While much concern, and rightfully so, is paid to the importance of being the exporter of record (EOR) insofar as licensing and regulatory oversight is concerned, understanding the importance of being or utilizing an importer or record (IOR), or more commonly known globally as the Declarant, takes equal amounts of due diligence in approach. As the IOR or Declarant, this party shares an equal level of responsibility as it relates to extra-territorial controls related to US technology. In addition, they must pay equal importance to the regional or national control for the security of the sovereign nation where the import or delivery of goods, data or services are rendered.

When the opportunity presents itself to share/do business in another country and the goods are bound for import into that country, it is vital to understand the regulatory environment necessary for the of goods to adhere to any/all trade control related concerns. This can involve duties/taxes, additional tariffs, specific import licenses, customs processing fees, additional governmental agency requirements, numerous additional taxes or surcharges, or corporate partnership solidifications before any part or good will be received in-country.

One of the most notable areas of understanding necessary is the effective ability to act as a declarant in the manner of being a third-country entity doing business in that country. It may be necessary to account for the specific requirements of that country to act as representative in the assigned country. It may involve further formal partnerships to be established in advance, such as a (Joint Venture) or similar, to ensure the nationalized laws of that country or also being recognized when establishing that proper business relationships to allow importation representation to occur.

Once established, be it representative arrangement or partnership, it is also vitally important for the business to be located in certain regions, if possible, to take advantage of certain tax advantages that may be present based on geographical footprint of the entity and allowances that may be available to use under trade-related agreements.

An example that sheds light on this importance occurred in the APAC region and was an actual event where these types of relationships and customs arrangements for that country made it possible to show significant savings when resolving a customer event effectively.

Real-Life Scenario-

Background:

• Customer aircraft was grounded due to major structural repair damage during mechanical work in hangar
• Damage was significant enough to need “shoring tool” to dissect fuselage and perform repair before re-attaching through use of this tool
• Tool is extremely large and is moved on a trailer
• Tool was only available in US and was needed to be utilized in the Philippines
• No other OEM tool globally is available for this aircraft
• Part was shipped following all trade control requirements from US with correct tariff codes and a total value of $300,000

Problem:

• Item shipped prior to a review for potential use of carnet to support the temporary import of the part (which would alleviate duties/taxes)
• Once equipment arrives, Philippines customs authorities only viewed item as a trailer despite a very detailed description of part and purpose and invoked a 40% duty rate based on value of item declared ($120,000)
• Broker assigned to manage cartage and customs (US or otherwise) would need to pay fee for import prior to it being received by in-country service provider
• Incoterms put responsibility on the shipper (US company) for being the importer

Resolution:

• By communicating issue with service provider, they helped manage the importer
• Supplier was fortunate enough to located in a duty-free zone
• Cover Letter by shipper was provided to the broker to correct Incoterms, as evident on Commercial Invoice as DDP, to be changed to DAP, which allows the in-country provider to be recognized as the importer AND authorized for the duty exemption of the part saving $120,000 of costs
• Future engagements by the shipper will be to issue carnet, for like/similar events, in advance to see if carnets are acceptable in the importing country for the goods being temporarily imported

As you can see, having the right partnerships, understanding of global trade regulations, and informed decision makers aware of the events can make a world of difference in approaching business transactions.

If you are a company looking to expand business opportunities across the globe, please let Cruzer LLC know. We may be able to lend a helping hand when encountering dilemmas such as this or may may trade variables you are encountering.

Fee free to contact us at compliance@cruzerllc.com to start the conversation. We would be honored to assist.