Alert to Carriers: U.S. Customs and Border Protection “Changes to the In-Bond Process”

Carriers Highway Sunset

U.S. Customs and Border Protection (CBP) published a final rule entitled “Changes to the In-Bond Process”, which incorporated several proposed amendments to the CBP regulations for shipments traveling in-bond.

Key Changes To The In-Bond Process

  • The paper form of the 7512 form for truck shipments traveling in-bond through the United States from Canada has been eliminated.  All in-bond applications will need to be filed electronically by the carrier or their authorized agent.
  • The maximum standard transit time between ports for truck shipments of in-bond merchandise will be 30 days.
  • Carriers will be required to request and receive permission electronically from CBP before diverting in-bond merchandise from its intended destination port to another port.
  • Carriers will be required to report the arrival and location of the in-bond merchandise within 48 hours of arrival at the port of destination or port of exportation.
  • Additional information on the in-bond application will include the six-digit harmonized tariff number if available.

Key Dates Of The Changes

July 2, 2018

The electronic filing of all new in-bond transactions will be the responsibility of the Carrier or their agent.  The paper form 7512 will not longer be accepted for input into ACE by CBP.

August 6, 2018

Mandatory electronic reporting of the arrival and export functions will be the responsibility of the carrier. In addition, Carriers will be required to electronically report diversion to a port other than the original port of destination .  The bonded cargo location will be required to be reported electronically in the form of firms code. ACE edits will be in place to reject arrival in this is not provided.

No Date Set

No date has been set for the implementation of the provision requiring the six digit harmonized tariff number.

How Do Carriers Meet These New Compliance Measurements?

Carriers can electronically file their in-bond applications, arrivals and export reporting, and diversion request through their ACE secure data portal.  If you do not have an ACE portal account you can find more information on how to secure one by clicking here.

How You Can Get Assistance To File Your Electronic In-Bond Data

If the carrier does not have an ACE portal account and does not want to obtain one, PCB can file the electronic in-bond data for you.  The carrier will need to contact us to get an account established, including a customs power of attorney to allow us to conduct customs business on behalf of your company.

The carrier is responsible for submitting the information regarding arrival, export or diversion requests to us for timely submission to U.S. Customs.

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Canada Announces Commodities Affected By Retaliatory Surtax

Retaliatory Surtax AnnouncedOn June 29, 2018, Foreign Affairs Minister Chrystia Freeland announced which products will receive retaliatory tariffs (also referred to as surtax) upon importation into Canada.

There are three lists of products, the first will receive a 25% tariff and the other two 10% and will remain in place until the U.S. removes the tariffs on Canadian steel and aluminum imports.
The finalized list was created after consultation with the Canadian business community most affected by these additional tariffs.

Which Products Will the Surtax be Imposed on?

The lists of commodities affected appears in the three tables published by the Department of Finance Canada and includes many steel, aluminum and other products including coffee, ballpoint pens, and ketchup.

What Products are Considered Originating from the U.S.A?

The surtax will only be applied to goods that appear in these three tables and are considered originating from the U.S. in accordance with the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations.

How is the Surtax Calculated?

According to the Canada Border Services Agency (CBSA), the surtax is calculated on the Value for Duty and if in addition to the duty rate:

Where the item is duty-free

“The value for duty (VFD) of an imported good subject to a surtax is $150 CAD. The imported good has a Most Favoured Nation (MFN) duty rate of zero percent. The applicable surtax is 10 percent, as per the Schedule to the United States Surtax Order (Other Goods).
The amount of surtax is calculated as follows: $150 (VFD) x 0.10 (per cent surtax) = $15 (surtax payable)” Source

Where the item has duty

“The same imported good is subject to an MFN duty rate of 8 percent.
The amount of customs duties is calculated as follows: $150 (VFD) x 0.08 (rate of Customs duty) = $12 (Customs duties payable)
The amount of surtax is calculated as follows:
$150 (VFD) x 0.10 (per cent surtax) = $15 (surtax payable)” Source

Are There Any Exemptions?

The surtax will NOT be applied to some headings of Chapter 98 of the Customs Tariff including:
  • 98.01 Conveyances or containers of Chapters 86, 87, 88 or 89, engaged in the international commercial transportation of goods or passengers 
  • 98.02 Conveyances temporarily imported by a resident of Canada for international non-commercial transportation 
  • 98.03 Conveyances and baggage temporarily imported by non-residents 
  • 98.04 (other than tariff item No. 9804.30.00) Travellers’ exemptions 
  • 98.05 Goods imported by a former resident of Canada returning to Canada to resume residence
The surtax takes effect July 1st, 2018 and will be applied to all products listed in the three tables originating from the U.S. However, if the goods can be proven to be in-transit before July 1st, they will not have the surtax imposed upon importation. Proof of date of direct shipment must be provided in the form of sales or purchase orders, bills of lading, report of entry and cargo control documents.
If you need assistance or guidance with commodities affected by the new surtax, please contact us to speak with a trade advisor for expert advice.
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Is Duty And Surtax The Same Thing?

Duty and Surtax
Many consumers and importers are confused with the current discussion on duty and surtax being imposed on goods imported or exported.
An import duty is a tax collected on imports by a country’s customs authority. It is based on the value, the classification, and origin of the goods in the tariff administered by the importing country.
Import duty has been referred to as a customs duty, a tariff, an import tax, and an import tariff. All these names apply to the same thing: duty. However surtax is different.
To make the differentiation between the two, you must first understand duty as it relates to the Country of origin and Free Trade Agreements.

How Country of Origin Determines Duty

Rates of duty can differ depending on where the goods were made and that specific country’s trade relation status with the country from where the goods are being imported. As an example, Canada has many trade agreements with other countries which would affect the tariff or duty applied to specific goods imported into Canada, such as the North American Free Trade Agreement (NAFTA).
Generally, there is a rate for a developed country and a special rate for a non-developed country.

What is a Surtax?

Surtax is an additional duty or extra duty applied to goods that are already dutiable.  Surtax in Canada is imposed by an Order in Council, which sets out the amount of the surtax, the goods to which it will apply, and normally a duration.
The Canadian government provides a Notice of Intent and or a Notification of the surtax. The notification will identify the rate of the surtax, the goods which the surtax will apply, and the period that the surtax will be collected.  When the period of the surtax is extended beyond the period specified in the Order in Council, the Canadian Government will issue a Notice.

Proposed Surtax Announced May 31, 2018

On May 31, 2018, the U.S. announced the imposition of surtaxes on imports of certain steel and aluminum products from Canada (at the rates of 25% and 10%, respectively).
In response, Canada issued a Notice of Intent to impose a surtax on imports of steel, aluminum, and other products from the U.S. Canada announced that the surtax will take effect July 1, 2018, and will remain in place until the U.S. eliminates its trade measures against Canada.  The surtax will only apply to goods originating from the U.S.

Will NAFTA Eligible Goods Receive the Surtax?

Yes, provided they are on the list of commodities that the surtax will be applied to. This would mean NAFTA eligible goods will remain duty-free, however, they will be subject to the surtax amount.

Will Commodities Eligible for Duty Elimination be Required to Pay the Surtax?

Commodities listed in Chapters 98 and 99 of the Customs Tariff will have the surtax applied upon importation into Canada.
As you can see, many products currently receiving the benefit of duty-free importation into Canada will be subject to the surtax. As the surtax has been proposed on a wide variety of commodities, it is essential to your operations that you understand how your import costs will be affected.
You should determine if they will increase, negotiate with your vendors and seek out alternative sourcing options. Plan A is ideal, but a good Plan B can help you stay ahead of surtax.
  • *If your imported goods are on the proposed list of commodities that may be subject to surtax come July 1st
  • *Alternative options for materials sourcing (alternative countries where you may take advantage of preferential duty rates or Free Trade Agreements)
  • Freight rates from your alternative origins
*Charges may apply.
Jan Brock | Author
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International Trade For Small Business Owners

Trade Bar Graph

E-commerce Trade is Big Business for Small Business Owners

The ability to do business online is creating a platform where businesses of all sizes are engaging in international trade. E-commerce is changing the market dynamics and the value of commerce on a global scale. Trillions of dollars are exchanged globally between businesses. This evolving global market has put a strain on customs agencies and other participating government authorities to efficiently apply their specific rules and laws. Especially those agencies that lack the capacity to manage the growing stream of parcels and packages.

The Challenge for Small Businesses

In addition, small businesses face challenges understanding and complying various international rules and regulations applicable to their commercial imports and exports. This includes lack of expertise to apply the appropriate tariff classification, which may include a beneficial tariff application or a tax benefit.

Trade policies and laws that govern various government rules in international trade are not easy to understand and apply. These laws and rules create pervasive barriers to the layman trader. The World Trade Organization (WTO) has tasked its membership to promote trade facilitation and reduce barriers to small businesses participating in international trade.

Complicated Rules of Trade

The rules of trade are not static and continue to grow in complexity and coverage as countries engage in additional trade agreements across numerous countries. This results in overly complicated systems, documentation and compliance requirements. It is hard to keep up and feel confident that all bases are covered and benefits and tax breaks realized for that small business.

Simplified Importing Processes

Customs agencies are trying to modernize the design and delivery of their specific trade policies so that trade is facilitated for big and small business. However a lot of these changes require legislative reform and the building or rebuilding of electronic systems to include single window applications amongst all applicable government agencies. Countries are at various stages as they progress down this road and even the more advanced countries continue to grapple with these changes and the need to keep up with the growth of global e-commerce.

Canada Border Services Agency (CBSA) and U.S. Customs and Border Protection (CBP) are working towards simplifying the importing process for all trade partners in international trade.  They provide a guide to importers at:

Step-By-Step Guide To Importing Commercial Goods Into Canada

CBP Basic Importing and Exporting

Expert Advice You Can Trust

International Trade is a complicated process for small and medium businesses. Pacific Customs Brokers can assist you with any and all of your trade questions from importing, exporting, transporting and storage. You can receive advice on all of the requirements and benefits applicable to your business, whether it’s importing or exporting.

You can save a lot of headaches and ensure you are compliant with customs, while receiving all of the possible benefits applicable to your goods and your bottom line.

Jan Brock | Author







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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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