Trade Compliance Onboarding

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Monster Cable Trade Compliance May 31, 2011 :

Monster Cable Trade Compliance May 31, 2011 Import & Export Basics

Why is Compliance Important? IT IS THE LAW:

Corporate Governance Risk of losing U.S. Import/Export Privileges Requirement to formalize Import/Export Management Systems Crucial step is education and training We need your help! Why is Compliance Important? IT IS THE LAW 2

Trade Compliance Interaction with Monsters:

Trade Compliance Interaction with Monsters

What Has Changed?:

Post 9/11 Increased emphasis on National Security Regulations becoming more complex Globalization Stepped up enforcement More onerous penalties What Has Changed? 4

Importing In Today's Environment:

Customs & Border Protection (CBP) identified high risk area: Value Classification Anti-dumping/Countervailing Duties Tariff 9801 and 9802 provisions Generalized System of Preferences and other Special Trade Provisions The Compliance Measurement (CM) program is a primary method by which CBP measures risk in the areas of cargo security, trade compliance, and revenue collection. Focus on Strengthening Supply Chain Security- Customs-Trade Partnership Against Terrorism Compliance Program – Formal Written Procedures Importing In Today's Environment 5

Import Classification Guidance:

Per 19 CFR 152.11 requires the importer to classify in accordance with the Harmonized Tariff Schedule of the United States (HTSUS) (19 U.S.C 1202) 19 CFR 141.86(a)(3) states that each invoice of imported merchandise shall set forth a detailed description of the merchandise, including the name by which each item is know, the grade or quality, and the marks, numbers, and symbols under which it is sold by the seller or manufacturer . Import Classification Guidance 6

Monster Must Classify After Project Approval:

What does it do? What is it made of? What does it work with? Refer to company website or get sales and technical literature on product & talk to the engineers Monster Must Classify After Project Approval

Country of Origin Marking Requirements (19 USC § 1304):

All goods of foreign origin, and their containers, must be marked clearly and conspicuously in English with the country of origin of the article, unless an exception applies. Marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article. Country of Origin Marking Requirements (19 USC § 1304)

Made in the U.S.A. Guidelines:

Federal Trade Commission (FTC) provides guidelines of “Made in the U.S.A.” and in order to satisfy claims, a product must be "all or virtually all" made in the U.S. All or virtually all" means that all significant parts and processing that go into the product must be of U.S. origin. That is, the product should contain no — or negligible — foreign content. FTC compliance guidelines can be found at . and . Made in the U.S.A. Guidelines 9

Marking Penalty:

Treatment of Articles Found to be Not legally Marked, Goods are detained until marked by importer under Customs Supervision Articles found to be not legally marked after release from Customs Custody Liquidated Damages = value of merchandise Marking penalties = 10 % of value Marking Penalty


Transaction Value Defined as: Transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States All imports and Exports must have a Fair Market Value- even for samples. Use replacement cost or other methodology to evidence value under GAAP . We are working on iniatives to reduce duty cost for the company related to defective returns from our customer Valuation 11

CBP Enforcement: Other Government Agencies:

FDA--Food Products (other than meat and poultry) Medical Products Radiation Emitting Products (Cell phones, lasers, microwaves, TVs) FCC--regulates equipment that emits radio frequency and products that cause harmful interference with radio frequencies. EPA—Regulates the importation of chemicals and chemical mixtures. Imports require a TSCA Certificate of compliance CPSC--Regulates a wide variety of consumer and children's toys and products, including products with lead and phthalates FTC–-Marking And labeling APHIS (DOA)–-Regulates import and export of plants and plant products; Wood products– Lacey Act Declarations CBP Enforcement: Other Government Agencies 12

CBP Enforcement – Cont’d:

Intellectual Property Rights (IPR) infringement-In fiscal year 2010, 19,959 seizures of counterfeit and pirated goods with a total domestic value of $188.1 million and a manufacturer’s suggested retail price of $1.4 billion were intercepted before entering the United States. IPR violations include trademark, trade name, copyright and patent violations. CBP seizures often lead to criminal investigations by the Bureau of Immigration and Customs Enforcement (ICE), like CBP, a Department of Homeland Security agency. CBP Enforcement – Cont’d 13

Import Penalties :

Import Penalties 19 USC 1592 Penalty Process Fraud: voluntary and intentional act Domestic value of goods Gross Negligence: actual knowledge or wanton disregard Four times loss of revenue (LOR) or 40% of dutiable value Negligence: failure to use reasonable care Two times loss of revenue LOR) or 20% of dutiable value Pre-Penalty Notice (normally 30 days to respond) Penalty Notice (normally 60 days to respond) Petition review and Penalty Determination Supplemental Petition Offer in compromise 14

Exporting in Today’s Environment:

Why Export Controls? Definition of an Export-tangible shipment, Monster hand carry , electronic submission or release of technology to a foreign national Compliance Program- system of checks and safeguards to limit liability for the company Exporting in Today’s Environment 15

Screen New Customers to Protect the Company from transaction Business with Restricted Parties:

Check the parties to your transaction (including freight forwarders, intermediate consignees, and the ultimate consignee) to identify restricted parties subject to denial orders such as those listed on Denied Persons List, Entity List or Specially Designated Nationalist List or otherwise restricted or prohibited from engaging in U.S. export transactions. Screen New Customers to Protect the Company from transaction Business with Restricted Parties 16

Export Controls:

Comprehensive Embargoed Country List: Cuba, Iran, Sudan, Syria & North Korea . Sanctioned Party Screening- see BIS link: Product Classification/ License Determination Diversion Risk/ Red Flags – “Know your Customer” Restricted End Uses Regardless of Classification (Nuclear, Missile, Chemical and Biological) Antiboycott : EAR prohibits agreements to refuse or actual refusal to do business with or in Israel or with blacklisted companies (EAR Title 15 Part760) Export Controls 17

U.S. Export Agencies:

Export Administration Act (EAA) U.S. Export Agencies ITAR EAR Arms Export Control Act (AECA) Department of State Directorate of Defense Trade Controls (DDTC) Bureau of Industry & Security (BIS) Department of Commerce Munitions List (USML) Commerce Control List (CCL) 18

EAR Penalties:

EAR Civil penalties are $250,000 per violation, or twice the amount of the transaction being penalized, whichever is greater. EAR Penalties 19

Foreign Trade Regulations Penalties:

Effective February 1, 2009, U.S. Customs and Border Protection (CBP) may assess civil penalties of up to $10,000 against any party failing to file export information, Electronic Export Information (EEI), required by the Foreign Trade Regulations (FTR) via the Automated Export System. A late filing incurs a Notice of Penalty of $1,100 per each day late, up to a maximum of $10,000. Foreign Trade Regulations Penalties 20

Import & Export Awareness Training:

General Awareness for Executives, Middle Management and Sales Function Specific for areas directly impacting import/export activities Import & Export Awareness Training 21


Risks of non-compliance are unacceptable to the corporation Compliance program is integral part of overall Risk Management process Corporate responsibility to National Security Conclusion 22

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