Importers, Exporters Must Be Cognizant of Changing Laws

By Colin A. McRae, published on May 2, 2012, in Business in Savannah.

Importing and exporting requires dealing with a number of different federal agencies including the Department of Homeland Security, the Food and Drug Administration, the State Department, the U.S. Customs Service and the Department of Agriculture. Each agency has its own set of rules that are constantly changing, particularly with regard to countries that tend to be less than friendly to U.S. trade. Failure to comply with the laws that govern import and export shipments can result in steep penalties.

Importing and exporting requires dealing with a number of different federal agencies including the Department of Homeland Security, the Food and Drug Administration, the State Department, the U.S. Customs Service and the Department of Agriculture. Each agency has its own set of rules that are constantly changing, particularly with regard to countries that tend to be less than friendly to U.S. trade. Failure to comply with the laws that govern import and export shipments can result in steep penalties.

Despite the growing risk of fines and even criminal proceedings, a poll by Compliance Week magazine and the research firm Paisley found that almost a third of companies polled had no formal policy controlling their import-export programs and that more than half had poorly executed programs. Many business owners could use counsel and guidance to avoid common mistakes and to make the import/export process go more smoothly.

When it comes to importing and exporting, an important detail to determine is the classification of the product. Classification determines which government agency oversees shipments of the product. Improper classification can lead to improper licensing, recordkeeping, reporting, and subsequently violations and fines.

Once businesses have the proper forms, it is critical to fill them out as accurately as possible. Maritime security has been especially tight since 9/11, so it is essential that these forms match the manifest on the shipping vessel. A data entry error can raise a red flag with U.S. customs agents. It is also important to keep detailed and secure records in case customs has any questions or concerns.

Time management serves as another essential skill in imports. The Importer Security Filing program requires importers to alert customs as to what they are importing before the cargo is loaded at a foreign port. Penalties can be applied to any importer that does not file its reports in a timely manner. Customs officers can also file a Do Not Load order if the cargo appears suspicious in any way.

Importing cargo that raises red flags can be a costly mistake for importers. Importers should make sure that what they import comes from a known manufacturer with a valid trademark license, that the product itself is cleared for import and that the product comes from a country with a valid trade agreement with the United States.

Of course, business owners would not want to export any products to trade embargoed countries, but they may not be aware that they need specific language in their sales agreements to protect themselves in case their shipments inadvertently end up in hostile countries. Trade agreements and laws about certain products change regularly, so importers must stay abreast of the most recent developments about products and countries from which they import. Ignorance of the law is not an excuse for lack of compliance with the law.

Buying and selling products on the world market opens up incredible opportunities for business owners, but it also exposes them to potential legal entanglements and possible fines if not handled carefully. Success in this area depends on due diligence and strict compliance with the law.
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Colin A. McRae is a partner at HunterMaclean who specializes in admiralty law as well as business litigation, real estate litigation, and intellectual property law. For more information, please contact him at 912-236-0261 or cmcrae@huntermaclean.com.