Archive for the ‘Customs Audit’ Category


 

U.S. Customs To Pilot Test Blockchain Viability

blockchain

In September 2018, U.S. Customs and Border Protection (CBP) will start pilot testing the viability of blockchain technology in international trade. One of the first tests will be to see if they can successfully receive Certifications of Origin to identify if a product can qualify for preferential treatment under the North American Free Trade Agreement (NAFTA).

What is Blockchain?

Blockchain allows for digital information to be shared but not copied. It was originally created for financial transactions however, tech communities are starting to get more creative on what it can be used for. This includes smart contracts, transparent voting for elections, file storage, and in the world of trade, supply chain auditing.

Blockchain acts as a large database spread over a network of many, many computers. By not storing the data in any one location decentralizes the data. By decentralizing the data, it makes it difficult for a “hacker” to corrupt, thus making it a safe way for many people to access the data simultaneously.

Another interesting fact about blockchain is it can be setup to share with the entire public, or only shared with a few selected individuals. This allows for it to be used on massive scales, such as an election, or small scales, such as a one-on-one contract between you and a supplier.

History is another important factor. Blockchain has the ability to collect and maintain all transactions and previous data. In the trade industry this could be vital since records are required to be kept by Customs for multiple years in case of an audit. With a clear history that is accessible at any time, it can make it easier on Customs and the individual or business being audited.

What is Your Commodities Origin?

The goal is to certify the backstories of commodities are genuine. Is your sweater really made in Canada? Is every part from your laptop obtained or produced entirely in Canada, the U.S. or Mexico? Probably not, however with the assistance of blockchain technology and supply chain auditing, the answer could be quick and easy for CBP to discover.

Why This Potentially Helps U.S. Customs?

The reason CBP is excited for the viability of blockchain technology is because it can permanently verify transaction records in a fast and secure way. Being able to work fast and safe is any businesses dream, and CBP wants to start testing the technology in the early stages to make sure they are ready to handle the demand for blockchain technology once more companies adopt the relatively new idea.

How Supply Chain Auditing Can Help You?

It is easy to drown in the science behind blockchain technology, but what matters most to you is blockchain can allow you to do business easier and safer than before. The introduction of Electronic Data Interchange (EDI) has eliminated the need for faxing, mailing or hand delivering paper documents. By having a safe way to transport the same “paper documents” digitally in only a way where you, the sender, and CBP, the receiver, can access it, than business will become better for you.

If You Need An Expert

With pilot testing to begin in September it will be interesting to see what the findings are from CBP. This might be the first step U.S. Customs takes to adopting blockchain technology and electronic supply chain auditing. For the latest in trade news and expert advice feel free to contact an experienced trade advisor to help you navigate the world of trade.

Pacific Customs Brokers Newsletter Sign Up

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.


Sign Up for PCB's Newsletter

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.

Did you like this article on common mistakes to avoid on U.S. imports? Sign up here to receive them each week!

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!

 

Your Designation Maintenance Begins with our Professional Development Courses

Image: Seminar Room

 

Your Professional Development starts with Pacific Customs Brokers! If you have never attended one of our Professional Development Courses, the following information might help you decide on attending the next one.

Professional Development Courses – Seminars and Workshops

At our in-person courses you learn the best practices of being a compliant importer and/or exporter which will help you expedite your commercial shipments to and avoiding costly delay triggers. Our experts share their knowledge and stories on international and cross-border shipping regulations to keep you current with customs and partner government agency requirements.  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 hurdles
  • Cost-effectiveness – More affordable than industry standards
  • Range of topics – Choose from a wide variety of topics
  • Certificate of Completion – Receive a certificate for each course you attend
  • Handouts – Take home your own set of course material
  • Industry accreditation – Earn points towards maintenance of your industry designations
  • Networking – Connect with other like-minded professionals

Professional Development Courses – On-Demand *COMING SOON*

Our on-demand library is designed to meet the demands of the global trade community. These sessions are a convenient way for trade professionals to stay ahead of new regulations with international trade and gain additional knowledge in key areas. Benefits of attending an on-demand course include:

  • Global accessibility – Travel is removed from the equation for companies with multiple locations or branches
  • Convenience – Attend from the comfort of your desk or home at any time that is best for you
  • Concise training – In a fast-paced industry, efficiency becomes just as important as staying compliant, watch in parts or “binge” on the full course
  • Industry accreditation – Earn points towards maintenance of your industry designations

 

Taking any of our courses may earn you maintenance points, credits, and hours towards a variety of professional designations. Some examples of eligible designations are:

  • Certified Customs Specialist (CCS)
  • Certified Trade Compliance Specialist (CTCS)
  • Certified Export Specialist (CES)
  • Designate with the Law Society of British Columbia (LSBC)
  • Accounting Professional

Registration for Fall 2018 is now open!

Review and plan your professional development maintenance for the second half of 2018 by clicking on the hyperlinked course names below. 

  CSCB NEI LSBC
Course Name CCS CTCS CCS CES  
How To Import Into Canada Part 1 5 5
How To Import Into Canada Part 2 5 5 3
How To Import Into Canada (Series) 5 5 3
How To Classify A Product 5 6 4
How To Import Into The US Part 1 5 5 3
How To Import Into The US Part 2 5 5 3 3
How To Import Into The US (Series) 5 5 3
How To Value A Product For Customs 5 5
*How To Choose The Best Incoterm 5 3 3
*How To Import CFIA Regulated Goods 5 5
*How To Import FDA Regulated Goods 5 5 3

 

*Registration for spring 2019 courses coming soon.

 

 

Have questions or comments about any of our courses? Call 888.538.1566 or email us today!