Any medical technology company seriously involved in manufacturing will encounter problems and complications while importing and exporting goods. Not only is there a lot to think about up and down the supply chain from factory or vendor through distribution, but the system fluctuates and is always subject to political and social change. Staying on top of developments and keeping abreast of news is vital to maintaining safe, legal, and effective importing and exporting procedures.

Imported and exported goods both have their challenges and both require business savvy, common sense, and a strict adherence to the law and its intricacies. For instance, the proper classification of imported medical devices is tremendously important to manufacturers who want to avoid civil and criminal penalties from the U.S. government, and careful attention to detail may be the best way to keep all activity above board. The law can be complicated and confusing, but one can run a successful (and legal) operation after properly classifying products.

Still, it is an ongoing problem for industry innovators: cutting edge technologies are difficult to classify within the Harmonized Tariff Schedule of the United States (the HTSUS). It lists the tax rate for various goods that enter and leave the country, detailing which products are exempt from taxation and which require heavy duties. The duty, or tax rate, of an imported product is established by the “essential character and use” provisions within the HTSUS. If a product is not listed or does not fall under a specific binding ruling, as is often the case with technology, there may be conflict between manufacturers and government experts regarding how to classify the products and therefore, determine just how much import taxes will be assigned.

Because the stakes are so high, it is wise to err on the side of caution and to consult legal experts before making a permanent and costly mistake. The government has full-time experts working to “inform” businesses, which means that businesses should have equally qualified experts working to negotiate an acceptable agreement and determination.

Another area of concern for those on the forefront of medical design is what to do with staggering research and development expenditures. Proper handling of such expenditures is crucial to levying the correct, legal amount of taxes for an item. Unless such research and development takes place inside the United States, the U.S. Government can tax such funds as part of the cost/transfer price of the imported merchandise. Such expenditures must be determined and disclosed, as appropriate. Royalties or license fees payable for products may also be required to be part of the taxable value of the product so careful analysis of these costs must also be considered.

Illegal transshipping, for instance, can bring severe penalties. Illegal transshipping can involve claiming a false country of origin to get around quotas, to avoid paying higher taxes, or even to get special benefits from trade programs like NAFTA. While it can be tempting, U.S. Customs and Border Protection cites illegal transshipping as a major worry that has a number of big picture side effects.

Illegal transshipping gives an unfair edge to whoever does it, hurting those who try to abide by the law, and thereby hurting free trade all around. It can restrict trade from legitimate manufacturers by making a country that has unwillingly participated in a transshipping scheme paranoid. Illegal transshipping also breaches trade initiatives and agreements between countries, can contribute to geopolitical unrest, and lowers consumer confidence by giving consumers a false country of origin on their products.

Imports aren't the only area that requires scrutiny. Exports also demand attention. Medical-device manufacturers should give particular attention to the proper outbound classification associated with their products. Errors can lead to substantial penalties, both civil and criminal. Exporters must be alert to the end user, the end use, and the destination of these items to ensure they are not violating the export control laws of the United States.

One more important consideration is that of “deemed exports.” When a company is dealing with foreign nationals, it must be careful about exposing them to particular U.S. technology. If a company brings in foreign nationals to their facilities in the U.S. or even abroad, and exposes them to U.S. technology or software that would have required an export license if exported to that foreign national's country, then the company has just violated the law. A license is required prior to sharing such information or technology with that foreign national.

The good news is that with proper foresight and precision, importing and exporting doesn't have to be a constant walk on a tightrope. As in most worthwhile enterprises, the more you know, the easier the whole process, and path to compliance, becomes.

Marian Ladner leads the International Trade Practice with Epstein Becker Green Wickliff & Hall, P.C. She advises global business for customs and import compliance, global law, corporate, and transportation and logistics. Ms. Ladner helps companies create and streamline strategic sourcing and supply chain operations by minimizing duties and maximizing compliance. She can be reached at MLadner@ebglaw.com.