Little-known tool provides tax relief for exporters

You wouldn't think CNN, the Chicago Symphony Orchestra, Lucent Technologies and the Ringling Bros. and Barnum & Bailey circus have much in common, but they do.

All four organizations need to move large amounts of equipment from one nation to another, creating a potential customs clearance

But all of these groups and others are able to transit many international borders, duty-free, thanks to a document called an ATA Carnet. An ATA Carnet allows organizations, such as performers, manufacturers with samples and others, to transit international borders without paying import duties or value-added taxes.

In light of Pennsylvania's drive to encourage exports, it's worth it for companies interested in overseas ventures to look into ATA Carnets.

In the United States, ATA Carnets are governed by the United States Council for International Business, a Chicago nonprofit that functions as the U.S. affiliate of the Parisbased International Chamber of Commerce. The council was appointed by the Treasury Department in 1968 to act as the guaranteeing association for the United States and began issuing ATA Carnets in 1969.

The council, in turn, has hired Corporation for International Business, a Chicago company that actually issues the documents and provides surety bonds to back them, says corporation President Curt Wilson. In addition, Wilson says his company sells insurance for goods in transit overseas.

ATA Carnets cover three areas: professional equipment, commercial samples and exhibitions and fairs, Wilson says.

"You can use a Carnet for a year and can go into any of the 60 (signatory) countries as many times as you like," Wilson says. He says ATA Carnets cover about $ 10 billion worth of goods a year, with 200,000 ATA Carnets issued internationally; U.S. companies and groups account for about 13,000 of these.

Bob Elsas, a senior international finance officer with the Small Business Administration who works at the U.S. Export Assistance Center in Philadelphia, says companies interested in exporting need to be aware of ATA Carnets.

"They're basically a way of getting a product in duty free. They use it for trade shows; you bring in your exhibit, samples," Elsas explains. However, he adds, ATA Carnets don't cover all countries - China won't honor them - and they don't cover certain products, like consumables.

Wilson says many U.S. companies remain unaware of ATA Carnets, particularly small and medium-sized businesses getting started in foreign trade. Many of these companies, he says, meekly pay duties whenever they cross a border. "You'd be surprised at how many still do that," he commented.

Further, they're often unsure about how to insure their goods. Most domestic business insurance policies tend to stop at the water's edge, "unless you get some kind of endorsement to your policy, but it's expensive," Wilson says.

Another alternative is to depend on a freight forwarder's policy, but these often have exclusions. To deal with this, Wilson says, "We came up with idea to do a single-risk shipment and put it under an open cover policy and generate an insurance certificate" at the same time the Carnet application is being processed.

"Usually, it's an all-risk policy," Wilson says, and will cover the value of the goods as well as the duty that has to be paid if a piece of equipment is lost or stolen. The corporation is a licensed insurance broker and represents international insurance markets including Lloyd's of London, the Institute of London Underwriters and Assurances Generales.

Carnet risks are unusual because merchandise often is in transit or storage and is only temporarily out of the country. Coverage is provided while in transit to, between or temporarily stored in participating Carnet countries.

To obtain an ATA Carnet, a company pays a fee ranging from $120 to $250, depending on whether the application is handled manually or electronically. The electronic application, done through the corporation's Web site - www.atacarnet.com - is more expensive, but "it's much faster," Wilson says, and clients can access data using a password system.

In addition, the applicant must post 40 percent of the shipment's value in cash, or he can buy a nonrefundable-premium surety bond through the corporation. Wilson says a bond costs about 1 percent of the shipment's value, making it a much more economical alternative.

For ATA Carnet insurance, Wilson says, "there's a minimum premium of about $50," and a deductible that can be adjusted. He says the premium usually amounts to about 1 percent of the shipment's value, but this can range either up or down depending on the nature of the product, the number of countries visited and the length of time the shipment will be out of the country.