Avoiding Landmines in Flooring Imports Moderator: Panelists: Jim Gould Scott Kaiser David Stepp Craig Vigliotta
Silence is Golden Please turn off all cell phones. At the conclusion of this session, be sure to fill out the evaluation form and turn it in to the course monitor as you leave. Thank you
Jim Gould Floor Covering Institute President
Agenda Panel Introduction Overview of the Topic Panelist Presentations Q&A Please hold questions until after the presentations. Casual format.
Scott Kaiser Bank Of America- Merrill Lynch Vice President, Trade Business Development Global Trade & Supply Chain Solutions
David R. Stepp Bryan Cave LLP Partner
Craig Vigliotta BlueLinx General Mgr, g, Import Distribution
Importing Imports offer excellent Profit Opportunities. Unique Products Exceptional Values Limited competition
Importing Partners Examples: Importer Supplier/Manufacturer Freight Forwarder Air/Ocean Carriers Licensed Customs Brokers Customs and Border Patrol Ground Logistics Banks and Attorneys
Avoiding Costly Mistakes
Potential Problem Areas Dispute Resolution Nonconforming Products Currency Fluctuations ti Disappointed Customers Delayed Shipments Cultural and Language Barriers Regulatory Compliance
When Making a Buy Considerations include: Material cost Ocean freight Inspections Insurance Duties, taxes and tariffs Rebates, etc. Land transportation
Commercial Terms Commercial Terms determine: When title transfers Cost and risk to buyer and seller Common International Commercial Terms (INCO) EXW FAS FOB CIF DDP
EXW Ex Works Title and risk pass to buyer including payment of all transportation, insurance and fees from seller s door, to final destination. TITILE PASSES AT FACTORY BUYER S RISK AND COST STARTS AT FACTORY
Title and risk pass to buyer alongside ship. Buyer s Cost = Cost plus Loading, Transport to port of Entry, Insurance, Tariff, Entry/Customs Fees, Carriage to Final Destination
Open Terms Title and risk pass to buyer when goods are delivered on board ship. p
Title/risk pass to buyer when delivered on board ship; seller pays transportation/insurance to named port.
Title and risk pass to buyer when seller delivers goods to named Port of Entry.
Legal Considerations
Structuring the Deal Purchase Order conditions Segmenting payments to reduce risk Using dispute resolution clauses Customs issues Tariff classifications Valuation methods
Purchase Order Be specific about expectations, for example: Cite to standards d such as NOFMA Require regulatory documentation, certifications, chain of custody for wood products, testing documents Be precise with product specifications delivery times and methods, etc.
Inspections You get what you Inspect, not what you Expect Overseas quality inspectors s can monitor the quality of production BEFORE it is shipped. The right of independent inspections should be specified.
Regulatory Requirements Specify regulatory requirements in advance: Lacey Act/illegal l wood prohibitions Technology licensing Fumigation VOC emissions (CARB, E1, EO) C-TPAT (security) requirements Product testing to meet standards
Structuring Payments Specify payment terms: There are options to reduce risk. Structuring payments Using documentary letters of credit
Dispute Resolution You are leaving U.S. law behind unless you specify it in contracts. China Consider: Alternative dispute resolution clauses in contracts HK/Singapore arbitration or Chinese CIETAC arbitration
Tariffs (The HTS) Tariffs are determined d by classification i under the Harmonized Tariff Schedule. http://www.usitc.gov/tariff_affairs/about_hts.htm affairs/about hts htm Importers are responsible for classifying the products they import. The HTS Code should be on PO; it is required on the commercial invoice. Classification is not an exact science.
Commercial Invoice The Key Document Required by Customs for Entry Contents specified by 19 CFR 141.85 Basis for transportation/insurance claims Source for bank/collection Primary resource in dispute resolution Should Flow from the Purchase Order Prepared by exporter
Financing Imports
Financing/Payment Options Common Options: Consignment Pre-Payment Open Terms Documentary Collections Letters of Credit Alternative, creative financing
Letters of Credit Widely Used payment mechanism Import Letter of Credit guarantees payment by buyer s bank providing seller complies with terms/conditions within LOC. Common guarantee of performance Standby Letter of Credit promise that seller Standby Letter of Credit promise that seller will be paid if buyer does not perform
Surety Bonds Surety Bonds must be posted with Customs to ensure e payment of duty and tariff when value of shipment exceeds $2,000. Continuous Bonds Single Entry Bonds Can you use your customs broker s Can you use your customs broker s bond?
Currency Risks Risk comes from varying costs induced by exchange rate fluctuations. The currency stated on the PO becomes The currency stated on the PO becomes the currency for the transaction and risk of fluctuation attaches to that currency.
Insurance Shipments by sea covered by marine cargo insurance. Specify the insurance carrier (Chinese example) 110% of the cost, insurance, freight (CIF)
Logistics and Customs
Partner Roles Freight Forwarder Assists in moving goods from point A to B, in contact locally with supplier to verify where and when goods will be available; books transport and communicates details. Licensed Customs Broker Licensed by CBP, makes Entry through customs on behalf of importer; interfaces with customs, submits documents and may arrange payment of duties and fees.
Loading and Packaging Proper container loading will minimize damage due to shifting. You can specify loading requirements, maximum pallet weights, strapping and banding procedures Detailed packing lists expedite customs. At a minimum, include all info on commercial, invoice for each container/pallet
Making Entry Making Entry is a Process. Arrive at Port, Present documentation Clear inspections Pay the necessary tariffs and fees 15 days to Make Entry before demurrage begins 15 days to Make Entry before demurrage begins to accrue and product is placed in storage.
Customs Inspections Focus is on: Determining duty (HTS) Proper country markings Proper invoicing Prohibited materials Federal requirements such as the Import Declaration for wood flooring Overages and Shortages
Entry Documentation Includes: Bill of Lading/Airway bill or carrier s certificate proves right to make entry Commercial Invoice Entry Manifest Packing Lists Import Declaration Surety Bond
Compliance and Best Practices Requires: Sr. Mgt. Commitment to Compliance Written Compliance Procedures/SOPs Recordkeeping Procedures Training Monitoring and Updating Watch the Federal Register Refer to online resources HTS Code updates, etc.
Standards of Conduct Reasonable Care set by 19 U.S.C. 1484 for all importers. Additionally Due Care standard is imposed by the Lacey Act Amendments when importing plant products. Civil and Criminal Penalties Apply
The Lacey Act Requirement ement File Import Declaration for each shipment Scientific name of plant (including genus & species) for all wood elements Value of importation Quantity Name of the country in which the plant was harvested 42
Jim Gould, Moderator Thank You For Attending! Floor Covering Institute President Two CityPlace Dr., Ste.200 St. Louis, MO 63141 Phone: (314) 812-2710 email: jgould@floorcoveringinstitute.com
Scott Kaiser, panelist Bank Of America- Merrill Lynch Vice President, Trade Business Development, Global Trade & Supply Chain Solutions 600 Anton Blvd., Ste. 150 Costa Mesa, CA 92626-1919 (714) 327-4545 email:scott.kaiser@baml.com
David R. Stepp, panelist Bryan Cave LLP Partner 120 Broadway, Ste. 300 Santa Monica, CA 90401-2386 Phone: (310) 576-2199 email: david.stepp@bryancave.com
Craig Vigliotta, panelist BlueLinx General Mgr, g, Import Distribution 120 Broadway, Suite 300 Santa Monica, CA 90401-2386 Phone: (770) 221-2416 email: Craig.Vigliotta@BlueLinxco.com