Daily Archives: May 15, 2015

Geopolitical Damnation 28: Customs Acts

Customs is the agency, authority, or regulatory body in a country that is responsible for collecting tariffs on, and controlling the flow of goods in, and out, of the country. While there is nothing wrong with, or damning about, controlling the flow of goods, as it ensures that products entering and leaving are safe, or collecting tariffs, as that is how many countries acquire the taxation revenue they need, the flow has to be understandable. [Moreover, import tariffs are one of the earliest forms of tax in many countries. For example, in the beginning, there were three types of taxes in the US, poll taxes (which is a type of head tax or per-person tax that pre-dated modern income tax), property taxes, and import taxes.]

Nor is there anything wrong with, or damning about, creating regulations and acts that clearly define the purpose of a customs agency, the authority it has, the documentation it requires, the taxes that can be levied, and the penalties it can apply for non-compliance. The damnation comes into play when the number of sheets of paper required to capture the rules, regulations, and constant updates to the regulations exceed the quantity of goods flowing into, and out of, a country.

For example, Brazil once updated its HTS code, that defines the import tax rates on different types of goods, 80 times in a single year. But its not just the plethora of confusing HTS codes, associated rulings, and updates that an organization needs to keep track of (which, globally, can require 2 Million data warehouse updates a year), it’s the dozens of regulations that each country subjects importers and exporters to.

For example, in the US, an organization involved in global trade has to be intimately familiar with, at a minimum, the following acts:

  • Trade Act
    that allows the President to negotiate trade agreements on behalf of the US for presentation to Congress.
  • Customs Modernization Act
    that amended the Tariff Act of 1930 and introduced “informed compliance” and “shared responsibility” that requires traders to provide CBP with accurate and timely classification, necessary data for appraisal, and to ensure adequate security of goods
  • North American Free Trade Agreement
    which is a free trade agreement between Canada, the United States, and Mexico
  • 10+2
    which is short for the Importer Security Filing introduced in 2009 that requires importers to notify CBP of impending cargo imports 24 hours in advance
  • C-TPAT
    which is short for the Customs-Trade Partnership Against Terrorism, a voluntary supply chain security program focused on improving the security of private companies’ supply chains with respect to terrorism

And may also need to be familiar with dozens of other acts, including:

  • Generalized System of Preferences
    which is a preferential tariff system which provides for a formal system of exemption from the most favoured nation principle and the more general rules of the WTO
  • U.S.-Caribbean Basin Trade Partnership Act
    which forms a trade agreement with the 23 independent countries of the Caribbean basin
  • International Traffic in Arms Regulations
    which controls the export and import of defence-related articles and services on the United States Munitions List (USML)
  • Lacey Act
    which prohibits trade in wildlife, fish, and plants that have been illegally taken, possessed, transported or sold.
  • Reciprocal Tariff Act
    which replaced the Smoot-Hawley Tariff Act which raised tariffs on over 20,000 imported goods to record levels in 1930 and which paved the foundation for modern HTS schedules

And this is just to manage import and export in the US. Some countries have lists of acts that are just as extensive. Now imagine your company does business in 100 countries. It’s damnation to the power of 100!