As a result of the 31% decline in imports flowing through the U.S. border between Q3 2008 and Q3 2009, customs duties collected by the U.S. Customs and Border Protection (CBP) also fell. As CBP assistant commissioner Thomas Winkowski explained in his speech titled “U.S. Canada Border Issues and Priorities,”1 since the agency is self-financed, the decrease in revenues led to 950 job cuts. These jobs have yet to be recovered and with the uncertain U.S. economic recovery, it doesn’t look like they will come back any time soon. As a result, the CBP is desperate to increase revenues. If U.S. imports don’t pick up, it will have to boost fines and customs duties. Therefore, expect CBP employees to be increasingly vigilant and demanding.
What this means is that as an exporter, you will have to be ready to respond to inspection and information requests. A growing number of Quebec firms are receiving a “Notice of Action” from the CBP, requesting, for example, documentation concerning the North American content of goods exported in the last four years. The CBP may also inform any export company that it will visit its facilities to make sure the firm’s warehouse separates North American from international goods.
Due to the broad-based decline in global trade, which has been going on for a few years now and affecting customs revenues everywhere in the world, it’s safe to assume that other countries will also be tightening their controls. It is therefore a good idea for Quebec companies to manage their customs and logistics procedures very carefully. Unfortunately, not everyone does, as we learned from our MDEIE colleagues following last year’s coaching program on customs compliance and logistics offered together with the Institut international de logistique de Montréal (IILM). The fact is that many Quebec companies need to tighten up their customs and logistics procedures.
Here are some examples of the problems they came upon:
- A company imports a product from Asia. Its supplier provides the HS codes and states that the product is duty-free. However, no one ever checked whether this was in fact the case.
- A company obtains supplies abroad according to Incoterm DDU and all the delivery charges and duties are included on its invoice. Despite this, the company allows the vendor to choose the transport method, route, timeline, customs classification and customs broker, and the company making the purchase ultimately pays the bill. Furthermore, the company is a registered importer that is fully responsible for the customs declaration issued by a broker it did not choose.
- A company always reuses the same declaration with the name and signature of a person who no longer works for the company.
- The CBP audits a company that must find all the documents to justify the Bill of Materials for products exported to the U.S. in the last four years.
These examples show just how easy it is to overlook certain crucial aspects of customs and logistics procedures. Through carelessness or lack of knowledge, many companies expose themselves to growing risks of major mistakes and fines. It is now more important than ever to review your procedures and make the necessary corrections to avoid errors that could have very damaging consequences for the company.
You can still register for our supply chain and logistics coaching-training program. Remember, the workshop starts on February 15 and you won’t be able to enrol after it begins.
The MDEIE is also holding a free training session on exporting to the U.S., customs compliance and logistics on Thursday, February 10, at World Trade Centre Montréal.
Feel free to contact us for more information on these two activities and on customs in general.
1 Speech delivered during the Can /Am Border Trade Alliance Conference in September 2009 in Washington D.C.