Import Misconception #25: Customs Inspections End at the Border


Truck Highway Sunset

You’ve had your goods released by CBSA and paid the duties and taxes. Are you free and clear from Customs inspections?

The short and quick answer is, not yet. The CBSA will verify and adjust commercial importations for origin, value for duty, or tariff classification for up to four years after importation furthering customs inspections.

What are Customs Adjustments?

If the CBSA adjusts your accounting document, they will issue a Detailed Adjustment Statement (DAS) that will outline the adjustment to you (the importer) and allow up to 30 days for you to pay any duties and taxes owing.

If you discover any errors in the accounting document after the fact and before the CBSA makes any corrections, you must correct the information within 90 days of discovering the error even if it is revenue neutral.

You must keep all records pertaining to your importations for six years following the importation of the goods, plus the year of import.

In addition, the CBSA uses Post Release Verification processes to manage trade compliance. These processes focus on tariff classification, valuation, and origin.  The CBSA Trade Division may choose an importer for an audit by one of two methods:

Customs Audit Methods

1 | Random Verifications

Random Verifications are chosen randomly to measure compliance with a specific company or commodity. The risk assessment may or may not be revenue based.

2 | Targeted Verifications

Targeted Verifications are risk based and announced by CBSA twice a year. Some verification priorities carry over from year to year with new priorities added. The January 2018 Trade Verification Priorities can be found at the following link: http://www.cbsa-asfc.gc.ca/import/verification/menu-eng.html

How to Stay Compliant After Import

Your importation responsibilities do not end with the payment of duties and taxes. The best practice is to make sure you and your company are in compliance with current CBSA trade regulations. However, if you get it right to begin with, you mitigate your risk moving forward. Educate yourself and your team.

Pacific Customs Brokers informs importers and exporters of the ever changing CBSA regulations while also educating how to stay compliant with customs. Whether you are new to importing or seeking training on the movement of international goods, our trade compliance team will match your needs.

Have questions regarding compliance? Reach out to a Trade Advisory today!

If your company is chosen by CBSA for verification process or audit, the experts at Pacific Customs Brokers can assist you through the audit process. Contact our Trade Advisory Team today to have a knowledgeable, experienced and skilled expert on your side.

Jan Brock | Author

 

 

 

 

 

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Flowers, Wine and Diamonds, Oh My | Valentines at Customs


Red Paper Hearts

Flowers, wine and diamond jewelry are just some of the more popular items to give this time of year. A very large percentage of these items are imported into Canada. With that in mind, let us take a look at where these items originate, the import process and the many supply chain partners that have a hand in getting them into your shopping cart.


How to Import Flowers

According to Statistics Canada, Canadians imported 11.1 million dozen roses for a total cost of $71.7 million dollars in 2016; the majority of which originated in Colombia and Ecuador.

Flowers fall under the category of agricultural goods and are regulated by the Canadian Food Inspection Agency (CFIA). The CFIA is charged with protecting Canada from invasive species of flora and fauna. They work collaboratively with Canada Border Services Agency (CBSA) to review incoming importations of all agricultural products, with a scrutiny of particular commodities that have a high chance of harbouring pests.

Want to know what other goods are subject to
Other Government Department Inspections?
Check out our handy guide here.

To import flowers into Canada you would follow these steps

  1. Consult the Automated Import Reference System (AIRS) for the import requirements for your commodity. This will tell you if the flower is approved for import, the conditions of import, and any additional instructions, such as the requirement for a phytosanitary certificate.
  2. If the import is showing as refused entry in AIRS, review the Pests Regulated by Canada database to determine if a common pest on your flowers would require them to undergo a pest risk assessment.
  3. Review your tariff classification and valuation to ensure they are correct. In the case of flower bouquet, there are different rules for when different flower types form a bouquet. Additionally, if the flowers traveled through the U.S. from offshore, the valuation will need adjustments to account for those handling costs.
  4. Have your customs broker provide CBSA and CFIA a pre-arrival notification via import declaration and all required certificates prior to arrival at the port of crossing.
  5. Wait for a release determination from CBSA in coordination with CFIA.

Alternatively, you can contact us and we will go through these steps on your behalf and present to you the final determinations of what is required.

International Flower Delivery

Like many perishable items, flowers require special shipping due to their delicate nature. They must be packaged to not damage the fragile petals or stems. They must also be kept at a cool temperature so they do not fully bloom or spoil before reaching their destination. Additionally, they must reach their delivery point before their beauty fades past the point of being a desirable item to purchase.

Flower Supply Chain Partners

Below is a list of all those that played a role in getting your beautiful bouquet to you:

  • Grower
  • Distributor
  • Purchaser
  • Importer
  • Carrier
  • Customs Broker
  • Freight Forwarder
  • The Flower Shop

How to Import Wine

Here is an interesting fact for those who favor wine over flowers: 481 million liters of wine were sold in Canada, 75.7% of which was imported in 2015.

Although Canada has a robust and impressive selection of local wineries, some still prefer to drink a variety from other countries. In those cases (no pun intended) the wine must be imported into Canada.

Wine is considered an intoxicating liquor that is subject to the Importation of Intoxicating Liquors Act. Under this act, wine must be imported by a “by a board, commission, officer, or governmental agency legally authorized to sell intoxicating liquor.” Each province in Canada has its own liquor board which importers must work with in order to import. This Provincial Liquor Authority must be named the Importer of Record, and the winery must be named the consignee. Authorization from this provincial liquor authority must be obtained prior to import.

Import costs will include Excise Duty and importers are required to have an Excise License.

Shipping Wine

CBSA will place a seal on each shipment of wine imported into Canada. Carriers must not transload these shipment after the seals have been placed unless they are under the supervision of a CBSA officer.

Wine Supply Chain Partners

Below is a list of all those that played a role in ensuring your wine glass is full this Valentines day:

  • Vineyard
  • Winery/Consignee
  • Purchaser
  • Distributor
  • Provincial Liquor Authority/Importer of Record
  • CBSA
  • Carrier
  • Freight Forwarder
  • Customs Broker
  • Liquor/Wine Store

How to Import Jewelry

As for jewelry, Canadian retailers sold 3.6 billion worth of jewelry and watches in 2015. As for diamonds, Canadians imported a value worth $493 million dollars and exported $2.1 million in 2016.

There are a few considerations to make when wanting to import jewelry:

  • What is it?
  • What is it made of?
  • What is the base metal?
  • Is it plated or solid?
  • Does it include ivory, leathers or other parts of animals or plants  that may be regulated by Convention on International Trade in Endangered Species of Wild Fauna and Flora
  • CITES? Think watches with ivory faces.  A CITES is then required.
  • Does the item include diamonds? If those diamonds were imported already cut, polished and ready to be mounted, there are no additional import steps. However, if those diamonds were imported unprocessed, as with the case of Kimberly Rough Diamonds,special regulations as laid out in Memorandum D19-6-4 must be followed.

Shipping Jewelry

Jewelry benefits in this area because of its size. No matter the value, the size is generally small and therefore the shipping cost is low.

However, consideration of valuation for insurance purposes must be made. To lose a $10 thousand dollar engagement ring in transit would be a hard thing to discuss with your partner!

Packaging also plays an important role. Although made of metal and stone, jewelry is very delicate. Shippers must ensure that the packaging can withstand the tribulations of transit.

Jewelry Supply Chain Partners

Below is a list of all those that played a role in getting that sparkly ring on your finger or watch on your wrist:

  • Diamond Mine
  • Consignee
  • Purchaser
  • Distributor
  • Importer of Record
  • CBSA
  • Carrier
  • Freight Forwarder
  • Customs Broker
  • Jewelry Store

This Valentine’s Day, when you are shopping for those special people in your life, take a moment to appreciate all of the people in the supply chain who jumped the regulatory hurdles and danced the shipping tango to get your precious item to you. Leave your love letters to those supply chain partners in our comment section below. Happy Valentine’s Day <3

Lisa Stevenson Marketing Coordinator Pacific Customs Brokers


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Sources

“Report – Trade Data Online.” Report – Trade Data Online – Import, Export and Investment – Innovation, Science and Economic Development Canada, Government of Canada, www.ic.gc.ca/app/scr/tdst/tdo/crtr.html?timePeriod=5%7CComplete%2BYears&reportType=TI&hSelectedCodes=%7C7102&searchType=KS_CS&productType=HS6¤cy=CDN&countryList=ALL&runReport=true&grouped=GROUPED&toFromCountry=CDN&naArea=9999.

Canada, Government of Canada Statistics. “Valentine’s Day… by the numbers.” Government of Canada, Statistics Canada, 29 Sept. 2017, www.statcan.gc.ca/eng/dai/smr08/2017/smr08_213_2017.

Government of Canada, Canada Border Services Agency. “Memorandum D3-1-3 – Commercial Importation of Intoxicating Liquors.” Government of Canada, Canada Border Services Agency, 25 May 2017, www.cbsa-asfc.gc.ca/publications/dm-md/d3/d3-1-3-eng.html.

 
 

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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What is the Value for Duty on Rescue Puppies: A Customs Valuation Case Study


Customs Valuation on Rescue DogsWhat is the value of a rescue puppy? What a silly question… man’s best friend is invaluable! Those cute bundles of happiness that greet you each day with a wagging tail and eagerness to go outside are a part of our family. However invaluable our four-legged companions may be to us, Customs needs a Customs valuation also known as value for duty (VFD) placed on them when importing into Canada. Therefore in this blog, we will take a closer look at a recent import we completed on some rescue dogs from Idaho.

 

Nothing is free in the eyes of Customs. To determine the value of seemingly free, invaluable or complimentary items, you must use one of the 6 Methods of Determining Customs Valuation.  This blog post explained the methods must be ruled out, one-by-one, beginning with transaction value.

 

What are the 6 Methods of Valuation?

The six methods are:

 

  1. Transaction Value: The value for duty is based on the price paid or payable
  2. Transaction Value of Identical Goods: The value for duty an established value for duty of identical goods
  3. Transaction Value of Similar Goods:The value for duty an established value for duty of similar goods
  4. Deductive Method: The value for duty on the most common selling price (per unit) of the goods sold to Canadian Consumers
  5. Computed Method: The value for duty is the cost of production, profit, and general expenses
  6. Residual Method: Used when none of the above will do

 

How to Value Free Goods

When we received the call from our client who was wanting to import a family of dogs from a U.S. shelter that could no longer keep them, we rose to the challenge. We were under a time limit to determine the value for duty as the shelter in Idaho was running out of space.

 

As previously mentioned, with items like samples, replacements, warranty items, short-shipped goods, importers are required to declare a fair market value, even if in the end payment of duties and taxes may be unnecessary. But was the value for rescue puppies the same?

 

In the case of the puppies, Canada Border Services Agency (CBSA) has a specific D-Memorandum on how to come to a correct value for duty.

 

Transaction Value Method

It states that the Transaction Value method should be used. Now, you may wonder, ‘how can it be used when there is no transaction taking place?’, Well, there is. CBSA states that:

 

“Where goods are sold for export to Canada, to a purchaser in Canada, and the price paid or payable (PPP) of the goods can be determined, the transaction value method is to be used to determine the VFD. The PPP is defined as all of the payments made or to be made by the purchaser to or for the benefit of the vendor.”

 

Some of those payments would be:

 

  • Adoption fee(s)
  • Veterinary charges
  • Foreign permits
  • Any other costs associated with exporting the animal from the U.S.
  • Permits acquired in Canada
  • Veterinary charges paid in Canada

 

Transaction Value of Identical or Similar Goods Method

If any of the above costs were not incurred, CBSA states that :

 

“If no money is paid by the importer to acquire the rescue animal, the VFD must be determined using an alternate valuation method. No VFD shall be determined by arbitrary or fictitious amounts.”

 

In looking at our 6 Methods of valuation, and knowing that they must be ruled out one-by-one, starting with Transaction Value, if Transaction Value cannot be used, the next option must be Transaction Value for Identical then Similar goods.

 

For example, if after this import, our client wanted to import another rescue dog from the same shelter in Idaho, of an identical breed and similar age, but no PPP was in place, the VFD should be the same VFD used in the previous import.

 

Deductive Method

If there is no identical or similar established value for duty,  move down the list to Deductive method.

In this method, you would find an established selling price in Canada for the same breed and similar aged dog. They would then use that figure less the profit earned and costs associated with importing the animal (veterinary costs, permits, etc.) to establish a value for duty.

Questions to Ask Yourself When Determining Value for Duty

The above methodology can be applied to many seemingly ‘free goods’. When looking to import them into Canada, we suggest you ask yourself the following questions. They will help to determine which method you should use:

 

  • Will you be selling the goods to a buyer for a price?
  • If you are not selling the goods, is there a selling price established on an identical or similar item?
  • If you are not selling the goods, and there is no established value for identical or similar goods you’ve previously imported or sold, is there an established selling price within Canada for the same goods?
  • If you are not selling the goods, and there is no established value for identical or similar goods, and established selling price within Canada by another vendor for the same goods, was there a cost to making the item?

 

In this case, the rescue puppies and mom were imported using the Transaction Value Method. The adoption fees, veterinary charges, and permits were added up to establish the value for duty. They have since been adopted and are happy and healthy new additions to Canada.

 

For more information on determining value for duty  or for assistance in Customs valuation, leave us a comment below. We are happy to help.