Instructions for Cross-border Shipments to IBM Corporation – Global Requirements (Also known as: Shipping Procedural Instructions – SPIs) Published Date: 8th March, 2018. Supersedes All Earlier Dated Versions. TABLE OF CONTENTS 1.0 INTRODUCTION 2.0 DOCUMENT REQUIREMENTS

2.1. General 2.2. Intra-EU (European Union) Movement of Goods 2.3. Commercial Invoice 2.4. Packing List 2.5. Billing Invoice

3.0 PACKAGING/LABELLING

3.1. Packaging 3.2. Labelling

4.0 MARKING/COUNTRY OF ORIGIN

4.1. Wording 4.2. Container Marking

5.0 SUPPLY CHAIN SECURITY RESPONSIBILITIES

5.1. Supplier Responsibilities under the WCO Framework of Standards to Secure and Facilitate Global Trade (“SAFE Framework”)

6.0 SHIPPING INSTRUCTIONS 7.0 APPENDICES

7.1. Example Commercial Invoice for Shipments to IBM Corporation 7.2. Example Commercial Invoice for Goods Returned After Rework, Repair or Test 7.3. Exceptions to the Commercial Invoice copies requirement

1.0 INTRODUCTION As a supplier or partner to IBM, you must comply with all government regulations pertaining to the importation of goods and comply with additional IBM requirements including, but not limited to, invoicing, labelling and security. The following shipping instructions for cross-border shipments to IBM (SPIs) contain global requirements that are applicable to all external shipping sources shipping goods cross-border. These instructions should be used by traditional suppliers as well as IBM partners in Research, Development, Engineering, and other sources when IBM is to be Importer of Record and when either shipping goods “charge” (billed to IBM for payment) or “no charge” (provided free of charge to IBM, or returned goods), including intra-EU shipments. These shipping instructions should be referred to and understood prior to making shipment to ensure all requirements are met. Where applicable, the country-specific shipping instructions (SPIs) for the ship-to country should be followed in conjunction with these global shipping instructions which contain requirements applicable to all countries in which IBM does business. The country-specific shipping instructions (SPIs) are available on the IBM Procurement website, or by contacting your IBM Procurement or other Representative. Reference to “IBM Procurement”, “Procurement” and “Suppliers” is made throughout the shipping instructions. For partners to IBM not contracted by IBM Procurement, and shipping without an IBM PO, the same instructions apply but you should contact your IBM contact in case of questions. Reference to “billing invoices”, “payments” and “charge” is not applicable to partners to IBM not contracted by IBM Procurement but in all cases – whether charge or no-charge - the “Fair Market Value” for the goods must be stated on the commercial invoice. See section 2.2 and appendix 7.2 for details. These instructions do not supersede other documented contractual agreements with IBM, including alternative shipping instructions provided by an IBM Business Unit. Please make your IBM Contact aware of any perceived conflicting information.

2.0 DOCUMENT REQUIREMENTS Suppliers and partners are responsible for providing the documents and required information listed in section 2.0. The Supplier agrees to cooperate by providing other information not specifically mentioned that may be necessary by the buyer to make a compliant transport or import. Example of information includes the Import Security Filing requirements for Ocean Shipments to the US, specifications for product classification, hazardous materials certificates, or special certifications demonstrating compliance with specific import requirements. 2.1 General Document Requirements

• All documents must be in English.

• Commercial invoice currency must match the purchase order and billing currencies. US Dollars is preferred, local currency is acceptable, if convertible.

• For air and truck shipments, provide the commercial invoice and the Air Waybill/Bill of Lading to the party who will be transporting your goods.

• Ask your Procurement or Other Representative if manufacturing assist information should be shown on the invoice.

2.2 Intra-EU (European Union) Movement of Goods: Data Requirements for Intrastat Reporting Suppliers shipping goods intra-EU (goods movement from one EU country to another EU country) must provide IBM - in the format requested - the specific information necessary to enable IBM in the receiving country to record the goods movement in its Intrastat reporting. The information required includes, but is not limited to, the following: indication of invoiced goods (tangible) items versus invoiced service items; Country of Origin of each individual item; the Shipping Country (not invoicing country, nor country of origin) of each item; accurate and complete description of the goods; the total weight of each individual item shipped (quantity shipped x item weight). Where practical, the information should be provided in electronic format via the existing online tools. In some situations, it may be necessary that the information is provided in soft-copy document format (e.g. spreadsheet). Your IBM Procurement or Other Representative will advise specific details of the information required, and the format in which it should be provided.

2.3 Commercial Invoice Requirements A commercial invoice must accompany ALL cross-border shipments delivered to an IBM location (see exception), and must match the billing (or "no charge") invoice for supplier shipments. EXCEPTION: a commercial invoice is NOT required for intra-EU (European Union) shipments UNLESS the shipment is to an IBM manufacturing or Spare Parts Operation (SPO) location in an EU country.

Information on the commercial invoice must match exactly the physical goods being shipped and must be consistent with all related documentation (e.g. air waybill / bill of lading, packing list, etc...) and shipping labels.

Unless there are additional “no charge” items listed on the commercial invoice which are not billable, the commercial invoice sent with the shipment must be the same as the billing invoice sent to IBM for payment. If any items are provided free of charge (“no charge”) they must have accurate values assigned to them for Customs declaration purposes. The statement “Value for Customs Purposes Only” must be included in the invoice. Shipments to IBM should be made using IBM’s contracted carriers, unless otherwise specified by your IBM Procurement or Other Representative. The contracted carrier may vary depending on the departure location and destination of your shipment, this information will be provided by your Procurement or Other Representative. For supplier shipments, your Procurement Representative will provide specific information on the purchase order (PO) that must be included on the commercial invoice (e.g., IBM Part Numbers, Descriptions etc…). One original plus two copies of the commercial invoice must accompany shipments to most countries. There are some EXCEPTIONS to this requirement so please refer to appendix 7.3 for country specific requirements. Software Shipments: License value and carrier media value must be separately listed on the Commercial Invoice. The following data elements are required on the commercial invoice;

a. The commercial invoice number.

b. Invoice date.

c. Sold To and Ship To complete address. The invoice must indicate that the “bill to”, “invoice to” or “sold to” company is IBM, not just “ship to” IBM. This information is required so it is clear that IBM is able to act as importer of record for the shipment. Applies also to partner shipments where no “sale” is taking place.

d. IBM Billing Codes (the “ship-to code” and the "invoice-to code"). Suppliers are requested to include the IBM unique ship-to and invoice-to codes associated with each shipment. These codes are available from your IBM Procurement Representative or IBM contact. These codes can be referenced as a data element imbedded in the IBM "ship to address" and / or the “invoice to address” on the commercial invoice header. This helps to facilitate the internal billing of freight, duty and brokerage within IBM. Alternately, this information may be included in the body of the invoice in a free text field.

e. Shipped From; Supplier complete address, including a contact name and phone number.

f. The delivery terms (Incoterms): The Incoterm used for the shipment transaction must be indicated on the commercial invoice, must be valid for the method of transportation being used, and should match the terms in the contract.

g. Quantity of cases.

h. Weights; total gross and net metric weight (kilograms, with at least one decimal) of each individual case in the shipment must be shown separately.

i. Dimensions; total metric (centimetres) length, width and height of each individual case in the

shipment must be shown separately.

j. The description of the product being shipped. The invoice description must be clear, precise, and sufficient for Customs in the importing country to verify the identity of, and classification of, the items listed on the commercial invoice and contained in the import shipment. Use of acronyms, abbreviations, and industry specific terms should be avoided.

k. The IBM Purchase Order (PO) number. Applicable only to supplier shipments.

l. The name of the IBM Procurement or Other Representative

m. The IBM Part Number (or machine type and serial number). If there is no IBM part number

assigned, the supplier or partner part number as defined in the PO should be provided. Use supplier part number only if no IBM part number has been assigned.

n. Country of Origin - required for each line item

The commercial invoice must provide country of origin information using:

• The 2-character ISO code (e.g., US, FR, TW); or • The full name of the country in English. • UK may be used as an abbreviation for the United Kingdom and USA may be used for

the United States. • In all instances, the country of origin information on the invoice must be consistent with

the country of origin marked on the immediate container and the article and consistent with the country of origin identified on the packing list (delivery notice).

o. Unit of Measure from the Harmonized Tariff System.

p. Quantity of product shipped.

q. Invoice currency must match purchase order and billing invoice currency. US Dollars is preferred, local currency is acceptable, if convertible.

r. Unit Price; the unit price of each item shipped. For no-charge goods, this is the Fair Market

Value.

s. Amount; the Extended Total Price of each item (i.e. quantity x unit price).

- NB: For supplier shipments, Unit Price and Extended Total Price must be consistent with the IBM PO and the billing invoice submitted to IBM for payment. If the shipment does not represent a shipment against a PO, including partner shipments, and the parts are shipped at “no charge” (no payment expected), a Fair Market Value should be referenced.

t. Total Value of Goods; the sum of all the line item total prices for the invoice.

u. Any additional charges associated with the shipment. “Additional Charges” on the invoice

may include charges for international freight, special handling, expedited delivery, commissions, and similar items. For supplier shipments, these charges must be listed on your PO for payment to be made.

v. Invoice Total; the total value of all items and related additional charges. Identify this amount

with the statement “Total Invoice Amount Payable”.

An example commercial invoice showing all required invoice data elements is included in Appendix 7.2 of this document. In addition, an example commercial invoice for transactions involving reworked, repaired and/or tested goods returned to IBM is included in Appendix 7.3.

2.4 Packing List Requirements Suppliers and partners are required to provide one (1) copy of the packing list which must be placed in an envelope attached to each separate case. If the goods are palletized, only one (1) copy is needed for each pallet. Alternately, the packing list may be sealed inside the case, with the words "Packing List Enclosed" placed on the outside of the package. The packing list should contain all information shown on the commercial invoice, with the exception of all pricing related information which must be removed. The packing list must include the following information at a minimum;

• IBM Purchase Order (PO) number (if applicable)

• Item Identifier (Part number(s) or machine-type-model and serial number or alternative per section 2.3, l)

• Quantity of each item

• Country of Origin for each item (see Section 4.0 for additional information)

• Case Number (= unique number assigned to the transport unit) A copy of the commercial invoice (after pricing information has been removed or obscured) may be used as the packing list, if all above elements are shown on this document. The packing list (delivery notice) must provide the country of origin information using the full English name of the country, the 2 character ISO code, or an appropriate abbreviation for the country. In all instances, the country of origin information on the packing list (delivery notice) must be consistent with the country of origin marked on the immediate container, article and commercial invoice.

2.5 Billing Invoice Requirements for Supplier Shipments

• The billing invoice value must match the commercial invoice value.

• The billing invoice number must either match, or reference, the specific (exact) commercial invoice number so that IBM can reconcile the payment to the commercial invoice value.

NB: Payment of the billing invoice may be held until reconciliation with the commercial invoice is complete.

• Billing invoices should be sent electronically, or by mail, as agreed with your Procurement Representative.

• A valid IBM Purchase Order number must be included on the billing invoice.

• The Procurement Representative/Requestor name should be shown on all invoices.

• When submitting a billing invoice to IBM, but no import of goods has occurred, please provide sufficient detail on your billing invoice to identify what the billing relates to, for example;

o No import - goods shipped domestically. o No import - goods repaired/reworked in country. o No import - domestic freight charges only. o No import - goods/tooling retained by supplier. o No import – service invoice.

3.0 PACKAGING / LABELLING 3.1 Packaging All shipments to IBM must be packed in a way so that the content arrives safely and intact at the destination. IBM Engineering Specification 31L5345 (Packaging and Handling - Supplier and Interplant Requirements) should be used for guidance. It is accessible via the IBM Global Procurement – Information for Suppliers website at: Packaging Requirements. All shipments, regardless of origin or destination, with packaging components made of non-manufactured wood packaging (NMWP), (e.g., skids, pallets, crates, dunnage) must meet the minimum requirements listed below. These requirements are derived from regulations typically being adopted in many countries and globally harmonized standard (ref. ISPM 15, updated in 2009): IPPC Agreement. ISPM: International Standard for Phytosanitary Measures IPPC: International Plant Protection Convention In summary, all non-manufactured wooden packing materials (NMWP) regardless of origin, destination or species (e.g., dimensional lumber) shall be debarked, treated and marked per ISPM-15. All NMWP (regardless of wood species) must undergo heat treatment to achieve a minimum wood core temperature of 56 degrees centigrade (133 degrees F) for a minimum of 30 minutes. Additionally, NMWP must then be marked a minimum of two times with the IPPC logo and treatment initials per sample below. Point of Emphasis Regarding IPPC Treatment Markings: The IPPC logo and all information shown in example 1 below must be legible and indelible. Blurred, smeared, incomplete or faint markings are non-compliant and the subject SWPM can be subject to rejection by border inspectors and potentially result in return shipping costs and administrative fines. This guidance is based on actual recent experience. SWPM observed to be non-compliant prior to export should be reworked or replaced.

XX = 2 character ISO 3166 Country Code where the treatment occurred 000 = 3 (or more) digit treatment facility code provided by the Nat’l. Plant Protection Org. (NPPO) YY = 2 character abbreviation of the Treatment Type (HT = Heat Treated) Although manufactured wood (e.g., plywood, OSB, presswood, masonite, etc...) is not subject to these restrictions, IBM still requires these be marked to distinguish them from the restricted non-manufactured type wood. There is no officially sanctioned marking for composite / manufactured wood. IBM’s required marking for such material is defined in Engineering Specification 37L8024

(accessible via the IBM Global Procurement - Information for Suppliers website at: Packaging Requirements). Packaging of Dangerous Goods All Dangerous Goods (e.g. Field Use Chemicals (FUMs), Batteries) must be packaged to meet all requirements of the IATA Dangerous Goods Regulations to be eligible for air shipment, even if they are shipped to IBM via ground transportation. This is required as IBM may need to ship the item via air. Refer to IBM Engineering Specification 92F6933 “Packaging/Product Requirements for Dangerous Goods” which can be obtained at the Information for Suppliers Portal.

3.2 Labelling All supplier/partner labels must comply with IBM’s Global Labelling Guides. The IBM Global Labelling Guides are available on the IBM Global Procurement Internet site under “Information for Suppliers”: Global Labelling Guides, or you may contact your IBM Procurement or other Representative for a copy of these. Case Contents Label: suppliers/partners are requested to apply one (1) per case: The case contents label itemizes the goods contained in the over pack case or pallet. Case contents labels, if provided, must contain the following information;

• IBM part number or IBM machine type-model

• Engineering Change (EC) level (if applicable)

• Serial number (if applicable)

• Quantity of each part number

• Country of Origin for each part number (see Section 4.0 for additional information) Shipping Label: suppliers/partners are required to apply one (1) per not palletized shipping container, and two (2) on adjacent sides of a palletized unit: The shipping label is placed on the shipping case and provides the information necessary to ship the goods. Shipping labels must contain the following information;

• Ship From Address (address where the shipment begins)

• Ship To Address (address of the final destination)

• Ship To Attention (name of person to notify upon arrival, if available)

• Case number

• Purchase Order number

• Case __ of __

• Weights: gross and net weight of the case or pallet in metric units (in kilograms, with one decimal at least). Note: English system weights (e.g., lbs, tons) may also be shown as additional information.

• Dimensions (Length, Width, and Height): Case dimensions (length, width and height in metric units). Note: English system dimensions (e.g., inches, feet) may also be shown as additional information.

Marking and Labelling of Dangerous Goods All Dangerous Goods (e.g. Field Use Chemicals (FUMs), Batteries) must be marked and labelled for transport to IBM as specified by the applicable Dangerous Goods regulations. Refer to IBM Engineering Specification 92F6933 “Packaging/Product Requirements for Dangerous Goods” which can be obtained at the Information for Suppliers Portal.

4.0 MARKING/COUNTRY OF ORIGIN All articles produced, procured, or repaired by or for IBM, including "no charge" items provided or returned to IBM, must be marked with the appropriate country of origin. This includes finished products, Field Replaceable Units (FRUs), sub-assemblies, parts, media recorded with software programs, manuals, accessories, and supply items. Each article must have the full English name of its country of origin marked on the article itself and on the packaging in which it is received. For all articles, the country of origin marking requirements is as follows: • On the immediate container (the outermost packaging in which the articles ordinarily reach the

ultimate purchaser) • On the article itself (where physically possible; see specific requirements below) • Conspicuous (can be easily seen with normal handling of the article or container) • Legible (can be easily read by a person with normal eyesight) • Indelible (resists fading) • Permanent (survives normal distribution and handling) • Indicating to the ultimate purchaser the full English name of the article's country of origin. The country of origin must be included on the commercial invoice and packing list (delivery notice) and must be consistent with the country of origin marked on the product package (immediate container) and the article. 4.1 Wording The following wording should be used for country of origin marking. Any modification to this wording must be approved by IBM Legal. Articles Manufactured in the US: Articles which are produced from contents, components, and raw materials of mixed national origin and where the US is determined to be the country of origin must be marked: • Produced in the US of US and non-US components (allowable for hardware only) • Assembled in the US of US and non-US components (allowable for assemblies only) • Printed in USA (allowable for printed material and publications only) • Recorded in USA (allowable for recorded media such as disks, tapes, and CDs only)

Articles Manufactured outside the US: Articles which are made or final assembled outside of the US and are determined to have undergone a substantial transformation must be marked: • Made in xxx (where xxx is the full English name of the country of origin) • Printed in xxx (where xxx is the full English name of the country where the material was printed.

Allowable for printed material and publications only). • Recorded in xxx (where xxx is the full English name of the country where the software was

recorded. Allowable for recorded media such as disks, tapes, and CDs only)

• For articles that are substantially transformed in Canada, use ‘Assembled in Canada’. No abbreviations, with the exception of UK for United Kingdom and US or USA for the United States of America, are acceptable. The 2 character ISO-3166 codes are not acceptable for marking articles or product packages (immediate containers). 4.2 Container Marking A product package (immediate container) is defined as the outermost level of packaging in which the articles will arrive at the ultimate purchaser. The immediate container must be marked with the full English name of the country of origin of the articles contained within it, using the same wording as the marking on the articles (see above for acceptable wording). Some immediate containers contain merchandise of different origins. In such an instance, each article within the immediate container must be marked with its country of origin and the immediate container must include a marking statement which summarizes the countries of origin of the articles in the immediate container. The country of origin summary statement begins: "Contains merchandise from:..." and is followed by a list of the full English names of the countries of origin of the articles in the immediate container. The country of origin of the “essential character” (the article that provides the most important function or is the reason why a customer would buy a specific product) in the immediate container should be listed first. If the contents of the immediate container are invoiced as a single line item (e.g., an IBM Option), the country of origin of the "essential character" must be the country of origin shown on the commercial invoice and the packing list. Containers designed for or capable of reuse must be individually marked to indicate the country of origin of the container. Use the following marking on containers suitable for reuse: "Container made in xxx", where "xxx" is the full English name of the country of origin of the reusable container. If the reusable container is not empty, and the reusable container is the immediate container, the reusable container must also be marked "Contents made in xxx" (where xxx is the full English name of the country of origin of the contents). Exception: if the contents are of US origin, use the wording in Section 4.1 above for Articles Manufactured in the US. In all instances, the country of origin marking must be in close proximity to any labelling which designates an address that is not the country of origin. All references to any country on a product or package cannot mislead or deceive the buyer as to the actual country of origin of the article. No abbreviations, with the exception of UK for United Kingdom and US or USA for the United States of America, are acceptable. The 2 character ISO-3166 codes are not acceptable for marking articles or immediate containers.

5.0 SUPPLY CHAIN SECURITY RESPONSIBILITIES 5.1 Supplier Responsibilities under the World Customs Organization (WCO) Framework of Standards to Secure and Facilitate Global Trade (“SAFE Framework”). While security has always been a focus area within IBM, ongoing incidents of global terrorism require that firms doing business with IBM, especially those shipping goods cross border, remain alert to threats that could enter the commercial supply chain. IBM has pledged its full support of the WCO SAFE Framework and as a certified participant in several AEO programs, IBM continually reviews its security practices and adjusts them based on risk. As an IBM supplier, you also have a key role to play in ensuring the security of our supply chain. IBM's suppliers should assess, and enhance if necessary, their security processes in the following areas recommended by the WCO: Business Partner Security, Container Security, Physical Security, Access Control, Procedural Security, Personnel Security, Security and Threat Awareness Training, and Information Technology Security. IBM's goal is to have all applicable suppliers and service providers comply with AEO requirements as outlined in the SAFE Framework. IBM Procurement administers the Security Letter Agreement (SECLA) towards this goal. Additional details on the SAFE Framework can be found on the WCO website at: WCO SAFE Package. Adherence to the AEO security recommendations is critical to strengthening security for all supply chain members. Your assistance in this endeavour is required. Global Procurement, in conjunction with the IBM Import Compliance Office, will continue to monitor the supply chain security environment and will advise our suppliers accordingly.

6.0 SHIPPING INSTRUCTIONS

Incoterms are a series of widely used, internationally accepted commercial terms published by the International Chamber of Commerce (ICC) that assist in clarifying the roles and responsibilities of buyer and seller when making international shipments. The agreed Incoterm must be included in the commercial invoice for all shipments to IBM Corporation. When it is agreed that IBM will be the Importer of Record, one of the following two scenarios applies. Scenario 1.) When it is agreed the supplier will use an IBM contracted carrier for goods shipment, the IBM Procurement Representative or IBM Agent will provide the following information:

· Method of shipment · Service level (air only) · Lead Logistics supplier in source country per the Shipping Transportation Guidelines (to arrange transportation) · “Named Point” (location the goods will be provided to specified IBM forwarder/carrier)

Note that in this scenario the Incoterm should be FCA (Free Carrier) -- the minimum supplier obligation Incoterm acceptable when IBM is responsible for the freight. If your contract with IBM specifies a different Incoterm, please contact your IBM Procurement Representative or Agent prior to making shipment. 'FCA Cleared for Export from Named Country' must be stated on the invoice. Specific information for United States (US) based suppliers: when FCA is the agreed Incoterm, the supplier acknowledges and accepts that the shipment is not being executed by the non-US IBM ordering location as a routed export transaction. US based suppliers must retain responsibility for the Electronic Export Information (EEI) filing in the Automated Export System (AES). Important note on Incoterm Ex-Works (EXW) -- it is not IBM general practice to utilise the Incoterm EXW. In the event EXW is agreed, the supplier/shipper is responsible for the export declaration and will be the Exporter of Record.

Scenario 2.) When it is agreed the supplier will use its own carrier for goods shipment, the IBM Procurement Representative or IBM Agent will provide the following information:

· “Named Point” (location the goods will be provided to specified IBM forwarder/carrier).

The supplier is responsible for the Export Clearance and will arrange transportation to the designated 'named point'.

Note that in this scenario the Incoterm should be CPT (Carriage Paid To), DAP (Delivered at Place) or DAT (Delivered at Terminal) and IBM will be the Importer of Record. The goods must be transferred on arrival at the ‘named point’ to IBM's

designated Customs Broker for Customs Clearance. The 'Shipping Transportation Guidelines' should be used to identify the appropriate contact for lane/country. If it is agreed the supplier will ship using the Incoterm Delivered Duty paid (DDP), the Supplier will be responsible for the import clearance, duties and taxes in the destination country and IBM will NOT be the Importer of Record.

If your contract with IBM specifies any other Incoterm, please contact your IBM Procurement Representative or Agent prior to making shipment.

7.0 APPENDICES 7.1 Example Commercial Invoice Format for Shipments to IBM Corporation: The following commercial invoice format will meet IBM and Customs requirements in many countries and, after pricing information has been removed or obscured, all requirements for the packing list which must accompany your shipment. In addition, this format will meet all IBM requirements for billing invoices sent to IBM for payment. This example commercial invoice format is intended to provide guidance on invoice data elements required by Customs and IBM for shipments to IBM. The exact format and layout of commercial invoices may vary. If you have specific questions or concerns please contact your IBM Procurement or Other Representative for guidance prior to making shipment. In this example, information provided by your IBM Procurement Representative (usually on the Purchase Order) has been underlined. All other information should be provided by you.

a. The commercial invoice number: 12345A b. Invoice date: 10th February 2018 or in the format 201802-10 (yyyy-mm-dd) c. Sold To and Ship To complete address: IBM Corporation, 6300 Diagonal Highway, Boulder

CO, USA 80301 d. Shipped From: ABC Company, 25 Ankang Road, Seoul, Korea. e. Contact Name: Bob Smith. Contact Number: 822 1234 5678 f. The delivery terms (Incoterms): FCA

g. Quantity of cases: three

h. Weights: total gross and net metric weight (kilograms) of each individual case; 2 cases @

30.7KG gross / 28.3KG net plus 1 case @ 15.2KG gross / 14.1KG net

i. Dimensions: total metric (centimetres) length, width and height of each individual case; 2 cases @ 40cm height/35cm width/50cm length plus 1 case @ 30cm height/25cm width/35cm length

j. The description of the product being shipped: Circuit Card Assembly

k. The IBM Purchase Order (PO) number: 2000012345 (supplier shipments only)

l. The name of the IBM Procurement or Other Representative: Susan Brown

m. The IBM Part Number: 28X2846 (if applicable)

n. Country of Origin: Korea (KR)

o. Unit of Measure from the Harmonized Tariff System: each

p. Quantity of product shipped: 5 pieces

q. Invoice currency: US Dollars

r. Unit Price: $125.00 (Fair Market Value for no-charge goods)

s. Amount; the Extended Total Price of each item; 5 x $125.00 = $625.00

t. Total Value of Goods: $625.00

u. Any additional charges: $100.00 expedited delivery charge

v. Invoice Total: Total Invoice Amount Payable = $725.00

With this information, the example commercial invoice format would appear as follows;

7.1 Example Commercial Invoice Format for Shipments to IBM Corporation (continued) PRINTED ON SUPPLIER/PARTNER COMPANY LETTERHEAD OR STANDARD INVOICE FORM Commercial Invoice Number: 12345A Invoice date: 10th February 2018 Shipped from: ABC Company 25 Ankang Road Seoul, KOREA Contact Name: Bob Smith Contact Number: 822 1234 5678 Sold to / Shipped to: IBM Corporation 6300 Diagonal Highway Boulder CO USA 80301 IBM Purchase Order Number: 2000012345 IBM Procurement Representative: Susan Brown Delivery Terms: FCA Currency used: US Dollars

IBM PN Description

Country

of Origin

Unit of

Measure Unit Cost Quantity Total Cost

28X2846 Circuit Card Assembly Korea Each $125.00 5 $625.00

Total Quantity Shipped: 5 pieces Total Value of Goods: $625.00 Additional Charges: $100.00 (Expedited Delivery Charge) Total Invoice Amount Payable: $725.00 Packaged In: Three (3) cases total Case Weights: Two (2) cases @ 30.5KG gross weight / 28.7KG net weight One (1) case @ 15.2KG gross weight / 14.1KG net weight Case Dimensions: Two (2) cases @ 40cm height/35cm width/50cm length One (1) case @ 30cm height/25cm width/35cm length

7.2. Example Commercial Invoice for Goods Returned after Rework, Repair or Testing (Applicable to Supplier Shipments Only) PLEASE NOTE THAT THE FOLLOWING INSTRUCTIONS ARE NOT APPLICABLE TO SHIPMENTS TO THE UNITED STATES. PLEASE REFER TO THE U.S. SUPPLIER SPI FOR U.S. SPECIFIC REWORK VALUATION INSTRUCTIONS. Specific additional valuation rules and requirements apply to articles that have been reworked, repaired and/or tested and are being returned to IBM by an overseas (nondomestic) supplier. Specific valuation rules and requirements also apply to articles found to be non-repairable and are subsequently returned to IBM for disposition (scrap). Customs has two valuation requirements applicable to shipments of articles that have been reworked, repaired and/or tested and are being returned to IBM. First, the amount to be paid to the overseas supplier for rework, repair and/or testing services (charges) must appear on the commercial invoice and must match the amount shown on the billing invoice. IBM verifies this information through an import reconciliation process. Failure to meet the requirements of import reconciliation may result in the delayed payment of supplier billing invoices. Second, Customs requires that the full value (fair market value) of the imported article be reported on the commercial invoice and import declaration. The following guidance will assist you in meeting these valuation requirements. General guidelines for reference of rework, repair and/or testing charges on the commercial invoice; The commercial invoice must clearly indicate the rework, repair, testing and any other charges that are payable to the overseas supplier for services provided. These charges will be declared to Customs in the import declaration and reconciled for payment against the IBM Purchase Order and the billing invoice submitted by the supplier. Charges may or may not be payable for rework and repair services performed on articles under warranty, or for articles found to be non-repairable. If there are no applicable charges for a warranty repair, the invoice must indicate “returned after warranty repair” or “returned as unrepairable”. In all instances, for chargeable or non-chargeable rework and repair services, for the return of a non-repairable item the commercial invoice must indicate that the item is non-functional and non-repairable. This is required so that Customs can differentiate between two items that may appear to be identical (i.e. same part numbers, one repaired, the other non-repairable), but with different invoice values.

General guidelines for valuation of reworked, repaired and/or tested articles on the commercial invoice; The commercial invoice must indicate both the value of the article provided by IBM plus any charges to be paid by IBM for rework, repair, testing services or failure analysis work required. The value of the article to be returned is for Customs purposes only and the supplier will not be paid for this. For functional parts returned after rework, repair and/or testing; the value of the article must equal the exact value (no rounding) referenced by IBM on the invoice used to ship the parts to the supplier, or, if not provided by IBM, the unit cost as “fair market value” as determined by you (supplier) based on the value of an equivalent or same new part, PLUS the value of the charges to be paid by IBM for the rework, repair, testing services. For non-functional parts returned after rework, repair, testing or failure analysis; the value of the article should be equal to the value of the parts as shown on the invoice received from IBM, or, if there is no value provided by IBM, 25% of the “fair market value” as determined by you (supplier) based on the value of an equivalent or same new part, PLUS, if any, the value of the charges to be paid by IBM for the rework, repair, testing services. Unacceptable valuation references for commercial invoices; Due to the specific valuation rules and requirements the following invoicing examples would be considered non-compliant and unacceptable to Customs in many countries;

An invoice which references the rework, repair and/or testing charge as the value of the imported goods are unacceptable. Reason: the goods would be undervalued for Customs purposes.

An invoice which references the value of the goods but does not reference the value of the rework, repair and/or testing charges to be paid to the supplier is unacceptable. Reason: the invoice would be under-valued and under-declared to Customs; it would also fail IBM invoice reconciliation.

An invoice for either warranty repairs, or non-repairable items, which references a total invoice value of zero (because there is no charge payable to the supplier for this work), is unacceptable. Reason: the goods would be undervalued for Customs purposes.

An invoice for non-repairable items which references an arbitrary or fictitious value (e.g. zero or $1) is unacceptable. Reason: arbitrary or fictitious values do not reflect ‘fair market value’ and are unacceptable to Customs.

An invoice for non-repairable items which specifies a correct value of 25% of functional equivalent (new) cost, but does not identify the parts as non-functional and non-repairable, is unacceptable. Reason: Customs would be unable to differentiate between functional and non-functional items with the same part number but significantly different declared import values. .

7.2. Example Commercial Invoice for Goods Returned after Rework, Repair or Testing (continued) PLEASE NOTE THAT THE FOLLOWING EXAMPLE INVOICE IS NOT APPLICABLE TO SHIPMENTS TO THE UNITED STATES. PLEASE REFER TO THE U.S. SUPPLIER SPI FOR U.S. SPECIFIC REWORK VALUATION INSTRUCTIONS. The following example commercial invoice format for reworked, repaired and/or tested parts being returned to IBM is intended to provide guidance on invoice data elements required by Customs and IBM. This example format will meet IBM and Customs requirements in many countries however the exact format and layout of commercial invoices may vary. If you have specific questions or concerns please contact your Procurement Representative for guidance prior to making shipment. In this example, information provided by your IBM Procurement Representative (usually on the Purchase Order) has been underlined. All other information should be provided by you. a. The commercial invoice number: 12345B b. Invoice date: 10th February, 2018 c. Sold To and Ship To complete address: IBM Corporation, 6300 Diagonal Highway, Boulder CO, USA 80301 d. Shipped From: ABC Company, 25 Ankang Road, Seoul, Korea. Contact Name: Bob Smith. Contact Number: 822 1234 5678 e. The delivery terms (Incoterms): FCA f. Quantity of cases: three g. Weights: total gross and net metric weight (kilograms) of each individual case; 2 cases @ 30.4KG gross / 28.2KG net plus 1 case @ 15.9KG gross / 14.7KG net h. Dimensions: total metric (centimeters) length, width and height of each individual case; 2 cases @ 40cm height/35cm width/50cm length plus 1 case @ 30cm height/25cm width/35cm length i. The description of the product being shipped: Circuit Card Assembly j. The IBM Purchase Order (PO) number: 2000054321 k. The name of the IBM Procurement Representative: Susan Brown l. The IBM Part Number: 28X2846 m. Country of Origin: Korea (KR) n. Unit of Measure from the Harmonized Tariff System: each o. Quantity of product shipped: 5 pieces

p. Invoice currency: US Dollars q. Unit Price: $125.00; as per the exact value (no rounding) referenced by IBM on the invoice used to ship the parts, or, if not provided by IBM, “fair market value” as determined by you (supplier) based on the value of an equivalent or same new part. r. Amount; the Extended Total Price of each item; 5 x $125.00 = $625.00 s. Total Value of Goods: $625.00 t. Any additional charges: $125.00 rework/testing charges u. Invoice Total: Total Invoice Amount Payable = $750.00 With this information, the example commercial invoice format would appear as follows;

7.2. Example Commercial Invoice for Goods Returned after Rework, Repair or Testing (continued) PLEASE NOTE THAT THE FOLLOWING EXAMPLE INVOICE IS NOT APPLICABLE TO SHIPMENTS TO THE UNITED STATES. PLEASE REFER TO THE U.S. SUPPLIER SPI FOR U.S. SPECIFIC REWORK VALUATION INSTRUCTIONS. PRINTED ON SUPPLIER COMPANY LETTERHEAD OR STANDARD INVOICE FORM Commercial Invoice Number: 12345B Invoice date: 10th February 2018 Shipped from: ABC Company 25 Ankang Road Seoul, KOREA Contact Name: Bob Smith Contact Number: 822 1234 5678 Sold to / Shipped to: IBM Corporation 6300 Diagonal Highway Boulder CO USA 80301 IBM Purchase Order Number: 2000054321 IBM Procurement Representative: Susan Brown Delivery Terms: FCA Currency used: US Dollars

IBM PN Description

Country

of Origin

Unit of

Measure Unit Cost Quantity Total Cost

28X2846 Circuit Card Assembly Korea Each $125.00 5 $625.00

Total Quantity Shipped: 5 pieces Total Value of Goods: $625.00 Additional Charges: $125.00 (Rework/Testing Charge) Total Invoice Amount Payable: $750.00 Packaged In: Three (3) cases total Case Weights: Two (2) cases @ 30KG gross weight / 28KG net weight One (1) case @ 15KG gross weight / 14KG net weight Case Two (2) cases @ 40cm height/35cm width/50cm length Dimensions: One (1) case @ 30 cm height/25cmwith/35cm length

7.3. Exceptions to the Commercial Invoice copies requirement One original plus two copies of the commercial invoice must accompany shipments to most countries. There are some exceptions to this requirement, details below; India: requirement is 2 x original invoices plus 2 x copies of the invoice Morocco: requirement is 3 x original invoices, copies are not acceptable Brazil: requirement is 1 x original invoice signed in blue ink plus 4 x copies of the invoice