After months of effort, you successfully establish a solid foreign source for a product line. You have met with the manufacturer and are confident with the company and their ability to produce a quality product that meets your criteria and time frame. You have determined packaging and labeling requirements, sought out a good freight forwarder to manage the movement of the goods, and have carefully researched the customs clearance process with your customs broker. Terms of sale, financing, tariff classification, import documents – everything is in order. In short, you have done all your homework to purchase the right product for the right price to get it to the right place at the right time.
So would you anticipate paying any other costs to import your goods? Probably not – because you have carefully covered all possibilities. However, let’s look at some of those unexpected fees that could occur. Some which are preventable and some which could happen even if you have done everything correctly.
Customs exams: Most of these are totally unavoidable. As the front line of defense for goods entering a country, any Customs agency in the world has the right to examine goods and will never divulge their process for determining which shipments are examined and which are not. In particular, you can probably expect an increased chance for an exam if you are importing from overseas for the very first time, or if you import from countries which could be deemed to be a higher risk.
Potential costs? Full ocean container inspections start around $850. Less Than Container Load (LCL) shipments are significantly lower and start around $35.
Canadian Food Inspection Agency (CFIA) exams: There are many other government departments involved with the importation of goods, however, the CFIA is the predominate one. They are Canada’s watchdog when it comes to imports of food, meat, fruit & vegetables, plants and flower bulbs to name but a few of the products under their governance. This also gives them the authority to conduct their own examinations independently from Canada Customs. Quite often these examinations are done on site for regular importers, however, the CFIA will determine this based on their own criteria. Currently wood packaging is a huge target on their radar due to the various types of bugs which can hide in untreated or raw lumber.
Potential costs? There are usual costs that the CFIA issues for standard inspections (http://www.inspection.gc.ca/english/reg/cfiaacia/feesfrais/feesfraise.shtml) but if goods are held in detention the costs could be over $100/hour. When it comes to improper wood packaging or if they find bugs (dead or alive) inside a shipment, the repercussions could be substantial – $1000 and upward. If they deem the risk too high, they can refuse the entry of the goods into Canada. Are these avoidable? The latter situation is however the CFIA works in a similar approach to Customs and has the right to examine shipments as they determine.
Demurrage, detention and storage fees: These are fees usually assessed for rail or ocean freight movements when free time has expired. The amount of free time that you have to move the container from the dock or rail yard will largely depend on several factors: the mode of transportation (rail or ocean), the terminal location (for example, Vancouver could be different than Montreal), and the shipping line or freight consolidator (in the event of less than container load freight). Your best course of action is to communicate closely with your freight forwarder or customs broker to verify who is looking after the final delivery once the container arrives at the terminal.
Potential costs? Based on the aforementioned factors the rates for a full container range from about $100 to $200 per day. In many cases the daily rate will continue to increase if freight remains at the terminal longer than three days.
AMPS penalties: AMPS is an acronym for the Administrative Monetary Penalty System which came into effect in 2002. AMPS covers a wide range of importing and exporting infractions where the penalties are administered by the CBSA (Canada Border Services Agency) and could be issued at either the time of entry into Canada, or during an audit or import review. To view the entire master penalty document go to: AMPS – Master Penalty Document.
Potential penalty amounts? There is a broad range of penalties from $150 per instance to $25,000. It is important to note that in most cases penalties increase with subsequent occurrences of the same infraction therefore if you do receive an AMPS penalty please put procedures in place to avoid future penalties which can only become more costly.
Avoidance? The best method is to have a solid understanding of your responsibilities as the importer of record and to build a compliance program with your customs broker. For a review of some of the key areas, please refer to our previous blog -Topics You Should Include When Documenting Your Import Process.
No one likes unpleasant, particularly costly, surprises especially at a time when profit margins are slim and time frames are short. The intent of this information was to make importers aware of some of the unforeseen situations so they can be best prepared when making a foreign purchase. As always, please feel free to contact Pacific Customs Brokers, if you should have questions or need assistance. Better to ask than assume.