Archive for the ‘Canada Customs’ Category


 

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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Is Duty And Surtax The Same Thing?

Duty and Surtax
 
Many consumers and importers are confused with the current discussion on duty and surtax being imposed on goods imported or exported.
 
An import duty is a tax collected on imports by a country’s customs authority. It is based on the value, the classification, and origin of the goods in the tariff administered by the importing country.
 
Import duty has been referred to as a customs duty, a tariff, an import tax, and an import tariff. All these names apply to the same thing: duty. However surtax is different.
 
To make the differentiation between the two, you must first understand duty as it relates to the Country of origin and Free Trade Agreements.

How Country of Origin Determines Duty

Rates of duty can differ depending on where the goods were made and that specific country’s trade relation status with the country from where the goods are being imported. As an example, Canada has many trade agreements with other countries which would affect the tariff or duty applied to specific goods imported into Canada, such as the North American Free Trade Agreement (NAFTA).
 
Generally, there is a rate for a developed country and a special rate for a non-developed country.

What is a Surtax?

Surtax is an additional duty or extra duty applied to goods that are already dutiable.  Surtax in Canada is imposed by an Order in Council, which sets out the amount of the surtax, the goods to which it will apply, and normally a duration.
 
The Canadian government provides a Notice of Intent and or a Notification of the surtax. The notification will identify the rate of the surtax, the goods which the surtax will apply, and the period that the surtax will be collected.  When the period of the surtax is extended beyond the period specified in the Order in Council, the Canadian Government will issue a Notice.

Proposed Surtax Announced May 31, 2018

On May 31, 2018, the U.S. announced the imposition of surtaxes on imports of certain steel and aluminum products from Canada (at the rates of 25% and 10%, respectively).
 
In response, Canada issued a Notice of Intent to impose a surtax on imports of steel, aluminum, and other products from the U.S. Canada announced that the surtax will take effect July 1, 2018, and will remain in place until the U.S. eliminates its trade measures against Canada.  The surtax will only apply to goods originating from the U.S.

Will NAFTA Eligible Goods Receive the Surtax?

Yes, provided they are on the list of commodities that the surtax will be applied to. This would mean NAFTA eligible goods will remain duty-free, however, they will be subject to the surtax amount.

Will Commodities Eligible for Duty Elimination be Required to Pay the Surtax?

Commodities listed in Chapters 98 and 99 of the Customs Tariff will have the surtax applied upon importation into Canada.
 
As you can see, many products currently receiving the benefit of duty-free importation into Canada will be subject to the surtax. As the surtax has been proposed on a wide variety of commodities, it is essential to your operations that you understand how your import costs will be affected.
 
You should determine if they will increase, negotiate with your vendors and seek out alternative sourcing options. Plan A is ideal, but a good Plan B can help you stay ahead of surtax.
 
  • *If your imported goods are on the proposed list of commodities that may be subject to surtax come July 1st
  • *Alternative options for materials sourcing (alternative countries where you may take advantage of preferential duty rates or Free Trade Agreements)
  • Freight rates from your alternative origins
*Charges may apply.
Jan Brock | Author
 
 
 
 
 
 
 
 
 
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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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CBSA Releases 2018 Departmental Plan

CBSA Departmental Plan

The CBSA Departmental Plan for the next two years supports the Government of Canada’s effort to improve travel and trade facilitation. The departmental plan covers a number of initiatives specific to various modes. The trade initiatives are as follows:

Pre-clearance for Cargo

CBSA will continue to advance the development and expansion of the pre-clearance program for cargo. In 2018-19 CBSA will work with U.S. Customs and Border Protection (CBP) on the Bi-national Rail Cargo Pre-screening Pilot. This Pilot involves CBSA Border Services Officers (BSOs) pre-screening rail cargo by viewing x-ray images of northbound rail cars at Rouses Point, New York. BSOs working with U.S Customs officers can note any irregularities and finish processing the goods in Canada. This pilot is the first time Canadian BSOs have worked in the U.S.  Additional pilot projects are being promoted. Canada is working to develop required legislative and regulatory frameworks to make this a reality. Bill C-23, the Preclearance Act,  is one example of this.

Marine Container Examination Facility

CBSA has invested in the new Marine Container Examination Facility at Roberts Banks, which is near completion. This is a joint project with the Vancouver Fraser Port Authority. This facility is scheduled to be operational in the summer of 2018.

CBSA Assessment and Revenue Management

The CBSA Assessment and Revenue Management (CARM) project is forging ahead. This project automates the processes to assess, collect, manage and report on revenue. It enables importers to self-assess and comply with Canada’s trade requirements. In 2018-19 CBSA will work with a third party vendor and external stakeholders to proceed with the design phase of the CARM project.

Improved Compliance and Duty Collection

The CBSA will conduct an analysis in 2018-19 to identify improvements in trade compliance and duty collection as identified in the 2017 Auditor General’s Report.

Anti-dumping and Countervailing

CBSA will implement new scope proceedings and anti-circumvention investigations to further strengthen the administration of the Anti-dumping and Countervailing Program.

Trusted Trader Mutual Recognition Arrangements

The CBSA intends to advance the Trusted Trader Mutual Recognition Arrangements (MRA) with China and EU and is pursuing an MRA negotiation with Hong Kong and Brazil.

Trusted Trader Corridor Concept

CBSA intends to pilot a Trusted Trader Corridor Concept (TTCC) in the highway mode. The TTCC is expected to create a seamless border experience where pre-approved, low-risk drivers with pre-approved low risk goods can cross the land border though an expedited process.

Harmonize C-TPAT and PIP

CBSA is moving to harmonize the Partners in Protection (PIP) program with the U.S. Customs-Trade Partnership Against Terrorism(C-TPAT) program with a focus to implement a joint application process for highway carriers.

Emerson FAST Lanes

CBSA intends to expand Free and Secure Trade (FAST) by adding FAST lanes in Emerson, Manitoba in late 2018

Revise Trade Appeal

CBSA intends to revise the internal Trade appeal process.

Additional Port Of Entry

And lastly the CBSA will continue to work closely with the Windsor-Detroit Bridge Authority to advance the Gordie Howe International Bridge project, which will add a new border crossing option at the busiest trade corridor between Canada and the U.S.

Advice You Can Trust

Pacific Customs Brokers strives to stay ahead of all CBSA and Canadian government initiatives. If you need any help regarding CBSA’s new initiatives please contact our experienced trade compliance team for expert trade advisory services.

Jan Brock | Author

 

 

 

 

 

 

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