Archive for the ‘US Customs’ Category


 

Wood Packaging Materials: 5 Tips to Avoid Shipment Refusal

wood-palletsWe have posted a few articles about the increase in U.S. Customs refusal of import shipments due to non-compliance with the wood packing material regulations, containing everything from perishable food products to floor tiles to machinery to textiles. This remains a topical subject, and while Customs has not officially published the exact numbers, U.S. Customs and Border Protection (CBP)  issued thousands of Emergency Action Notices in 2012 nationwide, with many of those being at the U.S.-Canada border. With very rare exceptions, these shipments have required immediate re-export. No recourse and no options for further mitigation or treatment are being offered at this time.

It is estimated that the U.S. spends about $138 million dollars each year fighting the effects of invasion by non-native species, which includes plants and seeds, as well as animals and insects. While CBP (U.S. Customs and Border Protection) and the USDA (United State Department of Agriculture) have been waging this battle for a number of years, there is a definite increase in the number of inspections taking place and the severity of required actions over the course of the past couple years. The International Plant Protection Convention (IPPC) regulations regarding wood shipping material (ISPM 15) went into effect in 2005. Since then, all wood packaging material (WPM) entering the U.S. must be either heat treated or fumigated according to these regulations. We want to be clear that the recent increased levels of inspection and refusal are not due to any new requirements, but rather more focus and increased officer training regarding this important issue.

Wood packaging materials must not only be appropriately treated and have certification issued, but if an inspection is ordered and the officer finds reason to question the validity of the stampings or documentary statements, Customs has the right and the responsibility to refuse the shipment.

This is a list of a few of the scenarios that have come to our attention recently:

  1. Cargo arrives at the port of entry with a mix of marked and unmarked WPM. No assumptions will be made by Customs as to the origin or status of the packing materials and the entire shipment will be refused and ordered for immediate export.

  2. When goods are delivered from overseas to a warehouse, the packaging is certified and appears clean. By the time it is shipped to the U.S., however, an uninvited rodent set up house in the warehouse. Even if the WPM is marked & certified, it will be rejected – likely for noxious weed seed – and refused, with immediate export demanded.

  3. The WPM is all certified and marked appropriately, but the Customs officer finds evidence, or even a question of evidence – say frass, or fresh boreholes – that it may have been re-infected, or possibly the initial treatment was not effective, or the marks and certification were fraudulent. You guessed it – the shipment is refused and immediate exportation is ordered.

  4. The WPM is certified and marked, but the Customs officer finds evidence that the WPM is concealed in some fashion – hidden between plys, or possibly an unmarked piece of bracing material. Once again, the shipment is refused and immediate export is ordered.

If your cargo is carried as a less than truckload (LTL) shipment, it may be consolidated on a truck or in a container with other shipments. If one shipment in that lot is found to be non-compliant, it is very likely that everything on that truck or container will be refused and sent back to origin. Who bears the costs involved? Every carrier makes their own decision on this, so you will want to address this issue with your client.

Clearly, the costs of having a shipment refused at the border can be tremendous. Between all of the necessary documentation, inspection fees and communications, wait time, a wasted trip to the border and return, re-import process, repacking the shipment and sending it again – possibly late this time, or the risk of having an angry customer who no longer wants the product, not to mention possible penalties issued at a later date by U.S. Customs for non-compliance… no wonder you have a headache!

So, here are a few suggestions on what can you do to lessen the likelihood of being caught up in this scenario:

  1. Make sure that your warehouse personnel and your vendors know, understand and follow the regulations on WPM – the USDA-APHIS website is a good starting place to look for more in-depth information.

  2. As you load your shipments destined for the U.S., look at it like a Customs officer will: is the shipment packed so as to be easily examined? Are all pallets and crates clearly and appropriately stamped? How about dunnage, bracing and loose packaging – are they stamped? Know the signs of infestation – bark, frass, boreholes, live insects or larvae. Is there any evidence of pest infestation on the packing? Make sure the pallets are clean and clear of rodent debris, unintended soil or plant/seed material, and any other unwelcome pests.

  3. If you are building your own crates or packaging materials, you must use materials from a registered and accredited manufacturer, and have the final packing material treated appropriately. You cannot create your own ISPM15 marks.

  4. Implement processes and policies for shipments being returned due to non-compliance, particularly if you are hauling LTL loads. Be prepared with a plan of action, and remember that shipments cross the border and are examined 24 hours a day, 7 days a week at some ports, so it is a good idea to advise your Customs Broker of after-hours contact instructions.

  5. Stay in close communications with your Customs Broker regarding updates and/or changes in the regulations, and know how these changes might affect you and your cargo destined to the U.S.

Pacific Customs Brokers can help advise you on how to better your chances of success with Wood Packaging Materials compliance. We can provide you with helpful information to avoid delays and refusals and manage the entire Customs process seamlessly.

Have questions about Wood Packaging Materials? Leave them in our comments section below.

 

Importer Security Filing: Mandatory Bond Requirement

ocean importsAre your Importer Security Filing (ISF) submissions completed on time and accurately with every transaction? Full enforcement of Importer Security Filing (ISF) has been in effect since July 2013, and yet there are still many ocean shipments entering the United States with late or missing filings. We have not been able to secure statistics or numbers on this, however we are aware that U.S. Customs and Border Protection (CBP) has begun issuing penalties for shortcomings such as failure to file, late filing, or inaccurate filings starting at US$5,000.

 

What has changed?

U.S. Customs and Border Protection (CBP) has just announced via the Cargo System Messaging Service (CSMS) that, effective January 10, 2015, these late ISF submissions will no longer be exempt from the bond requirements, as has been allowed to date.  Most ISF transactions will require a bond at the time of filing.

 

Impact on Importers:

For those importers who have been working hard to remain in compliance with these regulations and already have the appropriate bond on file with U.S. Customs, there should be no impact from this new layer of enforcement.

For importers who do not have a bond on file with U.S. Customs, there is an expectation of additional delays and expenses, in addition to the possibility of difficulties in finding agents willing to work with a non-compliant importer. With this added layer of enforcement of the ISF regulations, we fully expect to see a dramatic increase in the number of penalties being issued

 

Pacific Customs Brokers has published a number of blog articles over the past few years on this issue, that can be found at the end of this post.  If your company imports goods into the United States via ocean, we urge you to ensure that your business is complying with the requirements in this area and that you do have an ISF bond on file with U.S. Customs.

 

The Importer’s Responsibility:

While it is likely that most steamship companies will issue Do Not Load orders for shipments from known importers, they are not required by law to do so.  It is the Importer of Record’s responsibility to ensure that this filing is completed on time and accurately.

 

How we can help?

Pacific Customs Brokers offers Importer Security Filing services, in addition to customs clearances of ocean import freight into any port in the U.S. and Canada.  We are always pleased to answer any concerns you may have regarding this matter.

Have questions or comments about the Importer Security Filing final rule? Leave them in our comments sections below or email Ask Your Broker.

 

Related blog articles:

  1. Ocean Shipments and Importer Security Filing
  2. Enforcement of Importer Security Filing Final Rule
  3. Video: Importer Security Filing “10+2?
  4. Full Enforcement of Importer Security Filing (ISF) “10+2? Begins July 9, 2013

 

Additional articles:

  1. CBP Enters Next Phase of Importer Security Filing
  2. FAQs: Importer Security Filing “10 +2” Program

NAFTA Certificate of Origin: Top 5 Mistakes and How to Avoid Them

NAFTA Certificate of OriginPacking slips, commercial invoices and customs invoices are all documents that can be easily completed. What I mean is that you are simply taking shipping or invoicing data – shipper, consignee, carrier name, description of goods, etc. – and plugging it into the respective area on one of these documents.

But how about the North American Free Trade Agreement (NAFTA) Certificate of Origin? Can you use the same document completion philosophy?

In a quick glance at a NAFTA Certificate of Origin, one might assume that the answer is yes. Exporter — yes. Producer — yes. Importer, description of goods, blanket period — yes, yes, yes. Sounds like we’re on a roll! We read the NAFTA Certificate of Origin completion instructions, understand what information is required and we finish this form off to satisfy the foreign purchaser’s request. Right?

Wrong!

The main difference between an NAFTA Certificate of Origin and the aforementioned documents is that all the products you list on this document must qualify under the North America Free Trade Agreement. That’s right – do not simply complete the document. There are rules that must be observed.

As we already noted, some fields on the NAFTA Certificate of Origin are fairly basic and you can easily fill them in. The focus of this article is to provide clarification on the less understood areas to raise awareness of their complexity.

Five Common Errors on a NAFTA Certificate of Origin:

#1. Field 6 — Harmonized System (H.S.) Tariff Classification Number

As emphasized in a previous article, it is very important that the H.S. tariff classification is correctly assigned to each product, as the first six digits will determine which of the NAFTA “Specific Rules of Origin” will apply (Go to page 141  to see the list).  If you are unsure regarding the tariff classification a customs broker can help.

#2. Field 7 — Preference Criterion

The completion of this field is going to depend on where a product was sourced or manufactured, the extent of the manufacturing and transformation process, and/or the source and place of manufacturing for any raw materials. Note that the preference criterion chosen for one product might not be the same as for another, and each situation will need to be evaluated on its own merit.

#3. Field 8 — Producer

Hey, you get a lucky break! This is one of the easier ones. YES, NO(1), NO(2), and NO(3) are your options. The ‘NO’ options of (1), (2), and (3) refer to what you are basing your NAFTA claim on — whether you ‘just know it is NAFTA eligible’ (1), or you have documentation from the producer that it is NAFTA eligible (other than an NAFTA Certificate of Origin ) (2), or you have a voluntarily provided and accurately completed NAFTA Certificate of Origin from the manufacturer (3). We respectfully advise that you go for (3), as this assures that the actual producer has done his due diligence in confirming NAFTA eligibility of the product he is providing to you.

#4. Field 9 — Net Cost

In order to properly complete this field, you will need to understand the NAFTA “Specific Rules of Origin” applying to a product to determine if Regional Value Content is a factor and whether the Net Cost method will be used. In this field, you will either show ‘NC’ if the Net Cost method was used, or ‘NO’ (all other situations). By the way — do not place a dollar amount in this field, as this merely indicates to a customs agency that you did not read the instructions!

#5. Field 10 — Country of Origin

This one sounds simple, doesn’t it? You would be amazed, however, at the number of NAFTA Certificate of Origins  we receive that indicate countries other than the U.S., Canada or Mexico (remember, it’s the North American Free Trade Agreement). Another common mistake is for someone to automatically assume that just because certain products are made in Canada, the U.S., or Mexico they qualify for NAFTA. In fact, if they do not qualify, they must not be listed on this document.

Sound complicated? In some cases, it is straight forward, but in so many others (for example, products with many foreign components), NAFTA qualification can be an onerous task. The point we are making is for companies and individuals to realize that much care needs to be exercised (before signing, please read the disclaimer at the bottom of the form so you understand your responsibilities).

Repercussions of incorrectly filled out NAFTA Certificate of Origins:

Your worst nightmare would be a situation where a company has been importing a product for many years assuming that it qualifies under NAFTA (i.e. duty free), then discovering through a customs audit that the goods do not qualify. Regular Canadian or U.S. duty rates range from duty free to over 200%; fines and penalties could also be assessed. Need we say more?

It should be noted that similar rules apply for any Certificate of Origin relating to a free trade agreement. For instance, if you grab a copy of a Canada-Chile FTA Certificate of Origin, you will notice many similarities.

Still baffled over the completion of this document, or whether or not your goods qualify under NAFTA? If you require advice or have questions related to NAFTA,  please contact one of our Trade Compliance Specialists. They will help you take full advantage of the benefits provided by NAFTA.

Additionally, take an in depth tour of NAFTA, by attending an upcoming NAFTA Workshop wherein you will gain a better understanding of NAFTA, learn how to manage NAFTA compliance and utilize this free trade agreement to your benefit.

 

You may also leave your comments or questions on completing a NAFTA Certificate of Origin in the comments section below.

Related Blog Articles:

Related Customs Forms:

 Related Video:

The Most Crucial Aspect of Global Trade: HS Tariff Codes

HS Tariff CodesEvery commodity that clears through customs must have an accurate and correct Harmonized System code (HS code) applied to it. This code identifies the item to Canada Border Services Agency (CBSA), as well as indicates the duty rate payable.

The Canada Customs Invoices or Commercial Invoices prepared must provide enough detail to identify the goods and correctly establish the H. S. 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?

Almost 200 countries, representing about 98 percent of world trade use the Harmonized System as a basis for trade negotiations collecting international trade statistics, quota controls, rules of origin and for statistical and economic research and analysis.

Anatomy of an HS Code:

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 six 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.

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

 Commodities entering Canada are classified based on:

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

 The Six Universal General Interpretive Rules (GIR):

Rule No.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.

Rule No.2:

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.

2. (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.

Rule No. 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:

3 (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.

3 (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.

3 (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.

Rule No. 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.

Rule No. 5:

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

5(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.

5(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.

Rule No.6:

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.

The Three 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.

 

The Explanatory Notes

In addition to the GIRs 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).

 

Advanced Ruling

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.

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.

 

Proper classification is the starting point of compliance. A thorough knowledge of the Harmonized System is essential for anyone involved in global trade. If you would like to further your understanding of tariff classification and find the correct commodity codes for your goods, attend our upcoming H.S. Tariff Classification Workshop. In this hands-on session you will learn how to classifying goods and parts , understand the complexities of the various rules of interpretations of the H.S. Tariff System, gain a better understanding of how duties are determined and learn about preferential tariff treatments. Register today!

 

Have questions or comments on H.S. tariff classification? Post your thoughts in the comments section below or email us at Ask Your Broker.

4 Reasons For Determining the Correct Harmonized Tariff Classification

Harmonized System Tariff and ClassificationThe 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 us 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 us briefly examine the complexity of the tariff schedule as defined by the harmonized system.

The Harmonized System (H.S.) Tariff Schedule:

The H.S. Tariff Schedule is comprised of 21 sections with 96 chapters; in Canada there are over 12,000 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 sections, chapters 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.

Key Reasons Why “Getting It Right” Is So Important:

Let us start with the area that everyone is aware:

1. Duty rates: The tariff classification has a direct correlation to the duty rate that you will be expected to pay (and no, it is not a matter of “finding the one that says FREE”).

2. NAFTA: This is 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.

3. Anti-Dumping Duty (ADD): 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 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.For a full list of Canadian imports subject to dumping duties visit this link » Goods subject to anti-dumping or countervailing 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!

To learn more about the Harmonized System (HS) Code:

Proper classification is the starting point of compliance. A thorough knowledge of the Harmonized System is essential for anyone involved in global trade. If you would like to further your understanding of tariff classification and find the correct commodity codes for your goods, attend our upcoming H.S. Tariff Classification Workshop. In this hands-on session you will learn how to classifying goods and parts , understand the complexities of the various rules of interpretations of the H.S. Tariff System, gain a better understanding of how duties are determined and learn about preferential tariff treatments. Register today!

Have questions or comments on H.S. tariff classification? Post your thoughts in the comments section below or email us at Ask Your Broker.