Richard, before we examine your customs compliance practice deeper, could you provide a brief overview of Miller & Chevalier and the demographics of your client base (size, industry, location, etc.) for those who may not be aware of your firm?
Miller & Chevalier is a Washington, D.C.-based firm founded in 1920 that is sharply focused on targeted areas that interact with the federal government. One of them is international trade (a category that includes customs; export controls and sanctions; and trade policy).
The other practice areas are tax, litigation, employee benefits and government affairs.
The firm has a global client base which ranges from start-ups to Fortune 50 companies and cuts across all industries – from high-tech to oil and gas to consumer goods.
Of your clients, what percentage are actively importing and exporting, and how many markets on average are your clients conducting business in?
The vast majority both import and export.
In addition, the majority of our clients – many of which are multi-national corporations – are active in numerous markets around the world, which means their trade-related issues sometimes concern more than one country.
As a result, we work closely with our network of correspondent firms around the world to coordinate multi-jurisdictional responses
With such a diverse and globally active client base, I could see the challenges one would face in continually monitoring and analyzing the effects of new and evolving trade agreements. That said, in researching your firm I noticed that your practice offers supply chain optimization for importers. Could you please describe your approach to optimizing a client’s supply chain and the tools at your disposal.
Let me start by saying that the way we help companies optimize their supply chains is by counseling on the use duty-saving programs.
One way we do that is by helping companies qualify their products for duty-free treatment under Free Trade Agreements, such as NAFTA.
As you know, to be eligible for duty-free treatment under a free trade agreement, a product must satisfy a certain rule of origin.
Where we add value is by helping companies make strategic supply chain planning decisions, such as where to source a certain raw material, or where to perform a particular manufacturing step.
In addition to free trade agreements, there are other programs available to importers which can result in duty savings.
- Through “Duty Drawback” a company can recover up to 99% of duties collected at the time of importation of that is subsequently exported.
- Foreign trade zones (or FTZs) offer importers the ability to defer duty payments and save money by making weekly entries (rather than filing one entry per shipment and paying processing fees for each shipment).
- Under the program known as “First Sale,” importers involved in multi-tiered transactions may value merchandise according to the price between the manufacturer and the middleman (as opposed to the higher sales price between the middleman and the importer) and thus pay less in duties.
And there are others.
Each of these programs can have a meaningful impact on a company’s bottom line because they minimize the costs associated with importing merchandise into the United States.
With so many tools available are there any strategies that you routinely utilize or believe offers the best opportunity to reduce expenses?
The use of preference programs, such a free trade agreements, and Foreign Trade Zones, are, in my experience, the ones that companies are most interested in.
The popularity of the other programs is industry-dependent.
Could you provide an example of when the use of free trade agreements was used in an effort to optimize a client’s supply-chain and the beneficial effect it had?
In one instance, I was involved in assisting a company that manufactures pumps utilize free trade agreements to penetrate various Latin American markets.
The manufacturing process for the pumps in that case took place in England and the United States.
What we did there was to help the company modify its supply chain so that a certain amount of manufacturing took place in the United States – enough to make the product a U.S.-origin good under the applicable rules of origin.
As a result, the pumps qualified for duty-free treatment when exported to certain Latin American countries with which the United States has free trade agreements, such as Colombia and Chile.
This was a big deal for the company.
Having such a pulse of the global trade landscape, I was wondering if you could provide some insight into the competitive landscape of some of the most notable hot markets and to what extent the “re-shoring” story is accurate if at all on a macro-level?
U.S. manufacturing is staging a comeback in the United States, based on what we are hearing from clients, but perhaps a more accurate term is “near-shoring” given that companies are cutting back in China and headed to Mexico and other Latin American countries as well.
Near-shoring has become attractive to companies for several reasons, including: (1) rising inflation and wage expectations in China (which no longer offset the fuel and transportation costs); and (2) an interest to decrease turnaround times.
One point is that is often overlooked in the near-shoring discussion is that China remains a hot consumer market, so, even if companies stop producing merchandise for export in China, what I am hearing is that they will re-tool those factories to service the domestic market.
Richard, thank you very much for your time and insight today. For those that may be listening and are interested in seeking either customs compliance counseling or additional information on how Miller & Chevalier can optimize their global supply chain how can they best go about contacting your firm and initiating dialogue?
Thank you, Ben.
I’d like to end with an offer for those listening. Over the years, we have developed a one-page template that we use to review a company’s importing data and identify compliance risk areas and potential duty savings opportunities. If you’d like to see that template, just e-mail me and I’ll send you a copy.
My e-mail is email@example.com. You can also follow me on Twitter; my handle is @rmojicacustoms. I’ll be sure to post that information on the show’s Twitter feed.
About Richard Mojica
Richard’s practice is focused on advising companies on how to comply with the laws applicable to the importation of merchandise into the United States. In addition to counseling on the ‘nuts and bolts’ of customs law, he has helped companies optimize their global supply chains through the use of duty-saving programs and techniques.
Richard is a former U.S. Customs Headquarters attorney and U.S. delegate to the World Customs Organization in Belgium. Prior to joining Miller & Chevalier, Richard was affiliated with a multinational law firm for several years.
About Benjamin Jurken
Benjamin Jurken is Head of Business Development with The ABC Group. Since joining our team he has successfully worked alongside clients in multiple industries from consumer products to industrial goods. In doing so, he has become a valuable asset on many programs requiring market research, supply-chain management, and export development.
Benjamin holds a BS in economics from UW-Madison and has authored various articles providing insight into cost reduction measures across foreign supply-chains and export management within Mainland China. Benjamin is also a contributor to The Price of Business and is lean-six sigma certified.
About The ABC Group LLC
The ABC Group LLC is an international supply-chain and sales channel management firm focused on assisting companies more effectively conduct business throughout Southeast Asia. By creating transparent business relationships and offering a diverse array of services tailored to meet our clients’ specific goals, we aim to create significant long term value for stakeholders.
For additional information please visit www.theabcgroupllc.com