Parti

Organizing for Export

and Import Operations
 Chapter 1
Organizing for Export
and Import Operations

Smooth and efficient (and, therefore, profitahle) exporting or importing requires

certain personnel who have specialized knowledge. The personnel involved and their
organization vary from company to company, and sometimes the same personnel have
roles in hoth exporting and importing. In small companies, one person may perform
all of the relevant functions, and in large companies or companies with a large amount
of exports or imports, the numher of personnel may he large. In addition, as a company
decides to perform in-house the work that it previously contracted with outside com-
panies (such as customs hrokers, freight forwarders, packing companies, and others)
to perform, the export/import department may grow. As husiness increases, specialties
may develop within the department, and the duties performed by any one person may
become narrower.

A. Export Department
For many companies, the exporting department begins in the sales or marketing
department. As that department develops leads or identifies a customer located in
another country, an order may come in and the salespeople may have to determine
what additional steps that are different from domestic sales procedures need to be
taken in order to fill that export order. Often the exporter's first foreign sales are to
Canada or Mexico. Because the export order may require special procedures in manu-
facturing, credit checking, insuring, packing, shipping, and collection, it is likely that
a numher of people within the company will have input on the appropriate way to fill
the order. As export orders increase (for example, as a result of an overseas distributor
having been appointed], the handling of such orders should become more routine and
the assignment of the special procedures related to an export sale should be given to
specific personnel. It will be necessary to interface with freight forwarders, banks,
packing companies, steamship lines, airlines, translators, government agencies, do-
mestic transportation companies, and attorneys. Because most manufacturers have
personnel who must interface with domestic transportation companies (traffic depart-
ment), often additional personnel will be assigned to that department to manage ex-
 Organizing for Export and Import Operations

port shipments and interface with other outside services. Some of this interface, such
as with packing companies and steamship lines, and possibly governmental agencies
and banks, may be handled by a freight forwarder. The number of personnel needed
and the assignment of responsibilities depends upon the size of the company and the
volume of exports involved. A chart for a company with a large export department is
shown in Figure 1—1. The way in which an export order is processed at the time of
quotation, order entry, shipment, and collection is shown in Figures 1-2, 1-3, 1-4,
and 1-5, respectively. Smaller companies will combine some of these functions into
tasks for one or more persons.

B. Import Department
A manufacturer's import department often grows out of the purchasing depart-
ment, whose personnel have been assigned the responsibility of procuring raw materi-
als or components for the manufacturing process. For importers or trading companies
that deal in finished goods, the import department may begin as the result of being
appointed as the U.S. distributor for a foreign manufacturer or from purchasing a prod-
uct produced by a foreign manufacturer that has U.S. sales potential. Because foreign
manufacturers often sell their products Ex-Factory or FOB plant, a U.S. company in-
tending to import such products must familiarize itself with ocean shipping, insur-
ance, U.S. customs clearance, and other procedural matters. Increasingly, a number of
U.S. manufacturers are moving their manufacturing operations overseas to cheaper
labor regions and importing products they formerly manufactured in the United
States. That activity will also put them in contact with foreign freight forwarders, U.S.
customs brokers, banks, the U.S. Customs Service, marine insurance companies, and
other service companies.

C. Combined Export and Import Departments

In many companies, some or all of the functions of the export and import depart-
ments are combined in some way. In smaller companies, where the volume of exports
or imports does not justify more personnel, one or two persons may have responsibil-
ity for both export and import procedures and documentation. As companies grow
larger or the volume of export/import business increases, these functions tend to be
separated more into export departments and import departments. However, because
both departments may end up being in contact with some of the same outside parties
(such as banks, tbose freight forwarders that are also customs brokers, or domestic
transportation companies), some of these activities may he consolidated in specific
persons for hoth export and import while other personnel will work exclusively on
exports or on imports. A diagram of the interrelationships between the export
and import personnel in the company and outside service providers is shown in
Figure 1—6.
(Text continues on page 8.)
 LU to
i5

c
U. ^
LU < CO

o
TJ
CO
pi

O)

£
 Organizing for Export and Import Operations

Figure 1-2. Export order processing—quotation.

Customer, Distributor,
or Sales Agent

Export Department
Review

Engineering Marketing Finance Manufacturing

—Specifications -Forecast —Payment Terms —Cost

—Cost -Planning —Credit Check —Deiivery
—Drawings -Sale Terms —Credit Closing
—Bid Bond

Export Department

Consolidate Input
Quote

ustomer, Distn
or Sales Agent

Quotation or
Pro Forma Invoice
 Organizing for Export and Import Operations

Figure 1-3. Export order processing—order entry.

Match to Quotation
Send Acknowledgment

Transmit
Acceptance
to Customer
 Organizing far Export and Import Operations

Figure 1-4. Export order processing—shipnnent.

•inance Jlstf
—Check Customer's —Packing
L/C Opened —Shipping Instructions
—Insurance —Shipping Documents
—Collection Documents

D. Manuals of Procedures and Documentation

It is often very helpful for companies to have a manual of procedures and docu-
mentation for their export and import departments. Such manuals serve as a reference
tool for smooth operation and as a training tool for new employees. Moreover, since
the Customs Modernization Act, such manuals are required to establish that the im-
porter is using "reasonable care" in its importing operations and they are recom-
mended by the Bureau of Export Administration for export operations. Such manuals
should be customized to the particular company. They should descrihe the company's
export process and import process. They should contain names, telephone numbers,
and contact persons of the fireight forwarders and customs brokers, steamship compa-
nies, packing companies, and other services that the company has chosen to utilize as
well as government agencies. They should contain copies of the forms that the com-
pany has developed or chosen to use in export sales and import purchases and trans-
portation, identify the internal routing of forms and documentation within the
company for proper review and authorization, and contain job descriptions for the
various personnel who are engaged in export/import operations. The manuals shouid
he kept on a word processor and updated from time to time as changes in contact
 Organizing far Export and Impart Operations

Figure 1-5. Export order processing—collection.

I
Export Department

Follow-up

persons, telephone numbers, forms, or governmental regulations occur. Sample tables

of contents for export and import manuals are shown in Figures 1-7 and 1-8, respec-
tively.

E. Record-Keeping Compliance
Exporters and importers have always had an obligation to maintain records relat-
ing to their international trade transactions. Recently, however, these obligations have
assumed a place of central importance due to technological advances and related changes
in the law. As the volume of export and import commerce has increased, it has become
necessary to automate such transactions. The use of electronic purchase orders, accep-
tances, and invoices, and the related need of the governmental agencies to reduce
their own paperwork hurden has spurred some governmental initiatives. Under the
Customs Modernization Act, the U.S. Customs Service agreed to allow electronic filing
{Text continues on page 13.]
a;

s.

iZ

10
 Organizing for Export and Import Operations

Figure 1-7. Export manual table of contents.

I. Statementof Manual's Purpose

• Company Policies Relating to Exporting
II. The Export Department
• Role
• Function/Operation Statement
• Organization Chart—Personnel; Export Compliance Manager
• Job Descriptions and Responsibilities
• Initial and Periodic Training Requirements
• Procedures for Disseminating Current Regulatory Developments Information
III. Export Procedures
• Preliminary Considerations
• Formation of Sales Agreement
• List of Existing Agents and Distributors
• List of Freight Forwarders, Steamship Companies, Insurance Brokers, Packing Compa-
nies, Attorneys
• Collections and Banking Procedures (Drafts, Letters of Credit)
• Record-Keeping Compliance
IV. Export Documents {Samples of Company-Approved Stanclard Forms)
• Quotations, Costing Sheets
• Purchase Order Acknowledgments
• Purchase Order Acceptances
• Invoices (Commercial, Pro Forma, and Special Customs)
• Shipper's Export Declaration
• Powers of Attorney
• Shipper's Letter of Instructions
• Bills of Lading
• Packing Lists
• Inspection Certificates
• Insurance Certificates
• Dock and Warehouse Receipts
• Consular Invoice
• Certificates of Origin
• Delivery Instructions
• Declarations for Dangerous Coods [if applicable]
V. Export Licenses
• Procedures for Determining Applicability of Regulations, Including Exemptions
• Procedures for Monitoring Changes in Products
• Procedures for Monitoring Changes to Denied Persons and Specially
Designated Nationals Lists and Customers and Embargoed Countries
• Procedures for Applying for Export Licenses

11
 Organizing for Export and Import Operations

Figure 1-8. Import manual table of contents.

I. Statement of Manual's Purpose

• Company Policies Relating to Importing
II. The Import Department
• Role
• Function/Operation Statement
• Organization Chart—Personnel; Import Compliance Manager
• Job Descriptions and Responsibilities
• Initial and Periodic Training Requirements
• Procedures for Disseminating Current Regulatory Developments Information
III. Import Procedures
• Preliminary Considerations
• Formation of Purchase Agreement
• List of Existing Suppliers
• List of Customs Brokers, Foreign Freight Forwarders, Steamship Companies, Insur-
ance Brokers, Inland Carriers, Attorneys
• Payment and Banking Procedures (Drafts, Letters of Credit)
• Record-Keeping Compliance
IV. Import Documents (Samples of Company-Approved Standard Forms)
• Requests for Quotations
• Purchase Orders
• Invoices (Commercial, Pro Forma)
• Bills of Lading
• Packing Lists
• Inspection Certificates
• Customs Broker's Letter of Instructions
• Customs Entries
• Certificates of Origin
• Special Product Entry Forms
• Liquidation Notices
• Notices of Redelivery, Requests for Information, and Notices of Action
• Requests for Reliquidation
• Protests
• Summons, Warrants, Subpoenas, Seizure Notices
• Prepenalty and Penalty Notices
• ITC Questionnaires

12
 Organizing for Export and Import Operations

of customs entries, and under the Automated Export System the Department of Com-
merce and Customs have established a program for the electronic filing of export docu-
mentation. Under these scenarios, export and import trade will be facilitated;
however, the potential for exporters/importers to avoid their legal responsibilities,
including filing fraudulent entries with improper values or classifications or evading
their responsibilities to obtain export licenses is substantially increased. As a result,
in the Customs Modernization Act, new penalties were imposed upon importers and
exporters who fail to keep proper documentation, which the Customs Service intends
to audit from time to time to verify that the electronic filings are accurate. Now, even
if the electronic filing was accurate, if an importer/exporter fails to provide documents
requested by Customs, it can be fined up to $100,000 (or 75 percent of the appraised
value, whichever is less) if the failure to produce a document is intentional, or $10,000
(or 40 percent of the appraised value, whichever is less) if it is negligent or accidental.
Other laws, such as the Export Administration Act, the Foreign Trade Statistics
Regulations, and the North American Free Trade Agreement, also impose record-keep-
ing requirements on exporters. For most companies that engage in both exporting and
importing, it is important to establish a record-keeping compliance program that main-
tains the documents required by all the laws regulating international trade. In general,
U.S. export and import laws require that the records be kept for a period of five years
(or three years from date of payment on drawback entries). However, other laws, for
example state income tax laws or foreign laws (Canada under NAFTA), may require
longer periods.
The U.S. Customs Service has issued a Hecordkeeping Compliance Handbook de-
scribing in detail its interpretation of the proper record-keeping responsibilities for
importers. This Handbook states that the Customs Service expects each importer to
designate a manager of record-keeping compliance who can act as the point of contact
for all document requests from Customs and who is responsible for managing and
administering the record-keeping compliance within the company. The manager, as
well as all employees involved in importing (and exporting), is expected to receive
regular training on compliance with the customs laws and on documentation and
record-keeping requirements. Each company is expected to maintain a procedures
manual to ensure compliance with all customs laws and record-keeping requirements.
In addition. Customs offers a program for voluntary certified record-keepers who regis-
ter with the U.S. Customs Service and demonstrate their capabilities of compliance.
In return for participating in the voluntary record-keeping compliance program, tbe
record-keeper will not be fined for its first violation of the regulations. In return, the
record-keeper has to agree to a number of responsibilities.

F. Software
Many companies offer software programs for managing the export process, includ-
ing order-taking, generation of export documentation, compliance with export control
regulations, calculation of transportation charges and duties, and identification of
trade leads. The Department of Commerce, Trade Information Center maintains a list
of software producers and a description of their products and prices on its Web site at

13
 Organizing for Export and Import Operations

www.ita.doc.gov/td/tic (select "Export Resources," then "Puhlications and Software,"

and then "Export Software").
On the import side, a substantial number of companies offer "supply chain
management" (SCM) software. A good collection can be accessed on the Web
at http://directory.google.com / Top /Business /Business-Services /Distrihutiou-and-
Logistics/Logistics/Software).

G. Federal, State, International, and Foreign Law

The Constitution of the United States specifically provides that the U.S. Congress
shall have power to regulate exports and imports (Art. 1, §8). This means that export-
ing or importing will be governed primarily by federal law rather than state law. On
the other hand, the law of contracts, which governs the formation of international
sales and purchase agreements and distrihutor and sales agent agreements, is almost
exclusively governed by state law, which varies from state to state. As discussed in
Chapter 3, Section B.2.m, and Chapter 7, Section B.2.1, a number of countries, includ-
ing the United States, have entered into an international treaty that governs the sale of
goods and will supersede the state law of contracts in certain circumstances. Finally,
in many circumstances, the laws of the foreign country will govern at least as to that
portion of the transaction occurring within its borders, and in certain situations, it
may govern the international sales and purchase agreements as well. Most of the proce-
dures and forms that are used in exporting and importing have been developed to
fulfill specific legal requirements, so that an exporter or importer should disregard
such procedures and forms only after confirming that doing so will not subject the
company to legal risks or penalties.

14