Archive for January, 2016

How to dispute your courier brokerage bill

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If you’ve paid duties and taxes on a shipment only to realize later, its not too late to obtain a refund. Generally, if the invoice is less than 30 days old, you should be able to obtain a refund directly from the courier company. If the error is because of duty or because no NAFTA was applied, you can file a claim up to one year later directly with the CBSA; more info here.

Here are the top 5 reasons for claims:

  1. PST/HST/QST collected on a commercial import: if you are importing for a business you are only required to pay GST on your importations into Canada. You can apply to the courier to have the balance remitted to you by providing your business number. We recommend always supplying your business name when ordering supplies to avoid this problem recurring.

    Even if you've already received your shipment, its not too late to get a refund

    Even if you’ve already received your shipment, its not too late to get a refund

  2. Tax collected on returning goods: goods returning to you for repair should be cleared tax-free under the ‘goods once duty paid’ or ‘Canadian goods returning’ tariff heading. Note that you may need to provide evidence that the goods are returning to you.
  3. Incorrect classification: major couriers are known for their errors in filling out customs forms. Their classification clerks are inexperienced and often apply an incorrect HS code that will result in more duty paid than is necessary.
  4. Incorrect origin: for any items manufactured in the U.S. or Mexico, no duty should apply.
  5. Goods returned to sender: if you returned your goods to the sender as they were defective, please see this article here as a claim must be made directly to the CBSA.
  6. Brokerage charges ridiculously high: this is a common complaint. We have successfully obtained refunds for our clients where improper authority was obtained by couriers by stating this in the dispute, so we recommend trying this.

Here is the clearance dispute form for FedEx.

 

Trade Compliance Verifications List 2016: Could you get audited?

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Ambiguous tariff lines can lead to incorrect classifications, with a major price tag down the road if not corrected early

Ambiguous tariff lines can lead to incorrect classifications, with a major price tag down the road if not corrected early

Twice a year the CBSA publishes a Trade Compliance Verifications list. This list enumerates items that the CBSA is most likely to target. Customs decides to screen these items carefully because they are commonly misclassified.

How do improper classifications get released? Many items in the Customs tariff exist in a grey area which can leave room for classification in more than one heading, often with a large difference in duty owing. Many importers profit temporarily from the ambiguity, only to get audited down the road once Customs notices the missing revenue.

The Trade Compliance Verification list is a snapshot of where Customs is seeing lost revenue from years prior. It is also a heads up to encourage voluntary compliance before any audits begin. Classifying furniture as non-domestic is a good example of this:

“Headings 94.01 (Seats) and 94.03 (Other furniture and parts thereof) classify furniture for domestic purposes or other furniture for non-domestic purposes. The risk identified is that goods may be misclassified as furniture for non-domestic purposes, which is duty-free, instead of furniture for domestic purposes, which attracts a duty rate of up to 9.5%.”

The logic behind most duty rates is to encourage business and production (i.e. making office furniture for new companies duty-free) while taxing consumption on deemed luxuries (i.e. high duty rates on leather sofas). Drawing the line between commercial and domestic can be a difficult argument these days, but for Customs there is little ambiguity: a non-domestic chair belongs in an office, clearly indicated by its style and purpose. What is Customs take on trendy start ups filling their offices with bean bag chairs? We don’t know. An item can only have one correct classification as determined by the 5 General Rules of Interpretation, and the result is often arbitrary. For polemic cases, importers can take their cause to the CITT, which keeps a record of all classification challenges.


If you recognize any of the items on the list as products you typically import, don’t sweat too much. Due to the high cost of auditing, The CBSA encourages voluntary compliance so most penalties can be avoided. Call your broker and review any importations from the past six years to ensure they were classified properly. Claims can be filed for any errors, although you will remain responsible for any back duty.

Another good example of a likely misclassification is the Gazebo:

“The risk identified is that gazebos could be misclassified as pre-fabricated buildings, which attracts a duty rate of 6% under the Most-Favoured-Nation Tariff (MFN) and is duty-free under the General Preferential Tariff (GPT). The goods may be properly classified as structures of aluminum under tariff item 7610.90.90, which attracts a duty rate of 6.5% (MFN) and 5% (GPT).”

If you are a frequent importer, you should take a look at the Trade Compliance Verifications list when it comes out and make sure to bring it to the attention of your broker if you usually purchase one of the items listed. Click here to view this year’s list.

Top 5 Misconceptions about Customs

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Goods are kept in privately owned ‘sufferance’ warehouses rather than on Customs premises

Our service team has compiled the below list of most frequent misconceptions regarding Canada Customs that we typically hear. Given the breadth of the supply chain in Canada, that the CBSA’s practices remain shrouded in confusion is not surprising.

1. Customs ‘has’ your goods

Customs, only in rare cases, will take physical control of any imports. The CBSA has limited warehouse space for the massive amounts of imports the country receives daily, and instead retains control of these imports by licensing sufferance warehouses to store the imports until the CBSA approves them for release. These warehouses are strictly controlled and are not allowed to remove imports from their centres until the CBSA’s assent is given. While it remains technically true that Customs is controlling your goods, they do not have them in their possession 99% of the time. The other 1% would be when goods are delivered to Customs locations for examinations.

2. Customs is examining your shipment because they think you are importing contraband

Drug enforcement is a relatively small part of the CBSA’s mandate. Much more common in the world of commercial importing is undervaluation or fraud. If the CBSA has pulled your shipment for inspection, it is more likely due to suspicions about lost revenue (i.e. the price declared for your goods is lower than what was paid, hurting tax collection and the domestic economy). Other non-drug related inspection reasons include contaminated products, those containing soil, or illegally marked goods. Scientists believe that many invasive species were imported into Canada, a major reason for the CBSA’s skeptical exam policies.

While most exams delay the delivery of an order by one or two days, the efficiency with which the CBSA performs the task is impressive. As annoying as it is to have your shipment inspected, please pause and consider the potential environmental or economic damage the Agency may have prevented. In most cases, the importer has no idea that their shipment has been undervalued by the shipper or infested at origin until a CBSA inspection.

3. Goods made in the USA are exempt from tax because of NAFTA when brought into Canada

This is a popular myth. Unfortunately for importers (but fortunately for Canadian retailers) the NAFTA agreement only eliminates duty on items manufactured in the USA and does not affect the collection of GST. Duty and GST are distinct taxes and NAFTA only renders goods duty-free. In many cases, while the goods passed through some American labour, they do not even meet the strict requirements of NAFTA to qualify as duty-free. So for all its notoriety, the NAFTA has done nothing for you in this case.

Why does NAFTA not affect GST? It would be a huge advantage to American retailers to do so since Canadian sellers must still collect tax on all sales. The NAFTA is less and less important in today’s world because duty rates have been disappearing since the early 1990s. At the time of its negotiation, duty rates were hurting job growth in Canada, inspiring Brian Mulroney to lock the country into a three-way trade deal.

4. I need a NAFTA filled out to ship my product

This is not true although many transporters will ask for one to be completed before they ship your order. The NAFTA may save you money on duty but is never required. So long as you do not care about paying duty, you are free to arrange shipment of your goods. See answer number 3.

5. I can use my Canadian broker to import goods into the USA

This one catches a lot of companies off guard. Customs brokers can only be licensed in one country and cannot clear goods into any other country but their own. Many Canadian brokers circumvent this problem by setting up subsidiaries in the USA. So while your Canadian broker can clear your goods into the USA using their subsidiary, you will want to check first if they have set you up with the correct registration in order to import into the USA. Many importers find this out too late after promising a quick delivery to a client in the USA, only to have their shipment held up until the registration is sorted out.

FBA Canada: five tips to help you in the Great White North

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Dam up your revenue with amazon.ca!

If you’re looking for an easy way to expand your market by 10%, look no further than America’s biggest second-biggest trading partner!

Canada remains the first foreign location for most American businesses looking abroad, and the first place they learn the ins-and-outs of selling in a new country. Below we have compiled the top 5 tips to know to make your expansion an easy one:

  1. What is the GST!?

Canada’s GST (Government Sales Tax) applies to all sales within the country. It is similar to the value-added taxes found in most European countries, although the USA has managed to avoid one. Much like some US State sales taxes, you as the seller are burdened with the collection and remission of the tax, although are not taxed otherwise.

Luckily, this is made easy by Amazon.ca: they deposit the GST collected on your sales into your account. For your part, you merely need to remit the GST at the end of the year. You will get a letter from the Canada Revenue Agency as a friendly reminder when this is due.

2. My FBA account in Canada is approved, can I ship my goods?

Once you are set up with Amazon FBA, you will still need to obtain an importer number to obtain the release of your goods into Canada. If you are shipping the goods yourself, you will also need a delivery appointment with FBA so the goods can be received. FBA will not accept deliveries without an appointment.

3. I already paid duty on my goods to US Customs, do I need to pay again in Canada?

Yes, you may have to pay duty to Canada Customs on products previously imported through the U.S. However, a duty drawback may be filed with US Customs if the goods were imported within the last three years. Border Bee can assist with the drawback of your duties from US customs.

4. Can I ship my goods directly from overseas to FBA Canada?

Yes, although we recommend partnering with a Canadian logistics provider (like us!) to avoid issues like storage or customs delays on arrival in Canada.

 

More questions? contact us

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Ecommerce, Customs and You provides answers to your questions on importing goods, written by the Border Bee staff.

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