Importers Should Be Developing Standard Operating Procedure as Hedging Tool: Expert
As U.S. importers navigate the global trade landscape and all its unpredictability, companies should consider creating and adopting a standard operating procedure that addresses all the compliance and transport hiccups that might arise, according to a Nov. 13 webinar, "Beyond Tariffs and Turbulence," which sought to address import compliance issues related to airfreight.
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The supply chain stakeholders for the product, including customs brokers, purchasers and those in transport, also should have access to a standard operating procedure, or SOP, so that they are all on the same page should regulatory changes come, according to Rehnish Patel, customs growth and solutions manager for A.P. Moller-Maersk.
"A well-built SOP ensures that everyone is aligned and accountable, and it creates a structure that you can adapt as the regulations are changing, as your needs are changing," said Patel, who also is a licensed customs broker.
Patel gave an example of when a company thinks that it's saving $200 in airfreight costs, but then it ends up paying $500 in storage because the import compliance piece has yet to be fulfilled. Having a structured, individualized SOP with a company's providers enables everyone to know what to do, how to do it and how to connect based on the company's requirements, Patel said.
"Every supply chain is unique, and every supply chain has their own ups and downs, right? So you need to be the owner of your product. You know how it works," Patel said. "This is the most fundamental thing you can do to have a clear picture of what's going on in your supply chain, and then you can hold each party accountable."
If companies ship by airfreight because their product is sensitive or highly valued, then they really should take the trouble to ensure they are giving their customs brokers all the information they need to make the import compliance process efficient, Patel continued. It can also help ensure that the customs broker doesn't misclassify the product, which can result in the importer overpaying or underpaying a tariff.
"We've heard customers say, like, I ended up paying $3,000 in tariff, and in reality, I should have paid $600 because the broker didn't have all the information, and they mis-cleared it ... or [it was] misclassified," Patel said. "Our approach is we want to get ahead of that. We don't want you to pay and then try to recoup. We want to do the right thing at the right time to make sure that you're staying compliant."
Although customs brokers understand the Harmonized Tariff Schedule, importers should strive to be familiar with it as well, Patel said, especially since regulatory changes can happen so quickly and these changes may affect the tariff rates for their products. They can also keep track of regulatory changes via cargo system messages or White House executive orders, he said.
"If your broker is classifying your product, notice that they're only classifying based on the information they have on hand, and you will probably know best how good of a description that is on the commercial," Patel said, adding that his opinion is that brokers shouldn't bear the burden of classifying goods.
Brokers are "trying to do the right thing, but they're under pressure too. All these changes are happening," Patel said.