Archive for the ‘Customs Audit’ Category


 

5 Most Common Mistakes to Avoid When Importing into the U.S.

Image: 5 Most Common Mistakes to Avoid When Importing into the U.S.

In 2010, during one of our first U.S. Customs Compliance seminars, U.S. Customs and Border Protection (CBP) identified the 5 most common mistakes to avoid when importing into the U.S., and interestingly enough, these are STILL the most common mistakes today.

Whether you are a U.S. manufacturer sourcing from China, purchasing completed goods for immediate sale, or acting as the non-resident importer (NRI) into the U.S., understanding these common mistakes and how to avoid them could save you a lot of time and money.

Mistake #1: Not Determining Your Customs Tariff Codes Correctly

The Harmonized Tariff Schedule determines the correct duty rate for your imported products. It is the foundation for your import compliance. Using the wrong code can mean you are underpaying or overpaying customs duties and taxes.

There are many ways to determine your customs tariff codes, some more reliable than others:

Regardless of your method of determination, treat tariff classification like you would a medical condition. Rather than relying on a self-diagnosis obtained from the internet, some things are best left to the trained professionals!

Mistake #2: Misunderstanding Rules of Origin

There are standard rules of origin for all goods. When importing goods into a nation with which the U.S. has a trade agreement, such as the North American Free Trade Agreement (NAFTA), they may be eligible for reduced or eliminated duty. Something to note, however, the use of an FTA may result in additional rules of origin to qualify for preferential treatment.

NAFTA certificates list the originating nation of the goods and act as proof of the claim. You, as the importer of record (IOR), are responsible for the completeness and accuracy of the NAFTA certificate.

Ensure you are filling out NAFTA certificates correctly by taking our Free Trade Agreements and Rules of Origin seminar or NAFTA for Beginners webinar series.

Mistake #3: Incorrect and Incomplete Country of Origin Marking

Legibly and permanently mark you imported goods with their country of origin. The country of origin may not be the same as country of purchase. Reference the U.S. Customs Regulation (19 CFR 134) to ensure compliance regarding markings and “J” list exemptions.

Pay close attention when reusing boxes. All previous markings must be eliminated to ensure that the correct country of origin markings are the only ones visible.

Mistake #4: Misunderstanding U.S. Customs Valuation

Delare the proper value of the imported goods to customs. Ensure you also calculate any deductions or additions. Support these adjustments with proper documentation at the time of entry.

Determine your goods value by attending our Customs Valuation seminar or commissioning our Trade Advisors.

Mistake #5: Using a U.S. Goods Returned Declaration for Non-American Goods

If you are importing goods back into the U.S., you can declare them as U.S. Goods Returned (USGR) to eliminate the duty… unless it turns out that they are not U.S. goods!

Declaration of Free Entry of Returned American Products requires you to provide appropriate documentation that goods were manufactured in the U.S. Maintaining a close relationship with your U.S. vendors may be helpful when it comes time to request an affidavit of manufacture to avoid paying duties on U.S.-made goods.

Final Suggestions by CBP

  1. If you are in doubt of whether or not your good is NAFTA eligible, do not claim it as such, and ensure that your customs broker does the same.
  2. If, after the fact, you find that you have made a mistake or a ‘false statement,’ notify CBP as soon as possible to ensure that you do not get penalized.
  3. Talk to your customs broker about the steps needed to disclose the scope of a discovered discrepancy. Some discrepancies can be corrected very quickly while others require more effort.

CBP does not want to be an impediment to doing business with the U.S. Avoid these 5 most common mistakes when importing into the U.S. and enjoy import success.

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The Cost of Customs Compliance Part 3 | The Benefits of Being Proactive

You have read about the perceived cost of compliance and the ramifications of not being compliant for the last two weeks in our Your Broker Knows blog. This week it is time for some happy news! What are the returns of investing in compliant trading activities?

To answer this questions, we are interviewing some of our team members who have many stories to tell!

Q: Do you have an example of a company who endured a Customs audit without receiving penalties as a result of their trading activities?

A: A few years back we worked on behalf of a client who was importing a large capital project into Canada. We cleared the project as one unit under a provisional entry. This is permitted when each part of the import would not work without the other.

The components were arriving from multiple suppliers located in various countries, at multiple ports of entry by boat, airplane, and truck, over the course of three years.

For theses types of entries, Customs requires the importer, to keep exceptionally detailed and accurate entry records for each shipment in the entry. As we were the customs broker, we kept these records for the client. Once entirely imported, the shipment records were submitted to Customs for audit. This value of this project was over $265,000,000.00 CDN. You can imagine how many pieces this import was made up of! The client passed the audit with flying colors! There were no delays, penalty payments, or entry corrections necessary. It was a complete success.

Q: What compliant activities did this company conduct which resulted in such a successful result?

A: Accurate and detailed records and procedures! It’s surprising how many importers can overlook this aspect of compliance, yet it’s one of the biggest problem areas. In this example, it was the entry records. But non-existent operating procedure can lead to compliance issues.

One of our clients received a sizable penalty when the person normally in charge of filling out the customs documentation for each shipment went on vacation. The vacation relief was not trained in this area and had no procedure to follow. The only guide they had to follow was past entry documentation. They copied the information for a past entries invoice, replacing the piece count and value, for the shipment they were scheduled to import. It later turned out that the shipment they copied was for a different commodity. They had inadvertently used the wrong commodity description and tariff classification. This resulted in an inaccurate duty payment. The fine assessed to them was steep. So…records are super important! And pro tip….file them by transaction number as that is how Customs will ask for them.

Q: Customs motto of ‘know before you go’ are words we repeat to our clients often. What does it mean to you?

 A: Oh sheesh, yes we do say that a lot! Know before you go is the equivalent of looking before you leap (in my college’s words). Who takes the jump before looking at where they will land?!?

 We give a lot of credit to new importers who check import eligibility through preliminary research before they make a purchase. Their research is not just online; they reach out to other importers to understand the reality of importing. They call a customs broker or freight forwarder to get a checklist of what they should do before attempting to import. They try to understand all parts of their supply chain – who is responsible for what. There is also value in working with vendors who have experience. Far too many times we clear urgent shipments from new importers who are denied entry for not having done this research.  

 A client of my colleagues was importing produce from overseas and did not do this research. It turned out that the shipment required a phytosanitary certificate, which they did not have and could not get. Customs destroyed the 6 palettes of produce. It’s costly! That client lost money on the purchase and shipping of that produce. A little research and a lot of conversation can avoid this.

Q: In all your years in this industry, what is the best story you’ve heard with regards to a client being compliant? 

A: There is one back when I first started in this industry that I will always remember. I was getting trained in a seminar when this example came up. I had just learned that Canada Border Services Agency would accept voluntary disclosure of an incorrect entry, provided that they do not find the inaccuracy first.

If a new client had provided us a product database which had even one incorrect tariff, it could result in years of incorrect imports. Customs can look back 7 years, which could result in a lot of incorrect entries.

Now, there is not too much an importer can do as far as lost revenues because, in this example, they would have sold the imported product under the assumption that the import costs were far lower than what they should have been if the correct tariff was assigned and used for declaration. However, there would be an opportunity to disclose this error and make the corrections to Customs.

Clients who find errors should always report and correct them to avoid a penalty that could be a detriment to their business.

Q: If you could give an importer one compliance tip, what would it be any why?

A: Oh my…seriously…just one?! I’m going to give a few.

Do your research, educate your staff, choose vendors wisely, complete paperwork accurately, audit your broker, and maintain your records.

 

Did you like this Q & A format? Let us know if we should do more of these interviews in the comment section below!

 

2017 Designation Maintenance Begins in our Professional Development Courses!

T if for Trade Compliance Education

A new year means a new start for most everything and this includes a reset to the maintenance requirements of your professional designations set forth by the credential’s governing body. We are well into the year now and our Professional Development Courses for fall 2017 are about to launch.

Whether you are a Canadian or U.S. Certified Customs Specialist (CCS), a Certified Trade Compliance Specialist (CTCS), a Certified Export Specialist (CES), a designate with the Law Society of British Columbia (LSBC) or accounting professional, taking any of Pacific Customs Brokers’ seminars and webinars will earn you maintenance points, credits and hours towards a variety professional designations.

Review and plan your maintenance for the second half of 2017 by clicking on the course’s name below:

(Fall registration opens at midnight on July 15, 2017)

  CSCB NEI LSBC
Webinar CCS CTCS CCS CES  
CDN Importing for Beginners Part 1
CDN Importing for Beginners Part 2
US Importing for Beginners Part 1 1
US Importing for Beginners Part 2 1
FDA Regulated Goods 2 2 1
CFIA Regulated Goods 2 2
NAFTA for Beginners Part 1 1 1
NAFTA for Beginners Part 2 1
 
Seminar
Shipping Perishables – NEW! 5 5 3 3
CDN Trade Compliance Part 1 5 5
CDN Trade Compliance Part 2 5 5 3
Exporting from Canada 5 5 3 3
US Trade Compliance Part 1 5 5 3
US Trade Compliance Part 2 5 5 3 3
HS Tariff Classification 5 6 4
Free Trade Agreements and Rules of Origin 5 5 5
Customs Valuation 5 3.5
CFIA 5 5
FDA 5 5 3
CTPAT 3 3 2 2

 

If you have never attended one of our Professional Development Courses before, the following information might help you decide on attending the next one.

Professional Development Courses – Webinars

Our webinars are designed to meet the demands of the global trade community. These live webinars are a convenient way for trade professionals to stay ahead of new regulations with international trade and gain additional knowledge in key areas. The benefits of attending an online course include:

  • Cost-effectiveness – More affordable than industry standards and some even offered complimentary
  • Global accessibility – Travel is removed from the equation for companies with multiple locations or branches
  • Convenience – Attend from the comfort of your desk
  • Concise training – In a fast-paced industry, efficiency becomes just as important as staying compliant
  • Industry recognized sessions – Earn points towards maintenance of your industry designations

Professional Development Courses – Seminars and Workshops

At these in-person sessions, you will learn the best practices on being compliant as an importer and/or exporter helping you expedite your commercial shipments rather than triggering costly delays. Our experts share their knowledge on international and cross-border shipping to keep you current with customs and participating government agency regulations.  The benefits of attending an in-person seminar or workshop include:

  • All day access – Get our experts to answer your questions one-on-one
  • Case studies and real-life examples – Examine other attendees’ trade compliance issues
  • Cost-effectiveness – More affordable than industry standards
  • Range of topics – Choose from a wide variety of seminar topics
  • Certificate of Completion – Receive a certificate for each course you attend
  • Handouts – Take home your own set of course material
  • Industry recognized sessions – Earn points towards maintenance of your industry designations
  • Networking – Connect with other like-minded professionals

For future reference, download your own 2017 Fall Trade Compliance Program today!

Importing Bulk Commodities at Estimated Volumes or Weight

Bulk commodity truck

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Are you in the business of importing bulk commodities that are valued by weight or volume? If so, it is imperative to ensure that the values provided to Canada Customs are compliant with their valuation regulations.

Estimated Volumes vs. Actual Volumes

Many companies import a bulk commodity into Canada such as liquids, which are priced by volume. At the time of purchase, the supplier will normally use estimated volume on the customs invoice. For example 30,000 litres of fuel valued at $2.50 USD per litre = $75,000 USD.

When the product is physically loaded onto the conveyance and on its way to Canada the actual volume may not reflect the estimated value that was declared. For example: 30,000 litres estimated may in fact be 28,500 actual litres. 28,500 litres x $2.50 USD = $71,250 USD.

As the Importer of Record (IOR) is held ultimately responsible for any errors in the declaration of their imported goods, the IOR would be obligated to correct the customs entry. In this case the price payable used at the time of purchase was incorrect and the actual volume discovered at the time of loading must be submitted to Canada Border Services Agency (CBSA).

Failure to Amend Volumes

Failure to correct the B3 Canada Customs Coding Document can lead to a penalty as outlined in the Administrative Monetary Penalty System (AMPS) issued by CBSA to the IOR. CBSA’s Master Penalty Document, Contravention C083 states:

“Authorized person failed to make the required corrections to a declaration of value for duty within 90 days after having reason to believe that the declaration was incorrect.

Penalty

1st: $150 to a maximum of $5,000 (per issue) or $25,000 (per occurrence)
2nd: $225 to a maximum of $200,000 (per occurrence)
3rd and Subsequent: $450 to a maximum of $400,000 (per occurrence)”

 

Do you import bulk commodities with the pricing based on estimated volumes or weight? Contact us via the comments section below or email Ask Your Broker to discuss your options.

Are You Subject to a U.S. Customs Audit?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All companies importing goods into the U.S. are subject to audit – no matter their size, scope of business or resident or non-resident importer. Therefore it’s important to know what U.S. Customs and Border Protection (CBP) looks at when determining who to audit.

CBP utilizes a strategically layered risk management approach based on the potential impact of non-compliance in order to better focus on those areas of importing which may cause significant revenue loss, harm to the U.S. economy, or threaten the health and safety of the American people.

Priority Trade Issues

Customs publicizes a list of Priority Trade Issues (PTIs) which is reviewed and updated periodically. Currently, the following issues are ones that customs considers to be high-risk:

  • Anti-dumping duty
  • Countervailing duty
  • Import Safety
  • Intellectual Property Rights
  • Textiles
  • Trade Agreements

While this list by no means restricts customs from conducting audits on transactions that fall outside of these categories, it does provide a general idea of where their primary focus presently resides.

In determining the likelihood of your firm undergoing a U.S. Customs audit, there are all sorts of other considerations which come to bear and may include:

  • Total value and/or volume of your imports
  • Variety and chapters of H.S. classification
  • Special classes of entry, such as Temporary Importation Bonds (TIB), or U.S. Goods Returned (USGR)
  • Related party transactions
  • Your firm’s internal controls, compliance policies and record keeping practices
  • Prior audit history
  • Prior penalty history

We consider that there is a clear foundation on which the adequacy and accuracy of your customs declarations stand. These include tariff classification, country of origin, and valuation. Most importers are aware of the importance of ensuring that their tariff classification is declared correctly, and they know that they must declare the proper country of manufacture of the goods, and that those goods are required to be marked with the country of origin prior to import. Valuation, however, can definitely be a trip hazard to unwary or uninformed importers. This article speaks directly to that matter.

As an Importer of Record (IOR), whether a resident of the United States or a non-resident, it is your explicit responsibility to act with reasonable care. CBP’s reasonable care standards are clearly defined, and more information can be obtained on that subject referenced in this paper.

Transaction Value (TV) is the most usual valuation methodology, and used appropriately, does fit the most frequent type of transactions. Transaction value or TV can be defined as “the price paid or payable for the merchandise.” There are a number of possible influences that may prohibit declaring TV on your imports, including:

  • Related transactions may not be eligible, depending on a number of factors
  • Leased or loaned equipment is not eligible for TV
  • Sample or “no-charge” transactions
  • Consignment shipments
  • Assists that the buyer provides to the seller must be taken into consideration
  • Other additions, such as packing, commissions, royalties, transportation must all be added to the “price paid or payable” for the merchandise

These are simply a few of the matters that must be considered when you are determining the value declared to customs.

Additional Resources

Informed Compliance Publications available on the U.S. Customs and Border Protection website include a number of excellent publications. We suggest the following:

  • Reasonable Care
  • Bona Fide Sales & Sales for Exportation to the United States
  • Customs Value
  • Customs Value Encyclopedia
  • Determining the Acceptability of Transaction Value for Related Party Transactions
  • Proper Deductions for Freight and Other Costs

Customs Audit Assistance Services

If you have reason to believe that your valuation declarations may have the potential to raise flags during a customs audit, please give us a call to discuss this further. We have the expertise to guide your company through the audit process.

Preparing for a Customs Audit

To learn more and gain insight on the customs audit process, consider attending an upcoming seminar. For a session that will guide you through the maze of regulations that determine transaction value attend our upcoming Customs Valuation Seminar. If you are importing and exporting goods into the United States, you will also find our U.S. Trade Compliance Seminar of interest.

If you wish to know more about this important topic or wish to share your experiences please leave your questions or concerns in the comments section below or email us at Ask Your Broker.