Archive for the ‘HS Tariff’ Category

 

Correct Product Descriptions: Foundation for Import Accuracy

ChecklistWhen you travel, it doesn’t matter which English speaking country you are in. You could be in Canada, Britain, Scotland, South Africa, Australia or New Zealand. Everybody might be referring to the same thing but everyone uses a different word or phrase. Terminology, language, dialect, regional slang, pronunciation – so many factors enter into the equation and influence the way we describe people, places and things.

The same concept often applies when a customs broker is trying to process a Customs clearance on behalf of their client. Through trade names, item numbers or industry jargon, the product description on the commercial or Canada Customs invoice makes sense to the shipper and consignee, but is either too vague or lacks further information for the customs broker. Probably the number one reason that your customs broker needs to contact you or the shipper is for further details about the product description.

Why is this important?

The main reason your customs broker needs this information is to identify the correct tariff classification for each item. For a quick read on the importance of the tariff classification, refer to our previous post.

In addition, every product line on the Canada Customs or commercial invoice needs to be classified, data entered and transmitted to Customs. Generally, all shipments containing less than 100 product lines must be transmitted electronically in order to request a Customs clearance from Canada Customs. Yes, you read correctly…the information must be transmitted and accepted by Customs before the shipment can physically enter Canada. As you can well imagine, the window in which to perform this function could be very small if a truck driver is quickly approaching the Canadian border.

Ultimately, the “Importer of Record” (generally the Canadian purchaser) is responsible for all trade data submitted to a Customs agency on their behalf and is also liable for any errors or omissions. Essentially, this could lead to fines, penalties and interest fees under the Administrative Monetary Penalty System if the goods are incorrectly identified or classified due to an unclear or vague product description.

Here’s a hot-off-the-press real life example. This morning I had a client call me as her shipment was held up with a courier. The problem was that the product description was listed as “wine” on the bill of lading. Turns out the goods are actually “wine stoppers” (which, incidentally, carry a much lower duty rate than alcohol!).

So what information is your customs broker looking for?

In order to cover all the possibilities I would have to give you a 100 page booklet as every chapter of the customs tariff requests specific information. To keep it to the basics, the key areas are:

  • A clear literal description of the item (i.e. wooden chair with upholstered seat)
  • The chief materials from which the item is made (i.e. wood, plastic, steel, rubber, etc. If you import garments, you’ll need the fabric content)
  • The end use (if known) (i.e. used in the manufacture of __________)

Still frustrated? Attend our next Harmonized System Tariff & Classification Workshop and have our experts teach you how to properly classify products. Guess what you’ll learn first… it all starts with a detailed product description!

Still confused? Call Pacific Customs Brokers and we’ll discuss your customs requirements.

 

Posted on July 12th, 2011 by Richard Brinkert
Posted in Canada Customs, HS Tariff, Your Broker Knows

Determining the Correct Tariff Classification – How Important Is It?

The dilemma: You are always getting calls from your customs broker asking for further information about your products. When asked ‘why’, they respond that they need to determine the correct harmonized tariff classification.

To the uninformed observer, why care? I mean let’s be honest…all you want to know is… ‘Do I have to pay customs duty on these goods?’ Right?

Like everything, you need to peel back the layers to see what lies beneath.

First of all, let’s briefly examine the complexity of the tariff schedule as defined by the harmonized system.

It is comprised of 21 sections with 96 chapters; in Canada there are over 10,000 individual tariff classifications at the ten digit level. There is a specific hierarchy (the General Rules of Interpretation) which defines the methods used to determine a product classification. Additionally, there are section, chapter and explanatory notes to consider, plus further rules defining how to navigate the punctuation and use of dashes or hyphens. Granted, some items can be classified easily but many require an expert with years of tariff classification experience.

Here are the key reasons why ‘getting it right’ is so important. Let’s start with the area that everyone is aware of.

  1. Duty rates: The tariff classification has a direct correlation to the duty rate that you will be expected to pay (and no, it’s not a matter of ‘finding the one that says FREE’).
  2. NAFTA: Very important as one of the first steps in determining if goods qualify under NAFTA is to find the tariff classification for the product and to then check under the NAFTA Specific Rules of Origin to determine how the goods might qualify. A common misconception is that products will AUTOMATICALLY qualify if they are made in Canada, the U.S. or Mexico. Click Here to view these rules.
  3. Anti-dumping duty: If a government decides that they need to protect a domestic industry, they can impose an anti-dumping duty on specific imports. This is also driven by…you guessed it…the harmonized tariff classification! Pay close attention to this area as anti-dumping duty rates are always very high … usually double or sometimes triple digit percentages. Click here for a full list of the Canadian imports subject to dumping duties.
  4. Exporting to countries other than the U.S. where the shipment value exceeds $2,000.00? You or your freight forwarder will be required to complete a B13A export document (or electronic equivalent), and you will need the eight digit harmonized system export code or the Canadian 10 digit import code for each product. Once again, export restrictions and permits governed by Foreign Affairs are driven by the tariff classification.

The above topics are the primary reasons for determining the correct tariff classification. In addition, we should also include the controls through other governmental agencies, such as the Canadian Food Inspection Agency, Free Trade Agreements with other countries, and also the effects on Canada’s trade statistics.

Remember…if your company’s name is indicated as the importer on any customs documents, you (not your customs broker) are looked upon as the responsible party to ensure all declarations are correct. You may be able to avoid any future problems by getting it right the first time!

Posted on March 2nd, 2011 by Richard Brinkert
Tags:
Posted in Canada Customs, HS Tariff, US Customs, Your Broker Knows