Ecommerce, Customs and You

Answers to your questions on imports

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Everything You Need to Know about Customs Audits

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Ancient punishments for faulty Customs declarations including flogging. Yikes! Luckily laws have advanced since then.

In the early days of international trade, when merchants refused to pay the high duty rates ransomed by monarchs, they were typically whipped or flogged publicly. Customs officers were not yet civil servants. Instead, the practice of tax-farming meant the job of collecting duty was chartered to the highest bidder, typically a private firm with little interest in the welfare of its clients.

Today’s merchants should be happy we no longer live in such a tumultuous era. While the bureaucracy of Customs may be challenging, an importer’s rights are enshrined in law (see the Customs Act) and one can re-determine or appeal any decision made by a Border Services Officer.

Since the current Customs regime is based around expedited clearance, more and more Customs verification activity is taking place in the importer’s premises rather than at the port of release. Combing through books is an easy way for Customs to find lost revenue.

Generally, if you are an importer concerned about their compliance record, here are some easy steps to sleep soundly at night:

  • Customs cares about primarily about revenue. This is never directly stated, but the logic is behind every regulation in the Act. If you paid a foreign vendor for something, chances are it was taxable and you should have included it in your customs declaration (a.k.a. a form B3).
  • Keep your records for six years!
  • Avoid undervaluation: Customs keeps track of selling prices for each vendor and commodity in the world. They know its value and its origin. It is easy for them to discern when an importer has been dishonest about a declaration.
  • Keep your sellers honest too: if you seller declare’s less than what was paid for the goods to save on insurance, you–the importer–will be held responsible rather than the shipper. Be sure to buy from sellers with experience in international markets, or to double-check the paperwork for any new vendors you may purchase from.


The Truth About Customs Audits: 5 tips to avoid red flags with the CBSA

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An undervalued invoice will not fool Customs as they have other means of verification

The truth is that Customs knows everything already. If they have shown up at your premises and requested access to your records, it is already too late. Canada Customs has access to trade data from every vendor in the world–they know what your competitors pay for the same products you buy, and therefore can easily detect any attempts at undervaluation.

“Undervaluation” is one of many schemes an importer can use to lower the amount of tax and duty required to be collected on their imports. With a little bit of winking to a vendor, the stated price for the product they are buying can be lowered on the customs invoice so that the duty and tax amount reduces as well. This practice is a real sore spot with Customs. Importers should know that pleading ignorant will not wash as it is the importer of record’s responsibility to verify the accuracy of their declarations.

What does Customs do when they uncover such a practice?
Penalties and the potential withdrawal of importing privileges can be used by Customs to ensure good faith amongst its stakeholders. For cases where importers have dodged duties and taxes, these amounts also must be repaid along with interest.

This article is not meant to scare the average importer or assume they are involved in foul play. If you are at all concerned about your compliance record as a company, you are already ahead of the game. The CBSA is not interested in hurting Canadian business or making them less competitive, and many options exist to reduce your exposure should you find an importing error that has dated back a few years. Please follow these five steps to ensure a healthy compliance record:

1. Keep everything. For six years.

You can throw out those ancient invoices if they are collecting dust in your office–the CBSA is only concerned with the past six years of your importing activity. “Records” could be any of the following:

-invoices and receipts for payments to vendors

-Bills of Lading

-B3s

-certificates of origin

-communications  to vendors as well as any contracts

The records do not need to be kept in hard copy, but must be organized and in a media format that can be reproduced on paper (any computer file is fine). Customs has the right to search any and all files but it will be in your best interest to make the audit process easy for them.

2. Use a Customs broker
We have had more than one self-clearing client who assumed that because a BSO (Border Services Officer) was releasing their entries, that their declarations and classifications were being done properly. This turned out not to be the case as we had one importer who had been underpaying duties on their self-cleared entries for years. BSOs are not classification experts and their decisions can be repealed at any time by a higher authority at the CBSA (what Customs calls a “re-determination”). Customs brokers are not perfect and can also file erroneously on your behalf, but they remain your best bet to stay compliant.

3. Double-check your entries
Whether you self-clear or use a broker, double-checking your entries as they are processed is a sure way to stay free from errors. Watch out for changes in classification or prices that do not match what you have paid to your seller.

4. Correct any vendor’s errors
Vendors are vulnerable to errors when invoicing you, and may even reduce the value on your purchases to save themselves additional costs on shipping and insurance. Even though it was your vendor’s fault, you as the importer will be held responsible by Canada Customs.

5. File claims
If you do notice an error, have your broker file a claim to correct the problem. This does not need to be the same broker that filed your original entry. A claim is filed on Form B2 and is presented by your broker to the Customs office for review where it is typically approved in 90 days or less. A B2 has the effect of changing the recorded status of the original entry wherever there is a mistake–whether revenue is owed or not.

As a final word, not all audits are bad. In many cases, you may be overpaying on your customs entries and be due a refund from the CBSA. However, it is not the policy of the CBSA to investigate cases where revenue is owing or neutral, so let this be motivation to stay vigilant.



Getting a duty refund for online imports

Buying goods online poses a few problems–most related to the fact that you cannot see what you are buying. Many dresses show up that do not fit, and many engines that do not work. These items are usually simple enough to return to the vendor for a refund–however, what happens to the taxes and duties paid on the items if they were imported? Despite a fairly simple refund process offered by the CBSA, thousands of dollars in potential refunds go unclaimed. This article will guide you through the simple process of obtaining the refund (or how to hire us to file the claim for you).
The process is fairly simple: as long as you have proof that the seller refunded you for the item and proof that the item was returned to the sender, all you need to do is complete one form and mail it off to your local Casual Refund Center.

Your import receipt should resemble this

Sample import receipt


Filing your claim
You will need:
1. The import receipt or invoice
2. Proof of refund:
-credit note or e-mail receipt from the seller refunding your purchase
3. Proof of return:
-a waybill
-receipt for shipping
-any document from a transport company that describes the goods and provides a date of export

Don’t have any of these documents? 
Don’t despair–we recommend contacting the site that sold you the goods as they often have these records on hand. They should be able to forward this to you by e-mail. If you paid the taxes at the door but did not get an import receipt– you can still call the courier and have them send you a copy. Here are the most popular carriers:
UPS: 800-742-5877
FedEx: 800-GO-FEDEX
DHL: 855-345-7447

Wishing you had known this before returning those winter tires six months ago? Its not too late! Refund claims will still be accepted one year following the date of the original importation.
If you have the documents you need, you can follow this link to fill out CBSA Form B2G. Sign it, stamp it and send it off. If approved, you should receive a cheque in a couple of weeks.

 



CITES Permits for Antiques

European CITESCITES is an international organization that exists to control the trade and exchange of endangered species. What this means is that if you are trying to import any endangered fauna or flora (or more commonly, antiques made from endangered fauna or flora) you will likely have to apply for a CITES permit before arranging the shipping of the goods.

Export

Please discuss with your seller or freight forwarder if the country where you have obtained the goods requires a CITES permit before it can be exported. If so, please enlist their help in obtaining one. The process can take several weeks so be patient. Once approved, you will need a hard copy original of the original to clear customs in Canada so you will need to have the shipper mail this to you.

Import

We recommend contacting Environment Canada’s CITES department in Gatineau at this number (855-869-8670) to first establish whether your antique will be permitted importation into Canada. If yes, you can continue to their website to find the correct application forms to complete. The permit application required will vary depending on whether you are importing: a live animal, hunting trophy or an article made from a CITES protected species. Complete the application and submit to the e-mail address specified on the permit application. Please allow several weeks for the CITES to be approved. Once approved, Environment Canada will mail you the permit with further instructions. Do not lose this! You will need it to clear your item through customs on arrival.

What requires CITES?

The list is quite long but luckily Environment Canada provides a search tool on their website to assist. If you remain uncertain, please contact a CITES administrator at Environment Canada.

Must I file for the application myself?

No, Border Bee can also assist with your permit application as well as the customs clearance of your goods for a modest fee.

More questions? Please contact us



Canada Post: letters and “sent for customs review”

Update: Canada Post now uses e-mail to send out their release letters! If you believe your shipment is being held, please contact the Mail Centre nearest you with your tracking number.
Montreal: 514-496-1989
Toronto: 905-625-7450
Vancouver: 604-666-8952

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A sample letter sent out by Canada Post when parcels exceed $2500 in value

Many sellers will ship using their national postal carrier. Exporters in Korea and Europe are particularly fond of this. The problem is that when the parcel arrives in Canada it must be released through Canada Post. If the shipment is under $2500 CAD, Canada Post will clear it for you and collect the tax from you on delivery.

However, if your purchases exceeds $2500 CAD, you will likely get one of the below letters in the mail. By the time you receive the letter, your shipment will have already been sitting at a CBSA mail centre for a few days, unless you are on that particular mail centres fax list.

If you receive one of these letters, you have two options:

or

If you frequently have shipments held by the Post, you can request to be placed on their fax list to expedite release. Please contact us for details.