Archive for the ‘Customs Brokers’ Category


 

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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How to Import for a Trade Show in the U.S. or Canada

 

 

Trade Show Imports Stand

Are you attending a trade show across the border? This post will teach you what you need to know about Trade Show Imports into the U.S. or Canada.

Trade Show Imports: Saul Better Call Us

Saul was going to display his super duper machine at a trade show in Houston, Texas. His machine was bound to be a disruptor in the market and he was excited to show it off. Saul booked his booth, made his travel plans and hooked his machine to the back of his pick up, threw his promotional material in his suitcase and headed for the border.

What Saul did not know was he had to take certain steps before he made his way out of Canada and into the U.S.

  1. He did not realize that the entire bottle of window cleaner would need to be declared and the Toxic Substances Control Act (TSCA) would require a statement for the declaration.
  2. Saul did not know that the promotional material he would distribute at the event would need a consumption entry
  3. He did not understand that the super duper machine could be a consumption entry or a bond. A consumption entry would be the better choice if the machine is dutiable. If it is not dutiable, it would be better to use a bond. However, a bond comes with a tight timeline and increases the chance of a penalty.

 

Needless to say, Saul was late to his trade show and he had a few more expenses (in the form of penalties) that he did not account for in his budget.

With 2018 freshly upon us you might have the same opportunity ahead. A trade show could likely be on your horizon. If you are asking the question “how can I get my trade show goods across the border?” first off, kudos to you for researching. Secondly, hooray, you have come to the right place.

In this blog you will find a practical checklist to help you prepare for an international trade show. As well as, what you will need to know to import your trade goods into the U.S. or Canada.


Trade Show Imports Checklist (7)

(1) Take Inventory

Make a list of what you want to bring to the show and split the list into two sections.

Section One

Section one will include anything you could leave behind. Anything you would use, consume, giveaway or sell while in the country.

Section Two

The second section will include everything you will bring home in its entirety.

(2) Remove Purchasable Products

If you have an item that will be used or consumed in the visiting country, a simple option is to buy the product once you arrive rather than import them. A good example would be cleaning supplies. Even something as simple as glass cleaner could provide a hold-up at customs. Purchasing supplies in the country you are visiting will eliminate risks when clearing customs.

(3) Are the Goods Eligible?

Check with Canada Border Services Agency (CBSA), U.S. Customs and Border Protection (CBP), the Participating Government Agency, or your Customs Broker to see if there are any restrictions on the goods you are wanting to take to the show.

(4) Marking, Quantity & Packaging

All samples must meet marking regulations, and they must be within the country’s quantity and packaging requirements. Otherwise your goods could experience delays or be seized at customs.

(5) Entry Type

Find out from your customs broker what is the best type of entry to use for your goods. A Customs Broker will be able to help with your timeline requirements and potentially reduce your costs at customs.

(6) Letter of Recognition

The International Events and Convention Services Program (IECSP) was developed to encourage businesses and organizations to hold trade shows, conventions, events and exhibitions in Canada. They provide guidance and information to facilitate event participants, foreign exhibitors, and temporary imported goods and materials, into and out of Canada.

CBSA offers the IECSP in order for you to have one primary contact to provide you with federal government services and requirements associated with international events and conventions taking place in Canada.

Some trade shows will have a letter of recognition that is provided from CBSA to the event organizer. If the trade show you are attending has a letter of recognition you will be able to contact the event organizer for a copy of the letter of recognition.

If your Trade Show has a letter of recognition, the letter will contain:

  • The name and type of event
  • The date and location of the event
  • The expected number of participants
  • Who is responsible for processing any CBSA documents
    • Event Organizer
    • Customs Broker
    • Delegated Representative
  • A list of goods brought into Canada, their origin and intended use
  • A list of controlled goods being imported
  • A list of goods that will be sold or given away
  • If applicable, a note requesting the event be considered for Border to Show Service
  • What goods can possibly enter duty free and/or receive partial relief from GST/HST

What if the trade show you are attending does not have a letter of recognition? If your trade show does not have a letter of recognition, it means you have no designated exemptions.

(7) Time Limits

Some temporary imports and sample imports must be exported within a certain time frame. Take note of the entry date to make sure you do not go past expiry.

 


Trade Show Importing into the U.S.

Is Your Import Duty Free?

Your import will be duty free if it is recognized in a letter of recognition, if it is imported under a Temporary Import Bond (TIB), or if it is eligible to be imported under a Free Trade Agreement.

Is a Merchandise Processing Fee Applied?

All of your imports require a merchandise processing fee unless they are under a Free Trade Agreement. Unsure of what a Merchandise process Fee is? Check out our Blog Merchandise Processing Fee (MPF) Explained.

Your Recommended Entry

Consumption entries are recommended for anything that is consumable. Any goods where the duty is above $100.00 USD you would best be suited to import under a Temporary Import Bond. Keep in mind Temporary Import Bond items must be exported within 6-12 months depending on the commodity.

Errors You Will Most Often See

In speaking with our U.S. release Operations Manager, Breanna Leininger, she described the most common errors you will see when you try to import items for a trade show into the U.S.:

“The most common errors we see are in packaging and invoicing.  When looking to import goods into the U.S. for a tradeshow it is vitally important to package and invoice consumables such as giveaways separate from the trade show booth. This will prove to be helpful if you are flagged for inspection, as well as open you up to entry filing options that will save you time, money, and a headache.”

Note: We recommend getting items you could buy from a store, such as cleaning supplies, in the country your trade show is in. Items purchased in a store can require additional statements and manufacturing information you may not have access to when purchasing from a store.

Trade Show Imports U.S.

 

 

 


Trade Show Importing into Canada

Is Your Import Duty Free? Tax Free?

Your import will be duty free if it is recognized in a letter of recognition, if it is imported under a Temporary Import Bond, or if it is eligible to be imported under a Free Trade Agreement. To be tax free your import must either be imported on a Temporary Import Bond or waived by a letter of recognition.

Your Recommended Entry

Souvenirs and advertising materials intended for sale or consumption in Canada must be accounted for on a B3. Any branded paraphernalia left in Canada must also be accounted for on a B3. E29Bs are required for returning branded paraphernalia, office machines and equipment, as well as, display goods.

Errors You Will Most Often See

In speaking with our Canadian release Operations Manager, Cherie Storms, she described the most common errors you will see when you try to import items for a trade show into Canada:

“Forgetting to ask the event organizer if the event has been approved by CBSA, and if so, travelling with the approval letter which supports the purpose of entry. Also, bringing in consumables that will not be returned, forgetting that there may be duties and taxes on those”.

Trade Show Imports Canada

 

 

 


Why You Should Declare Your Trade Show Imports

Not declaring items intended for business purposes is illegal. Customs can make samples useless for resale and your goods could even be seized or destroyed. Keep in mind not being prepared at customs can delay your journey. Being forced to complete all of the paperwork at the port of entry can be a huge headache and time consuming. Knowing before you go will make your trade show experience pain-free.

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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.

 

 

 

6 Methods of Determining Customs Valuation

Six Methods of Determining Customs Valuation

 

 

 

 

 

 

 

 

 

 

 

Are you uncertain of how to properly declare the value of your goods when importing into Canada? You are not alone, many importers are. This lack of clarity is partly due to the many rules and factors when determining value for duty. With an expectation to be compliant,  customs valuation is one of the three main targets for a Canada Border Services Agency (CBSA) audit. Unfortunately, we see many importers spending the least amount of attention to this area. Valuation can be an intricate area to navigate if your foreign purchases involve situations which could change the declared value to CBSA.

So, let’s take a look at the 6 Methods of Determining Customs Valuation by first understanding what valuations are.

What is Valuation?

Valuation is the determination of the correct value of goods. CBSA requires all goods imported and declared into Canada have a value for duty which is the base figure on which you must calculate the duty and taxes you may owe the CBSA on your imported goods.

With items like samples, replacements, warranty items, short-shipped goods, you are still required to declare a fair market value although in the end payment of duties and taxes may be unnecessary.

How is Customs Value Determined?

The Customs Act identifies six methods of customs valuation.

The World Trade Organization’s Valuation Agreement is the basis of the requirements of each of these methods. These rules ensure the value of the imported goods are in accordance with commercial reality, and they prohibit the use of arbitrary or fictitious customs values.

 

 

 

 

 

 

What is Transaction Value?

Importers should use this method when determining the value for duty on the price paid or payable for imported goods with consideration to certain adjustments. This method is the most commonly used. When selling goods for export to Canada to a purchaser in Canada, the Transaction valuation applies. We have outlined the difference between the price paid and payable below:

Price Paid is the total of all payments made directly or indirectly by the purchaser to the vendor.  Price Payable, however, is the total of all payments that are owed and made directly or indirectly by the purchaser to the vendor.

You must use the transaction value method whenever possible to determine the customs value of imported goods.

What is Transaction Value of Identical Goods?

When you cannot use transaction value, you must use an established value for duty of identical goods. Identical goods are considered the same in all respects as the goods being appraised. They have one exception however and that is for minor differences in appearance. These difference cannot affect the value of the goods. For goods to qualify, production would have to be in the same country as the identical goods.

What is Transaction Value of Similar Goods?

When you cannot use transaction and identical goods, you must use an established value for duty of similar goods. For goods to qualify, the value of goods must be:

  • Closely resembling the similar goods
  • Capable of performing the same function
  • Commercially interchangeable
  • Produced in the same country and by the same manufacturer as the similar goods

What is Deductive Method of Valuation?

If none of the above methods apply, the deductive value method is the next method to consider. The basis of this method is on the Canadian importers most common selling price (per unit) of the goods sold to Canadian customers.

What is Computed Method of Valuation?

The computed value is the cost of production, profit and general expenses of the imported goods. These must be realized by producers in the exporting country when selling the same type of goods to Canadian importers.

What is Residual Method of Valuation?

The residual method does not identify specific requirements for determining a value for duty. Instead, the value is based on one of the other methods (considered in sequence). It also requires the least amount of adjustment. The value must be fair market, and reflect commercial reality.

In the end, the final value for duty can also be influenced by:

  • The relation between the parties involved.( i.e. a related buyer and seller)
  • Condition where the goods were provided to the Canadian consignee at no charge (i.e. consignment)
  • Allowable additions or deductions to the value of the goods
  • Used goods
  • Goods not sold in Canada (i.e., for rent or lease)

Now that you understand the 6 different methods of determine value for duty, the next step is to learn how to calculate your value for goods and why it’s important to get it right. Receive in-class training from one of Sr. Trade Advisors. To be notified of the next Customs Valuation seminar, you can subscribe to our mailing list below. 

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If you have reason to believe that you have valuation situations which have the potential to raise flags during an audit leave a comment below and I will be happy to reply.

 

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.

 

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