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Technology can help with trade compliance

Speakers during an American Shipper webinar talked about how software solutions could help importers and exporters navigate sanctions, tariffs and security filings.

   Increasing tariffs, growing sanctions and added security filings can pose challenges for importers and exporters, but global trade management (GTM) software solutions are among the options that can help companies remain compliant with trade regulations, speakers said Thursday during an American Shipper webinar.
   “The need to comply with diverse, multinational trade regulations and agencies poses some real issues,” said Melissa Harrington, Descartes sales director of content business, during the “Trade Compliance Round Up — Hot Topics & Digest” webinar, which is available on demand. 
   She continued, “When importers and exporters don’t understand or know the compliance obligations of certain countries or regions, it will often result in increased transit times, operational inefficiencies, higher logistics costs and possibly eroding sales, profit margins, customer service and in some cases fines and penalties for noncompliance. … The good news is once you’ve taken time to understand your compliance obligation, implementing a comprehensive compliance program is relatively easy with trade compliance software solutions. Visibility and up-to-date information is key to a successful trade compliance program.”
   There has been a rash of sanctions activity in 2019 alone, said Beth Pride, president of BPE Global, including counter-narcotics trafficking, counter-terrorism, transnational criminal organization and foreign interference in U.S. elections sanctions; Democratic Republic of Congo and Iran sanctions; and changes to sanctions on Libya, Nicaragua, North Korea, South Sudan, Syria and Venezuela, she said.
   More than 7,000 individuals and entities are sanctioned by the U.S. and European Union, Harrington said.
   The Office of Foreign Assets and Control (OFAC) implemented a Ukraine and Russia-related sanctions program in March 2014, Pride said, but the Specially Designated Nationals (SDN) program started in 2008. Assets of SDNs — individuals or companies owned or controlled by, or acting on behalf of, targeted countries, or individuals, groups and entities designated under programs that are not country-specific — “are blocked and U.S. persons are generally prohibited from dealing with them,” the Treasury Department’s website reads. 
   “This is kind of brushing off a set of rules that if you are a specially designated national you actually have to determine ownership to determine if you can or cannot export to an entity,” Pride said of the 2014 sanction. “They brushed off that 2014 program, calling it a new regulation and put Russia and Ukraine on the cover of it, but the reality is it’s not just Russia and Ukraine. … There’s not a single entity on the first page of the SDN list that is Russia or Ukraine.”
   North Korea, Iran, Colombia, Ireland, Burma, Saudi Arabia and entities in the U.S. are included on the first page, she said.
   Under the OFAC 50% rule, an entity owned in the aggregate, directly or indirectly, 50% or more by one or more blocked persons also is considered a blocked person regardless if the entity is listed in the annex to an executive order or is placed on the SDN list, according to a guidance by the Treasury Department.   
   The OFAC doesn’t provide a list of companies related to the 50% rule, Harrington said, “so it really is your responsibility to ensure that you are not doing business with companies or individuals that could be sanctioned by law.”
   Pride said, “Now although OFAC still hasn’t provided any real additional guidance, there have been fabulous databases built by GTM providers … and content providers and credit reporting firms that actually really help companies set entities against the 50% rule.
   “Some companies may do it manually. I encourage people to continue to look at their GTM solutions providers to figure out how they can meet this rule. Don’t limit yourself to just Russia,” she said.
   Software solutions also can help importers handle Customs and Border Patrol’s Air Cargo Advanced Screening (ACAS) program. Enforcement of ACAS, which is a program that evaluates air shipments for threats to aviation by using air cargo-related data prior to loading an aircraft at a foreign airport, will begin June 4.
   Necessary data elements include total quantity based on the smallest external packing unit; total weight; cargo description, for which Harrington said to try to use the six-digit HS classification description; both shipper and company name and address; the house airway bill number, which is a mandatory element; the seven-character participant originator code; and the master airway bill number, which is a conditional data element.
   ACAS is one of many security filings worldwide, Harrington said, and the disparity between global mandates and varying infrastructure capabilities could make the exchange of information difficult.  
   “As we go, we’re going to start seeing more customs and regulatory agencies at a global level leveraging technology to ensure compliance with trade laws, and as importers and exporters, carriers and forwarders we should all be doing it as well,” Harrington said.
   The recently increased Section 301 tariffs across $200 billion worth of Chinese goods, possible looming tariffs of up to 25% across another $300 billion worth of Chinese goods and retaliatory tariffs from both China and the European Union add even more complexity for importers and exporters, Pride said. China announced Monday it would set tariffs of 5% to 25% on $60 billion worth of U.S. products beginning June 1, and the European Trade Commissioner said the EU has prepared a list of American products worth $22.5 billion, she said.
   Companies can submit comments requesting subheadings to be excluded from the fourth tranche or to provide input for specific tariff levels that should be imposed to the U.S. Trade Representative by June 17, which is the day the USTR will hold a public hearing, Pride explained.
   “Absent any intervening agreement with China over these trade relations, List 4 is likely,” she said. “It could be implemented any time after June 24 at any amount up to 25% on top of the existing rate of duty. This is where you go get your voices heard.”
   Pride said companies should ensure their products are properly classified, and technology can help them do so.
   “I would also then recommend using a GTM solution because they link your classification to the list and indicate immediately if you are subject to it,” she said.