Wednesday, September 29, 2010

CBE Study Tip 12: CBP Directives

For many years, the Customs Brokers Exam only required the use of the HTSUS and the CBP Regulations; however, in 2004, CBP expanded its scope of materials to include Customs Directives and other reference materials. These materials are important because they provide guidance on activities brokers perform that aren’t included in the regulations. Since their addition, these resources have comprised 8% to 10% of the total questions on the exam. Because of the number of resources, it’s difficult to predict specific areas for testing. The best thing to do is to study all of it. We’ve provided the key highlights for the four most frequently tested supplemental resources.

1. Instructions for Preparation of CBP Form 7501

Although most entry summaries are completed electronically, it’s important to have a good understanding of the information contained in this document. By reading these instructions, you can complete a CBP 7501 by hand without the assistance of a computer. You should keep this document handy and review all blocks because it has been one of the most frequently tested supplemental resources since the implementation of the new CBP 7501 format in September 2005. Become very familiar with each block number, so you can easily reference it. Block 2 (Entry Type Code) and Block 31 (Net Quantity) are easy targets!

2. CD 3510-004 - Monetary Guidelines for Setting Bond Amounts

The purpose of the bond is to protect the revenue and ensure compliance. The amount of a bond is calculated using information on the bond application, the criteria in Part 113 of the CBP Regulations and the guidelines in this directive. This directive provides standardized guidelines for computing the bond amounts for all types of bonds. For the exam, it’s important to know how to calculate single entry and continuous bonds.

The first type of bond is the Activity 1, Importer or Broker Continuous Bond. The minimum amount of a bond in this category is $50,000.

For importers paying zero to $1,000,000 in duties and taxes, the bond should be computed as 10% of the duties and taxes paid for the previous calendar year and issued in increments of $10,000.

For importers paying over $1,000,000 in duties and taxes, the bond should be computed as 10% of the duties and taxes paid for the previous calendar year and issued in $100,000 increments.

The next type of bond is the Activity 1, Importer or Broker Single Transaction Bond. This bond is valid for one shipment and is computed in an amount not less than the total entered value of the merchandise plus all duties, taxes and fees, unless the merchandise falls into a special category. If the merchandise is subject to other government agency requirements such as the FDA or FCC, the bond will be computed in an amount of at least three times the total entered value of the shipment. In addition, the district director may set the single transaction bond amount at 10 percent of the total entered value for unconditionally free merchandise, which is not subject to the previously mentioned categories.

Not all of the government agencies are included in the list that requires a bond in the amount of three times the value of the shipment. If your goods are not regulated by one of the government agencies on the list, then the single entry bond will be written for value plus duty.

3. CD 3550-055 - Instructions for Deriving Manufacturer/Shipper Identification

Questions involving the manufacturer’s identification code “MID” should be some of the easiest to answer. Not only does this directive provide instructions on how to construct the code, but the information is also included in the CBP Form 7501 Instructions. Just memorize the rules for deriving the MID.

This code is commonly referred to as the MID or Manufacturer Identification Code. This technique is also known as keylining. On the broker’s exam from October 2005, a question required knowledge of the term keylining.

Customs requires the formation of a code from the name and address of the manufacturer.
The MID contains five components that are added together without spaces to create the code. The code can be up to 15 characters in length. The five components consist of the following information:

· Two letter abbreviation for the country of origin
· First three letters of the first name of the manufacturer
· First three letters of the second name of the manufacturer
· First four digits of the street address, and
· First three letters of the city name.

There are some general rules to consider.

· Ignore all punctuation
· Ignore single character initials. and
· Ignore the words “a”, “an”, “and’, “of”, and “the”.

4. 3550-067 - Entry Summary Acceptance and Rejection

Customs Directive 3550-067 provides guidelines for uniform acceptance and rejection of entry summaries. Five major areas of interest in this directive include the following:

· Collections Processing – Rejections
· Acceptance Review and Summary Processing
· Processing of Rejected Entry Summaries
· Time Limit
· Rejection Effect on Entry Summary Filing Time

This information is a little more complicated to grasp, so read each of the major areas and highlight key information.

Although we didn’t cover all of the directives and supplemental materials, they are not any less important. Remember the advice from the beginning of the article - the best thing to do is to study all of it.

We welcome your comments on these suggestions and encourage you to add your own ideas to this forum so that other students studying for the exam can benefit from your experiences. Check the Boskage Trade News regularly to find more useful news for international trade professionals! As soon as the Wizard obtains a copy of the test and has time to work out some preliminary answers, we’ll post them here for your review and comments.

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