The challenge here is twofold. First, a company must be able to prove that it’s paying the right duty or tariff on what it’s importing while making sure it’s not exceeding the annual quota laid down in the rules. (The United States currently plans to phase out import quotas by 2005, in favor of a system based wholly on tariffs. Of course, say observers, that could change.) Second, a company will try to minimize the tariff payable or (legally) circumvent quota restrictions. If leaving a button off a shirt or sewing one on moves it into another quota or tariff category, why not? Of course, this requires up-to-the-minute knowledge of both the categories and the quotas.

At the Plano, Texas, import office of retailer J.C. Penney, Customs and Trade Manager Sandra Fallgatter uses such a service from Fasturn, which maintains timely, product-by-product quota positions on a website to which Penney’s and other companies subscribe. "A lot of the apparel sourcing we do is driven by quota fill rates. And quotas can fill up very rapidly at certain times of the year," Fallgatter says. Electronic updates, supplemented by the website, keep Penney’s abreast of what’s happening. The goal is to source from the highest quality, lowest-cost manufacturer in the country with the lowest tariff penalties and then the next cheapest, and so on. Make the wrong decision and you’re spending twice as much on sheets as you could, and you’re either passing that cost on to your customers or putting your margins on a helluva diet.

Exporting: Be Careful Who You Trade With

On the export side, there are another thousand pages of dense text in the Code of Federal Regulation plus a further seven sets of regulations relating to the trade embargo rules for countries such as Cuba, Iran, Iraq and Libya. Then there are the so-called denied party lists, maintained by the U.S. State Department, the Treasury and the Commerce Department, that include names and aliases of people, countries and organizations with which trade is prohibited. As of June there were 7,747 of them, including 846 separate terrorists or terrorist organizations, with new additions coming out every three weeks or so.

Policing is carried out by the Office of Export Enforcement, an agency of the Bureau of Industry and Security within the Commerce Department. And no matter your intentions, running afoul of these agencies is all too easy. According to U.S. Treasury Department documents, Swedish retailer Ikea and Tyson Foods were companies recently fined for breaking the rules. Ikea got in trouble for buying rugs from an area of Afghanistan it thought was non-Taliban but which turned out to be Taliban controlled and therefore beyond the pale. In Tyson’s case, a $150,000 fine was levied because a Jordanian company it had acquired shipped chicken parts to Iraq. In another well-known case, American Home Products was fined $2.5 million when a minor, Colombia-based subsidiary was found to have dealt with blacklisted narcotics dealers.