Increase Import Compliance

Take control of your supply chain Take control of your supply chain and its related costs or face the and its related costs or face the

consequences.consequences.

WILL WILL CUSTOMS COMPLIANCECUSTOMS COMPLIANCE

SINKSINK YOUR SHIP?YOUR SHIP?

TRG Direct Copyright 2008 22

“The first thing you need to know is that importing is not a right. I own your import privileges. You follow the rules and regulations, or I will take those privileges away from you.” –U.S. Customs Inspector

ABSOLUTE POWERABSOLUTE POWER


WHAT EVERY IMPORTER WHAT EVERY IMPORTER WANTSWANTS

To MAXIMIZE the impact of imports on PROFITS through the integrity of its import practices including;

1) Compliance,

2) Control of import process,

3) Cost reduction.


HOW YOU WILL GET HOW YOU WILL GET THERETHERE


MAXIMIZE IMPORT MAXIMIZE IMPORT COMPLIANCECOMPLIANCE

COMPLIANCCOMPLIANCEE

Demonstrating the “reasonable care” compliance expectations of the Mod Act.

Reducing errors and omissions while streamlining the entry filing process.

Implementing best practices for Customs record keeping and internal document review.


CONTROL YOUR IMPORT CONTROL YOUR IMPORT ENTRIESENTRIES

CONTROLCONTROL Increasing the visibility of shipments and clearance information in real time.

Establishing internal procedures to manage inventory control.

Developing internal controls and structure to avoid repeated entry errors which negatively impact your compliance rating.


MINIMIZE IMPORT-RELATED MINIMIZE IMPORT-RELATED COSTSCOSTS

COST

COSTCOST Improving inventory turns and customer payment streams.

Reducing supply chain outsourcing costs.

Bringing processes in-house where feasible.


Complying with the ever-changing, complex rules and regulations enforced by U.S. Customs.

Controlling and reducing paperwork errors which can hold up entire shipments in demurrage.

Managing costs from unpredictable shipping delays, fuel surcharges and transportation expenses that negatively impact your profit margins.

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YOUR CHALLENGESYOUR CHALLENGES

SOURCE “THE CHANGING LANDSCAPE OF IMPORTING AND EXPORTING” BY FELIX PEKAR, FEBRUARY 2008


Transportation costs.

Costs of customs tariffs, duties and taxes.

Inventory carrying costs.

Costs of internal controls.

Selling, general and administrative expenses.

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TOTAL LANDED COSTSTOTAL LANDED COSTS

Understand your true landed import costs—bothdirect and indirect.

The challenge is to understand total supply chain costs and devise better methods to manage and contain them.


SOURCE FURNITURE TODAY

10

The cost of shipping a standard 40-foot container from East Asia to the East Coast of the U.S. has tripled since 2000.

That cost will double again as oil prices reach US$150 per barrel.

Goods with the lowest value-to-freight ratio will be most affected (e.g. furniture and apparel).

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SHIPPING COSTS ARE SHIPPING COSTS ARE SOARINGSOARING


SOURCE WACHOVIA

11

As the dollar slumps, import costs rise.

In 2008, the dollar hit record lows against the Euro and the Canadian Dollar and slumped against all major currencies.

“Looking forward, we project further dollar volatility in the quarters ahead.”

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DOLLAR VOLATILITY IMPACTS DOLLAR VOLATILITY IMPACTS TRADETRADE


Importers who want to keep their competitive edge must find ways to offset the rising costs of transportation and the negative effects of the devalued dollar.

SKYROCKETING COSTS CAN SKYROCKETING COSTS CAN KEEP YOUR SHIP IN PORTKEEP YOUR SHIP IN PORT


SUPPLY CHAIN SECURITY SUPPLY CHAIN SECURITY A series of events reflect an increasingly complex A series of events reflect an increasingly complex

global environmentglobal environment

C-TPAT

10+2 ISF

MOD Act

ACE

ISA

1990 2000 2005

1995 201520101985

9/11

Safe Harbor Act


Importers are expected to exercise reasonable care in

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THE MOD ACT OF 1993THE MOD ACT OF 1993““Reasonable Care & Informed Reasonable Care & Informed

Compliance”Compliance”

SOURCE U.S. CUSTOMS AND BORDER PROTECTION “REASONABLE CARE”

Importers are expected to familiarize themselves with the details of their supply chain.

Importing anything to the U.S.,

Customs entry filing,

Classifying imported items for duty purposes,

Record keeping.


9/11 CHANGED IMPORTING9/11 CHANGED IMPORTING

SOURCE WORLD CUSTOMS JOURNAL

Collecting revenue,

Protecting U.S. trade interest,

Catching unscrupulous or criminal importers who didn’t play by the rules.

Pre 9/11 U.S. Customs Focus

Post 9/11 U.S. Customs Focus

Preventing terrorists and terrorist weapons from entering the U.S.,

Performing the priority mission without disrupting the flow of legitimate trade or the U.S. economy.


More than 8,300 companies are C-TPAT certified.

CBP has conducted 7,469 validations, including 830 revalidations, of member supply chains.

252 companies have achieved Tier 3 (highest) status, further reducing their risk score for cargo exams.

Tier 3 companies consistently use best practices to manage their supply chain.

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SOURCE AMERICAN SHIPPER

C-TPATC-TPATCustoms - Trade Partnership Against Customs - Trade Partnership Against

TerrorismTerrorism


There are 317 Points of Entry in the U.S.

190,000 vessels dock in U.S. ports annually.

31.4 million entries are cleared representing $2 trillion in imports.

Customs must track more than 10 million cargo containers and their contents each year.

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CUSTOMS CHALLENGES CUSTOMS CHALLENGES TODAYTODAY

SOURCE U.S. CUSTOMS AND BORDER PROTECTION YEAR IN REVIEW 2007

Globalization has made importing more Globalization has made importing more complexcomplex


Currently 5-6% of all containers are externally examined.

2% are subject to full physical inspection.

100% of shipping information for all containers is reviewed.

SOURCE LOGISTICS TODAY

CUSTOMS STILL KEEPS CUSTOMS STILL KEEPS SCORESCORE


The U.S. Census Bureau alone reports that 8% of all import transactions contain one or more errors, overall

errors are even higher.

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REPORTING ERRORS ARE REPORTING ERRORS ARE COMMONCOMMON

SOURCE U.S. CENSUS BUREAU IMPORT STATISTICS


Pentax, a large camera maker, imported $60 million worth of duty-free camera equipment that was incorrectly labeled “Made in Hong Kong” when in fact the equipment was made in China.

The camera maker settled with Customs out of court for a $20 million fine.

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A COSTLY MISTAKEA COSTLY MISTAKE 100% of shipping paperwork for ALL containers is reviewed

THE PROBLEM

$20 M

FINE!

SOURCE GLOBAL TRADE MANAGEMENT TEAM


CUSTOMS NIGHTMARESCUSTOMS NIGHTMARES

Your shipment is held in demurrage, incurring daily storage fees.

You miss an important trade show or fail to deliver the goods to a client who is counting on you.

You lose time, customer goodwill and money.

You are subject to fines, penalties or even forfeiture of goods.

Your compliance rating takes a hit, threatening your next import.

Your paperwork is incorrect or incompleteYour paperwork is incorrect or incomplete


CUSTOMS BROKERS ARE CUSTOMS BROKERS ARE NOT LIABLE FOR ERRORSNOT LIABLE FOR ERRORS

Only 2.4% of corporations were 100% Customs compliant based on 1999-2001 government statistics.

CUSTOMS BROKERS

SOURCE U.S CENSUS BUREAU IMPORT STATISTICS

Are not required to participate in continuing education or recertification,

Frequently migrate to new firms, Do not know your product as well as you

do.


You give your Customs broker the correct data.

You provide your Customs broker with specific instructions.

They can still get it wrong.

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YOU PAY FOR ITYOU PAY FOR IT


Executone’s Customs broker failed to fill out duty-free forms for client merchandise.

Because of the Customs broker’s error, Executone was incorrectly assessed an 8.5% duty rate.

Customs agreed that the error was a mistake of fact, correctable under § 1520(c)(1).

But, because Executone could not explain why the broker failed to do his job, the duty rate was not reversed and the company had to add legal expenses to an already burdensome import duty.

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INCORRECT DUTY RATE INCORRECT DUTY RATE CASE STUDYCASE STUDY

SOURCE EXECUTONE INFORMATION SYSTEMS V. UNITED STATES, 96 F.3D 1383 (SEPTEMBER 24, 1996)


The Customs broker for an importer of LCD screens assigned the wrong tariff number, resulting in a $6M penalty to the company.

CBP rejected the company’s “reasonable care” defense that reliance on a customs broker to classify merchandise correctly is sufficient to establish that an importer exercised reasonable care.

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INCORRECT TARIFF INCORRECT TARIFF CLASSIFICATIONCLASSIFICATION

CASE STUDYCASE STUDY

SOURCE UNITED STATES V. OPTREX AMERICA, INC. , (MAY 17, 2006), SLIP OP. 06-73

$6 M Penalty


The owners of PK Promotions Inc. were arraigned July 7, 2008 on a 16-count indictment alleging they conspired to commit Customs and wire fraud.

They are accused of filing fraudulent reports to avoid paying the full amount of duty tax required on imported goods.

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FRAUDFRAUDCASE STUDYCASE STUDY

SOURCE U.S. VS. KOTASAKOS - INDICTMENT


Pillsbury Co. was raided by Customs while under investigation for fraud.

The company allegedly obtained duty refunds from fraudulent drawback entries.

300,000 import documents were seized.

Employees were subpoenaed for depositions.

The case settled out of court for $3.9M.

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INCORRECT DRAWBACK INCORRECT DRAWBACK ENTRYENTRY

Pillsbury’s premises were raided by CustomsPillsbury’s premises were raided by Customs

SOURCE NEWSBANK INC, PILLSBURY V. UNITED STATES

$3.9 MSETTLEME

NT


$2.8 M FRAUD $2.8 M FRAUD SETTLEMENTSETTLEMENT

SOURCE THE CULLEN LAW FIRM, PLLC

In 2008, Intertex Clothing agreed to pay nearly $2.8 M for fraudulently reporting to U.S. Customs that imported textiles were manufactured in Korea to evade quotas on goods that were actually made in China.

The defendants imported the goods for domestic sale to retailers, including Wal-Mart, J.C. Penney, Family Dollar Stores, Kohls and Marshalls.


SOURCE 19 U.S.C 1618 & 1623 (c)

2929

TRUTH & CONSEQUENCESTRUTH & CONSEQUENCES

NEGLIGENCE Two times the value of duties, taxes and fees—hit to compliance rating making future imports more difficult.

GROSS NEGLIGENCE Four times the value of duties, taxes and fees.FRAUD Entire domestic value of goods and possible jail time.

Penalties for Penalties for ErrorsErrors


For the mere inability to produce documents, fines could be $10,000 per document.

Unlike IRS penalties (percentages), the civil penalty provision of Customs law results in multiples of the loss of revenue involved.

Just at the simple negligence level, it's possible to end up paying one or two times the duty loss per shipment.

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THE TRUTH HURTSTHE TRUTH HURTS

SOURCE TRANSPORTATION AND DISTRIBUTION

When U.S. Customs Comes KnockingWhen U.S. Customs Comes Knocking


Despite current global market challenges, importers can take control of their supply

chain and realize efficiencies through proactive management of their Customs

entries.

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THERE IS THERE IS HOPEHOPE


You have the right to direct file your Customs entries.

Any importer of record may file without a license or permit.

““AUTOMATE OR PERISH”AUTOMATE OR PERISH”~ William von Raab, Customs Commissioner Circa 1980’s~ William von Raab, Customs Commissioner Circa 1980’s

CUSTOMS 19CFR Ch.1 111.2


Broker mistakes are NOT just part of the cost of doing business.

They can and DO affect your bottom line.

They can and DO affect your compliance rating.

33

TAKE CONTROLTAKE CONTROL


You already provide your broker with the data (i.e. value and country of origin).

The paperwork you collect for your Customs broker is all you need to direct-file in most cases.

Follow up audit of broker entry accuracy.

34

YOU ALREADY DO THE YOU ALREADY DO THE WORKWORK


Save broker fees,

Save time and prevent delays by self filing Customs entries,

Eliminate broker premiums for dock fees and transportation arrangements,

Establish and maintain a positive relationship with Customs.

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YOU SHOULD REAP THE YOU SHOULD REAP THE REWARDSREWARDS


A few of your import entries may be too complex for you to handle on your own—think 80/20.

A good relationship with a trustworthy broker is essential to your company’s success.

A phased approach can facilitate the transition more quickly.

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WHEN YOU NEED A BROKERWHEN YOU NEED A BROKERThe 80/20 SolutionThe 80/20 Solution


FACE YOUR CHALLENGES FACE YOUR CHALLENGES & GET WHAT YOU WANT& GET WHAT YOU WANT

Direct Filing your Customs entries allows you to:

Increase import compliance and control,

Decrease import costs.


Minneapolis-based Target Corporation is the 2nd largest importer in the U.S.

Target decided to direct-file its Customs entries, using the 80/20 rule.

Target has achieved a 100% compliance rating for the past two years while saving money.

Target’s positive relationship with Customs enables it to manage its supply chain more efficiently.

38

DIRECT FILING CASE STUDYDIRECT FILING CASE STUDYTARGET CORPORATIONTARGET CORPORATION

SOURCE MICHAEL LADEN, FORMER DIRECTOR OF TARGET CORPORATION’S IMPORT OPERATIONS

39 39

INTRODUCINGINTRODUCING

TRG Direct Copyright 2008

TRG Direct employs a seasoned group of international trade experts whose depth of experience includes:

404040

TRG DIRECT IS YOUR ENTRY TRG DIRECT IS YOUR ENTRY FILING SOLUTIONFILING SOLUTION

ABI development based on 25 years with U.S. Customs,

17 years of underwriting U.S. Customs Bonds,

30 years in supply chain management & security.


The ONLY web-based direct filing system available on the market today that allows you to pay as you go,

$20-$30 per entry, 80% below industry average, No expensive software or upgrades, State-of-the-art security, On-site training that gets you up and running in less

than one day, 24-hour access to licensed Customs broker available, File an entry in as little as four minutes.

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THE TURBO TAX™ OF DIRECT THE TURBO TAX™ OF DIRECT FILINGFILINGTRG Direct makes it easyTRG Direct makes it easy


In a post 9/11 world, TRG Direct safeguards and backs up our systems to ensure that you never experience an outage or inability to access the direct filing system.

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TRG DIRECT SYSTEMS TRG DIRECT SYSTEMS INTEGRITYINTEGRITY

Multiple fault tolerant storage systems,

Secured data center with encrypted off-site storage,

24/7 on-site technician, SSL encryption, Customer records maintained for 7

years (per U.S. Customs mandate).

Your data is safe with usYour data is safe with us


10+2 Importer Security Filing is a proposed rule by Customs & Border Protection requiring importers and carriers to transmit these additional data elements 24 hours prior to vessel lading:

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TRG DIRECT IS YOUR TRG DIRECT IS YOUR 10+2 SOLUTION10+2 SOLUTION

Manufacturer Name & Address,

Seller Name & Address,

Container Stuffing Location,

Consolidator Name & Address,

Buyer Name & Address,

Ship to Name & Address,

Importer of Record #,

Consignee #,

Country of Origin of the Goods,

6 Digit Commodity #.

Importers (10)

Vessel Stow Plan, Container Status Message Data.

Carriers (2)


What are the true costs of your import practices?

IMPORT PROFITABILITY QUOTIENTIMPORT PROFITABILITY QUOTIENT

Demurrage

Delays

Fines/Penalties

Supplemental Duties

Over Payment of Duties

Filing Costs

Legal Fees

Cost of Capital


Deciphering your broker’s bill requires a review of all charges associated with each entry.

You may think your base entry fee is only $75.

If your invoice contains any one of these charges, your entry rate is potentially much more than $75.

4545

WHAT DO YOU WHAT DO YOU REALLY PAY YOUR REALLY PAY YOUR BROKER?BROKER?

Ala Carte Pricing

Out- of-Pocket

Carriers $2.50

Truckers $2.50

Customs $2.50

Terminal $0.00

Total Out-of-Pocket $7.50

Administrative Items

Entry Fee $75.00

Additional Tariff #s $10.00

Additional Invoices $10.00

ABI Fee $0.00

Agency Fees $5.00

FTA $5.00

Advance Fee $10.00

Handling Fee $5.00

Coordination $30.00

Messenger $12.50

Telephone $5.00

Total Revenue Items $167.50

Actual Per Entry Fee $175.00


HOW MUCH CAN YOU SAVE?HOW MUCH CAN YOU SAVE?TRG Direct is Priced 80% Below Industry AverageTRG Direct is Priced 80% Below Industry Average


RESOURCES & STAFFINGRESOURCES & STAFFING

Assumptions: Hours needed based on 240 working days in one yearTime needed to complete one entry = 20 minutesBroker fees = $100 per entry

AnnualEntries

DailyEntries

Daily Time

Decrease in Broker Mgmt

DailyTime

Employees Needed

StaffingCost

CostSavings

Net Savings

Average Min 5% Net $48,687

Easy Entries 1500 6 125 6 119 0.28 $13,766 $103,800 $90,034Total Entries 2000 8 167 8 158 0.38 $18,354 $138,800 $120,446Entry Growth 2500 10 208 10 198 0.47 $22,943 $208,800 $185,857

4000 17 333 17 317 0.75 $36,708 $278,800 $242,0925000 21 417 21 396 0.94 $45,886 $348,800 $302,91410000 42 833 42 792 1.88 $91,771 $698,800 $607,029


IMPLEMENTATION IS EASY IMPLEMENTATION IS EASY

1) Complete a simple application process.

2) Train online and/or on-site.

3) Begin filing your entries.


TAKE ACTION!TAKE ACTION!Now is the time to control your compliance and costsNow is the time to control your compliance and costs

Contact us today to schedule a free consultation.

Phone: 847.756.7543

Fax: 847.756.7545 Email: [email protected] Website: www.TRGDirect.com

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Increase Import Compliance