Archive for the ‘Trade Talk’ Category


 

How To Kick Trade Anxiety Out of Your Business In 4 Steps

Trade

Watching the news these days really takes the gusto out of trade plans. Compared to previous years, trade nowadays seems far more risky. Each day we field calls from worried importers…

“Will there be surtax applied on my goods in the future?”

“Will NAFTA dissolve?”

“I signed a year long commitment to purchase goods that now carry an unreasonable amount of duty. What can I do?”

 

Whether you are currently importing or looking to expand into an international market, you may share these queries. And although there are many questions left to be answered at this time, it does not mean you cannot take action to alleviate some of the uncertainty and accompanying anxiety.

So here are our top 4 tips on how to curb your trade anxiety and forge forward with your trade plans.

Step 1: Arm Yourself With Trade Knowledge

Perhaps step away from the news feed and do some research on what can and cannot happen. Can NAFTA be dissolved overnight? Nope. Is there an existing bilateral trade agreement between Canada and the U.S.? There sure is. However, it is out of date and will take some work to make it current. Can you claim back surtax paid if it is significantly harming your business? Possibly. There are certain criteria to meet, but it is an option. The point here is that you need to understand what options you have, how quickly you need to move and how your company will be impacted if and when the trade winds change. In times of uncertainty, get as certain as you can.

You can seek this council from International Trade Lawyers, who are perfect for large companies or Trade Advisors for small to medium sized businesses. Both will gain an understanding of your questions and lay out the options you have currently as well as bring any potential issues to your attention. Together you can create an action plan for some of the expected outcomes.

Step 2: Research Financing and Other Trade Support Opportunities

There are many opportunities for financial assistance that go unutilized. There are entire government entities that have a sole purpose of facilitating trade by offering support. Here in Canada importers can work with EDC, or Economic Development Canada, who provide risk insurance, financing and working capital assistance to companies wanting to expand internationally.

Recently, the Government of Canada announced a Surtax Remittance process where those companies negatively affected by the imposed surtaxes that came into effect on July 1st, 2018 can apply for a refund. For more information to determine if your company is eligible read our blog Are You Eligible To Request Remission Of Canada’s New U.S. Surtaxes?

The Canadian Trade Commissioner Service is available to all Canadian companies looking to expand into new markets. They will team you up with your own Trade Commissioner who specializes in your industry. This partner will help you map out an export plan and connect you with their extensive list of network contacts across the globe.

Step 3: Spread Your Goods Thin

The advice we give out the most these days is diversify, diversify, diversify. Although it is not the goal, some companies may find themselves in a situation when one of their clients can make or break them financially. This is a dangerous situation to be in, especially if your client is from another country and you are acting as the non-resident importer in order to deliver your goods to their door.

So our advice is to begin seeking additional markets in which to sell your goods. Regardless of the current trade landscape, diversification can create sales stability. However, like all business ventures, it is not without its share of risk. Utilizing organizations such as EDC and the Trade Commissioners Services can help you in this area.

On the flip side, if you find yourself purchasing your goods from one international supplier, now is the time to look for alternatives. If you are locked into a purchasing agreement, speak to your supplier and determine if your long standing relationship can relieve some of the financial impact you may be experiencing from unexpected and increased duty.

Working with a Freight Manager and Trade Advisor can help you source from Countries that may offer preferential duty treatments or have a current Free Trade Agreement in place. A Freight Manager can help you determine the shipping costs from this new location. From there you can calculate your anticipated landed costs from these new locations and compare it to your current costs.

Step 4: Do It Now

Let’s say you are walking down a forest trail when a bear steps on to your path. Hopefully your instinct is to freeze and back away slowly as the experts advise. Reacting to threats in trade should not have the same approach. Do not freeze and back away. Do not even pause to ‘see what plays out’. Act NOW. Buy, sell, trade your heart out because few duties are retroactive (typically only found in antidumping and countervailing cases where companies were found to have been undercutting the domestic market), and they can not tax what is already in the country. So, do not wait, act now.

If you are new to importing internationally, know that the setup process typically only takes a couple of days provided the paperwork is filled out correctly and completely. Working with a Customs Brokers allows for swift business registration and import bond implementation.

Do you have unanswered questions regarding your trade future? Leave us a comment below and one of our experienced Trade Advisors will reach out to you.

Lisa Stevenson

 

 

 

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Offshoring In The Canadian Customs Brokerage Industry

Offshoring

A very interesting blog post caught our eye by our industry neighbor, Cole International. They wrote about the hot topic of Canadian Customs Brokers offshoring their entries in Is Your Canadian Customs Broker Offshoring?

In support of this question, we wanted to add to this discussion.

First off, it is true.

Your Canadian Customs Broker may be offshoring your entry release requests. It is important you are notified if your customs entries are being outsourced. This blog details why offshoring your Customs entries is important to you and how outsourcing your Customs entries can affect your relationship with Customs moving forward.

Why Are Canadian Customs Brokers Offshoring Your Entries?

Two reasons.

  1. To cut costs.
  2. Because they can.

 

Unlike in the U.S., where confidentiality and record keeping rules prohibit customs business from being conducted outside of the U.S., in Canada, there are no such rules at this time. U.S. Customs work must be completed and filed in the U.S. by a licensed Customs Broker.  In Canada, a Customs Broker can contract out this work, entry work that is being completed on behalf of their clients, to another business. Neither Canada Border Services Agency or the Canadian Government have addressed this.

Some businesses in the Customs Brokerage industry have adopted a strategy of cutting their costs by using less experienced outsourced labor to handle vital client Customs data entry. Cost-cutting measures are common practice for any business, but cost cutting the quality of Customs entries has a drastic effect on clients compliance with Customs agencies. The costs of not being compliant with Customs can hurt business where it hurts the most, their wallets, or at an extreme, losing the privilege of conducting cross-border trade.

There is a catch. Customs Brokers who are willingly adopting this strategy are not at any actual risk because, importing risk falls on the importer, not the Customs Broker or their contractor. If a Customs Broker submits a declaration to Customs on your behalf incorrectly, Customs penalizes you, the Importer of Record, and NOT the Broker. Yes, it is true that you could then turn around and try to pass that monetary penalty on to your Broker that made the error, but you might not win that case.

Errors in understanding increase each time a new party is used to relay instructions. If you do not have a close relationship with the broker clearing your entries, your risk increases. Just like the telephone game, the more people your instructions pass through, the more diluted and incorrect the final message is.

The relationship you have with your Customs Broker needs to be founded on a clear understanding of your supply chain, importing needs and any specifics that require the broker to take extra care and attention when submitting your declarations to Customs. It requires close communication and access to those that do this sensitive work for you. That is why it is important for importers to choose their broker wisely; fully knowing the weight of the decision the broker makes for you falls squarely on your shoulders.


Looking for a Customs Broker to clear entries on your behalf? Check out 10 Questions to Ask When Selecting a Customs Broker.


Is Offshoring an Issue?

Offshoring is not an issue provided the staff members who are completing the entry work on your behalf know your company’s importing practices intimately, hold industry certifications assuring training in Canadian import regulations, and have a stakeholder relationship with YOU and not just the Customs Broker which pays them.

Here is an example of how these three fundamental aspects of your relationship with your Customs Broker play into the declarations they make for you.

Say you import prefabricated buildings. Your Customs Broker knows this and notices that the more recent entry release request they received from you was for 10 boxes of bolts from a new vendor. Upon review, the paperwork is perfect; all components necessary for declaration are present. However, a shipment made up of only bolts is out of the ordinary.

A Broker who is not familiar with your trade practices would process the perfect paperwork as is.

A Broker who is familiar with your practice would call you to find out a little more about the shipment.

During the conversation you inform your Broker the 10 boxes are a part of a prefabricated home and the vendor was just unfamiliar with the paperwork process. The entry should clear as a prime ETA and not as a singular shipment.

If this was not caught, extra duty and tax would have been paid unnecessarily. It took a Broker familiar with your work, access to speak to you the about anomaly, and the training in Canadian entry types to avoid overpayment.

In this example the person clearing the entry on your behalf has a duty to you directly, to get it right, and not a third party.

If your Customs Broker is using a third party for the data entry portion of the entry, they likely also have an account manager in place to review that third parties work. However, like most review roles, the account managers attention is spread across multiple accounts and hundreds of entries each day. Therefore, they likely prioritize shipment review based on complaint and error, if and when it is brought to their attention. The quantity of output should never outweigh the quality of input. Your best chance of an excellent compliance rating with Customs is supported by a Customs Broker who prioritizes quality by hiring experienced Brokers and fostering continuous improvement through education.

Some may look at this as an issue of keeping Canadian jobs in Canada or from the opposing view that to offshore is an opportunity to provide better rates to clients while providing an opportunity for jobs in other Countries. Or perhaps offshoring allows small brokers the ability to handle your business when it grows past their capacity to process your requests. However, looking at it solely from the perspective of compliance and client service may help you determine if it is the best option for you.

According to the Office of the Auditor General of Canada’s Report, in 2014-2015 Canada Border Services Agency lost $42 million or more in revenue due to misclassification of goods by importers. As a result, the Auditor General recommends “The Canada Border Services Agency review its penalties in order to better protect import revenues and ensure compliance with trade programs.” CBSA agreed with this recommendations and we expect significant increases to monetary penalties for non-compliance.

What Can Importers Do To Ensure All Levels of Client Service and Compliance Are To Their Satisfaction?

Can you reach the person that holds your documentation in their hands 24/7 and get the answers you need? Do they understand your business and why the entry needs to be cleared in a specific way? If your entries are being offshored, it is recommended you take extra care in your own internal practices to make sure you have shown reasonable care with Customs. If you can demonstrate to Customs that you are showing reasonable care of your entry process than you will have a better opportunity to stay compliant with Customs.

Although to date compliance has seemed like a secondary worry for many importers, stricter penalties are more likely than ever with the influx in tariff increases and surtaxes applied at the border.

As a business who conducts trade across the border, eventually, Customs will put the microscope on you. The question you have to ask yourself is, ‘Am I confident in the work being completed for me by my Customs Broker’? If your answer is yes, happy trading. But if your answer is no, find a Customs Broker who you can trust.


Love your Customs Broker? Tell us why in the comment section below.


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Are You Eligible To Request Remission Of Canada’s New U.S. Surtaxes?

Surtax | Canadian Cash

Surtax Got Your Profits Down? You May Be Eligible For A Surtax Remission.

Many Canadian Importers of Record have experienced an increase in importation costs on items originating from the U.S. that appear on the surtax list. The surtax of 10% to 25% on a wide range of items, including steel and aluminum, was imposed on July 1st, 2018, in retaliation to the U.S. decision to increase tariffs on Canadian steel and aluminum imports into their country. There is a possibility that you could be relieved or refunded of the surtaxes you are currently paying.

Under What Circumstances Will You Be Relieved Or Refunded Your Surtax Paid?

The Federal Interdepartmental Committee may recommend to the Minister of Finance to grant relief under “exceptional and compelling circumstances that outweigh the primary rationale behind the application of duties and, in the current case, surtax.”

They continue with a list of three situations where a refund or relief may be applied:

  1. To address situations of short supply in the domestic market, either on a national or regional basis.
  2. Where there are contractual requirements existing prior to May 31, 2018, for Canadian businesses to use U.S. steel or aluminum in their products or projects.
  3. To address, on a case-by-case basis, other exceptional circumstances that could have severe adverse effects on the Canadian economy.


If you need assistance applying for a refund or possible relief of the surtaxes please
contact one of our expert Trade Advisors. With all of the pertinent import history details, they can help you write and apply for remission of surtax on your behalf.

To date, no timeline has been provided to let us know how long this review process will take. However, we will continue to provide you with details on the possibility of refund or relief as they develop. To ensure you do not miss any updates please subscribe to our mailing list.

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How The Proposed Tariffs Affect You In The U.S.-China Trade War

China U.S. Trade War Proposed Tariffs

For the second time in July the U.S. government has placed additional tariffs on products exported from China and imported into the U.S.  If the proposed tariffs were actioned, there would be changes for both American and Canadian importers. How will the additional tariffs on Chinese manufactured goods affect trade between the United States and Canada?

The Proposed Tariffs Effect On Canadians

Canada is already in the midst of a trade war with the U.S.  Now Canada is unwittingly affected by the trade war between the U.S. and China because many items proposed for additional tariffs are manufactured in China, exported to Canada and then finally exported into the U.S.  The additional tariffs levied against Chinese goods are applicable to goods manufactured in China without regard to the previous country of export.

Canada has enjoyed a long standing trade partnership with the U.S.  Canadian companies often act as Non-Resident Importers; handling all of the import requirements including payment of duties and taxes. This has allowed Canadians to sell their goods to companies in the U.S. as seamlessly as a U.S. company. This allows Canadian exporters to expand their market beyond the Canadian border.

The third list of tariffs released on July 11th cover consumer goods such as furniture, seafood, automobile parts, televisions and video equipment, which we see our clients from Canada ship on a daily basis.

Even though the trade war is between the U.S. and China, other countries are affected because they, like the U.S., have their goods manufactured in China.

Many of the items on the proposed list such as furniture and seafood, which are normally duty free, will be dutiable at 10% if the proposed tariffs are actioned.

If you are a Canadian company who exports Chinese manufactured products into the U.S. you will need to consider how you will address the increase in cost of exporting to Americans.

The Proposed Tariffs Effect On Americans

Over 75% of the new tariffs target machinery for manufacturing goods, electrical equipment, televisions, recorders, bicycles, bicycle parts, and automobile parts: all merchandise which is in high demand with american consumers. With the U.S. being a consumer based economy, where the consumer is interested in paying the lowest price possible, this new legislation would have an adverse effect on the U.S. economy.

In short order, the increase in costs to bring goods into the U.S. will increase costs for producers, importers and ultimately the consumer. This is never a popular solution, however the U.S. has tried to entice China to come to the table to discuss revising their unfair trade practices.  

The additional tariffs were initiated to combat Chinese regulations that require companies wishing to do business in China partner with a chinese company and share the technology associated with their products leading to violations of both intellectual property rights and World Trade Organization (WTO) rules.

Some economists say that a more appropriate way to combat these unfair trade practices would be to band together with other countries and take their concerns to the WTO to initiate a lawsuit against China.

In the long run, if the two countries can come to a satisfactory solution to the root of the issue the U.S. will benefit greatly and the trade deficit will balance out.

The Proposed Tariffs Affect On U.S. Import Bonds

How will the increased duties affect your import bond? Bond limits are set based on duties, taxes and fees paid in a 12 month period. With the increased duties, higher bond limits may be required. In addition to the higher bond limits, the surety company may request financial documents and collateral to secure the bond.

Your Guide To The Proposed Tariffs

This is a retaliatory move by the U.S. to address concerns of intellectual property rights.

The United States Trade Representative (USTR) will be holding a hearing August 20th-23rd on the impact the proposed tariffs will have if imposed. In order to appear at the hearing, submission must be made before July 27th, which must include a summary of the expected testimony. Written comments can be submitted to the USTR from now until August 17th, 2018.

A decision on if the additional 10% tariff will be imposed or not is expected to be announced at the end of August, after the hearings.

This 10% will be in addition to the already imposed 25% tariff on $34 billion worth of goods from China that came into effect on July 6th, 2018. China retaliates with a reciprocal tariff increase on U.S. commodities imported into China.

How You Can Prepare For The Proposed Tariffs

As a business it is best for you to be proactive in your approach to the impending changes. Contacting a trade professionals for advice on how the proposed legislation could affect your company will provide you with the knowledge to make quick decisions when change inevitably comes.

This includes understanding;

  • What country has the most cost effective solution to source your materials from,
  • Determining your rate of duty if there were changes to the proposed tariffs or NAFTA,
  • Education to make yourself prepared for current practices and future changes, as well as,
  • Freight costs to get your products from your source to you.

All of these services are provided to you by our Trade Advisory experts in Canada and the U.S. Contact us to start a conversation with a Trade Advisor today.

 

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Possible Trade War: U.S. and Canada

 

Canada, the U.S. and Mexico Flags NAFTA

On June 1, 2018, the U.S. committed to a 25% tariff on imports of steel and 10% tariff on aluminum, on the European Union, Canada and Mexico. The tariffs have triggered retaliatory tariffs on U.S. goods and heightened the chance of a trade war.

The U.S. steel industry will initially benefit from the tariff increase through decreased international competition, driving up the price of U.S. steel and therefore the profits. These profits can be reinvested into the steel industry by improving their technologies and potentially providing more job opportunities.

A potential downfall to the tariff increase is retaliatory measures from U.S. trade partners, as is the case with Canada. Canada has announced $16.6 billion in retaliatory tariffs. The Canadian tariffs will go into effect July 1, 2018, and cover a broad range of commodities. Some, mainly unfinished iron and steel products will be hit with a 25% tariff, while others including many consumer products will be hit with a 10% duty.

 

If history repeats itself, trade policy experts warn tariff increases could cause future harm. An example of this was in 2002, when the U.S. enacted a tariff of 8% to 30% on international steel. The increased tariffs set off a chain reaction with the European Union responding with tariffs of its own and a number of countries disputed the tariffs at the World Trade Organization. The WTO ruled the U.S. violated the international trade agreements, and opened the door for sanctions and retaliation. Retaliation by the EU cost many Americans their jobs, and in late 2003 the U.S. Government reversed the sanctions.

Canada’s Stance

The tariffs could cost the Canadian economy over $3 billion a year.  According to the Canadian Steel Producers Association, Canada is the largest supplier of steel and aluminum to the U.S.  Approximately 90% of Canada’s steel is exported to the U.S. The price of steel and aluminum is going to go up as a result of these tariffs and jobs will be lost in Canada. Steel production employs around 22,000 people in Canada concentrated mainly in Ontario. Canada exports around 84% of its aluminum to the U.S., which represents around 8,300 jobs in the aluminum sector with the majority being in Quebec.

Canadian consumers can expect to pay more for products imported from the U.S. that are largely made of steel and aluminum which could apply to anything from cars, refrigerators, canned sodas and beer.

International Stance

China, and the European Union have also responded negatively to the U.S. tariff increases. Brazil contributes 13%, followed by South Korea at 10%, and Mexico at 9%. The original target China only imports 2% of the U.S. steel imports.

Along with fighting the tariffs at the World Trade Organization, European officials have been preparing levies on an estimated $3 billion worth of imported American products in late June. In a joint statement, ministers from France and Germany said the countries would coordinate their response.

Steel and Aluminum Statistics

Below you can see a few interesting statistics on Canada-U.S. cross-border steel and aluminum trade.

  • In 2017, Canada exported nearly $17 billion of steel and aluminum products into the U.S. (Statistics Canada)
  • More than $14 billion of steel crossed the Canada-U.S. border in 2017 (Canadian Steel Producers Association)
  • Canada exported $11.1 billion of aluminum and aluminum articles to the U.S. in 2017 compared to $3.6 billion of imports from the U.S. (Statistics Canada)
  • Close to 45% of Canada’s steel production is exported to the U.S.  Predominantly to Michigan, Ohio, Illinois, and New York.
  • Over 50% of American steel exports go to Canada.
  • Canada sent more than $5.6 billion of primary aluminum exports to the U. S. in 2016. New York, Kentucky, Michigan and Pennsylvania are the top destinations.
  • Between 2000 and 2015, Canada’s share of world aluminum production fell from 10% to 5%. For the U.S. from 15% to 2.7%. While China’s increased from 11% to 55%.
  • U.S. aluminum production fell following the 2008 financial crisis and recession. It was up 6.9% in 2018 from 2017.
  • Canadian aluminum production is down 7.6% for the first two months of 2018 compared to the same time in 2017.

The Beginning of the End for NAFTA?

With the likelyhood of eliminating multilateral trade agreements in favor of bilateral trade agreements. In order to have control over your trade in these uncertain times, you must arm yourself with the knowledge of what your duty rates will be without NAFTA, alternative countries of origin for your imported goods and freight quotations on getting your goods from your new origin to the final destination.

You can talk with our trusted trade advisors to determine your rate of duty without NAFTA. Click here to get in contact with a trade advisory expert today.

Jan Brock | Author

 

 

 

 

 

 

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