Archive for the ‘H.S. Tariff Classification’ Category


 

Breaking Down Barriers with the Canada-EU Trade Agreement

Canda EU Free Trade DealAs a strong supporter of free trade, the European Union (EU) is a strategic partner for Canada, with the oldest formal relationship dating back to 1959. On October 18, 2013, Canada and the European Union (EU) reached an agreement in principle on a Comprehensive Economic and Trade Agreement (CETA) that proponents suggest will bring the trade and investment relationship between the two trading partners to a new level.

What is CETA?

The Comprehensive Economic and Trade Agreement (CETA) covers issues relevant to a modern trade and investment environment, from new market access opportunities to clear rules for European and Canadian traders and investors.  It addresses the full range of conditions that shape international trade in goods and services in order to eliminate or reduce barriers.

Impact of CETA on Canadian Businesses:

This agreement is by far Canada’s most ambitious trade initiative. It covers most aspects of the Canada-EU bilateral economic relationship, including trade in goods and services, investment, and government procurement. It also grants the flexibility to include areas of mutual interest beyond those that have traditionally been included in Canada’s trade agreements, such as regulatory cooperation. CETA will open new markets to Canadian exporters throughout the EU. It will also make Canada a more attractive destination for investors and manufacturers.

Key Milestones:

  • In an effort to deepen and broaden the Canada-EU commercial relationship, in 2008 Canada and the EU issue a joint study, Assessing the Costs and Benefits of a Closer EU-Canada Economic Partnership, which provided supporting rationale for a launch of negotiations.
  • Negotiations on a Comprehensive Economic and Trade Agreement (CETA) were launched in May 2009 at the EU-Canada Summit in Prague.
  • The content of the CETA and its general modalities were agreed in June 2009.
  • A successful and productive first round of negotiations toward a CETA was held in Ottawa in 2009. Both sides made efforts to identify common grounds and set an ambitious negotiating timeline.
  • EU Trade Commissioner Karel De Gucht and his Canadian counterpart Trade Minister Fast met in February 2013 to take stock of the remaining open points.
  • After months of intense negotiations, Commission President José Manuel Barroso and Canadian Prime Minister Stephen Harper  reached a political agreement on 18 October 2013.

Economic Ties Between the EU and Canada:

  • In 2010 Canadian merchandise exports amounted to C$34.5 billion, while imports stood at C$47.8 billion.
  • Canadian exports to the EU are diverse and include a significant share of value-added products in addition to traditional exports of resource-based products and commodities. Machinery and transport equipment, chemicals, pharmaceutical products, mineral fuels and diamonds are among our leading merchandise trade items.
  • Trade in services is significant, with Canada exporting C$12.6 billion in services to the EU in 2010, while importing approximately C$14.9 billion. Examples of often traded services between Canada and the EU are transportation, travel, insurance and communication.
  • The investment relationship is equally highly important. In 2011, European investors held investments worth more than €221.6 bn in Canada while Canadian direct investment stocks in the EU amounted to almost €137.6 bn. (Source: EU trade relations with Canada)
  • Key growth sectors of interest to Canada include ICT, telecommunications, aerospace and defence, energy technologies, and environmental products and services.

CETA Benefits:

The Agreement will provide Canada with preferential market access to the EU’s more than 500 million consumers and to its annual $17 trillion in economic activity.

A  joint study conducted in 2008 examined the costs and benefits of pursuing a closer economic partnership and revealed that both the EU and Canada can expect to gain from a closer bilateral trade relationship. A future agreement would contribute to economic growth and the creation of jobs. It would have several benefits, in particular:

  • The economic model of the Joint Study predicts annual real income gains of approximately €11.6 billion for the EU and €8.2 billion for Canada within seven years following the implementation of an agreement.
  • Total EU exports to Canada are estimated to go up by 24.3% or €17 billion, while Canadian bilateral exports to the EU are predicted to increase by 20.6% or €8.6 billion.
  • 50% of the total expected gains for the EU are related to trade in services, 25% to the removal of tariffs and the remaining 25% of the GDP gains can be reached by the dismantling of Non-tariff barriers (NTB).
  • The benefits from the Agreement in the area of NTBs are estimated to result in a €2.9 billion gain for the EU and €1.7 billion for Canada.
  • In the service sector new opportunities will arise both for European and Canadian companies.
  • Companies on both sides will benefit from the disciplines on investment protection, which are currently being negotiated, making investment even safer!
  • An agreement would bring the investment protection regimes on both sides to a comparable level.
  • Both countries will gain from increased access to the respective public procurement markets. All sub-federal levels of government in Canada will be open to European companies to engage in tenders.

Status of the Agreement:

Now that an agreement in principle has been reached, both parties will seek to conclude the formal agreement and undertake a legal review of the document. Once the final agreement is signed, it will then need to be ratified by respective parliaments.

 

Pacific Customs Brokers is monitoring the situation and will continue to post updates to the Trade News section of our website as they become available.

For more information on this agreement and to see how this it unfolds, please visit the CETA website.

 

Webinars: Learn from the Comfort of Your Desk

Computer-WorldMap-600As the laws governing trade continue to evolve and become more complex, continual improvement in voluntary compliance is required through awareness and education. At Pacific Customs Brokers, we firmly believe that it is in the best interest of an importer to understand the entire supply chain process and be aware of their responsibilities in order to remain well within regulatory compliance. For the past 5 years, Pacific Customs Brokers has offered a variety of Trade Compliance Seminars related to importing and exporting into Canada and the United States.

In keeping with the current business climate and the fact that we all have different learning styles and constraints on time and travel, we are excited to move into the next phase of our education program with the introduction of Trade Compliance Webinars. Our live and on-demand webinars are designed to be a convenient way for trade professionals to stay ahead of new regulations with international trade and gain additional knowledge in key areas. The webinars will focus on practical tools that trade professionals find themselves using every day and provide you with substantial knowledge necessary to complete accurate documentation, understand logistics, get a feel for how transactions move through the regulatory process, valuation considerations and other topics of interest. Each of our live webinars will be followed by a Q & A session.

September Webinars:

Join us for the unveiling of:

 More webinars coming soon

 

We recognize that each of us gathers and processes information in different ways. In addition to educating the trade community through our seminars and webinars, we offer the following online resources:

  • Weekly Trade eNewsletter – updates on international trade, cross-border issues, Customs regulations, seminars, webinars and more
  • You Broker Knows Blog – informative trade blog articles written by our team of professionals 
  • International Trade News – current and archived trade news from Customs and other government resources
  • Your Broker Knows Videos – informational videos on a wide range of trade and shipping topics
  • Live Chat – instant messaging service where each ‘chat’ is one-on-one with a client services team member

We hope you’ll join us and encourage you to share this with colleagues and business partners who might find it useful.

Do you have questions about our trade compliance webinars? Use the comments section below to leave us your thoughts or email Ask Your Broker.

 

Are You New to Importing into the USA?

cutflowers-300If you are new to importing goods into the United States there are many requirements, restrictions, and regulations involved. From quota restrictions, other government agency permits/inspections, and Customs forms. Some information, such as an item being eligible for reduced rates of duty or eligible for one of the many Free Trade Agreements, or products that are not permitted to enter the commerce of the United States because they are manufactured from a facility located in an embargoed country, can only be determined if you know the products Harmonized Tariff Schedule Classification. Determining your product’s tariff number can be extremely complex.

Starting out with a good understanding of Customs regulations and requirements are key to importing success.  Below is a brief overview of what is required when shipping goods into the United States.

Requirements for importing into the United States:

1. Customs Clearance or Release:

Customs clearance or commonly referred to as release  is probably the first thing to consider.  Depending on the value of your shipment you need to determine if a customs broker is required. For shipments valued under $2500.00, U.S. Customs and Border Protection (CBP) will typically allow the goods to enter into the U.S. under an informal entry.  However, in cases where the goods are regulated by U.S. Food and Drug Administration (FDA), or if the goods fall under Anti Dumping Duty/ Countervailing Duties, quota, or other restricted goods, these goods require a formal entry and do not qualify for this exemption.

If a formal entry is required you need to have an account set up with a customs broker and documentation prepared prior to shipping. Documentation is usually completed by the exporter or supplier prior to the goods being delivered to the carrier.  The importer of record is ultimately responsible to ensure that the documentation provided is accurate and complete.  It is critical that you have all the proper documentation and information. Once paperwork is submitted to your customs broker, they will review the information for accuracy prior to the information being submitted to U.S. Customs and Border Protection.

2. Documents:

Documents that are typically required with each shipment are listed below:

  • Customs or Commercial Invoice
  • Bill of lading
  • Other government agency documents
  • Commodity specific requirements or documents

3. Commodity Specific and Other Government Agencies (OGA):

Commodity specific and other government agency (OGA)  requirements depend on other government agencies’ safety, energy efficiency, health, standards, etc.  Many of the items cannot be imported without a permit, license or additional documentation to satisfy the agencies’ requirements.

Everything imported into the U.S. must be properly marked with the country of origin. There are some exceptions to the marking requirements which are listed in the federal code of regulations 19CFR134.33 the J List exceptions. Some products are very hard, or impossible, to mark are as follows:

  • bolts
  • nuts
  • washers
  • cut flowers
  • firewood

If imported in a container and the container reaches the ultimate purchaser,  then it is required to be marked with the country of origin.

4. Duty Rates:

Duty rates are fees that are paid to U.S. Customs and Border Protection.  Duty rates are based on the classification of the products that are entering the USA.  The Importer of Record is responsible for paying these fees.  Your customs broker has the authority to pay the duty fees on your behalf and invoice you for them or set up an automated clearing house account for you to pay the duty directly to U.S. Customs.

Products that enter the U.S. are classified according to the Harmonized Tariff Schedule of the United States.  Goods are placed in a product category called classification, the number used to classify the product is more commonly referred to as a Harmonized Tariff Schedule or HTS number.  The classification number is 10 digits and that number determines the rate of duty that will be applied to your product.  U.S. Customs has an online version of the most current HTS codes available.

Classification can be a very difficult process that generally requires a lot of research and product information.  You as the Importer of Record (IOR) are ultimately responsible for providing the correct product classification to U.S. Customs.  Entering goods into the United States with an incorrect classification or duty rate could result in penalties or increased duty bills.   Many importers choose to hire a customs broker to assist them with the classification of their goods. Do not be surprised if your customs broker asks for ingredient lists or written literature on your product when assisting you with your product classification.

In conclusion, it is the Importer of Record’s (IOR) responsibility to make sure that their goods meet all the requirements for entry into the United States.  A customs broker is there to lend a hand and assist you with the various requirements and regulations.  Always plan ahead and be sure to know before you go to ensure a hassle free importation into the U.S.

 

To learn more about importing and regulations into the U.S., attend the U.S. Customs Compliance Seminar on Thursday, September 12th, 2013. Sign up today!

Have questions or comments regarding importing to the USA? Leave them in our comments section below or email Ask Your Broker.

 

7 Excellent Reasons to Invest in Trade Compliance Education

Investing in Trade Compliance EducationToday’s business climate is fast paced. Time is limited and precious, and there is always a long list of tasks to accomplish. So why would you take valuable time out of your busy schedule to attend a trade compliance seminar or webinar?

Like any good business person worth their salt, let’s examine the Return on Investment (ROI). Obviously the seminar or webinar topic has to have some relevance to your business. Here are some questions a potential attendee may ponder on as they contemplate the decision to attend or not:

  • Is there a way my company can save money?
  • Will it improve a process?
  • Will it provide potential insight to solve a problem?
  • Will it provide valuable knowledge to move a project along?
  • Is the topic one that cannot easily be ignored? (e.g. compliance issues)

 

What is Trade Compliance?

Trade compliance refers to importers and exporters meeting all of the requirements governing the movement of commercial goods across the border. To be trade compliant is to ensure that the tariff classification, origin and valuation of goods are all accurately declared in accordance with legislative requirements and that the appropriate duties and taxes are paid. There is a clear obligation under the Customs Act to provide true, accurate and complete trade information, including a proper description of the goods, and to correct wrong information regardless of dutiable status. Furthermore, an essential part of trade compliance is to ensure that all import requirements are met, such as having the appropriate import permit. If not all import requirements are met, this violates the control measures that are in place to protect the economy, the environment and the health of citizens.

The Importance of Trade Compliance:

In recent years, the Canada Border Services Agency and U.S. Customs and Border Protection have shifted much of their emphasis from import inspections to post audit verifications. The responsibilities put upon Importers of Record have steadily increased as all members of the supply chain endure higher scrutiny from Customs officials. Now more than ever it is imperative that the Importer of Record maintain a high level of sophistication, demonstrate due diligence, ensure they understand their responsibilities, implement internal sets of controls and procedures for best practices as well as understand the consequences of non-compliance.

International trade no longer stands on the sidelines of corporate awareness. It is being transformed from an operational function into an evolving eco-system that helps mitigate organizational risks and strategically drives value. In order to do business efficiently, smart businesses need to strike a balance between ensuring timely movement of cross-border goods and complying with complex regulatory systems designed to ensure safe, verifi­able cross-border transactions. Effective global customs planning can help improve a company’s bottom line.

Benefits of Attending a Trade Compliance Seminar or Webinar:

1. Gain Insight on Key Trade Topics

A well designed seminar or webinar will help you gain a better understanding of key trade topics, teach you how to manage trade compliance and utilize free trade agreements to your benefit. The substantial knowledge you receive will aid in completing accurate documentation, understanding logistics and getting a feel for how transactions move through the regulatory process.

2. Stay Current on Customs Regulations

In our industry, where we deal with Customs and other government agencies, regulations are ever-changing. A trade compliance seminar or webinar can be a convenient way for trade professionals to stay ahead of new regulations with international trade.

3. Avoid Possible Penalties and Risks By Being Informed

Customs agencies and other government departments emphasize the importance of compliance. This is monitored through increased enforcement and could result in monetary penalties to the importer. One of the most important reasons to attend a seminar or webinar is the knowledge and guidance you will receive from the presenters with regards to the steps your organization will need to take to become more compliant with government agencies.

4. Cost-effective Training and Knowledge Refreshment Tool for Logistics Professionals

Seminars and webinars make for excellent training for someone in a new role, a new employee, or training for yourself. Quite often we have repeat attendees who regularly register on an annual or bi-annual basis. Part of our Trade Compliance Education Program covers general overviews of importing or exporting, but we also offer training on specific subjects (e.g. North American Free Trade Agreement, H.S. Tariff & Classification), thus providing an excellent opportunity for companies to utilize this as a cost-effective training tool.

5. Access to Trade Compliance Experts

A well designed seminar and webinar should include adequate time for audience participation or a valid opportunity at the conclusion to get answers to your questions. A live seminar gives you the chance to personally speak to the presenter(s) or other subject matter experts, while a live webinar usually offers this in a Q&A session. We all agree that sometimes the best experiences occur when there are excellent inquiries that promote further ideas and discussion, particularly when you thought you were the only one with that challenge.

6. Reasonable Time Commitment

The ability to obtain some specific knowledge in a short period of time is an added benefit. Night school courses are requisite for more in-depth subject learning but often you need something that is less intensive but still provides substantial knowledge.  Half or full day seminars or an hour long webinar is an excellent way to get a quick update.

7. Networking – Make Valuable Professional Connections

A live seminar and webinar allows you to network and learn alongside other like-minded professionals, coming away with increased knowledge and understanding. Perhaps you will encounter a person who had a similar business problem to yours, or someone who can share their own experience on a certain issue and provide you with valuable insight.

Here is a quote from an attendee at one of our recent Trade Compliance Seminars  “… it’s always interesting to have an informal conversation with compliance people from other industries.” Which brings up another great point – where else would you have a chance to rub shoulders with people of similar business interests?

Hopefully this has inspired you to take the next steps in your trade compliance education. Check out our Winter Spring 2014 Trade Compliance Education Schedule online or download a printable Winter Spring 2014 Schedule (PDF). We hope you’ll join us and encourage you to share this with colleagues and business partners who might find it useful.

Do you have questions about our trade compliance education program? Use the comments section below to leave us your thoughts or email Ask Your Broker.

How Much Do You Know About H.S. Tariff Codes?

The Harmonized System Code (HS Code)

Every commodity that clears through Customs must have an accurate and correct HS code applied to it. This code identifies the item to Canada Border Services Agency (CBSA), as well as indicating the duty rate payable.

The Canada Customs Invoices or Commercial Invoices prepared must provide enough detail to identify the goods and correctly establish the HS Tariff Classification code.

Tariff classification can be very complex and speaks to the essential character of the article being imported:

  • What article is being imported?
  • What is the article made of?
  • What is the item used for?

All imported items must be classified in the Harmonized Tariff System (HTS) using the General Rules of Interpretation and other aids.

The HS code is a 10 digit code. The first six (6) digits of the HS code are universal (meaning that all countries use the same first 6 digits to classify a commodity); the remaining four (4) digits that make up the HS Code are unique from country to country and used for statistics.

Classifying commodities correctly is key with regards to the importer paying the correct amount of duty and avoiding Administrative Monetary Penalty System (AMPS) penalties, or worse, seizure of your goods.

The Customs Tariff book is a comprehensive list of all HS codes laid out in 99 chapters; the progression being from raw products to the most highly processed. These 99 chapters are also broken into 21 sections for ease of reference. The tariff book contains over 10,000 detailed tariff options. In order to select the correct tariff code, you or your customs broker are required to understand the rules contained in the tariff book, and have detailed knowledge of the item(s) being imported.

Should you get an advanced tariff classification ruling from CBSA?

Not all goods require an advanced ruling from Customs in order to be properly classified, however the process remains complex and all imported items must be classified in the Harmonized Tariff System (HTS) using the General Rules of Interpretation and other aids. Getting an advance ruling ensures that the tariff classification number used is deemed correct by the CBSA. The advance ruling provides certainty to the importer, or his or her representative, as to how goods are to be classified and thereby facilitates the documentation and other governmental department requirements for clearing goods at the border.

 Commodities entering Canada are classified based on:

  1. Six (6) Universal General Interpretive Rules (GIR) and
  2. Three (3) Canadian Rules

 Universal General Interpretive Rules (GIR):

1. The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions.

2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled.

(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3.

3. When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to Rule 3 (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to Rule 3 (a) or 3 (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

4. Goods which cannot be classified in accordance with the above Rules shall be classified under the heading appropriate to the goods to which they are most akin.

5. In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to therein:

(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This Rule does not, however, apply to containers which give the whole its essential character.

(b) Subject to the provisions of Rule 5 (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.

6. For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis, to the above Rules, on the understanding that only subheadings at the same level are comparable. For the purpose of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.

Canadian Rules:

1. For legal purposes, the classification of goods in the tariff items of a subheading or of a heading shall be determined according to the terms of those tariff items and any related Supplementary Notes and, mutatis mutandis, to the General Rules for the Interpretation of the Harmonized System, on the understanding that only tariff items at the same level are comparable. For the purpose of this Rule the relative Section, Chapter and Subheading Notes also apply, unless the context otherwise requires.

2. Where both a Canadian term and an international term are presented in this Nomenclature, the commonly accepted meaning and scope of the international term shall take precedence.

3. For the purpose of Rule 5 (b) of the General Rules for the Interpretation of the Harmonized System, packing materials or packing containers clearly suitable for repetitive use shall be classified under their respective headings.

 

Correctly understanding and interpreting the General Interpretive Rules (GIR), and using them to apply the most accurate HS code, is the basis of tariff classification. A customs broker has years of practice using the GIR to apply true and accurate HS codes chosen from the 99 Chapters of the Customs Tariff book.

In addition to the GIR’s contained in the Customs Tariff, a second publication, the Explanatory Notes, is used to assist in correctly classifying commodities. The Explanatory Notes is a list of definitions, explanations and rules that apply to and clarify headings and subheadings in the Customs Tariff.

As well as identifying the commodity and duty rate to CBSA, the HS code also indicates if the product requires additional clearances from other government agencies such as the Canadian Food Inspection Agency (CFIA) or Natural Resource Canada (NRCan).

In the event that there is no obvious classification that fits the item being imported, an Advanced Ruling should be requested. An advanced ruling ensures that the item will be classified to CBSA’s satisfaction and there will be no penalty for misclassified items. This is recommended for any item that is not clearly stated in the Customs Tariff or appears to have more than one equally applicable tariff.

To learn more about this topic, attend an upcoming H.S. Tariff & Classification Workshop.