Posts Tagged ‘incoterms’


 

Trade Talk | Exploring Customs Brokers and the Supply Chain

Trade Talk | Exploring Customs Brokerage and the Supply Chain

Back in 2013 it was reported by Canadian National (CN) that Six million goods and raw materials cross international borders every single day. Now imagine what is involved in clearing these goods through customs in different countries.

This is where Customs Brokers come into the Supply Chain. Customs Brokers are your translators. We communicate with customs and participating government agencies, vendors, carriers and all other participating parties.  throughout the shipping process, ensuring that all of the proper procedures have been followed.

From televisions and home appliances to custom machinery for large construction projects, we clear thousands of shipments every day. Seven days per week, 24 hours per day, 365 days a year, regardless of the port of entry or mode of transport. It is the Customs Brokers duty to ensure that your shipments in and out of the U.S., Canada, Mexico or any other country are being cleared and managed efficiently.

Trade between the United States and Canada is huge and growing. In 2013, our two-way trade was $606 billion. To put that into context, that’s $1.7 billion a day — or $1.2 million every single minute.

What we know for sure:

 According to WX1130 a popular radio news channel, it is expected that aside from the bi-lateral negotiations with the US on NAFTA, Canadian parties will likely address some of the points in debate at the State level rather than the Federal level. This means that those who are representing impacted interests are getting focus by those who have the ability to ensure minimal negative impact and/or even improved experiences across the Supply Chain.

There are 9 million U.S. based jobs that exist because of NAFTA being in place. If Monday’s meetings between Canada and the U.S. indicate anything, it is that there is willingness and there are channels open to ensuring that those 9 million jobs across the Supply Chain remain unaffected and that more jobs can be created with the incoming infrastructure goals of both these countries.

What we are talking about:

Customs Brokers in Supply Chain

Where does your Broker fit in the supply chain? Well the supply chain in truth can actually starts with either the buyer or the seller – it will also ultimately end with either the buyer or the seller. What is determined at either position will impact the activity and costs within the supply chain.

What most people have traditionally considered “supply chain” actually happens in between these two points, your broker is your asset at each end of the supply chain. So do we extend supply chain to incorporate Customs Brokerage?

When we look at past clients cases our experience would suggest YES to this.

Something as seemingly simple, can create extremely complex issues and unnecessary expense, because at the outset it seems so very simple. Take HS Tariffs or even Incoterms, reclassification or reassignment of one of these codes has saved over 50M for just one of our clients on a mere 5 international shipments.

Incoterms if they are new to you were issued updated in 2010. You can see them here

What are Incoterms®:

What are IncotermsModern-day Incoterms, date back to the creation of the first FOB term in 1812.

Here is a basic explanation of what Incoterms are below and if you want to see the updates made in 2010 you can view those HERE

“A series of three-letter trade terms related to common contractual sales practices, the Incoterms® rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods. Incoterms inform sales contract defining respective obligations, costs, and risks involved in the delivery of goods from the seller to the buyer. However, it does not constitute contract or govern law. Also it does not define where titles transfer and does not address the price payable, currency or credit items.

The Incoterms® rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries. As such they are regularly incorporated into sales contracts worldwide.” ~ 

As you can see here, supply chain is much more than freight forwarding and logistics – because these actions take place in between the buyer buying and the seller selling. For many years now we have been working to expand our client’s understanding of where to best access our value as customs brokers – the customs brokers value is best seen on either end of the supply chain for the buyer or the seller before activating the supply chain in the delivery process.

What we think:

Customs Brokers on Supply Chain

We are thinking about ensuring our readers and customers understand IncoTerms and HS Tariff Codes. Earlier this month we shared an article on HS Tariffs you can review it here, and next week we will sharing a powerful article on Incoterms.

 

What we advise:

Advice on Customs Brokerage and Supply Chain

Engage your customs broker early in the sales process, or early in the buying process to ensure that all parties experience the best trade compliance results both top line and bottom line.

 

Getting this right is money in your pocket – getting it wrong, well that is a loss we don’t want you to experience! 

 

What we are reading:

Reading - Customs Brokers and Supply Chain

Forbes: As an analyst who covers supply chain management (SCM) and procurement practice across industry, I tend to keep my keyboard focused on the disruptive themes that continue to re-define it. That said, if you’re expecting me go on about the unprecedented growth of the SCM solution markets, the accelerated pace of innovation, tech adoption, social change, etc., don’t hold your breath. I can’t, as the data argue otherwise. Too many of us conflate diversification with acceleration. There’s a difference.

Great Suppliers Make Great Supply Chains

Wall Street Journal: Leave it to California growers to find a new way to eliminate the shipping from farm to warehouse. A startup operation near the San Francisco International Airport is trying to turn the warehouse itself into a farm, the WSJ’s Jacob Bunge and Eliot Brown report, eliminating the timing, transportation and preservation strategies that are critical to modern agriculture distribution. Backed by a group of tech entrepreneurs and investors, Plenty United Inc. hopes to begin selling produce soon that they say is bred for local tables rather than for shipping durability. The operation is part of the expanding field of indoor farming made possible by new lighting and other growing technology. Several startups are trying to marry that technology to the consumer push for local goods, and make it economically palatable by slashing logistics costs. Warehouse space isn’t cheap, however, particularly close to urban consumers, and Plenty United will have to nurture more funding to meet its goal of running 60 farms outside major U.S. cities.

Today’s Top Supply Chain and Logistics News From WSJ – WSJ

 
Have our team put a quote together for your projects below:

 

When topics as broad as free trade re-negotiations, tariff amendments, any type of international border barriers to business are being discussed many of us want to be the fly on the wall that hears the discussion. We try to be that fly on the wall for you, our valued readers.

We know that you also want to know how to have your voices heard in that discussion, especially when you are directly affected.

One way to share your voice is to publish your concerns, insights, ideas or expertise online. Each week we publish and share industry news, our insights and reports that impact you as our readers. Do you have something that you would like us to share? Ask? Research for you? Let us know and we will add your requests to our weekly research and publishing goals.

Trade Talk – HELP! “I’ve been chosen for a (CBSA) Trade Compliance Verification Audit!”

Canada Border Services Agency (CBSA) Verification list 2017 is out – Are you an importer of these items?

As an Importer of goods into Canada, you may one day be faced with a terrifying reality of being chosen for a Canada Border Services Agency (CBSA) Trade Compliance Audit. You may wonder what your next step should be.

Step 1: Breathe, it may not be as bad as you think. Contact your customs broker and discuss the situation. They will guide you through this process. You are not alone.

Step 2: Understand how an audit works.

The CBSA uses Post Release Verification Audits as a tool to measure trade compliance with the various CBSA programs.  Typically a trade compliance audit will focus on one of three major programs, Tariff, Origin or Valuation.  In all cases, there are two processes by which your company may be chosen for an audit.  

  1. Random Verifications – These verifications are typically focused on the type of goods being imported, the country of origin of the goods, the relationship between the purchaser and the seller, etc.   
  2. Targeted Verification Priorities – Targeted verifications are determined through a risk-based assessment.  A list of verification targets is typically issued by CBSA in January and July of each calendar year.  Each list will carry new items to be verified for compliance with tariff, origin and valuation, and, there will be some items that carry over from previous calendar years.

The January 2017 Trade Compliance Verification Priorities can be found at the following link:

http://www.cbsa-asfc.gc.ca/import/verification/menu-eng.html

 

CBSA Verification Audit

 

 

Step 3: Educate your team.

Trade Compliance Education:

Pacific Customs Brokers aims to keep importers and exporters informed on changing customs regulations while educating them on the consequences of non-compliance. Whether you are new to importing, exporting or are seeking training on the movement of international goods, our trade compliance program will aim to match your needs.

Related blog post: 7 Excellent Reasons to Invest in Trade Compliance Education

 Trade Advisory Services:

If your company is chosen for a Trade Compliance Audit or Verification Audit, Pacific Customs Brokers is here to help.  Please contact our office as soon as you are notified of your audit, and one of our Certified Trade Compliance Specialists will work with you to guide your business through the audit process.  It is very important that we be brought in right at the beginning to ensure that we can represent your best interests with CBSA to mitigate the impact of any additional duty, penalties or interest that may otherwise be payable.

Our trade advisory services include but are not limited to:

  • Thorough HS database review with ongoing updates
  • Current industry training and education to review transactions completed by customs brokers thereby minimizing errors
  • Experienced counsel on valuation and origins
  • Strategic advice on withstanding a customs audit
  • Firm support through the challenges of the audit process

For more information about our trade compliance audit services, contact us today or learn more at Canada Customs Trade Compliance.

 

Do you have questions about CBSA’s   trade compliance verification priorities? Use the comments section below to leave us your thoughts or email Ask Your Broker .

Video: Drop Shipping, Part 2 – Using Incoterms® to Your Benefit

Part two of three, in this video you will explore ‘International Commercial Terms’, commonly referred to as Incoterms®. You will also learn about terms like Delivered Duty Paid (DDP), Cost Insurance and Freight (CIF), Free on Board (FOB) and Ex Works (EXW) and detail the responsibilities and obligations of a buyer.

 

Incoterms® – International Commercial Terms

International commerce is governed by a set of terms known as International Commerce Terms, or Incoterms®.

Established by the International Chamber of Commerce, the Incoterms® assign responsibilities to both the buyer and the seller throughout the international transaction thereby eliminating uncertainties and avoiding costly misunderstandings by clarifying the tasks, costs and risks involved in delivery of the goods from sellers to buyers.

Originally published in 1936, the latest set came out in September of 2010 and took effect on January 1, 2011.

 

Benefits of Incoterms®:

  • Incoterms® help determine how prices and risks are designated between the importing buyer and the exporting seller with respect to shipping of products.
  • It lets shippers take shipment transport cost and risk responsibility in hand when it benefits them most.
  • They help improve supply chain performance by avoiding the confusion created by varied interpretations of the rules in different countries.
  • The understanding and the proper use of applicable Terms of Sale may make the difference between future success and failure.
  • Understanding Incoterms® and their implications to your business transactions is crucial, especially with regard to import or exports of goods.
  • You determine your financial and commercial fate when you manage your Terms of Sale.

 

Responsibilities and Obligations of a Buyer:

To begin with, you will need to determine how involved you want to be in the process of getting the goods from source to destination and how much information you want the seller to see.

Below is a list of terms that provide the least obligation to terms that provide maximum obligation:

1. Delivered Duty Paid (DDP)

Delivered Duty Paid places the entire obligation on the seller to deliver the goods to the final destination. This can be useful if you want to avoid all obligation and are delivering goods to a third party warehouse from where you will fulfill your sales. This term implies that you have no logistics team in place and is not a good model if you intend on having the goods shipped directly to your client as you are essentially handing your supplier a sales lead on a golden platter.

2. Cost, Insurance and Freight (CIF)

This is one of the most commonly used terms. Basically, the seller is responsible to deliver the goods to a named destination port where you will then clear customs and arrange for delivery to your client. Under this term you will need to have a good logistics network in place consisting of a Customs Broker to clear the goods and a local freight forwarder to deliver the goods once they arrive. Since you arrange the details once the goods arrive, you keep the seller at an arm’s length from your client.

3. Free on Board (FOB)

Assuming more control and obligation, Free on Board or FOB is a classic maritime trade term where the seller is obligated to deliver the goods cleared for export to the named conveyance of your choosing. In this model you assume the obligation of arranging transport from the foreign port of lading all the way through to the final destination. Under this term you will need a logistics network consisting of an international freight forwarder to arrange the transport and a customs broker to clear the goods once they arrive.

4. Ex Works (EXW)

Maximum obligation comes with the terms of Ex Works, which places full responsibility on the buyer to arrange transport from the seller’s premises, clear the goods for export and then clear customs and deliver the goods to the final destination. This is usually used by multi-national companies with many locations and a sophisticated logistics network and not a very good choice for drop shipping.

 

As you can see there are many choices to consider when negotiating the terms of sale. More obligations also mean more control, so you need to decide how much effort you are willing to spend before you buy. The last equation to figure out is duties, taxes and clearing customs.

In our next blog post we will take a look at Leveraging Free Trade Agreements and Non-Resident Importing in Drop Shipping.

Watch the rest of this series:

Related Blog Articles:

 

Have you had experience with drop shipping? Why not leave us your comments or questions below or email Ask Your Broker.

 

Drop Shipping, Part 2 – Using Incoterms® to Your Benefit

CrosswordOfGlobalTrade-600In my previous blog post, I reviewed the benefits of drop shipping. As previously noted, with the expansion of global trade it has never been easier to find sources for goods worldwide and then sell directly to your clients. That being said, before you embark on this journey, you will need to know the rules of international commerce. That is where Incoterms® come in.

 

Incoterms® – International Commercial Terms

International commerce is governed by a set of terms known as International Commerce Terms, or Incoterms®.

Established by the International Chamber of Commerce, the Incoterms® assign responsibilities to both the buyer and the seller throughout the international transaction thereby eliminating uncertainties and avoiding costly misunderstandings by clarifying the tasks, costs and risks involved in delivery of the goods from sellers to buyers.

Originally published in 1936, the latest set came out in September of 2010 and took effect on January 1, 2011.

 

Benefits of Incoterms®:

  • Incoterms® help determine how prices and risks are designated between the importing buyer and the exporting seller with respect to shipping of products.
  • It lets shippers take shipment transport cost and risk responsibility in hand when it benefits them most.
  • They help improve supply chain performance by avoiding the confusion created by varied interpretations of the rules in different countries.
  • The understanding and the proper use of applicable Terms of Sale may make the difference between future success and failure.
  • Understanding Incoterms® and their implications to your business transactions is crucial, especially with regard to import or exports of goods.
  • You determine your financial and commercial fate when you manage your Terms of Sale.

 

Responsibilities and Obligations of a Buyer:

To begin with, you will need to determine how involved you want to be in the process of getting the goods from source to destination and how much information you want the seller to see.

Below is a list of terms that provide the least obligation to terms that provide maximum obligation:

1. Delivered Duty Paid (DDP)

Delivered Duty Paid places the entire obligation on the seller to deliver the goods to the final destination. This can be useful if you want to avoid all obligation and are delivering goods to a third party warehouse from where you will fulfill your sales. This term implies that you have no logistics team in place and is not a good model if you intend on having the goods shipped directly to your client as you are essentially handing your supplier a sales lead on a golden platter.

2. Cost, Insurance and Freight (CIF)

This is one of the most commonly used terms. Basically, the seller is responsible to deliver the goods to a named destination port where you will then clear customs and arrange for delivery to your client. Under this term you will need to have a good logistics network in place consisting of a Customs Broker to clear the goods and a local freight forwarder to deliver the goods once they arrive. Since you arrange the details once the goods arrive, you keep the seller at an arm’s length from your client.

3. Free on Board (FOB)

Assuming more control and obligation, Free on Board or FOB is a classic maritime trade term where the seller is obligated to deliver the goods cleared for export to the named conveyance of your choosing. In this model you assume the obligation of arranging transport from the foreign port of lading all the way through to the final destination. Under this term you will need a logistics network consisting of an international freight forwarder to arrange the transport and a customs broker to clear the goods once they arrive.

4. Ex Works (EXW)

Maximum obligation comes with the terms of Ex Works, which places full responsibility on the buyer to arrange transport from the seller’s premises, clear the goods for export and then clear customs and deliver the goods to the final destination. This is usually used by multi-national companies with many locations and a sophisticated logistics network and not a very good choice for drop shipping.

 

As you can see there are many choices to consider when negotiating the terms of sale. More obligations also mean more control, so you need to decide how much effort you are willing to spend before you buy. The last equation to figure out is duties, taxes and clearing customs.

In our next blog post we will take a look at Leveraging Free Trade Agreements and Non-Resident Importing in Drop Shipping.

 

Have questions on Incoterms®? Leave us your comments or questions below or email Ask Your Broker.

 

Related Blog Articles:

 

AMPS – How Would This Affect Your Bottom Line?

Loonie

What does AMPS mean?

If you are an importer and exporter of goods into Canada, it is in your best interest to know what AMPS are.   Administrative Monetary Penalty System (AMPS) are monetary penalties issued by Canada Border Services Agency (CBSA) to ensure customs compliance. Both imports and exports of goods are subject to AMPS.

Carriers, importers, exporters and customs brokers (and many others that deal   with the Customs Act and Customs Tariff) are all held accountable on errors and can be subject to costly AMPS penalties. The penalty can be anywhere from $100.00 to $25000.00.  Another term for a “mistake” is non-compliance or an even scarier term — Contravention.

Customs compliance has become one of the new buzz words in the last ten years in the Transportation Industry.   Judging by the amount of penalties that have been assessed over the years, it is in your best interest to make sure you are compliant when it comes to   importing/exporting goods. The other buzz word is “Reason to Believe” and that means if you think you made a mistake fix it and fix it as soon as possible.

Recently, the Canadian Society of Customs Brokers(CSCB) sent out one of their regular emails and this one was on AMPS Statistics. Are you ready to be shocked?

This is for the period of July 2008 to June 2011:

  • during this period, the total number of penalties issued was 93,808;
  • during this period, the total value of penalties was $21,371,433.94;
  •  importers continue to have the highest number of penalties assessed;
  • the penalty amount assessed against importers is twice that of carriers and six times that of warehouse operators;
  • the penalty assessed the most often was C082 (27,785), followed closely by C353 (27,443); and
  • the contravention for which the highest amount was assessed is C358 ($2,043,846.18).

Code Definitions & Penalties:

  • C082: Authorized person failed to make the required corrections to a declaration of tariff classification within 90 days after having reason to believe the declaration was incorrect (penalty range $150 up to $450 per instance).
  • C353: Authorized person failed to pay duties as a result of required corrections to the declaration of the value for duty within 90 days of reason to believe the declaration was incorrect (penalty range $150 up to $450 per instance).
  • C358: Person removed goods from a Customs Office or Sufferance Warehouse prior to release or authorization by an officer (penalty range $1000 up to $4000 per shipment).

We suggest that you cross your t’s and dot your i’s to ensure compliance with Canada Customs and Other Government Departments (OGDs) when you import and export.

To learn more, attend as many Trade Compliance Seminars as possible. It is also a cost effective way to train new logistics employees. Not only will you gain the trade knowledge needed but you can rest easy that you are staying informed with the ever changing regulations with Customs and other government departments.

Be prepared because if not,   you can lose your ability to import. Remember importing is a privilege not a right.