Archive for the ‘Ask Your Broker’ Category


 

The Cost of Customs Compliance Part 2 | Not as Expensive as One Might Think

Image: The Cost of Customs Compliance Part 2 | Not as Expensive as One Might Think

Carrying on from last week’s Part 1 article, a customs compliance penalty often brings into question whether the customs broker can be held accountable if the importer is found to have errors in their import declarations. Since customs holds the importer of record (IOR) ultimately responsible for customs compliance, it is rare that an importer can shift the blame to their service providers or vendors who offered incorrect advice, submitted the declaration with erroneous information or lacked the expertise to catch potential problems with an imported item. Therefore, it is important to ensure your service provider evaluation includes the following:

  1. Does the customs broker have a process in place to review customs declarations for incomplete or inaccurate documentation prior to submission to customs?
  2. Does the customs broker offer Trade Advisory Services which can help with binding ruling applications on unclear product classifications or on new product purchases to determine any additional duties required and/or reporting requirements to other government departments?
  3. Does the customs broker clear all modes of transportation including courier shipments therefore ensuring consistency in both process and tariff classification?
  4. What is the level of certification, education and experience of the entry staff who are reviewing and submitting declarations on your behalf?
  5. Is your customs broker open during your hours of operation? If so, will they have an experienced representative available to answer questions about your specific account?

If your company’s supply chain requires the use of multiple customs brokers, we advise you to look into the following possible areas of inconsistencies.

Multiple Customs Brokers = Multiple Inconsistencies

We previously published an article on the Downside of Using Multiple Customs Brokers in which we highlighted two things to look out for when using multiple customs brokers.

Inconsistency between your chosen customs brokers:
Customs Broker ‘A’, who clears your incoming air shipments, may use a slightly different tariff classification code for your imported item than Customs Broker ‘B’ who clears the same item via highway transport. During our trade compliance seminars we often tell the tale of the outcome of three customs brokers classifying the same item and each coming up with their own justifiable explanation for their classification. This is a result of a highly complex harmonized system tariff schedule, the different experiences each of those brokers have had in their classification practice, as well as their understanding and application of the General Rules of Interpretation (GRI) as they relate to the item.

Difference in business process:
Not all customs brokers are created equal. Each has its own area of expertise and therefore business process. A courier company who offers customs brokerage as an added service has a priority to ensure speed and accuracy with the parcel delivery. A compliance broker, like us, Pacific Customs Brokers, specializes in ensuring their clients trading practices fall within Customs law. Our process differs in the the attention given to detail.

Review Your Entries to Mitigate Risk

As you can see from the areas of concern we have addressed in this article, and despite best efforts, an importer may be completely unaware of their shortfall in customs compliance. One way to review your customs broker’s accuracy is to review the declaration summary provided with the invoice against the following checklist:

  1. Has your vendor provided a full and accurate description of goods for classification purposes?
  2. Is the value declared on your vendor’s invoice correct and will it match your reconciliation to the vendor?
  3. Will you be receiving any additional invoices for value added costs such as royalties or commissions?
  4. Have all applicable discounts been declared and taken where applicable?
  5. Has the country of manufacture been declared correctly for all items on the invoice?
  6. Were all the items listed on the invoice received? Were there shortages or overages?
  7. Do you have properly completed certificates on hand for all items declared under a preferential tariff treatment, including North American Free Trade Agreement (NAFTA) Certificates of Origin?
  8. Has the Goods and Services Tax (GST) been correctly accounted for on all items?

 

We encourage you to reach out to our Trade Advisory team with any questions you may have regarding your customs compliance practices at askyourbroker@pcb.ca. We are here to help!

The Cost of Customs Compliance Part 1 | Is Compliant Trade Expensive?

Image: The Cost of Customs Compliance Part 1 | Is Compliant Trade Expensive?

We often field questions regarding the cost of compliance from importers. There is a misnomer that acting in compliance with Customs regulations is an expensive alternative to the status quo. “We’ve been doing it this way for years with no issue,” or, “I have never had any problems or heard of anyone who has,” and, “Customs is looking for criminals, not paperwork errors” are common phrases we hear. Compliance is seen by some businesses as having few financial benefits. With this view, trade compliance can be considered an unnecessary expense or in some cases, a bridge too far financially. But is compliance expensive?

As a compliance focused customs broker, we admittedly have a biased view on this topic: compliance is key. However, this view is not without merit. Working with both importers and Customs makes us privy to stories of delay, penalty, audit and in extreme cases, loss of importing privileges. We have seen all too frequently the impact these ramifications have on companies of all sizes and want to ensure our clients mitigate these risks.

To further expand on this, let us take a look at what makes a company compliant with trade regulations.

Areas of Compliance

Some of the standards that are expected of importers and their trade transactions include:

  • Accurate valuation of all imported items
  • Accurate application of the Harmonized Tariff Schedule
  • Accurate utilization of duty rates, including preferential claims to free trade agreements
  • Accurate marking of imported items
  • Knowledgeable logistics team who both understands and remains current with importing and exporting regulations
  • Staying apprised of the many potential antidumping and/or countervailing duty cases that may be applicable to an imported product
  • Correct and complete documentation

Now that we understand the primary principles of what makes a importer compliant, let us take a look at the associated costs.

Costs of Compliance

Compliance costs can be internal, in the case of your in-house logistics or customs department conducting the work, or external when the work is contracted out to advisors such as our Trade Advisory Team. These costs vary greatly from company to company as each has their own internal costs and risks of non-compliance. Additional variants are based on the number of imported items within your company’s database, origin of sourced materials, complexity of the finished product and the time and resources required to accurately classify it. A compliance audit will highlight areas of concern and provide costs and time frames required to ensure that a company is in compliance with all of the pertinent regulations and processes.

Contact our Trade Advisory Team to assess your company’s compliance. We can address specific areas of concern or conduct an all encompassing audit.

Costs of Non-Compliance

The compliance costs described above are typically realized upfront. However, costs associated with non-compliance are realized throughout a company’s importing lifespan such as:

  • Overpaying or underpaying duty
  • Unintentional evasion of duties and other potential fees
  • Unintentional smuggling of commodities
  • Administrative Monetary Penalty System (AMPS) penalties which range from X – X for the first offense and increase for successive offensive of the same nature per instance.

Other costs such as loss of importing privileges or obtaining a flawed record with Customs can have ongoing impacts on a company’s bottom line. The costs of non-compliance are too great to gamble with.

Is My Company Compliant?

In evaluating your company’s compliance with trade regulations ask yourself the following questions; and if you are unsure of any of the answers, you may wish to reconsider your compliance program and practices.

  1. Does my procurement team fully understand international terms of sales (Incoterms®) and the many advantageous terms to use and how to avoid admissibility issues?
  2. Where did my logistics staff learn how to fill out trade related documents? If not my logistics team, who fills out these documents and who audits them to ensure accuracy?
  3. When was the last time the logistics staff attended refresher courses on trade regulations? How do I ensure that my staff knows what to watch out for? Who audits the Customs Broker’s work?
  4. How do we obtain regulatory updates related to the commodities we import? How are these updates implemented? Are we staying up to date with Customs publications?
  5. Who is our contact person on file with Customs and are they aware of what to do with the correspondence?
  6. Who valued, classified and labeled my imported items? Who maintains and updates this database? How did I ensure these activities were completed in compliance with the pertinent regulations? Do we have a written record of the work that was done, by whom, dated, and basis for the determinations made?
  7. How are my customs documents filed and for how long? Are they filed in accordance with Customs specifications?

In Summary

Yes, compliance with regulatory requirements is definitely an expense that all importers must contend with. However, in comparison with the much higher costs of non-compliance, it is a total bargain.

Being protective of your company’s bottom line is a vital business practice. However, the bottom line is trumped by Customs drawing the line. Do not let your trade practice reach a point where your business is negatively impacted. Educate your logistics team as the first step towards trade compliance.

Pacific Customs Brokers offers a variety of trade advising and trade compliance education methods for all budgets including free Youtube videos and blog posts, cost-effective seminars and webinars and customized on-site training sessions. Our fall Trade Compliance Education schedule is now available and registration opens on July 15, 2017! Contact us today to evaluate your company’s compliance with trade regulations.

TOP 5 MISTAKES WHEN COMPLETING A NAFTA CERTIFICATE OF ORIGIN

Packing slips, commercial invoices, customs invoices they are all documents that can be easily completed unlike a NAFTA Certificate! What I mean is… 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.

How about the North American Free Trade Agreement (NAFTA) Certificate of Origin? Can you use the same document completion philosophy?  There is much more to a NAFTA Certificate than just “completing another form”.

At a quick glance at a NAFTA Certificate, 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 completion instructions, understand what data is required and we”ll just finish this form off to satisfy the foreign purchaser’s request. Right?

Wrong!

The main difference between a NAFTA Certificate and the aforementioned documents is that all the products you list on this document must qualify under the NAFTA Rules of Origin. 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.

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. In order to correctly qualify the product under these Rules, you must be sure the tariff classification is correct. If you are unsure regarding the tariff classification, please contact a customs broker for assistance.

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.

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) (2), or you have a voluntarily provided & accurately completed NAFTA Certificate 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.

Field 9 — Net Cost

In order to properly complete this field, you will need to understand the NAFTA Specific Rule 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…NEVER place a dollar amount in this field, as this merely indicates to a customs agency that you did not read the instructions!

Field 10 — Country of Origin

This one sounds simple, doesn”t it? You would be amazed, however, at the number of NAFTA Certificates 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

Lets say we have a NAFTA Certificate that has all the boxes completed with what appears to be correct data.  We clear and account for the goods and bill you.  No duty is paid.  Then 11 months later or more (up to 4 years after the date of release),  Canada Border Services Agency (CBSA)  decides to audit that NAFTA.  They will go to the exporter with a NAFTA Verification questionnaire.  Let’s say CBSA comes to the decision that the goods actually do not qualify.  Guess who suffers for the exporter incorrectly completing the NAFTA?  Your Company.  You get the penalty applied to your importing profile and you have to remit the unpaid duty with interest.

 

So keep that in mind when you see NAFTA Certificates that are not properly completed.  Its a red flag that the supplier actually has no clue whether or not the goods qualify.

 

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,   feel free to contact our Trade Compliance Department.

 

Trade Perspectives | The Free Trade Conversation

For The Trading Post 02-23-2017 | Trade Talk Perspectives – Quick Updates on the Free Trade conversation to catch up on this week:

It has been a fairly quiet couple of weeks for people sharing their perspective on “Free Trade”.  There is lots of noise in the global conversation around trade however much of it is political in nature and our aim is to provide you with the “fly on the wall” updates to conversations that directly impact the activity and requirements for trade as it affects your businesses. You can count on these updates to leave the generalized political conversation for other sources – staying focused on perspectives that impact you and your business directly is how we ensure we provide the most possible value into your inbox.

Here are the updates from current conversations for your review:

According to Jeff Berman who is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review, these are strong data points to keep in mind:

  1. NAFTA eases trade among 450 million people in the U.S., Canada, and Mexico, with NAFTA trade more than quadrupling in 20 years and, in turn, boosting the economies of each country.
  2. And according to U.S. Chamber of Commerce data, nearly 14 million U.S jobs depend on trade with Canada and Mexico, coupled with separate data from the Peterson Institute stating that NAFTA makes the U.S. $127 billion richer each year.   

Within 36 hours of the Trudeau-Trump speeches, France’s 20 Minutes reported that the European Parliament had adopted CETA. This finally gives Canada access to a thriving field to recover what it might need to concede within NAFTA. CETA will remove 99% of Canada’s customs tariffs in the European Union, increasing the latter’s trade by 25%.

 

Robin Speer, executive director of the Western Canadian Wheat Growers Association. Tyler Marr / Meridian Booster

Sound economic policy is key to ensuring competitiveness and market access for the agriculture sector, according to Robin Speer, executive director of the Western Canadian Wheat Growers Association.

Speaking to attendees in the Dick Jones Sales Pavilion Wednesday as a keynote speaker as part of Agri-visions taking place at the Lloyd Exhibition Grounds, Speer spoke on the increasing commodities being grown in Western Canada every year, and what needed to be done to ensure we can get the ‘Grain on the Train.’

“Transportation and trade are two key issues. They are heavily regulated issues that affect the bottom line and profitability of farming and economic growth,” Speer said.

“We want market access and we want competition and advanced infrastructure, and transportation to get our goods to market.”

With this, Speer touched on a number of key trade deals and pieces of legislation which were all resting high on the minds of producers in Canada.

With the approval of CETA (Comprehensive Economic and Trade Agreement) in Europe on Wednesday, and at home in Ottawa Tuesday night, Speer explained the “good news to the tune of hundreds-of-millions-of-dollars a year” in reduced tariffs for canola and livestock growers shipping their product to European markets.

Steve Lamar is executive vice president of the American Apparel & Footwear Association.

Regardless of what policy choices this administration works out with Congress, policy makers should take pain to remind themselves that trade – or more precisely access to global suppliers and global customers – remains important to our economy, our society, and our way of life.

As always we look forward to and appreciate your feedback, questions and comments!

For those of you who are doing compliance in-house or have an interest in furthering your compliance knowledge, our in-house seminar series on U.S. Trade Compliance and Canadian Trade Compliance are a great way to understand the movement, compliance and regulations around goods imported into both the USA and Canada.

Have questions or comments regarding the hidden areas of risk and how to mitigate them? A desire to share your thoughts with us or have us share your updates, tips ideas on trade with others? Leave a note in the comments section below or email Ask Your Broker.

We love to hear from you our readers!

Resources:
 http://www.mmh.com/article/new_legislation_calls_for_key_changes_to_be_made_to_nafta1/blogs
 http://nafta.einnews.com/article/367179888/K7wtO45ITq0Drx58?lcf=1Homazc_0YDKSVkdCVA4kA%3D%3D
 http://www.meridianbooster.com/articles/article/2017-02-21-agri-visions-2017#.WK3F6TsrKUk
 http://www.globaltrademag.com/global-trade-daily/changing-perspectives-trade-2017

Trade Talk | Exploring Customs Brokers and the Supply Chain

Trade Talk | Exploring Customs Brokerage and the Supply Chain

Back in 2013 it was reported by Canadian National (CN) that Six million goods and raw materials cross international borders every single day. Now imagine what is involved in clearing these goods through customs in different countries.

This is where Customs Brokers come into the Supply Chain. Customs Brokers are your translators. We communicate with customs and participating government agencies, vendors, carriers and all other participating parties.  throughout the shipping process, ensuring that all of the proper procedures have been followed.

From televisions and home appliances to custom machinery for large construction projects, we clear thousands of shipments every day. Seven days per week, 24 hours per day, 365 days a year, regardless of the port of entry or mode of transport. It is the Customs Brokers duty to ensure that your shipments in and out of the U.S., Canada, Mexico or any other country are being cleared and managed efficiently.

Trade between the United States and Canada is huge and growing. In 2013, our two-way trade was $606 billion. To put that into context, that’s $1.7 billion a day — or $1.2 million every single minute.

What we know for sure:

 According to WX1130 a popular radio news channel, it is expected that aside from the bi-lateral negotiations with the US on NAFTA, Canadian parties will likely address some of the points in debate at the State level rather than the Federal level. This means that those who are representing impacted interests are getting focus by those who have the ability to ensure minimal negative impact and/or even improved experiences across the Supply Chain.

There are 9 million U.S. based jobs that exist because of NAFTA being in place. If Monday’s meetings between Canada and the U.S. indicate anything, it is that there is willingness and there are channels open to ensuring that those 9 million jobs across the Supply Chain remain unaffected and that more jobs can be created with the incoming infrastructure goals of both these countries.

What we are talking about:

Customs Brokers in Supply Chain

Where does your Broker fit in the supply chain? Well the supply chain in truth can actually starts with either the buyer or the seller – it will also ultimately end with either the buyer or the seller. What is determined at either position will impact the activity and costs within the supply chain.

What most people have traditionally considered “supply chain” actually happens in between these two points, your broker is your asset at each end of the supply chain. So do we extend supply chain to incorporate Customs Brokerage?

When we look at past clients cases our experience would suggest YES to this.

Something as seemingly simple, can create extremely complex issues and unnecessary expense, because at the outset it seems so very simple. Take HS Tariffs or even Incoterms, reclassification or reassignment of one of these codes has saved over 50M for just one of our clients on a mere 5 international shipments.

Incoterms if they are new to you were issued updated in 2010. You can see them here

What are Incoterms®:

What are IncotermsModern-day Incoterms, date back to the creation of the first FOB term in 1812.

Here is a basic explanation of what Incoterms are below and if you want to see the updates made in 2010 you can view those HERE

“A series of three-letter trade terms related to common contractual sales practices, the Incoterms® rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods. Incoterms inform sales contract defining respective obligations, costs, and risks involved in the delivery of goods from the seller to the buyer. However, it does not constitute contract or govern law. Also it does not define where titles transfer and does not address the price payable, currency or credit items.

The Incoterms® rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries. As such they are regularly incorporated into sales contracts worldwide.” ~ 

As you can see here, supply chain is much more than freight forwarding and logistics – because these actions take place in between the buyer buying and the seller selling. For many years now we have been working to expand our client’s understanding of where to best access our value as customs brokers – the customs brokers value is best seen on either end of the supply chain for the buyer or the seller before activating the supply chain in the delivery process.

What we think:

Customs Brokers on Supply Chain

We are thinking about ensuring our readers and customers understand IncoTerms and HS Tariff Codes. Earlier this month we shared an article on HS Tariffs you can review it here, and next week we will sharing a powerful article on Incoterms.

 

What we advise:

Advice on Customs Brokerage and Supply Chain

Engage your customs broker early in the sales process, or early in the buying process to ensure that all parties experience the best trade compliance results both top line and bottom line.

 

Getting this right is money in your pocket – getting it wrong, well that is a loss we don’t want you to experience! 

 

What we are reading:

Reading - Customs Brokers and Supply Chain

Forbes: As an analyst who covers supply chain management (SCM) and procurement practice across industry, I tend to keep my keyboard focused on the disruptive themes that continue to re-define it. That said, if you’re expecting me go on about the unprecedented growth of the SCM solution markets, the accelerated pace of innovation, tech adoption, social change, etc., don’t hold your breath. I can’t, as the data argue otherwise. Too many of us conflate diversification with acceleration. There’s a difference.

Great Suppliers Make Great Supply Chains

Wall Street Journal: Leave it to California growers to find a new way to eliminate the shipping from farm to warehouse. A startup operation near the San Francisco International Airport is trying to turn the warehouse itself into a farm, the WSJ’s Jacob Bunge and Eliot Brown report, eliminating the timing, transportation and preservation strategies that are critical to modern agriculture distribution. Backed by a group of tech entrepreneurs and investors, Plenty United Inc. hopes to begin selling produce soon that they say is bred for local tables rather than for shipping durability. The operation is part of the expanding field of indoor farming made possible by new lighting and other growing technology. Several startups are trying to marry that technology to the consumer push for local goods, and make it economically palatable by slashing logistics costs. Warehouse space isn’t cheap, however, particularly close to urban consumers, and Plenty United will have to nurture more funding to meet its goal of running 60 farms outside major U.S. cities.

Today’s Top Supply Chain and Logistics News From WSJ – WSJ

 
Have our team put a quote together for your projects below:

 

When topics as broad as free trade re-negotiations, tariff amendments, any type of international border barriers to business are being discussed many of us want to be the fly on the wall that hears the discussion. We try to be that fly on the wall for you, our valued readers.

We know that you also want to know how to have your voices heard in that discussion, especially when you are directly affected.

One way to share your voice is to publish your concerns, insights, ideas or expertise online. Each week we publish and share industry news, our insights and reports that impact you as our readers. Do you have something that you would like us to share? Ask? Research for you? Let us know and we will add your requests to our weekly research and publishing goals.