Archive for the ‘US Customs’ 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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Will CPTPP Impact NAFTA Negotiations?

North America

Prior to the latest NAFTA negotiations, Canada entered into the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In this blog, we look at how this may impact the next round of NAFTA negotiations in late February, early March.

Before the January NAFTA Negotiations

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Canada and Mexico has agreed to the new CPTPP. An international trade agreement between 11 countries the U.S. previously withdrew from on January 23rd, 2017.

With the U.S. adopting a bilateral trade agreement philosophy, while Canada and Mexico have joined the multilateral CPTPP agreement. How will this impact the NAFTA negotiations going forward?

 

New U.S. Duties on Solar-Panels and Washing Machines

Also, the U.S. recently introduced new import duties on solar-panels and washing machines. Solar-panel duties have increased by 30%, while washing machines duties have increased by 50%. The new duty on solar-panels will have a minor impact on Canada and Mexico. The new washing machine duty will only impact Mexico.

 

January’s NAFTA Negotiations: Round Six

Tuesday, January 23rd, Canadian, American and Mexican representatives met in Montreal for the sixth round of NAFTA negotiations. Let us focus on the four main focal points surrounding the latest NAFTA negotiations. Chapter 19, the auto parts industry, the dairy industry and the sunset clause.

Chapter 19: Trade Disputes

The U.S. is looking to eliminate Chapter 19 in the NAFTA negotiations. Currently, Chapter 19 allows for trade disputes between two NAFTA countries to go through an independent third party arbitrator. This prevents Canada and Mexico from having to enter into the U.S. legal review process for anti-dumping and countervailing duties imposed by the U.S. government.

Previous Chapter 19 rulings have favored Canada. Most recently Boeing made a bid to increase import duties by 300% on Bombardier’s CSeries. An independent third party arbitrator, the U.S. International Trade Commission (USITC), voted 4-0 to reject the 300% duty because it did not have a negative impact on the U.S. aircraft industry.

The Auto Parts Industry

With the new CPTPP in place, the NAFTA negotiations are going to feel some extra pressure in the auto parts industry. At the moment, NAFTA allows for 37.5% of a cars parts to come from outside of Canada, the U.S. and Mexico. However, in the new CPTPP agreement, the percentage of allowable foreign composition is 55%. This difference will create a more competitive market for auto parts in Canada and Mexico, while at the same time acting as a disadvantage for Canadian and Mexican companies creating auto parts.

The U.S. is aiming to decrease the percentage of car parts that come from outside of North America to 15%. Translating to more job opportunities for Americans in the auto industry.

Canadians are trying to introduce a line of thinking that auto industry software and other high-tech equipment should be taken into consideration when talking about the net cost of auto parts since a higher percentage of software and high-tech equipment is created and produced in Canada, the U.S. and Mexico. Thus adding to the auto parts percentages.

The Dairy Industry

The CPTPP agreement has also opened up the dairy debate as well. Since there has been a small opening to Canada’s originally closed market, the U.S. wants greater access to Canadian consumers. Currently, if a U.S. dairy farmer was to export milk to Canada, they would face a 270% duty. Eliminating dairy trade barriers would be beneficial to Canadian consumers, but would deal a great blow to Canadian dairy farmers who presently enjoy the benefits of the ongoing trade barrier.

The Sunset Clause

The U.S. also wants to implement a sunset clause. A sunset clause would allow any of the three NAFTA countries to walk away from the proposed agreement after five years. If the sunset clause was to be implemented it would almost certainly mean the end of the current NAFTA agreement in five years, since it would be unlikely for all three countries to be happy with the state of the agreement in five years.

 

NAFTA Negotiations and Trade

Despite all of the uncertainty with NAFTA, trade between the three countries has remained steady and consistent. Everyday airplanes, trains, cargo ships, and trucks transport essentially everything you use daily. If you would like to explore international trade opportunities, give us a call. We can provide you assistance with customs clearance, freight forwarding, trade education and trade advisory services.

 

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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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Why Do I Need an IRS Number When Importing Into the U.S.?

{This post was last updated on August 9, 2017}

You have made your sale, shipped the goods to the U.S. buyer, and the shipment is on its way to the border. And then, without warning, the goods get stopped at the port of entry, and the customs broker for this shipment requests an IRS number. At this point, you are likely wondering what an IRS number is and why it’s needed. To help you understand, let’s dive into this scenario a little deeper.

What is Internal Revenue Services (IRS) Tax Number and Why is it Required?

First off, all goods entering the U.S. from overseas are considered Imports and U.S. Customs and Border Protection (CBP) must approve all Imports for entry. CBP requires documentation which includes shipment details such as the identification of the Ultimate Consignee. An Ultimate Consignee is a person, party, or designee that is located in the U.S. and will receive the shipment (which is usually the buyer of the goods). An Internal Revenue Service (IRS) number, is used by CBP to identify the Ultimate Consignee.

There are two types of IRS numbers:

  1. Employer Identification Number (EIN): Issued to business entities
  2. Social Security Number (SSN): Issued to individuals

 

Without an IRS number, CBP does not know who the Ultimate Consignee is and therefore will not accept the shipment into the U.S.

U.S. Customs states the following.

 

(Source: CUSTOMS DIRECTIVE NO. 3550-079A )

 

Will One IRS Number Cover a Host of Different Goods Sold to One Consignee?

The IRS/EIN or SSN is specific to the Ultimate Consignee as the IRS issues these numbers directly to the company or individual. Therefore, if someone in the U.S. buys a host of products from you, you would declare the IRS number for that buyer on the entry declaration to U.S. Customs.

If you have more than one buyer, then it is best to make a declaration per transaction and declare the IRS number for each buyer in each transaction.

My Shipment DID Have an IRS Number. Why Was it Stopped?

If you run into this scenario, and your import documentation included an IRS number, it could be for one of two reasons. First, the Ultimate Consignee of the shipment had never purchased goods from a foreign party and therefore is not in U.S. Customs database.

Another likely culprit for this delay could be a deactivated account. Deactivation happens when more than a year has passed since the Ultimate Consignee last received an import.  

If the IRS number is not on file or has been deactivated by U.S. Customs, then it will need to be added to their database by filing a Customs Form 5106.

What is a Customs Form 5106?

A Customs Form 5106 is used by U.S. Customs to input the name, physical address, and IRS number of the Ultimate Consignee into their database.  The Customs Form 5106 must be on file for all consignees at the time of entry.

Is a 5106 Required for Every Shipment I Send to the U.S.?

U.S. Customs states that “An importer identification number shall remain on file until one year from the date on which it is last used on Customs Form 7501 or request for services.” This means that as long as the Ultimate Consignee continues to receive goods on a regular basis, this form will only have to be completed once.  If their 5106 importer record is not used for over a year, then they will have to reactivate their number.

How Can I Determine if the U.S. has a Customs Form 5106 on File for the Consignee/Buyer?

Your customs broker can query the Ultimate Consignee information with U.S. Customs and advise you if they have an active 5106 on file.   This is a simple, and proactive step that can save you a lot of hassle.

How Do I File a Customs Form 5106?

If a 5106 is not on file,  you need not worry as your customs broker can supply you with one. You can then ask your buyer to fill it out. One you have received it back from your buyer, you can provide it to your custom broker, who will then submit it to Customs. CBP will then add it to their database.

In summary, if you are selling to U.S. buyers from outside of the U.S. and you are responsible for declaring the goods at the port of entry, you must ensure your buyer has an IRS number. If they do not, work with your customs broker to get one. We are here to help!

 

 

What to learn more about importing into the U.S.?

Get a comprehensive understanding of the process involved with our webinar on U.S. Importing for Beginners [Part 1] (just so you know…it’s free!). Take your learning a step further by attending the U.S. Importing for Beginners [Part 2] webinar and delve into the details previously touched upon in part one of the series.

 

Do you have questions or comments regarding importing to the U.S.? Please leave them in our comments section below and I will be happy to provide an answer.

 

 

 

 

 

How U.S. Customs Determines Your Import Compliance Through Reasonable Care

Image: Best PracticeIf you are importing into the U.S., you will likely undergo a review by U.S. Customs and Border Protection. This review could be in the form of a regulatory audit, either a quick response audit, or focused assessment. During this time, Customs will review your transactions and procedures to determine your import compliance and see if you have exercised Reasonable Care, also known as, “Have you done enough to ensure import compliance?”

What is Reasonable Care

Because U.S. Customs expects that importers be knowledgeable and proactive in the conduct of their regulatory responsibilities, during  their review they will determine the degree in which you have tried to meet these regulations. This is referred to as Reasonable Care.

Example of Reasonable Care

There are some very specific areas that form an importer’s foundation of compliance.  While all as laid out in the U.S.Customs and Border Protection Informed Compliance Manual entitled Reasonable Care, we have briefly outlined a `short list`of specific areas below.

Areas in which importers must exercise reasonable care:

All Transactions

  • Use of external or internal experts
  • Review of all customs documentation, inclusive of entry declarations, for accuracy
  • Practice consistency in same or similar transactions across ports and modes of transport
  • Search for errors and make the appropriate adjustments or Prior Disclosures

Merchandise Description and Harmonized Tariff Classification

  • Having procedures in place to ensure that you are fully knowledgeable of the products you are importing including composition, country of origin, end use etc.
  • Describing the merchandise to Customs according to regulations in a detailed manner
  • Ensuring that you are providing the correct tariff classification of the goods
  • Verification of whether your goods are eligible for specific duty-free status

Valuation

  • Create procedures to ensure accuracy of your declared transaction value, per Customs regulations
  • Ensure that you are declaring the correct values to Customs for any transactions between “related” parties
  • Declare assists, commissions, royalties, etc.

Country of Origin / Marking / Quota

  • Create reliable procedures to ensure correct declaration of the country of origin on your entry
  • Mark all imported articles with the country of origin/manufacture
  • Establish documentation processes to determine and ensure that all necessary documentation at time of entry

Intellectual Property Rights

  • Ensure that you have the legal right to import trademark or copyright protected merchandise

Miscellaneous Questions

  • Ensure to file all Participating Government Agency filings, while using the correct type of entry

It is especially important to document all of the above actions, reviews and approvals thoroughly.

Example of a Lack of Reasonable Care

Now that we understand what Reasonable Car is and what ares of international trade it relates to, let us now look at an example of what not to do. Unfortunately, after an audit has revealed non-compliance, we occasionally hear comments such as “I thought I did everything I was supposed to,” or “My broker never told me to do that.”

In a recent ruling by the U.S. Court of International Trade, a company was found negligent in this area. The importer was unsure of the Tariff Classification for the goods they wanted to import into the U.S. While they did contact a Customs Broker, who provided them with three different classifications in 20 minutes, they took not further action to ensure the information they received was correct. The importer chose to use the classification with the lower rate of duty and conducted no further due diligence.

Mistakes like these can be seemingly ‘harmless’ however, can result in being deemed non-compliant.  In this case it was considered negligence not to use the many resources available to help with tariff classification.

Reasonable Care Resources

And now for the good news! There are so many resources available to you to help you towards your import compliance goals. And what is especially important is that knowledge of, access to and use of are considered part of exercising reasonable care.

  • Experienced third parties: lawyers, accountants, customs brokers and trade consultants
  • Government Resources: CROSS database of CBP rulings, H.S. Tariff schedule, informed compliance publications

Create Internal Processes

Another resource is to create an efficient and compliant import process which starts with everyone involved understanding their role and responsibilities. It is especially crucial that importers:

  • Understand their risks and responsibilities
  • Meet Reasonable Care standards with established processes, and
  • Ensure to monitor and enforce standards therefore safeguarding your continued privilege to import

It is important to note that without having the proper knowledge of the responsibilities of an importer, and ensuring that you are both in compliance and have evidence of your actions, you may be at a higher risk for:

  • Penalties
  • Liquidated damages
  • Various customs audits
  • Increased costs of doing international business
  • Supply-chain disruptions and delays
  • Losing your import privileges

On the other hand, being knowledgeable about the expectations and acting with the expected due diligence, while not guaranteeing that you are not subject to an audit, does assure that you are taking full advantage of allowable reductions in duty.

Why conduct an internal import compliance customs audit?

A thorough internal audit will help identify areas of risk while also helping to lay the foundation for your customs compliance plan.

In conclusion, we encourage you to conduct regular internal audits on your Customs transactions to ensure import compliance. Furthermore, use the Customs guidelines in developing your internal controls and standard operating procedures. 

Do you have questions about conducting an internal customs compliance audit? Leave a comment below.