ATA Carnet - 'the merchandise passport.' - export marketing instrument

Business America, May 17, 1993 by Cynthia J. Duncan

With a minimum of effort and expense, U.S. firms can enjoy the benefits of an ATA Carnet, and join the thousands of Carnet users whose merchandise, valued at over $1 billion, travels the world on a Carnet.

ATA Carnets, introduced into the United States 25 years ago, were developed for exporters taking sales samples out of the country for less than one year. An ATA Carnet is "The Merchandise Passport" covering commercial samples, professional equipment, or items intended for trade shows and fairs. Because the Carnet is a combination entry document and bond, guaranteeing any fees (e.g., value-added taxes and duties) that might be charged by foreign Customs authorities, it eases the way through each port of entry, a particularly important factor when dealing with time-sensitive shipments. By using a Carnet, companies avoid paying value-added taxes (VAT--a minimum of 15 percent in the European Community) and duties, posting a temporary import bond, or registering the goods when leaving the United States.

The Carnet process is simple. First, determine whether a Carnet is suitable. (Call the Carnet Helpline, 1-800-ATA-2900, to determine the appropriateness of a Carnet for your merchandise.) Assuming the merchandise will be out of the country for less than one year or that it is not consumable or disposable, then a Carnet is appropriate. Second, complete the "General List," a detailed roster of the goods covered by the Carnet. The General List requires serial numbers, countries of origin, weight, and the merchandise value. Third, complete an application, providing your name, company, address, federal ID or social security number, and the countries to be visited during the life of the Carnet. Basic processing fees are pegged to sliding scale corresponding to the total value shown on the General List. Such fees range from $120 to $250.

Before an application can be accepted, security must be furnished. This acts as collateral against any potential violation of the Carnet agreement. As the guaranteeing association, the United States Council for International Business, appointed by the U.S. Treasury Department as the sole issuer and guarantor of ATA Carnets in the United States, is obliged to honor all valid foreign Customs charges that result from an improperly used Carnet. If a violation occurs, foreign Customs officials contact the U.S. Council for payment.

A claim for a violation of the Carnet agreement might result from several circumstances: 1) the goods are sold or stolen, 2) the Carnet documentation is not properly validated entering or exiting a foreign country or the United States, or 3) the goods do not leave a foreign country before the Carnet expires.

Few Carnet holders experience claim situations. Claims on U.S.-issued Carnets in 1991 totaled approximately 1,500, of which 80 percent were resolved without payment to foreign Customs.

Security equal to 40 percent of the value of the General List is typically required and may take two forms--certified check or surety bond. Assuming the value of the goods on the General List is $50,000, then security in the amount of $20,000 is needed. An exporter can either leave a certified check in that amount with the U.S. Council or submit a surety bond. Surety bonds may be purchased from any of the more than 200 companies on the U.S. Department of Treasury list.

The premium rate (price) of a surety bond varies from company to company, although the rule of thumb in calculating the bond charge is 1 percent of the value of the bond. In our example, for a shipment value of $50,000, a $20,000 bond (40 percent of the $50,000 value) is necessary. The bond premium is likely to be $200 (1 percent of $20,000). Like the Carnet processing fee, this is a non-refundable charge. However, the security (either certified check or bond) is returned once the Carnet is cancelled. More information on the bonding process, including a list of acceptable surety companies, is available from the U.S. Council.

Without a Carnet, goods (using the U.K. and Sweden as a sample itinerary) are subject to the following charges: 17.5 percent VAT in the United Kingdom, and 18 percent VAT in Sweden. Based on the $50,000 product value assumed in our example, the VAT payable to the United Kingdom is $8,750 and to Sweden $9,000. In both instances these charges are refundable, however it will take some months before the money is returned. Should the itinerary vary from the one outlined, yet other VAT charges would be payable. In addition, duties would be due at the first port of entry into the EC as well as into Sweden.

Another alternative is to post a temporary import bond (again $20,000) at the time of importation into the European Community and then again into Sweden. For a small company new to the European market, cash ($20,000) will probably be required for any bond to be written.

To obtain a Carnet, dial Carnet headquarters at (212) 354-4480; 1-800-CARNETS (for the Roanoke office nearest your calling number); or 1-800-ATA-2900 (Carnet Helpline). The Roanoke Companies, an authorized issuing agent of the U.S. Council, has Carnet issuing facilities in New York, Los Angeles, Chicago (Schaumburg), San Francisco, Boston, Baltimore (Hunt Valley), Miami, and Houston.