Archive for the ‘Importing into Canada’ Category


 

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 window cleaner and paper towel he would use to clean his display booth each night is considered a consumable item and would need a declaration for the portion used while he was in the U.S.
  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 would need a bond to avoid paying the entire amount of duties and taxes.

 

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 everything you want to 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.

(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.

The event organizer will often work alongside the IECSP’s Regional Coordinator to ensure all parties are prepared for customs entry. Once CBSA recognizes the event, they will provide a letter of recognition to the event organizers, the customs broker or designated event representatives.

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
  • Goods brought into Canada, their origin and intended use
  • Controlled goods being imported
  • 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

It is important for you to get a copy of the letter of recognition to ensure your entry process at the border is smooth.

(7) Time Limits

Some imports must be exported within a certain time frame. Take note of the entry date to make sure you do not go past expiry. For instance, the IECSP requires 15-30 business days notice in order to help you prepare for the customs clearance. If the request is made with less than 15 business days it is up to the IECSP’s Regional Coordinator to decide whether or not to provide a letter of recognition.

 


Trade Show Importing into the U.S.

Is Your Import Duty Free?

Souvenirs, branded paraphernalia and advertising materials are eligible to be duty free if they can be applied to a Free Trade Agreement. Office machines and equipment can be duty free if they enter under a Temporary Import Bond (TIB). For commercial samples and apparel samples, they can enter the country duty free if their value is less than $1.00 USD. For anything over $1.00 USD, to be considered duty free, customs must modify the goods to the point where they are unsuitable for resale. This is done by marking, tearing, perforating, gluing, or otherwise altering the goods.

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 souvenirs, branded paraphernalia, advertising material, and commercial/apparel samples. For office machines and equipment where the duty is above $100.00 USD you would be best suited to import under a Temporary Import Bond. Keep in mind Temporary Import Bond items must be exported within 12 months of entry.

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?

Souvenirs are duty free if a Free Trade Agreement can be applied. Branded paraphernalia is duty free as long as it is exported back with you. Office machines and equipment, as well as, display goods are duty free if they are exported within 18 months. For advertising materials, most paper goods are conditionally duty free, any other materials must be applicable to a Free Trade Agreement. Finally, commercial samples and apparel samples are duty free.

Is Your Import GST Exempt?

Souvenirs and advertising materials are not exempt. Branded paraphernalia is exempt if it is exported. Office machines and equipment are GST exempt. Commercial samples and apparel samples are GST exempt if only one of each is displayed or if the samples are clearly not for resale. Finally, display goods are exempt as long as they are exported within 6 months.

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.

 

 

 

How NAFTA Negotiations Affect You

 

 

 

 

 

 

Do the NAFTA Negotiations Really Affect You?

If you are engaging in cross-border trade and investment you need to stay informed on the recent news in NAFTA negotiations and other trade agreements with Canada;

  • Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA)
  • Trans-Pacific Partnership (TPP)

This week marks the start of the 5th round of NAFTA talks in which Mexico, the U.S. and Canada hope to make considerable progress on the NAFTA text.

For the past 23 years, NAFTA has tied together North America’s economy through predictability, openness, and collaboration.  The creation of NAFTA in 1994 marked the largest free trade agreement in the world. NAFTA removed previous barriers to encourage the flow of goods and labor between the U.S., Canada, and Mexico.

U.S.’s NAFTA Priorities

In 2017 the U.S. is prioritizing employment for American citizens. Along with the renegotiation of NAFTA, the U.S. government withdrew from the Trans-Pacific Partnership (TPP) negotiations. This would have seen 12 of the top economic countries eliminate trade barriers to encourage international trade. The U.S. ultimately decided to withdraw from the TPP to prioritize protecting American jobs.

With the latest rounds of negotiations, the U.S. released a series of what Canadian Foreign Affairs Minister, Chrystia Freeland, considered “unconventional proposals” challenging the 23 years of predictability and collaboration. The two main concerns, specifically highlighted by Freeland are:

  • The auto industry’s supply chain management system
  • The currently enforced dispute-resolution system (Chapter 19)

The U.S. auto-industry has stated that cars containing less than 50 percent U.S. auto parts should be subject to a tariff since this will encourage Americans to buy and sell cars locally. This is a problem for Canada and Mexico because it will affect current supply chains leading to an international disadvantage, as well as a loss of jobs for Canadians and Mexicans.

For the currently enforced dispute-resolution system the U.S. wants to ensure enforcements on disputes are non-binding or voluntary, therefore, eliminating the importance of any future rulings.

The U.S. has been aggressive in the negotiations because they are less dependent on NAFTA than Canada and Mexico. If NAFTA were to fall apart for all three countries, Canadians and Mexicans would lose a substantial amount of jobs and opportunities. However, Canada has leverage as the current largest export market for the U.S. The two nations also have the previously established Canada – U.S. Trade Agreement. Although the agreement is outdated, it does provide a fallback for ongoing trade.

Canada’s NAFTA Priorities

Canada’s priority in the negotiations is to stop the U.S. from implementing tariffs on goods that were previously being traded freely. While the U.S. has prioritized the removal of Chapter 10, which allows foreign access to Government procurement, Canada intends to safeguard it.

Furthermore, Canada is also looking elsewhere to strengthen trade ties. CETA was introduced on September 21st, 2017 and will reduce and in some cases possibly eliminate tariffs between Canada and Europe. These changes will open up new opportunities for Canadians and Canadian business. In November of 2017, Canada and the 11 remaining signatories of the TPP reached an agreement to move forward with the free trade deal.

Mexico’s NAFTA Priorities

Mexico’s priorities in the negotiations are similar to Canada. They want to prevent the United States from placing tariffs on products that are currently being traded freely. The United States imports approximately 80 percent of all Mexican exports. Mexico is the second largest export market for the U.S. As a result, any further complications would encourage Mexico to strengthen its trade relations with other countries.

How NAFTA Affects You?

Changes in trade can be extremely disruptive to your business and investments. Whether NAFTA folds or is successfully re-negotiated is still to be determined. However, one thing is certain, international traders who utilize this trade agreement can expect to see a change in how they trade after a decision on NAFTA is reached.

 

Pacific Customs Brokers is always here to help you stay informed with NAFTA and the ongoing negotiations between the U.S., Canada, and Mexico.

 


Interested in learning more about what Free Trade Agreements your goods might fall under? Leave me a comment below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

De Minimis Increase

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

What is De Minimis Threshold?

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

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

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

De Minimis and the NAFTA Renegotiation

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

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

What is the Case for a De Minimis Increase?

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

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

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

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

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

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

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

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

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

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

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

What Happens Next?

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

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

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

 

 

 

 

 

 

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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.