Introduction to Import Management – Part II

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Introduction to Import Management – Part II
International trade and customs expert Atty Agaton Teodoro Uvero

Know the Import and Export Process. Customs process in the Philippines is still partly manual and tedious. In addition, there are import regulations issued by more than 40 government agencies and there are numerous parties involved when transacting across international borders. Importers need to plan how they import and they would need a minimum understanding of the following: process and risks in ordering and selecting suppliers abroad, payment terms and arrangements (e.g. letter of credit), role of forwarders and customs brokers, and basic import rules and regulations.

It would of course take some time to have a working knowledge of the whole import and export process and the alternative for traders is to hire an import/export specialist with proper experience and related training.

Ordering goods overseas will require the assistance of a freight forwarder. The role of the forwarder is to ensure that goods are properly packed, loaded and transported from the warehouse of the supplier, transferred to loading docks of shipping lines or airlines, unloaded at the port of destination, and finally delivered to the buyer. The forwarder will assist the importer in documenting the whole process. Most forwarders likewise provide customs clearance service. The importer may hire a service provider that will including forwarding, customs clearance and trucking service. Alternatively, the importer may hire a separate forwarder, customs broker and trucker.

It is imperative for importers to look at the track record and integrity of service providers. A good customs broker should ensure customs and trade compliance. Failing that, importers are at risk of incurring additional costs or failing to release their goods in time.

Learn the Basics of International Purchasing and Supply. Traders engaged in cross border trade should ensure that they are able to efficiently purchase the right product or service at the right time and place in the most economical way possible and based on the needs or requirements of the customers.

A company’s purchasing objectives may specifically refer to lower acquisition prices, extended credit line, decreasing lead time, reducing clearance and delivery costs, and the provision for value added services.

Securing market information on the prices of goods will involve consideration of factors such as historical costs, quotations from other suppliers, reference prices, pricing and costing trend and expert estimate. Assessing a prospective supplier will require a review of the supplier’s capabilities and strategy by looking at their technical capabilities, financial situation, value added services, management capabilities, business processes, compliance and risk standards, industrial relations, reputation, track record and network.

While cost is the main driver for choosing a supplier, the increasing scope and complexity of trade encourages companies to take a closer look and provide importance on other factors when purchasing goods, i.e., technical and financial capabilities, technology support (e.g. information and communication technology solutions), management expertise and the value-added services.

In short, importers and exporters will need a working knowledge on how to specify supply requirements, obtain offers, select suppliers and manage vendors.

Comply with Trade and Customs Rules. The adoption of the WTO Agreement on Customs Valuation in January 2000 and the Post Clearance Audit system in June 2001 has brought about significant changes in how importers deal with customs. Prior to these developments, customs then had the responsibility to determine the correct valuation, classification and quantity of imported goods. These changes now require that importers are responsible for ensuring the completeness and accuracy of declarations to customs and for compliance with trade regulations. In addition, importers are required to keep import and related business records for customs audit purposes.

Most traders look at the import process as a logistics process and as such, there is less focus on ensuring compliance with trade and customs regulations. When confronted with compliance issues, many importers hire ‘fixers’ to resolve their issues. The main concern with short cuts is that the problem is only solved temporarily and the issues may haunt the importer in the future especially when there is fraud involved and when a customs audit is conducted.

Importers therefore must always prioritize compliance with trade and customs rules even if doing so may result in delays in the initial stage of the import process. Importers must always prepare and plan properly. Non-compliance may result in goods being confiscated by customs, delayed releases and costly storage charges, or imposition of hefty fines and penalties.

An emerging need for corporate governance will involve the internal provision for a trade compliance and record keeping system, and a customs broker management system. A trade compliance and record keeping system is basically a set of procedures and controls applicable to concerned units of the company (e.g. import, finance, transport, etc.) as well as the third-party suppliers (e.g. customs brokers and freight forwarders). This system will include periodic compliance and risk assessment of the company’s import operations and should provide the procedures and controls for maintaining electronic and manual records. A customs broker management system should address both the logistics requirements of the company and the need for compliance with customs and trade regulating agencies.

For part I of this column, click here.

Atty. Agaton Teodoro O. Uvero is an international trade lawyer and a logistics and supply chain consultant.  He previously served as Deputy Commissioner for Assessment and Operations at the Bureau of Customs and later, as Legislative Liaison of the Department of Finance. For questions, please email at agatonuvero@yahoo.com.