Archive for the ‘H.S. Tariff Classification’ Category


 

How Bombardier may Avoid Anti-Dumping and Countervailing Duties

It was announced earlier this week that Bombardier, a Canadian rail and air transport manufacture and AirBus, an aeronautics maker from France, have struck a deal which will avoid the U.S. anti-dumping and countervailing duties that were to be imposed on them upon importation.

 

How are some companies able to avoid these duties while others are not?

The Background

In 2016 Bombardier landed a contract to sell 75 of their C-Series jets to Delta Airlines in the U.S. In a move that was considered to be protectionist, U.S. air plane manufacture Boeing argued that Bombardier was able to sell their jets to Delta at low cost due to Canadian government subsidies. This complaint was heard by the U.S. Commerce Department which ruled in agreement with Boeing. The result was an almost 300% combined countervailing and anti-dumping duty to be placed against Bombardier C-Series jets upon importation into the U.S.

What are Anti-Dumping and Countervailing Duties?

In our previous post The Potential Perils of Anti-Dumping and Countervailing Duties, we explain anti-dumping and countervailing duties. In a nutshell, the intent of anti-dumping is to protect domestic industry through a government imposed increased duty on foreign imports and importers that it believes are priced below fair market value, and below what they would normally sell the goods from in their own domestic market.

 

Countervailing, is an import tax imposed on certain importers, and importers that may receive subsidies from their country which allows them to sell the goods for under market value in the U.S. Market. Countervailing is also referred to as anti-subsidy duties.

Why Were the C-Series Jets Considered to be Unfairly Subsidized?

The Government of Quebec’s has a 49.5% interest in the C-Series jets. Additionally, the Canadian Government  provided a $344-million dollar loan to Bombardier when sales for the jet were lagging.

How Will Bombardier Possibly Avoid Paying Anti-Dumping and Countervailing Duties?

As mentioned above, anti-dumping and countervailing duties are imposed on foreign importers. If the company manufactures goods within the U.S., they are no longer foreign nor would there be an import.

 

Bombardier partnered with Airbus on the C-series jet recently, which effectively provided a 50.01% interest to Airbus. The C-series jet will not be manufactured in Canada, but on a secondary Bombardier assembly line at the U.S. Airbus facility. Therefore any sales into the U.S. would not be considered foreign and import duties not applicable.

What’s Next?

It is too soon to tell if this move by Bombardier and Airbus will indeed successfully avoid countervailing and anti-dumping duties. In some cases where an importer avoids anti-dumping and countervailing duties by moving manufacturing they could still face these duties and taxes on the parts they import. It is expected that there will be research into this deal and subsequent comment for the U.S. Commerce Department in weeks to come.

Which view do you take on this story? Has the U.S. unfairly penalized Bombardier or has Canada unfairly subsidized them? Please leave a comment below.

 

 

The Cost of Customs Compliance Part 2 | Not as Expensive as One Might Think

Image: The Cost of Customs Compliance Part 2 | Not as Expensive as One Might Think

Carrying on from last week’s Part 1 article, a customs compliance penalty often brings into question whether the customs broker can be held accountable if the importer is found to have errors in their import declarations. Since customs holds the importer of record (IOR) ultimately responsible for customs compliance, it is rare that an importer can shift the blame to their service providers or vendors who offered incorrect advice, submitted the declaration with erroneous information or lacked the expertise to catch potential problems with an imported item. Therefore, it is important to ensure your service provider evaluation includes the following:

  1. Does the customs broker have a process in place to review customs declarations for incomplete or inaccurate documentation prior to submission to customs?
  2. Does the customs broker offer Trade Advisory Services which can help with binding ruling applications on unclear product classifications or on new product purchases to determine any additional duties required and/or reporting requirements to other government departments?
  3. Does the customs broker clear all modes of transportation including courier shipments therefore ensuring consistency in both process and tariff classification?
  4. What is the level of certification, education and experience of the entry staff who are reviewing and submitting declarations on your behalf?
  5. Is your customs broker open during your hours of operation? If so, will they have an experienced representative available to answer questions about your specific account?

If your company’s supply chain requires the use of multiple customs brokers, we advise you to look into the following possible areas of inconsistencies.

Multiple Customs Brokers = Multiple Inconsistencies

We previously published an article on the Downside of Using Multiple Customs Brokers in which we highlighted two things to look out for when using multiple customs brokers.

Inconsistency between your chosen customs brokers:
Customs Broker ‘A’, who clears your incoming air shipments, may use a slightly different tariff classification code for your imported item than Customs Broker ‘B’ who clears the same item via highway transport. During our trade compliance seminars we often tell the tale of the outcome of three customs brokers classifying the same item and each coming up with their own justifiable explanation for their classification. This is a result of a highly complex harmonized system tariff schedule, the different experiences each of those brokers have had in their classification practice, as well as their understanding and application of the General Rules of Interpretation (GRI) as they relate to the item.

Difference in business process:
Not all customs brokers are created equal. Each has its own area of expertise and therefore business process. A courier company who offers customs brokerage as an added service has a priority to ensure speed and accuracy with the parcel delivery. A compliance broker, like us, Pacific Customs Brokers, specializes in ensuring their clients trading practices fall within Customs law. Our process differs in the the attention given to detail.

Review Your Entries to Mitigate Risk

As you can see from the areas of concern we have addressed in this article, and despite best efforts, an importer may be completely unaware of their shortfall in customs compliance. One way to review your customs broker’s accuracy is to review the declaration summary provided with the invoice against the following checklist:

  1. Has your vendor provided a full and accurate description of goods for classification purposes?
  2. Is the value declared on your vendor’s invoice correct and will it match your reconciliation to the vendor?
  3. Will you be receiving any additional invoices for value added costs such as royalties or commissions?
  4. Have all applicable discounts been declared and taken where applicable?
  5. Has the country of manufacture been declared correctly for all items on the invoice?
  6. Were all the items listed on the invoice received? Were there shortages or overages?
  7. Do you have properly completed certificates on hand for all items declared under a preferential tariff treatment, including North American Free Trade Agreement (NAFTA) Certificates of Origin?
  8. Has the Goods and Services Tax (GST) been correctly accounted for on all items?

 

We encourage you to reach out to our Trade Advisory team with any questions you may have regarding your customs compliance practices at [email protected]. We are here to help!

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!

TOP 5 MISTAKES WHEN COMPLETING A NAFTA CERTIFICATE OF ORIGIN

Packing slips, commercial invoices, customs invoices they are all documents that can be easily completed unlike a NAFTA Certificate! What I mean is… you are simply taking shipping or invoicing data – shipper, consignee, carrier name, description of goods, etc. and plugging it into the respective area on one of these documents.

How about the North American Free Trade Agreement (NAFTA) Certificate of Origin? Can you use the same document completion philosophy?  There is much more to a NAFTA Certificate than just “completing another form”.

At a quick glance at a NAFTA Certificate, one might assume that the answer is yes. Exporter — yes. Producer — yes. Importer, description of goods, blanket period — yes, yes, yes. Sounds like we”re on a roll! We read the NAFTA completion instructions, understand what data is required and we”ll just finish this form off to satisfy the foreign purchaser’s request. Right?

Wrong!

The main difference between a NAFTA Certificate and the aforementioned documents is that all the products you list on this document must qualify under the NAFTA Rules of Origin. That’s right – do not simply complete the document. There are rules that must be observed.

As we already noted, some fields on the NAFTA Certificate of Origin are fairly basic and you can easily fill them in. The focus of this article is to provide clarification on the less understood areas to raise awareness of their complexity.

Field 6 — Harmonized System (H.S.) Tariff Classification Number

As emphasized in a previous article, it is very important that the H.S. tariff classification is correctly assigned to each product, as the first six digits will determine which of the NAFTA “Specific Rules of Origin” will apply. In order to correctly qualify the product under these Rules, you must be sure the tariff classification is correct. If you are unsure regarding the tariff classification, please contact a customs broker for assistance.

Field 7 — Preference Criterion

The completion of this field is going to depend on where a product was sourced or manufactured, the extent of the manufacturing and transformation process, and/or the source and place of manufacturing for any raw materials. Note that the preference criterion chosen for one product might not be the same as for another, and each situation will need to be evaluated on its own merit.

Field 8 — Producer

Hey, you get a lucky break! This is one of the easier ones. YES, NO(1), NO(2), and NO(3) are your options. The ‘NO’ options of (1), (2), and (3) refer to what you are basing your NAFTA claim on — whether you ‘just know it is NAFTA eligible’ (1), or you have documentation from the producer that it is NAFTA eligible (other than an NAFTA) (2), or you have a voluntarily provided & accurately completed NAFTA Certificate from the manufacturer (3). We respectfully advise that you go for (3), as this assures that the actual producer has done his due diligence in confirming NAFTA eligibility of the product he is providing to you.

Field 9 — Net Cost

In order to properly complete this field, you will need to understand the NAFTA Specific Rule of Origin applying to a product to determine if Regional Value Content is a factor and whether the Net Cost method will be used. In this field, you will either show ‘NC’ if the Net Cost method was used, or ‘NO’ (all other situations). By the way…NEVER place a dollar amount in this field, as this merely indicates to a customs agency that you did not read the instructions!

Field 10 — Country of Origin

This one sounds simple, doesn”t it? You would be amazed, however, at the number of NAFTA Certificates we receive that indicate countries other than the U.S., Canada or Mexico (remember, it’s the North American Free Trade Agreement). Another common mistake is for someone to automatically assume that just because certain products are made in Canada, the U.S., or Mexico they qualify for NAFTA. In fact, if they do not qualify, they must not be listed on this document.

Sound complicated? In some cases, it is straight forward, but in so many others (for example, products with many foreign components), NAFTA qualification can be an onerous task. The point we are making is for companies and individuals to realize that much care needs to be exercised (before signing, please read the disclaimer at the bottom of the form so you understand your responsibilities).

Repercussions

Lets say we have a NAFTA Certificate that has all the boxes completed with what appears to be correct data.  We clear and account for the goods and bill you.  No duty is paid.  Then 11 months later or more (up to 4 years after the date of release),  Canada Border Services Agency (CBSA)  decides to audit that NAFTA.  They will go to the exporter with a NAFTA Verification questionnaire.  Let’s say CBSA comes to the decision that the goods actually do not qualify.  Guess who suffers for the exporter incorrectly completing the NAFTA?  Your Company.  You get the penalty applied to your importing profile and you have to remit the unpaid duty with interest.

 

So keep that in mind when you see NAFTA Certificates that are not properly completed.  Its a red flag that the supplier actually has no clue whether or not the goods qualify.

 

It should be noted that similar rules apply for any Certificate of Origin relating to a free trade agreement. For instance, if you grab a copy of a Canada-Chile FTA Certificate of Origin, you will notice many similarities.

Still baffled over the completion of this document, or whether or not your goods qualify under NAFTA? If you require advice or have questions related to NAFTA,   feel free to contact our Trade Compliance Department.

 

Trade Talk | This week in HS Tariff Changes

Trade Talk | This week in HS Tariff Changes

Trade – New 2017 Customs HS Tariff Codes in Effect NOW!

What we know for sure: HS Tariff changes

Getting your HS Tariff Code right is really important! The HS Tariff changes have been coming for quite a while and most are well known to customs brokers however let’s ensure that you, the vendors, are clear!

The current updates announced by the World Customs Organization (WCO) that came into effect as of January 22, 2017, are still being digested by most organizations. Our Trade Compliance Advisors have been on top of this for several months and are prepared to offer support where your company might need it.

If you are a client of ours, rest assured that we have already implemented the required changes and addressed all prior rulings that needed updating. If however, you are not a client of ours, we recommend you either contact your customs broker to ensure your tariff classifications and rulings are correct or contact our Trade Compliance Advisors. We are available 24/7 to provide this service on your company’s behalf.

What we are talking about:

The HS Tariff Changes had a large focus food products.

“The majority of the new changes to the HS have been broached by the FAO (Food and Agriculture Organization of the United Nations).

The HS 2017 amendments for fish and fishery products are to further enhance the coverage of species and product forms which need to be monitored for food security purposes and for better management of resources. The split by more detailed product forms for crustaceans, molluscs and other invertebrates is motivated by the importance of trade and consumption of these species in the various product forms.

The amendment for cuttlefishes and squids is to extend the coverage of the present codes, in order to have all those species grouped. At present, a significant share of cuttlefish and squid trade is recorded under residual codes for molluscs.”

With the final actions and rulings in regards to Forestry Products we are also talking about the amendments on this section of the WCO amendment announcement:

“The amendment for forestry products aims at one main area: enhancement of the coverage of wood species in order to get a better picture of trade patterns, including endangered species. In particular, separating the data on tropical wood trade will both serve to focus attention on the important issue of tropical wood use and clarify data on non-tropical hardwoods. The HS 2017 amendments also include the creation of new subheadings for the monitoring and control of certain products of bamboo and rattan, requested by the International Network for Bamboo and Rattan (INBAR).”

What we think:

We have been ensuring over recent months that our clients rulings are up to date with the changes and requirements laid out in the 2017 Customs Tariff. We are confident that our clients will, and have, found the transition to the 2017 Customs tariff seamless.

What we advise:

If you have a ruling on a classification we advise you to ensure that it is upheld under the 2017 customs tariff amendments, if you are not sure we highly recommend you contact a customs broker as soon as possible to avoid penalties, fines or worse, holdups of your company’s goods at border crossings.

Here is a great excerpt from our blog Your Broker Knows blog which covers tips on how to correctly classify your goods using the H.S. Tariff:

Key Reasons Why “Getting It Right” Is So Important: (The full article is here: http://bit.ly/2kagZzd)

Let us start with the area that everyone is aware:

  1.   Duty rates: The tariff classification has a direct correlation to the duty rate that you will be expected to pay (and no, it is not a matter of “finding the one that says FREE”).
  2.   NAFTA: This is very important as one of the first steps in determining if goods qualify under NAFTA is to find the tariff classification for the product and to then check under the NAFTA Specific Rules of Origin to determine how the goods might qualify. A common misconception is that products will “automatically” qualify if they are made in Canada, the U.S. or Mexico.
  3.   Anti-Dumping Duty (ADD): If a government decides that they need to protect a domestic industry, they can impose an anti-dumping duty on specific imports. This is also driven by the harmonised tariff classification. Pay close attention to this area as anti-dumping duty rates are always very high – usually double or sometimes triple digit percentages. For a full list of Canadian imports subject to dumping duties visit this link » Goods subject to anti-dumping or countervailing duties
  4.   Exporting to countries other than the U.S. where the shipment value exceeds $2,000.00? You or your freight forwarder will be required to complete a B13A export document (or electronic equivalent), and you will need the eight-digit harmonised system export code or the Canadian 10-digit import code for each product. Once again, export restrictions and permits governed by Foreign Affairs are driven by the tariff classification. The above topics are the primary reasons for determining the correct tariff classification. In addition, we should also include the controls through other governmental agencies, such as the Canadian Food Inspection Agency, Free Trade Agreements with other countries, and also the effects on Canada’s trade statistics.

Remember – If your company’s name is indicated as the importer on any customs documents, you (not your customs broker) are looked upon as the responsible party to ensure all declarations are correct. You may be able to avoid any future problems by getting it right the first time!

What we are reading:2017 Customs Tariff Amendments

The WCO has published the accepted amendments to the Harmonized System (HS) Nomenclature that went into force on 1 January 2017. It includes 233 sets of amendments, divided as follows: agricultural sector 85; chemical sector 45; wood sector 13; textile sector 15; base metal sector 6; machinery sector 25; transport sector 18; other sectors 26.

Link: http://bit.ly/2kI8prv

Along with the announcements and information shared on the WCO website, we are and have been, reading and disseminating the new Customs Tariff Documentation as you can see in this image – all 4 inches thick of it!