Archive for the ‘Canada Customs’ Category


 

The Issues and Solutions of Container Exams at the Port of Vancouver

Container Exams at the Port of Vancouver

Importers like you are frustrated with the lengthy delays and subsequent costs of Canada Border Services Agency (CBSA) container exams moving through Canadian Ports, especially in the Port of Vancouver. Let us take a closer look at the cause, reasons for extended delays, and the associated fees with the current CBSA Vancouver container exam program.

Why the Trade Community is Frustrated With Container Exams in Vancouver

According to the Canadian International Freight Forwarders Association (CIFFA) and the container examination cost survey they conducted, delays of up to four weeks were experienced in the Port of Vancouver compared to three to five days in the Port of Montreal.  Their blog post entitled “Container Examinations Out of Control” reported that their members have experienced the following with the current container exam process at the Port of Vancouver:

  • Six to seven week delays in receiving their goods
  • Thousands of dollars in unexpected costs for container exams, storage, detention, per diem and demurrage charges
  • Lost sales as a result of the delays
  • Lost goods in the case of perishables

CIFFA estimates that invoices for examination, demurrage, and storage of containers can range up to $4,000 per container. Those fees add up to millions of dollars, which are inevitably passed on to the consumer.

CIFFA argues that there is no incentive to improve inspection efficiency because container terminal operators charge daily per container storage fees of $150 or more, and shipping lines bill shippers and freight forwarders for demurrage.

Importers bear all the direct costs incurred for the exams. Importers are also responsible for all indirect costs resulting from exams such as damages or losses during the exam, lost sales, production and/or contract penalties due to delivery delays. Another cause of frustration is the unnecessary confusion an importer is faced with when the demurrage, detention, and per diem terms are often and incorrectly used interchangeably on invoices.

Tip: Always clarify in advance what shipping delay charges you face.

Why is the Container Exam Process Longer at the Port of Vancouver?

The two main factors in the delays are the location of the exam facility and the volume of containers at the Port of Vancouver.

It is important to understand CBSA and the transportation industry agreed the best option for examining marine cargo containers for contraband was to use a specialized central examination facility.  With this centralized facility, CBSA officers can conduct efficient examinations using high tech equipment in a secure environment.  The current inspection facility for the Ports of Vancouver is located in Burnaby, a fair distance away from the ports.

More than 80% of global merchandise is transported across oceans as marine cargo, and over 95% of marine cargo imported into Canada comes through five major marine ports:

  • Vancouver
  • Prince Rupert
  • Montreal
  • Saint John
  • Halifax

The three largest Canadian container ports are the Port of Vancouver, Prince Rupert and Montreal. Together, they handled five million, twenty-foot equivalent units (TEU) in 2016. Around 50% of this freight comes through the Vancouver and Prince Rupert ports. The Port of Vancouver consists of 4 container terminals with an annual capacity of just under three million TEUs per year. The volume clearly shows the one CEF/MCEF in Burnaby is busy.

Who is Responsible for the Container Exam Delays in Vancouver?

The delays experienced in Vancouver are further compounded by an already lengthy process. To gain an understanding of where issues lie we need to take a quick look at the stakeholders and their general responsibilities and possible contribution to the issue.

The Current Container Examination Process

Regardless of the Port, the container exam steps are the same as detailed below.

  1. The marine carrier reports to CBSA with information on the vessel, the crew and the routing via Electronic Data Interchange (EDI) at least 96 hours prior to arrival.
  2. The marine carrier sends cargo data via EDI to CBSA 24 hours prior to loading the cargo onto the vessel at the foreign port.
  3. Using the marine carrier’s information, CBSA performs a risk assessment at the CBSA National Targeting Centre in Ottawa.
  4. At the first Port of Arrival (POA) the vessel arrives and the containers are discharged, put through a radiation portal, and then stacked at the Terminal storage.
  5. Containers that are targeted or selected by CBSA for examination are staged for dockside exam, Mobile Large Scale Imaging or for furtherance to Container Examination Facilities (CEF) or Marine Container Examination Facilities (MCEF) for an intrusive examination.
  6. The containers, which require de-stuffing, are transported to the CEF/MCEF for fumigant testing, possible ventilation, assignment to an examination bay and offloaded and reloaded following an examination.
  7. Containers are authorized to move by CBSA from the CEF/MCEF back to the Terminal and released for transport to the Importer/Consignee.

CBSA Roles and Responsibilities

CBSA targets 1.3% of all containers for examination as it views containerized cargo as a huge risk.  Physical exams are done with the assistance of the Canada Port Authorities. They are legislated to provide facilities for CBSA inspection. These facilities are known as Container Examination Facilities (CEF) and Marine Container Examination Facilities (MCEF).

CBSA has a number of methods to examine Containers:

Container Examination Facilities (CEF) and Marine Container Examination Facilities (MCEF): Containers are moved from the marine port to the CEF or MCEF where they are fully de-stuffed, the contents intrusively examined, followed by an examination of the container itself.  CBSA has a service standard for examination, which states that CBSA will strive to conduct a marine container examination within 24 hours of the arrival of the container at the CEF or MCEF. This service standard does not include weekends or holidays. Additional time is required for fumigant testing and ventilation procedures in addition to container reloading times and containers that are resultant for contraband.

Note on fumigation: The CBSA requires testing of all marine containers for fumigants before examination. Fumigants include methyl bromide, phosphine and benzene. Fumigant testing identifies chemical levels prior to the execution of an in-depth examination. Chemical levels found to be above acceptable levels require that the container be ventilated in order to reduce the elevated chemical levels to a safe level. The maximum time that may be required to ventilate is three days. Once the contents and container can be safely examined,  the container is de-stuffed, examined, and then reloaded and returned to the port.

Large Scale Imaging (LSI) Examinations: LSI examinations are non-intrusive, dockside x-ray examinations of containers, enabling the CBSA officer to see inside the container. Anomalies deep within a container, such as contraband, can be detected, depending on the commodities density. A LSI examination can also assist in determining whether an intrusive examination is needed, and is especially useful in selective examinations.

Pier Examinations: This dockside examination is partially intrusive and involves the CBSA officer opening the container doors to perform visual inspections and a limited physical examination of the cargo closest to the door. The inspection may result in referral for an intrusive examination conducted at the container examination facility.

The CBSA is responsible only for the costs associated with their services, such as the officers examining the container and the equipment and tools required for marine container examinations. They do not bill the importer for these costs.

Goods found violating Canadian legislation may be subject to enforcement action such as a monetary penalty or seizure.

CEF/MCEF Warehouse Operators Roles and Responsibilities

CBSA informs the Warehouse Operator of the containers requiring exam and works with CBSA on priorities. The Warehouse Operator coordinates with the Highway Carriers to move the containers from the Terminal to the CEF/MCEF. They then coordinate and are responsible for the offloading and reloading of containers for presentation of cargo for exam. The warehouse operator is responsible for all truck movements at the CEF/MCEF such as moves to and from the ventilation area and examination bays.

The CEF Warehouse Operator generates the fees for presenting the goods for exam, to cover the cost of transportation to and from the examination facility and the unloading and reloading of the container. They then bill these costs to the shipping lines that in turn pass the cost on to the importer.  

Marine Carriers Roles and Responsibilities

The marine carrier is responsible to present the cargo for examination when requested by CBSA.

If CBSA requests a full container exam the marine carrier is responsible to:

  • Ensure the container is picked up from the terminal and transported to the CEF/MCEF
  • Monitor the pick-up of the container and the subsequent return of the container to the terminal after examination
  • Field any calls from the importer regarding any delays on their shipment

They must obtain any terminal charges for a dockside/tailgate and LSI exam completed at the Terminal.  If the CBSA container hold is removed after an exam the carrier then invoices the importer for the costs incurred at the Terminal. Once the importer pays the costs to the marine carrier the container will be released to the importer.

Marine Terminal Operators Roles and Responsibilities

After the Terminal Operator receives EDI data regarding the vessel and the cargo from the marine carrier they will:

  • ‘Arrive’ the cargo electronically to CBSA when the vessel arrives
  • Discharges the cargo from the vessel to the shipyard
  • Arranges for on-dock and off-dock examinations as requested by the CBSA
  • Permits containers to depart the terminal when released by the marine carrier and CBSA

Importer Roles and Responsibilities

The Importer orders goods for import and then organizes logistics or depends on third party links in the supply chain to facilitate the movement and subsequent entry of the import into Canada.

Customs Brokers & Freight Forwarders Roles and Responsibilities

Customs Brokers and/or Freight Forwarders directly represent Importers in the coordination or facilitation of the exam processes with the Terminal Operators, the Marine Carriers, Drayage Carriers and CBSA.

The Customs Broker and/or Freight Forwarders may be involved in the logistics and may pay charges on behalf of the importer as their client.  The Customs Broker and/or Freight Forwarder is generally aware that a hold has been placed on an Importer’s shipment for examination by CBSA.  Although not a responsibility, the Customs Broker and/or Freight Forwarder generally fields calls from the Importer regarding the status of the delays in the release of the container.

Highway Carriers Roles and Responsibilities

The Terminal Operator informs the Highway Carrier which containers need to be examined by CBSA. The Highway Carrier then makes a reservation for pick-up of the container at the Terminal with the Terminal Operator.

Reservations sometimes have to be made about three days in advance. The Highway Carrier then has a one-hour window around their reservation time to pick up the container at the Terminal and transport it to the CEF/MCEF for CBSA examination.

Once the examination is complete, the Highway Carrier returns the container to the Terminal. The container is then released by CBSA and can now be delivered to the Importer/Consignee by the Highway Carrier or the Drayage Company once a reservation has been made to pick the container up from the Terminal.

Stakeholder Summary

As each stakeholder carries out their responsibility, it results in more opportunities for delays. These can quickly add up to become lengthy delays.

Many of the stakeholders state there needs to be improved transparency and efficiency in the inspection process by ALL parties. CIFFA urges CBSA to address both the pricing model and the regulatory framework of the shipping lines, terminal operators, and warehouse operators surrounding container examinations across the country.

CBSA’s Action to Improve Ocean Trade

The CBSA has made a commitment in their 2017/18 departmental plan “to work with industry partners and the Port Authority in Vancouver to advance the Marine Container Examination Facility (MCEF) project over the course of the year. The opening of a new MCEF will increase the Agency’s examination capacity and enhance the facilitation of legitimate trade.”

The CBSA held a one-day conference with all stakeholders in Vancouver in September of 2017. The conference identified a number of opportunities for improvement.  Some areas of improvement included the communication between all stakeholders regarding delays, service hours, and service standards including:

  • Shipping lines, Terminal Operators and Warehouse Operators must post standard fees associated with the movement and facilitation of freight through the marine process.
  • Terminal Operators need to improve the reservation system for pickup and return of CBSA examined or targeted containers. CBSA needs to provide proof of examination, LSI exam and ventilation timelines to stakeholders.
  • There needs to be a transparent dispute resolution between all stakeholders. Use of technology for real-time status and progress of the exam providing importers and their service providers’ insight to better plan and mitigate impacts of the exam to their business and supply chains.
  • Importers need the flexibility and the option to deliver direct from the exam site.
  • CBSA needs to identify opportunities to improve efficiencies and consistencies with their targeting and examination of container freight. A clear focus on the client is necessary which is transparent with defined and measurable service standards.

Steps To Improve The CBSA Marine Container Exam Program

CBSA argues that numerous factors complicate the issue, and terminal/warehouse operators are only one part. CBSA states it is working with the Port of Vancouver, terminal operators, and other industry stakeholders to improve the system’s efficiency.

This initiative includes the construction of a new federal government container examination facility (MCEF) on Tsawwassen First Nation land which is strategically adjacent to the Port of Vancouver’s Deltaport and the new Delta iPort container logistics center.

A New MCEF in Tsawwassen

A new MCEF in Tsawwassen (TCEF) will augment the severely constrained facility in Burnaby and will initiate the new CBSA marine container examination program focusing on technology (scans) and less on manual inspections. The TCEF will consist of a new warehouse complex, which will house CBSA container examination facilities, a fumigant ventilation area, a LSI fixed building site and operator transload area in the warehouse. The facility is currently under construction and should be operational as of May 2018.

The Operator of the TCEF will charge fees such as drayage, scans, ventilation and de-stuffing. The Vancouver Fraser Port Authority (VFPA) will set the fees the TCEF Operator can charge but will consult with the Industry to ensure fees stay competitive.

CBSA and VFPA are considering options to release goods at the earliest opportunity for consignees so that delays are minimized. This would suggest that the container arrives at Deltaport and is selected by CBSA to be examined and/or LSI scanned. The container is moved from the adjacent Deltaport to the TCEF and scanned through the LSI facility. Then the container will be released or transported to the adjacent warehouse for examination, ventilation testing and then subsequently released directly from TCEF by CBSA to be delivered to the importer.

Outcome for Importers & Consumers

This post will help you gain a clearer understanding of the issues associated with the current CBSA Vancouver container examination operations. It is a complex problem, which will require all stakeholders to collaborate and take responsibility in improving their role in the process in order to provide consumers with goods that are not subject to a flawed and costly system.


If you have any questions on CBSA container exams, please leave them in the comments section below, and I would be happy to look into them for you.

 

 

 

What is CETA?

CETA Agreement

CETA is the Comprehensive Economic Trade Agreement between Canada and the European Union (EU).  It is the 14th trade agreement that Canada has entered into. CETA received Royal Assent on May 16, 2017, and has been provisionally applied on September 21, 2017.

 

The European Union is (currently) comprised of 28 countries:

  •  Austria
  • Belgium
  • Bulgaria
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Ireland
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Poland
  • Portugal
  • Romania
  • Slovak Republic
  • Slovenia
  • Spain
  • Sweden
  • United Kingdom

This agreement will allow Canadian importers and exporters improved access to these markets through reduced or eliminated duties.

 

This agreement intends to break down trade barriers between the signatory nations and create both jobs and economic growth through new opportunities for importers and exporters.  Since the Comprehensive Economic Trade Agreement between Canada and the European Union is now in force, it will provide sweeping tariff reductions for almost all sectors of industry immediately.  Approximately 99% of products will be eligible for reduced duty rates immediately, and after 7 years all customs duties on industrial goods will be eliminated.   

 

With that in mind, CETA does have provisions for Canada and the EU to protect certain commodities from duty reduction or elimination, such as chicken and turkey imports into Canada and beef into the EU.   

 

For items to take advantage of the Comprehensive Economic Trade Agreement between Canada and the European Union preferential treatment, the commercial invoice or another commercial document must identify the originating product(s) in the shipment and  include the statement for originating goods such as the below:

 

(Period: from___________ to __________)

The exporter of the products covered by this document (customs authorization No …) declares that, except where otherwise clearly indicated, these products are of Canada/EU preferential origin.

 

……………………………………………………………………………………………………

(Place and date)

…………………………………………………………………………………………………

(Signature and printed name of the exporter)

 

The “Period from ___ to ___”  field can be left blank, or if it is completed, it cannot be for a period of greater than one year.  It is important to note that although a blanket period may be indicated, the origin statement must still accompany each shipment. The “customs authorization No” is only to be completed by approved EU exporters, otherwise, it can be omitted or left blank.

If the product being exported from the EU contains non-originating materials the supplier should also provide the following statement:

 

I, the undersigned, supplier of the goods covered by the annexed document, declare that:

The following materials which do not originate in the European Union/in Canada (1) have been used in the European Union/in Canada to produce the following supplied non-originating products.

Any other materials used in the European Union/in Canada to produce these products originate there.

 

I undertake to make available any further supporting documents required.

…………………………………………………………………………………………………………………………

(Place and Date)

…………………………………………………………………………………………………………………………

(Name and position, name and address of company)

…………………………………………………………………………………………………………………………

(Signature)

 

Unlike NAFTA, there is no CETA certificate of Origin, and therefore a certificate is not required for imports into Canada to utilized the CETA tariff treatment.

 

The products must also meet the origin and transshipment requirements applicable to them.  For the most part, this means the items, must be shipped directly from any EU Country or remain in customs control when in transit through a third country.

 

Already Canadian cheese importers can apply for tariff rate quota from Global Affairs Canada to enjoy reduced duty rates upon enforcement (without quota, cheese from the EU, as with other countries, will be subject to prohibitively high duty).  

 

The text of the agreement can be found on Canada Border Services Agency’s website here.

 

Are you an importer who is interested in Importing EU goods or already do so and want to know if your items will qualify for reduced duty under CETA?  Ask us a question below, and I will be happy to answer.

 

 

 

Attn Online Shoppers, A De Minimis Increase Means More Duty-Free Importing

De Minimis Increase

Do you shop online from retailers outside of Canada? Have you ever ordered something online that arrived alongside a sizable Customs duty and tax bill? If so, then the North American Free Trade Agreement (NAFTA) renegotiation may affect you. How? The answer is in Canada’s de minimis threshold. What is the de minimis threshold and why does it matter to Canadian consumers? We have unpacked the details below.

What is De Minimis Threshold?

The de minimis level is the threshold which a package sails through the border with neither tax nor duty applied. In other words, Canada’s de minimis threshold is a duty-free threshold on imported goods.

Up to What Value Can be Imported Duty-Free Under De Minimus?

Under the Canadian Postal Imports Remission Order and Courier Imports Remission Order, the current de minimis level is $20 CDN. Therefore goods with values equal to or less than $20, would not be subject to duties or taxes upon import.

De Minimis and the NAFTA Renegotiation

The U.S. Administration released its wish list for the overhaul of NAFTA in mid-July of this year. This wish list is long with the Canadian de minimis threshold appearing high on the list.

U.S. based couriers and online merchants have been pushing hard for a de minimis level increase. They would like it to be increased from $20 to at least $200 CDN. The U.S. may likely want Canada to raise the threshold to one similar to their $800 USD level.

What is the Case for a De Minimis Increase?

De minimis is a legal maxim: de minimis non curat lex. This translates to the law does not concern itself with trivial things. In this context, de minimis regimes are intended to streamline border clearance. The rationale is that the administrative burden and processing cost does not justify collecting taxes or duties on very small shipments. In other words, if it costs more to collect the duty and tax than the amount collected then it is a financial and administrative burden to the government.

The Canadian Government currently allows goods valued at $20 to enter the country either by mail, courier, or transported by distributors without charging duty or taxes. This Canadian de minimis threshold has not changed in over 35 years. It is one of the lowest in the world. Many other countries have raised their thresholds in response to the growth of e-commerce.

Until last year the U.S. de minimis limit was $200 USD. In March 2016, U.S. President Barak Obama quadrupled the limit to $800 USD. This meant any Americans ordering from a retailer outside of the U.S. could expect any package worth less than $800 U.S. to arrive promptly without interference at the border. Neither would they receive an additional bill to cover duties and taxes and any other fees to process those duties and taxes.

All indications suggest that the Canadian consumer is on board with raising the de minimis threshold. There are many reasons why Canadians shop online, and they are no different than anywhere else in the world. They include the convenience of technology, accessibility, a wider selection of goods, targeted marketing, and sales promotions. Raising the threshold would save the Canadian consumer money they would normally pay for duties and taxes and processing fees.

What is the Case for the De Minimis Threshold to Remain Unchanged or Kept Low?

The de minimis value increase is already a hotly contested issue with retailers in Canada. Domestic retailers are concerned that a higher de minimis threshold would place them at a competitive disadvantage. This is because they would be required to levy Goods and Services Tax (GST) and Harmonized Sales Tax (HST) on the goods they sell. However, foreign retailers would not. Canadian merchants would be required to collect sales taxes on competing items sold in Canada whether in store or online and also pay duties and taxes on the imported goods.

The U.S. merchants on tax alone would have an advantage over Canadian merchants ranging from 5% in Alberta to 15% in Atlantic Canada. The Retail Council of Canada argues the U.S. online merchants would experience a 12.3% (at least) price advantage over the Canadian merchant in Canada.

The Retail Council of Canada fears that an increase in the de minimis threshold would lead to a massive increase in cross border orders with a negative impact to retailers in Canada. U.S. online merchants may start to offer free shipping as they do their U.S. customers. The investment made by retailers in Canada could be in jeopardy impacting wage jobs in IT, logistics, and distribution. The Council argues “Allocation of capital for U.S. and other international firms operating in Canada would be difficult to persuade their headquarters to invest in Canadian online offerings or bricks and mortar where customers could be easily serviced online from outside Canada.”

Some argue that the Canadian federal and provincial governments would experience a significant loss of tax and duties. The Retail Council of Canada argues that Canada and the U.S. are not on a level playing field when it comes to the acquisition of online customers. There is no tax advantage created for inbound shipments as the U.S. does not have a federal sales tax. The U.S. does not collect state and local sales taxes at the border or for interstate shipments. Also, the U.S. dominates its online retail space; with only 22% of the U.S. customers reporting to have purchased from a non-U.S. seller. By comparison, 67% of Canadians report having made online purchases in the U.S.

The recent Auditor General of Canada Report concluded that the Canadian federal government is spending more money collecting duties and taxes on shipments than those duties and taxes are worth. Simply put the government spends two dollars to collect one dollar.

The C.D. Howe Institute released a report in 2016 stating the Federal Government would save $161 million per year by raising the de minimis threshold to at least $200. The report also stated there would be a net positive benefit to Canadian consumers, governments, and businesses combined of $648 million. The C.D. Howe Institute is an independent nonprofit research institute in Canada. They are considered one of Canada’s influential think tanks on essential economic policy.

What Happens Next?

Canadian consumers appear to be on board with raising the de minimis threshold. According to the Nanos Research Poll, 76% want it raised to at least $200. Thousands have also signed a petition organized by the Canadian American Business Council pushing for change.

What will the Federal Liberal Government do? Well, we will have to wait and see for when NAFTA renegotiations conclude.

Do you have a questions or comments regarding Canada’s de minimis threshold? Share them in the comment section below and I will be happy to respond.

 

 

 

 

 

 

Subscribe here

10 Easy to Follow Steps to Importing Into Canada for Entrepreneurs

Image: 10-Easy-to-Follow-Steps-to-Importing-into-Canada-for-EntrepreneursThere are so many things to think about when you are running a business. And if you are a U.S. business looking to sell into Canada, or you are a business importing into Canada, the task list gets even longer. But many entrepreneurs do not know the first step to importing. That is why we have created The 10 Easy to Follow Steps to Importing Into Canada for Entrepreneurs.

As a prospective entrepreneur or new business owner, use these steps and links to external resources to navigate through the complexities of importing into Canada.

Determine if the Goods can be Imported into Canada

We often help first-time importers get out of a Customs jam as a result of not first checking eligibility of the imported goods. because of this, we recommend knowing what can and cannot be imported into Canada as step number one.

To start, you need to

  •         Obtain an accurate description of the goods you plan to import or export.
  •         Identify the country of origin, manufacturer, and export of the goods.
  •         Canada has a range of goods over which it imposes import controls. The Import Control List (ICL) of the Export and Import Permits Act lists these goods.

Next, you will need to determine whether the goods are controlled, regulated or prohibited by any Other Government Department (OGDs). OGDs regulate groups of commodities relating to their agency (Health Canada, Environment Canada, and the Canadian Food Inspection Agency are a few).

There are over 10 OGDs that are involved in the importation, in-transit movement, and exportation of various commodities. If your goods are regulated, they may require special permits, certificates, licenses, special labeling, or a specific type of packaging (i.e. child resistant) depending on the commodity.

To understand OGDs in more detail, read our post on how OGDs regulate the flow of your goods.

Determine the Tariff Classification, Rate of Duties and Taxes, Value for Duty

Once you have ensured you can import your goods into Canada, you must determine the:

  •         Tariff classification;
  •         Applicable tariff treatment;
  •         Rate of duty; and
  •         Taxes payable when importing goods.

The fact that every commodity that clears through Customs must have an accurate and correct Harmonized System Classification (tariff classification) applied to it is especially important. This classification comes in the form of code which identifies the item and rate of duty to CBSA.

While correctly classifying your commodities is key to avoiding under or over payment of duties and possible, it also reduces the possibility of Administrative Monetary Penalty System (AMPS) penalties, or seizure of your goods.

Visit the Canada Border Services Agency website to determine how to calculate duties and taxes.

Determine if you can Take Advantage of a Free Trade Agreement

Free Trade Agreements are agreements made between countries that desire to reduce trade barriers on goods manufactured in their respective countries. They allow for preferential duty treatment to items that qualify from certain countries. They can also impact exports by reducing or eliminating duty rates for qualifying goods.

Canada has free trade agreements with several nations. For more information on the respective Canadian Free Trade Agreements, visit the Trade Negotiations and Agreements section of the Department of Foreign Affairs and International Trade Canada.

Understand Your Import Responsibilities and Opportunities

We highly recommend that you gain a good understanding of customs regulations and requirements. Enrolling in trade compliance education will teach you:

  •         What documents need to be created (and how to spot an error if created by a vendor)
  •         Key trade topics such valuation, tariff classification, free trade agreements, emanifest, etc.
  •         How to manage trade compliance

The substantial knowledge you receive help you in understanding logistics and getting a feel for how transactions move through the regulatory process.

Register Your Business for Import or Export

Before you can import into Canada, you must obtain an import/export account (commonly referred to as an import/export license).  To do that you must complete several registration and licensing requirements with municipal, provincial and federal governments early in the process.

Once you complete these steps, you will have the necessities such as a Business Number (BN), registered business name and a GST/HST account. Your Business Number is your single account number for dealing with the federal government regarding taxes, payroll, import/export and other activities.

Canada Revenue Agency’s Business Registration Online is the one-stop-shop for all of your federal business registration requirements.

Determine How You Will Submit Your Entry Declaration to Customs

Businesses have many options to communicate import declarations to CBSA. Some are:

  •         Using a courier broker of freight forwarder who both ships your goods and submits the customs declaration on your behalf.
  •         Creating an in-house team that submits it directly from your business to Customs via Electronic Data Interchange (EDI).
  •         Doing it yourself; arriving at the port of entry to meet your goods and make the declaration.
  •         Hiring a customs broker. A customs broker can help you:
    •         Obtain shipment and contract documentation
    •         Review the prepared documentation for completeness and compliance with customs regulations
    •         Prepare and submit a declaration to Customs on your behalf at the port of arrival

Aside from submitting a declaration on your behalf, customs brokers can also help your company reduce costs, improve efficiency, and mitigate risks related to cross-border trade.

Most companies who import goods into Canada find that it is far too expensive and time-consuming to travel to the facility or port of arrival and await clearance, prepare a formal declaration, pay the charges due and then anticipate delivery of their product. Even more expensive is an in-house team.

It can be worth the investment up-front, to at least consult with a customs broker in the planning stages, so that you can have a clear understanding of your risks and proper tariff classifications.

Determine How You Will Pay Duties and Taxes

Just like there are many options for submitting your entry declaration, there are a couple of options for paying duties and taxes. You may:

  •         Prepare the release and accounting documents yourself, or
  •         Hire a licensed customs broker to do so on your behalf  and therefore, services fees would apply

There are three different payment methods available:

  1. Direct security – this is where you would have your bond and security posted with Customs, but this may not be a viable option if you are a new company. When this is in place, you will pay Customs on the last business day of the month for amounts owing on your statement.  If payment is late, penalties will apply and possible suspension of deferred payment privileges.
  2. Goods and services tax (GST) direct – Once you are a GST Direct Registrant, you can opt to pay Customs on the last day of the month, but without posting a bond and obtaining your security.  This does not cover duty, only GST.  The same conditions apply as above for late payment.
  3. Use of a customs broker’s bond – Customs brokers already have bonds in place with Canada Customs, but would charge a fee for the use of their bond.   You may need to post a deposit or meet other criteria for this to happen.  If you think this is the right option for you, speak to a customs broker to find out their requirements.

Plan for the Shipping of Your Goods

Another important aspect is arranging transportation of the goods. At this stage, you will need to determine how involved you want to be in the process of getting the goods from source to destination. Here again, you have many options including using the services of:

  •         A freight forwarder who will manage the entire transportation process including multiple carriers and modes.
  •         Carriers directly. If your shipment is only using one mode of transport, this can be an easy option to manage.

Additionally, you will need to identify the mode of transportation that will be used. Various modes area available including highway, marine, rail, air, postal or courier service. Choosing a mode  will lead you into selecting the best method of shipping and therefore communicating with the transportation company on cross-border requirements.

Identify Your Terms of Sale

It has never been easier to find sources for goods worldwide and then sell directly to your clients. However, before you embark on this journey, you will need to know the rules of international commerce otherwise known as Incoterms®. It is important to identify your terms of sale as they clarify your shipping responsibilities and iron out your landed costs.

To learn more about Incoterms®, visit the Incoterms® Rules for a short description of the 11 rules from the Incoterms® 2010 edition.

Build a Customs Compliance Program

Especially relevant is the need to build a customs compliance program that works best for you. The key to maintaining customs compliance of your business is to be informed.  It is good practice to know how customs regulations apply to your business. While customs brokers can review your business activity, assuming that do so often is an oversight by importers. Therefore, it is important to designate a company representative to monitor Customs activity and work with your customs broker directly. This person would monitor Customs process, stay up to date with changing regulations and prepare to withstand a Customs audit.

In addition, make sure your internal procedures, documents, tariff classification, free trade agreements, valuation, and origins are in compliance with Customs requirements. Also, understanding the links between your internal operations, accounting and Customs procedures can help address any shortcomings. Part of a winning formula is to ensure that your business plan includes a strategy for monitoring compliance over time.

In conclusion, as you prepare to import into Canada, know that there are many resources available to help you. We hope this information will help you plan for a successful start to your entrepreneurship journey.

Sign up below to receive this checklist. 

 

Ready to learn more? Sign up below to be added to our mailing list. We will deliver seminar and webinar event notifications, regulatory updates and more article like this one straight to your inbox.

 

 

Enjoy Duty-Free Imports With A Free Trade Agreement

Duty Free Free Trade

 

With relative ease, you can benefit from free trade. Free Trade Agreements allow you to import certain goods duty-free or at a reduced customs duty rate with participating countries.  To determine if you can benefit from one, let’s first take a look at the definition of a Free Trade Agreement (FTA).

What is a Free Trade Agreement?

Free Trade Agreements are agreements made between countries who want to reduce trade barriers on goods manufactured in their respective countries. Canada has entered into agreements with several countries including Colombia, Peru, Panama, Chile and most recently the European Union to name a few.

Free Trade Examples

Now that we understand the definition, let’s take a look at some examples.  A popular agreement is the North American Free Trade Agreement (NAFTA) which includes Canada, the United States, and Mexico. A more recent example is the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union.

4 Considerations When Evaluating Free Trade Benefits

 Now that we understand what a trade agreement is and examples of how they are used, lets take a closer look at the responsibilities you would be assuming.

In the case of NAFTA, eligible goods must be:

  • Manufactured in one of the respective countries (Canada, the U.S. or Mexico)
  • Qualify under the Rules of Origin
  • Shipped directly from the foreign country to the importing country (Canada, the U.S. or Mexico)

The following 4 areas require additional consideration:

1. Ensuring the items are shipped directly from a foreign country

In some instances, it is necessary to move the goods through a third country. A transportation scenario like this can still fall within the Free Trade Agreement rules by meeting certain conditions. In these instances, if the importer wishes to claim reduced or duty-free benefits, they will need to have proof that the goods were moved “in bond” through another foreign country and were never entered into the commerce of that country.

2. Accurate application of the tariff classification

Also of note is the common assumption that all Free Trade Agreements imported goods are all duty-free. This unfortunately, is incorrect.

Although some goods are entirely duty free, others are not.  Establishing the rate of duty for an imported good depends in part on determining the proper H.S. Tariff Classification. This classification must be accurate.  Furthermore, Tariff classification can be very complex and speaks to the essential character of the imported article including the following:

  • Description
  • Composition
  • End use

Additional questions about the product will need to be answered once the essential character has been determined.

To learn more about The Harmonized Commodity Description and Coding System sign up for our next H.S. Tariff Classification Workshop.

3. Comply with rules of origin

Another vital aspect of compliance are the Rules of Origin.  For example, if the product you are importing has any foreign content you must ensure it complies with NAFTA’s Rules of Origin to be eligible. Some goods containing foreign materials may qualify depending on the rules for those tariffs or the Regional Value Content (RVC). 

4. The party completing the documentation has sufficient knowledge

A further area of consideration relates to the party responsible for completing the shipment documentation. It is imperative that your foreign supplier has sufficient knowledge of the goods to support the completion of the Free Trade Agreement you will be using. Using the example of NAFTA, the person completing and signing the NAFTA Certificate of Origin is declaring that all statements are true and accurate. In other words, this person is attesting to due process and confirms that the goods listed qualify. 

Additionally, while the foreign supplier is responsible for supplying the respective FTA Certificate of Origin, the importer of record is ultimately responsible for the payment of duties, taxes and penalties if at a later date the goods are discovered not to qualify.

If you have reservations regarding the validity of a free trade certificate, you may better choose to pay the regular rate of duty.

In conclusion, not all Free Trade Agreements are the same. They provide importers and exporters  advantages such as duty-free or reduced customs duties. The best way to maximize the financial benefits of using an FTA is to ensure you understand your responsibilities.

Looking to learn more about how your company can benefit from free trade? Sign up below to be notified of our complimentary NAFTA for Beginners webinar.