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In today's business environment, organizations have to cope with an increasing number of diverse and complex compliance requirements stemming from various laws, regulations, internal or external policies, business contracts, and technical documents etc.

Compliance management is thus essential for ensuring that the business processes of an organization are in line with a huge set of prescribed requirements. With respect to international trade that involves import and export, the compliance burden multiplies because it is now driven by multiple sets of laws and regulations of different countries.

Our seasoned and competent team of consultants provide a wide range of trade and Customs compliance consulting services that aim to improve your compliance performance as a whole and reduce your time and monetary cost at the same time. Typical subjects include but not limited to:

Tariff Classification

Customs Valuation

Rules of Origin

Compliance Review and Implementation

Broker Compliance

Trade Security & Facilitation Program

Internal Control Program

Investigation and Prior Disclosure

Help Desk

Tariff Classification

With respect to international trade and trade compliance, tariff classification is indeed the very first and most important step. Most countries in the world base their tariffs on the Harmonized System (HS) developed and maintained by the World Customs Organization, tariff classification in practice usually means to identify the most appropriate HS code for a particular product, or several HS codes for a number of products respectively.

Please note that tariff classification is the sole responsibility of importers and exporters although the classification result will be reviewed by Customs administrations for potential mistakes or fraudulence.

Given a product, the importer or exporter of the product is responsible for selecting the most appropriate tariff provision for it from among thousands of tariff headings. An accurate or defendable classification is of great value in following scenarios:

  1. Commodity description and HS code are indispensable parts of a valid Customs declaration. Without the information, Customs authorities will not accept your import or export declaration;
  2. The HS code in Chinese tariff book functions like an anchor or a primary key of a database table. Given a commodity, all the trade policies applicable to that commodity are defined and associated with its HS code. For example, the import duty rate, import VAT rate, export duty rate, export VAT refund rate, and license requirements etc., all vary from one HS code to another;
  3. The HS code is heavily used in China’s import and export controls. For instance, the anti-dumping and countervailing measures, the applicability of sanctions and embargoes, and the various control lists published by different authorities are all HS code based;
  4. The HS code is the foundation of the many free trade agreements that China has signed with its trade partners. Not only are the coverage of these agreements defined in HS code, many products are subject to changes in tariff classification measured under a “tariff shift” test to determine their eligibility under the agreements;
  5. Due to the aforementioned significance, tariff classification is among the top priorities that come under Customs scrutiny in post clearance audit, violation investigation, and other law enforcement activities.

In summary, tariff classification has a direct impact on importers’ and exporters’ logistic efficiency, financial performance, and trade compliance obligations.

Questoud can help you properly classify your products, software, and technologies. Accurate and defendable are the properties of our classification service.

Questoud can review the tariff classifications already assigned to your products to determine their compliance status or identify opportunities that may arise from reclassification.

When necessary, Questoud can assist you to prepare and file a request for classification ruling with China Customs.

For the clients who have bulk classification needs, Questoud offers cost-effective solutions to classify tens of thousands of items quickly and regularly. Based on the big data, our consultants can help develop a company-specific classification process tailored to the needs and products of your business. Moreover, tariff classification database can be developed upon your request to significantly improve the integrity, consistency, and efficiency of your classification work across the organization.

Questoud has solid records in helping clients resolve classification issues with Customs authorities, which tend to happen from time to time and the stakes are usually high.

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Customs Valuation

In China, duties are imposed on most imports and a few exports. Importers and exporters must declare the proper dutiable value of their shipments. Unfortunately, unwitting mistakes such as failing to account for dutiable assists or other off-invoice payments are very common in practice. Most of these violations are unintentional, frequently due to people's ignorance of the applicable legislation.

For example, China Customs stipulates that the dutiable value of an import shall be its CIF value, and the dutiable value of an export shall be its FOB value. Because the majority of items are assessed on an ad valorem basis, an under-declared value causes a duty loss to the government. Duty loss or evasion can expose the economic operator to an administrative penalty or even a criminal penalty depending on the actual situation.

Moreover, the declared value is subject to more scrutiny from Customs if the transaction happens between related parties. For example, transactions between the subsidiaries of a multinational, or deals between a parent company and its subordinate etc.

Questoud can help you better understand the principles and practical know-how in this complex area. We can review your current pricing policy against the best practice, and recommend adjustment to your declared value.

Questoud can assist you to resolve past valuation errors, implement the required corrective actions, and design a system of controls to prevent any recurrence.

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Rules of Origin

A Free Trade Agreement (FTA) lowers trade barriers between signatories of the agreement, typically with more market access but less import duties. On the other hand, in order to prevent free riders, FTAs all come up with strict and complicated rules of origin. Failure to satisfy these rules would deprive your shipments from the preferential treatment. In practice, the rules of origin challenges can take various forms. For example, it can be technical issues like substantial transformation, local content calculation, and direct transportation etc., or operational know-how such as how the origin certificate shall be dated in relation to the invoice or shipping date, and whether we should tick a choice or cross it, etc.

The origin of a product determines not only its eligibility for FTAs but also the applicability of other trade control measures such as in antidumping or countervailing cases or in the calculation of De Minimis. Additionally, origin is closely related to the labeling and packaging regulations.

Origin determination is one of the three core functions for the assessment of duty, along with tariff classification and valuation. Rules of origin are divided into two categories in China:

  1. The preferential rules of origin apply to scenarios in which preferential duties are involved, such as transactions under a FTA;
  2. The non-preferential rules of origin apply to the rest scenarios, such as in anti-dumping cases, or transactions under normal trade.

Questoud can help you with your analysis of product origin, FTA feasibility study, product qualification, document review and record keeping etc.

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Compliance Review and Implementation

Trade compliance is not an option but an obligation imposed by statutory laws and regulations. It is thus critical for prudent businesses to conduct periodic compliance reviews, either as a quick health check on specific functions like classification and valuation or as a comprehensive audit to test the effectiveness of entire compliance work.

Questoud’s compliance review is designed to measure a company's level of compliance with applicable trade control legislation. With extensive experience in compliance, our review typically traces back twelve months to determine if trade related processes such as classification, valuation, rules of origin, license determination, license exception or application, declaration, tax payment, documentation and record keeping etc. are compliant with the relevant legislation. Our deliverables include standard gap analysis with a weighted and graphical assessment of a company's trade compliance processes and procedures, and recommendations for corrective actions as well.

There are occasions where companies have done a compliance review already, which exposed all the problems and potential violations. However, the organization may lack the expertise or resources to implement the corrective actions or similar improvement efforts. In such a situation, Questoud can help you develop new SOPs or refine existing SOPs to accommodate the changes, and facilitate the process with tailored training sessions.

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Broker Compliance

Partners, particularly those specialize in logistics and supply chain, are indispensable to importers and exporters. The successful delivery of international shipments rely on the professional services provided by Customs brokers, freight forwarders, and warehouse operators etc. However, that does not mean you can sit back and relax after entrusting your import and export process to your partners. Because punishment for the violations committed by your brokers or freight forwarders may very likely get to you as well.

For instance, supposing your Customs broker misclassified your imports in the past year, which resulted in a great loss of import duties, Customs will of course punish the broker with fines, penalties, and even the revocation of its licensure. At the same time, The authority will turn to you for the underpaid duties, and fine you for your negligence or without exercising reasonable care.

In past decades, we have witnessed many cases, in which violations committed by business partners were attributed to the importers and exporters.

In short, you must ensure that each and every link of your compliance chain is evenly strong. Questoud can help you run compliance testing of your key partners such as customs brokers and freight forwarders. The test can be run against either the particular legal framework that applies to your partner to see if it operates with the utmost diligence and in full compliance with all the applicable regulations; or the SOPs and expectations that you have set for your partner to qualify its level of adherence to the agreement or contract of service.

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Trade Security & Facilitation Program

Trade security and facilitation programs usually have two essential parts. Part one includes the standards and procedures for business accreditation/certification. That is how to profile economic operators, differentiate them by risk levels, and qualify the best. Part two consists of the corresponding control and facilitation measures defined respectively for businesses at each risk level.

For example, the Authorized Economic Operator (AEO) program endorsed by the World Customs Organization (WCO) has been adopted by over 100 customs administrations in the world. China Customs introduced its AEO program in 2008. Up to now, more than 2,000 companies have been certified and rewarded with the AEO tile in China.

The Customs-Trade Partnership Against Terrorism (CTPAT) implemented by US customs is another example. As long-term trade partners of American companies, many Chinese enterprises participate in CTPAT. Ever since the first pilot program launched in 2008, more than 300 Chinese entities have passed the CTPAT verification conducted jointly by China Customs and US Customs.

For Businesses that participate in these trade security and facilitation programs, the benefits are usually reflected in the increased efficiency of their supply chain. For instance, privileges offered by China customs to Chinese AEOs usually include:

  1. Lower inspection rate;
  2. Consolidated taxation;
  3. Expedited clearance process; and
  4. Dedicated Customs coordinator etc.

In practice, to understand and take actions to meet the certification standards set in the programs is a daunting task, not to mention going through the strict verification audit conducted by Customs authorities. In fact, many companies failed the audit and resulted in troubles with negative findings.

Questoud can clarify different trade security and facilitation programs and interpret their certification standards and procedures for you, help you examine your operation against the standards and procedures, spotlight the problems and risks, and recommend corrective measures. Consequently, you will have not only a better understanding of these programs and their relevance to your business, but also a better chance to pass the certification process later on.

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Internal Control Program

If a responsibility cannot be defined and measured in daily process, it cannot be managed. This is especially true for compliance work. An Internal Control Program (ICP) aims to address this issue by ensuring that:

  • Trade compliance as an overarching rule is recognized and respected throughout the organization;
  • Each and every member of the organization understands their compliance responsibilities in terms of daily operation and detailed processes;
  • Prescribed procedures are being followed and right decisions are consistently being made.

An ICP is regarded by all regulatory agencies as a key measurement of compliance performance because it includes both the general compliance policies and procedures an organization implements and a written set of guidelines that captures those policies and procedures. For example, an ICP is encouraged by Commerce authority for export control purposes, and by Customs authority for AEO certification efforts. In these scenarios, an absent or weak ICP is considered a major negative.

Questoud can help you design, develop, and implement ICPs that are tailored to suit the characteristics of your industry in general and the special needs of your business in particular.

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Investigation and Prior Disclosure

As China tightens its control over international trade, government agencies have increased their investigations, prosecutions and enforcement actions related to imports and exports across Chinese borders.

Agencies including the Ministry of Commerce, the General Administration of Customs, the General Administration of Quality Supervision Inspection and Quarantine, the Ministry of Industry and Information Technology, the State Administration of Foreign Exchange, the Bureau of State Cryptography Administration, and the State Administration of Science Technology and Industry for National Defense are involved in these efforts. For instance, as China Customs shifts its spotlight from real-time control to post-clearance audit, economic operators are facing a probability of being targeted and audited higher than ever before.

Investigations can be far-reaching and take various forms in practice, from simple outreach visits to interviews of corporate officials and employees; from execution of search warrants at business facilities to arrest of wrongdoers. Violations can result in the detention and seizure of goods crossing the borders, criminal prosecution and imprisonment of the liable, and multi-million dollar fines, significant business disruptions and adverse publicity for the companies.

Utilizing our extensive experience in trade compliance consulting and robust expertise in import and export enforcement assessment, Questoud can help you get better prepared for an impending visit/investigation or assist you through an investigation to minimize monetary loss, disruption of business, and negative publicity. During the process, we analyze and evaluate the alleged violations, evidence of reasonable care, exposure to criminal prosecution and civil penalties, and develop corresponding strategies including defenses, voluntary disclosures and settlements in compromise. Most importantly, we help you identify the underlying root causes of non-compliance and resolve gaps to avoid violations repeating themselves in the future.

In other situations, mistakes or violations can be identified by businesses before they are detected by government agencies. In such cases, prior disclosure can be a good choice. When properly prepared and timely filed, a prior disclosure protects the importer and exporter, and can significantly reduce the amount of penalties that would have been imposed had Customs initiated a formal investigation. However, an improperly prepared disclosure will result more in a greater loss than in any sort of protection, which is actually an invitation for big troubles.

Looking forward to a positive result, a prior disclosure must be prepared with great care and in a professional way. For example, it should be able to advise Customs of the circumstances of the violation, including the nature and extent of the errors or incorrect information submitted, the identity of the entries or period to which the disclosure relates, and the correct information that should have been given. It should be able to convince Customs of your sincerity as well, showing the reasonable care exercised and corrective measures adopted etc.

Questoud can help you assess the applicability and effectiveness of a prior disclosure, provide you with practical guidance throughout the prior disclosure process, and facilitate the case closure.

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Help Desk

If you do not have any problem that is serious or urgent enough to trigger some of the aforementioned services, but you do have a few small questions about trade compliance from day to day, then you may think about our Help Desk service, through which our able and dedicated consultants will answer your questions in a simple and agile way.

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