American Shipper

Hamster ovaries and your trade compliance program

Global trade compliance director of pharmaceutical company Merck spoke to the AAEI annual conference about the complexity of valuation and country of origin requirements on non-sale materials.

   Here’s a strange question: what do hamster ovaries have to do with your trade compliance program?
   Maybe more than you think. Daniel Muscato, executive director of global trade compliance for the pharmaceutical maker Merck, said Tuesday that his company has struggled with how to properly value not-for-sale materials that it ships globally.
   Valuation is a critical component of any trade compliance process, as it is necessary step to allow customs agencies to determine duties applicable to goods moving across borders.
   For items that are eventually for sale, valuation is typically more straightforward. But most multinational companies send items between countries that have no direct sale value – maybe a laptop that was left behind by a traveling executive, or something more systematic.
   For Merck, hamster ovaries are a necessary component for a specific clinical trial, Muscato explained at the 2015 American Association of Exporters and Importers’ Annual Conference in Washington, D.C. this week. But it is difficult to make a valuation on a component that has little direct market information known about it.
   Making matters more complex is that valuation of non-sale materials is regulated more stringently by some customs agencies than others. Muscato specifically mentioned South Korea as a country that examines this issue closely.
   Companies must make a sincere effort to determine the value of such non-sale goods, and that effort is a big factor in determining whether they are seen to be evading payment of proper duties.
   A similar problem crops up when companies try to determine country of origin. Muscato cited the example of the shipment of historic documents and goods from one country to another for compilation in a company museum. One of the items in question was an antique ceramic piece used to mix medicine, but it had no country of origin identification. Again, a company has to show that it has diligently tried to determine where the product was produced in the absence of direct evidence.
   Country of origin determinations differ from country to country, adding to the complexity of the situation.
   Many of these cases are one-offs and don’t necessarily need to be addressed on an ongoing basis, but a company needs a plan of action when such non-sale items must be shipped across borders.