity. Thanks to an unprecedented number of mergers and acquisitions in 2016 forced by a glut of excess capacity causing rates to bottom out, the alliances are a way for carriers to offer the same or better services with less risk and less operational cost.

How did we get here?

The market-wide investment in supersize ships was originally a boon to carriers as it lowered their per container cost, but as more carriers invested in larger vessels, capacity skyrocketed, supply outpaced demand and the prices tanked. Container demand was unable to continue growing at an average of 4% per year once China’s growth began slowing in 2010.

The first, and the largest, casualty from the pricing crash came when Hanjin collapsed in August of 2016, after months of attempted debt restructuring. This left the supply chain industry in a state of chaos as Hanjin vessels were barred from docking due to their inability to pay port fees. The threat of container seizures led to a panicked scramble as shippers tried to locate and acquire their cargo from the Hanjin vessels.

Who are the alliances?

  • 2M: Maersk and MSC (in a vessel sharing agreement with HMM) which has 29.5% of the global market share. They may see this rise to 33.4% if Maersk’s plan to acquire Hamburg Sud is approved.
  • THE Alliance: Hapag-Lloyd (merging with UASC), KLINE, MOL, MYK, and Yang Ming which has 16% of the global market.
  • Ocean Alliance: CMA, COSCO, Evergreen, and OOCL which has 26% of global container capacity

What are alliances?

It’s important to note that these alliances aren’t mergers between companies to form enormous super carriers. Instead, these alliances are a cooperative agreement that forms a strategic alliance to cover major trade routes as no single carrier can provide service to every trade lane and every port every week. By sharing common resources, shipping alliances are able to cut variable expenses.

How do the alliances help?

Carriers can offer more sailings with fewer vessels, relying on their partners to pick up any slack and cover any trade lanes that are not serviced to better benefit customers, reduce congestion at ports, and lessen environmental impart. Alliances also offer an internal support and financial stability as operational costs decrease and allows for a much better allocation of resources as they create economies of scale. Alliances are also able to keep cargo moving in the event of a carrier bankruptcy thus preventing calamity for shippers.

Is this an oligopoly?

No. While alliances can use their immense size to negotiate with marine terminal operators who agree to that arrangement, the alliances cannot share cargo or customer information or rates within the alliance and must negotiate independently and avoid collusion in the market.  Eventually, as port alliances begin to take shape, there is the chance they’ll prefer to negotiate alliance to alliance with carriers, but currently only MTOs even have the option. These alliances can and likely will reconfigure again as the market changes and new lanes take precedence and carriers find better, more effective collaborations.

Where does that leave us?

As 2016 was a turbulent year in the ocean landscape, marked by rapid industry consolidation and painfully low rates due to overcapacity, the final formula for alliances may need more adjusting before finding a progressive mix of growth and stability. However, for now, alliances aim to protect both the carriers and shippers while the market settles and we discover what business as usual means for ocean freight once again.

 

Attention food importers: Major changes to FSVP beginning May 27th. Are you ready?

FSVP Importers and CBP importers have new rules to follow beginning May 27, 2017.

The Food Safety Modernization Act (FSMA) contains a requirement that Food Supplier Verification Program (FSVP) begins on May 27, 2017, and importers will need to provide additional data elements to file entries for release with CBP and FDA.

There are many new acronyms. What is FSVP?

FSVP is flexible, risk-based program to verify foreign suppliers and the safety of the food they produce. The FSVP will require two key things:

  • Identification of the FSVP importer for foods imported into the United States.
  • The FSVP importer (defined below) is responsible for verifying that the foreign suppliers are using safe processes and procedures. The food must also not be adulterated or misbranded.

Is the FSVP importer different from the CBP Importer of Record?

This is a great question, and in most cases, the parties might be the same. The party must have, in the words of the legislation, “direct financial interest in the food product.” If you have any question as to whether or not you believe you are both the CBP Importer of Record and the FSVP importer, contact us for a determination.

A simple rule of thumb is: If the CBP Importer of Record is the US owner or consignee, they are by definition the FSVP importer.

What is used to identify the FSVP importer?

As the Customs broker preparing your entry, this additional requirement will add time to enter and process the shipment. Additionally, three key pieces of information we require are the FSVP importer’s contact information, DUNS number and food facility registration number.

How can and should an importer verify the FSVP party?

The regulations allow for a great deal of flexibility in this interpretation. FDA allows the US importer to establish an internal program using a “qualified individual” to verify suppliers, or they can rely on third party verifiers. If your company is looking to setup or outsource this step of the process, we are happy to help you accomplish this important compliance goal.

Are any kinds of food product exempt from the FSVP requirement?

Yes. The parties will need to be identified at the time we file the Customs entry, but the verification processes are far less rigorous. A short list of exempted commodities include:

  • Juice under HACCP.
  • Seafood
  • Alcoholic beverages
  • Products of Canada and New Zealand have less restrictive requirements as their food safety systems are considered comparable to the United States.

Can I read more about this?

If you’re the kind of person who enjoys a deep dive into federal regulations, by all means we encourage to to take time and read it end to end.

Here is a quick FAQ prepared by FDA that lays it out in simple terms.

Here is the final rule including a link to the Federal Register publication.

We’re here to help.

As always, this is never something an importer should feel like they have to tackle alone. As a Customs broker with a deep practice filing entries on many kinds of food, we are aware of the regulations and how importers can navigate them safely. For more information or a consultation contact us today.

Live from the floor of Seafood Expo, it’s Edward J. Zarach & Associates and the WCA Perishables Network!

Last week was Seafood Expo, the largest trade show for companies in the seafood industry. Held annually in Boston and formerly known as the “Boston Seafood Show”, the show is where US fisherman, producers and foreign suppliers come to present their products to buyers large and small. The show also features packing, refrigeration, blast chilling, metal scanning and other weighing and portioning machinery. One of the most interesting parts of the show are the country pavilions, where a nation will purchase a booth and give smaller producers the opportunity to get in front of a global audience.

While we handle many commodities across our five US offices located in Reno, Minneapolis, Chicago, New York and Boston, one of our major areas of specialty is seafood. We understand the importance of speed and accuracy because seafood, whether fish, shellfish or lobster, is a perishable commodity. Any delay in getting the goods moved, cleared and delivered impacts our clients ability to sell to their audience.

It is for this reason that we walked the floor with two distinct groups over two days. On Sunday, I was on the floor with Patrick Wyndham and Veronica Rosa from our Boston office. Boston, understandably, sees a tremendous amount of seafood through the port, both for transport into and out of the country as well as Customs clearance. Patrick and Veronica are key in ensuring that the goods are cleared before arrival, including both Customs and FDA, so that as soon as the cargo is available, we move it to final destination or make it available for our customers to retrieve from the airline.

On Monday, we had a global consortium of member companies in the WCA Perishables Network, one of the specialty networks of the WCA Family of Networks. Comprised of freight forwarders and Customs brokers from around the world, the WCA Perishables Network audits and validates the member companies and their capabilities, ensuring a consistent quality and level of service globally. The WCA Perishable Network sees the chance for individual companies to compete against global and multinational firms by offering a standardized level of service, allowing best-in-class companies in cities and countries to compete for global tenders.

We are especially proud of our membership in this group. Pictured in the image from left to right with me are: WCA Perishables Members from Asthon Cargo, Edward J. Zarach and Share Logistics at Seafood Expo 2017

 

 

 

 

Edward J. Zarach & Associates joins WCA’s new eCommerce network

We are proud to announce that Edward J. Zarach & Associates have expanded our involvement in the WCA and their family of networks.

We are now members of their brand new eCommerce network which recently announced a partnership with Amazon’s primary competitor, Chinese eCommerce company Alibaba.

In addition to being a member of WCA First, one of the earliest and deepest networks of the group, this puts us in a group of companies that are experienced providing eCommerce services from door to door serving B2B, B2C and eventually C2C customers.

The benefits of WCA membership include professional management of the group, financial backing for transactions between members and access to programs offering competitive transportation rates with air and ocean providers.

“There is no question that our customers will benefit from this network,” says Edward Zarach. “We realize that the changing patterns of international commerce mean that more shipments are going to be going directly from overseas producers to the end users or consumers and the WCA and this network will facilitate those shipments.”

 

 

Edward J. Zarach adds Boston office – we now have 5 locations to serve our clients

Edward J Zarach & Associates opens a new Boston office

As we reach the end of 2016, we are excited to begin 2017 with the announcement of our newest location in Boston, Massachusetts.

Patrick Wyndham is a licensed Customs broker heading up our Boston office. In addition to the general commodities that we handle for all kinds of importers and exporters, Patrick brings a focus on perishable cargo. Patrick will be coordinating our sales and operational efforts throughout the Northeast and down the Eastern seaboard. You can find the office details on our contact page.

Boston brings to five the total number of offices for Edward J. Zarach & Associates. Our geographic reach includes the East Coast, Midwest and southeastern United States.

Our company is experienced in the handling of several commodity groups that require working with agencies outside of Customs and Border Protection, and this experience is to the benefit of our customers and our global partners seeking an agent who can handle LDU and LDP shipments of these more complex commodities.

In New York, Louie DeMarco leads a team focused on perishable cargo, textiles and wines and spirits.

In Minneapolis, Raymond Langevin is focused on perishables and wine & spirits for the upper Midwest.

In Reno, wholly owned subsidiary Novo Customs & Logistics is headed up by Robin Flaherty and specializes in firearms and munitions, an ever-changing area of both import and export regulations and eligible consignees, destinations and companies.

Finally, our corporate headquarters in Chicago is home to our import compliance and audit group as well as our teams that handle perishables, wines & spirits, live animals, fresh cut flowers, fresh fish and textiles. Chicago is also the central point for our export services for both air and sea freight.

Edward J. Zarach recently received our IATA endorsement. This, along with our status as a TSA Indirect Air Carrier, gives us additional reach and carriers to assist importers and exporters with their air cargo. Added to our existing FMC license as an Ocean Transportation Intermediary, we can manage a company’s supply chain from beginning to end.

For more information on how Edward J. Zarach & Associates can help reduce costs, improve compliance and accelerate your supply chain, contact us today.

 

Tianjin accident reminds everyone about hazmat safety

Last week, a tremendous series of explosions in Tianjin, China, caused hundreds of deaths and injuries to firefighters and civilians. The damage at the port complex is extensive and has been covered by global media. The explosion was traced to a company and warehouse that handles hazardous materials.

While it is questionable whether or not we will ever know the true cause of the blast given the Chinese government’s track record on openness, the magnitude of what happened should call into question whether or not one or more hazardous commodities was improperly stored, loaded or handled that led to such devastation.

Safe handling of dangerous goods and hazardous materials throughout the supply chain is a shared responsibility. From origin to destination, people and companies involved in the safe handling, transport and clearance of these goods must be trained, certified and registered as per the regulatory demands on their role.

These are the hazardous materials classes that must be declared to ensure safety and compliance.

These are the hazardous materials classes that must be declared to ensure safety and compliance.

We’ve centralized our hazardous materials handling efforts company-wide in our Chicago corporate headquarters under the direction of Scott Mills. Scott is responsible for all booking, documentation, domestic and international movement of dangerous cargo. We believe that by centralizing the process in one location we can better monitor compliance and ensure that we deliver consistent and accurate service company-wide.

Remember as well that hazardous materials shipments aren’t just those where the primary cargo shipped is dangerous. Shippers will sometimes add something to a shipment to support machinery or a product at origin or destination that must be declared. Those undeclared hazardous materials can lead to tens of thousands of dollars in fines for the shipper as well as the carrier. Our strongest advice is that if you have a question whether something is hazardous or not, ask a qualified professional first.

ACE is still coming November 1st – Are you ready?

The Automated Commercial Environment (ACE) is the new means by which Customs is receiving and processing data for international trade. Well over a decade in the making and development, the functions which most affects importers, ACE Entry Summary and ACE Cargo Release, are here. On November 1st, Customs is mandating that the majority of cargo (by entry type) be filed in ACE.

The most significant difference between ACE and the existing system, ACS, is the amount of data and the granular level of detail that is required to be submitted. Our people are still submitting the same transportation data, but the Customs data requires us to provide additional information. When we start talking about PGA data (for Food & Drug and others), there is even more.

Perhaps the best way to compare the two systems is to look at a typical commercial invoice that may be from one trading party and has multiple lines of products or SKUs. Under ACS, we could aggregate all those things under a single HTS line. Under ACE, we need to provide information about each line because that’s how CBP is going to look at cargo; on a line by line basis.

This additional information will give CBP and the participating government agencies (or PGA’s) the ability to release cargo into commerce where permitted and to detain or examine violative cargo with greater accuracy. The implementation dates for the PGA message sets, were the subject of discussion at the recent COAC Customs Advisory meetings in Chicago, a recommendation was put forth (read here, pages 6 through 12) that suggests that because the PGA message sets are just now being released for testing, a phased implementation of their required use would be preferred.

Importers (and exporters) can also take advantage of ACE by signing up for an ACE Portal Account. From here, CBP is providing a single window to monitor entry filings, liquidations and, in the future, serve as the primary vehicle of communication when requesting additional information.

We encourage our clients to participate in ACE. We are participating in ACE and will be ready before the November 1st deadline.

For more information on ACE, including how to sign up for an ACE Portal Account, visit CBP’s website where they cover the issue in great detail, including upcoming proposed deadlines and implementation dates.

 

Welcome to our new website

It is with great pleasure that we present the new Edward J. Zarach & Associates website.

This site has been in development for the past several months and our focus has been to create a tool that our customers can use and learn from and that our agent partners and prospective clients can use to establish a level of trust to work with us.

We understand that our people are the heart and soul of our company. This site allows you to connect with our key leaders easier than ever and find and communicate with our branches around the United States.

We welcome your feedback; this is a work in progress. We are committed to communicating and delivering information through this platform and others to ensure that you are as well informed about the issues that impact your business. Knowledge, especially when delivered early and with good analysis, gives you the edge in your business and against your competitors.

We look forward to keeping you at the forefront of the issues that will help you stay ahead.