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PRESS COVERAGE All season clearance Canadian Transportation Logistics Recent changes in infrastructure and in technology have provided shippers with new options for dealing with Canada Customs. Thanks to Revenue Canada's Customs 2000: A Blueprint for the Future initiative, shippers can decide how much control they would like to exercise when importing goods. Choosing the right alternative for your company will yield significant savings. The willingness of government to speed up border traffic and the recent popularity of electronic data interchange (EDI) have merged to make possible more efficient releasing, accounting, and paying for imported goods. Richard N. Manicom, the assistant deputy minister of Revenue Canada, believes these changes "have reduced our costs and those of Canadian brokers and importers." When setting up for the Free Trade Agreement (FTA), Revenue Canada determined that our borders were unprepared for the coming free trade environment. Customs 2000 laid out the necessary changes they would have to make to facilitate the quicker release and more efficient accounting for imported goods.
THE ELEMENTS OF CUSTOMS 2000
The effect of Customs 2000 on the shipping function has been dramatic. David Ogle, manager of Customs and Logistics at Bridgestone/Firestone Canada Inc., has witnessed 25 years of Customs changes, both as a shipper and as a Customs broker. He says, "In the last six years or so, Canada Customs has made it possible for an importer to deal with Customs directly." Now an importer can handle the release of goods, the accounting for those goods and the payment of the duty and taxes all through automation. But, shippers will find the entire process of bringing your clearance in-house takes about four months, almost all of it waiting! Actually going through the application procedure only takes about three hours. Maria Sheppard, shown here with David Ogle, manager of Bridgestone/Firestone's Logistics & Customs, says new Customs initiatives may make bar coding a thing of the past. SELF-CLEARANCE PROCEDURE Step One: POSTING A SECURITY BOND A security bond must be posted with a financial institution. You can simply phone your insurance company or bank to make the arrangements. In January 1995, the amount of this bond was reduced. It is now equal to the average monthly amount of your duties the GST portion no longer requires a bond. Since 80% of most imports are duty free, the fee should be significantly less than 1% of the cost of your current duties. Step Two: RECEIVING ACCOUNT SECURITY When you send proof of your bond through to Ottawa, you will be notified of your Account Security Number within a day. This number makes the third step possible a request for central payment. Step Three: REQUESTING CENTRAL PAYMENT This allows you to remit your duties and GST at the port closest to you regardless of the port where your goods entered Canada. Better yet, you can pay your duties and taxes at the end of the month, not with each shipment. The time taken for these two applications is about two hours, and no costs are involved. Step Four: SUBMITT1NG TO CADEX This step involves submitting your Customs Automated Data Exchange (CADEX) Transmission Application Form. CADEX allows an importer to communicate directly with Canada Customs from any computer in the country. Step Five: ARRANGING PHONE INSTALLATION Revenue Canada will arrange and pay for the installation of the line. Any line charges and the cost of the modem are also picked up by the government. This step usually requires the lion's share of waiting, but when completed, you will be able to handle the three basic steps of customs clearance releasing, accounting and paying for duties and taxes on goods yourself. Step Six: RELEASING GOODS Releasing the goods is painless and inexpensive. At present, you will need a supply of bar-coded labels that incorporate your Account Security Number and a sequential transaction number. These can be generated in-house with your customs clearance or may be purchased from any commercial printer. If you are unable to have the bar codes accompany your shipment, you will have to hire an agent at the border who will apply the label for you. Fees for this service range from $5 to $10. Bar coding may become a thing of the past. An electronic release system termed ACROSS is currently in pilot stages but should be available from Revenue Canada in the fall of 1995. This system will allow you to send release information over the phone line. Your shipments will be electronically released before they even arrive in Canada! Step Seven: ACCOUNTING FOR GOODS With a few additional tools, you can account for your goods on your computer. Creating these documents is the biggest cost associated with using a broker. Creating the documents that imports and exports require, however, can be easily automated since tariffs are rule-based and repetitive. Producing the documents involves inputting on your computer the information you normally provide to your broker. "You don't have to be a customs expert to do this," says Dave. "You need basic training, but it doesn't take long." The software necessary for creating the accounting documents will be the greatest cost associated with bringing the clearance process in-house but will also save you the most money. To begin with, paying for duties and taxes on goods is simplified. Canada Customs electronically sends you a monthly statement that you presently pay by cheque to your nearest port. With EDI, payments will eventually be electronically transmitted too. Once you have costed all the tools you require, compare this to what you are currently paying for your brokerage service. A one or two-year payback is usually required for this investment, but this figure varies from company to company. While cost is the main factor, there are also other benefits to consider in making new customs decisions. CONTROLLING THE IMPORT FUNCTION Gord Best, a seasoned Customs consultant, points out the significance of increasing your ability to control the import function, "Probably the best person available to classify the goods will be found inside the company that actually purchases the goods. Misclassifications in this situation tend to be considerably lower." If you have had a review of your customs payments, determine how much misclassifications cost to recover and add this figure to your brokerage costs. With self-clearance, the time spent dealing with your broker regarding tariff classification, accounting, auditing and tracing your goods is virtually eliminated. Iris Jameson of Hallmark Cards, who moved to self-clearance, has statistics showing that "the time savings alone in import document preparation are running about 85% per truckload." "Wondering where the goods are, or if there will be a problem at the border, is no longer a big worry because you know more about the procedures," affirms Dave. "The ability to deal with Customs directly means you can control the entire shipping function." So, even though you are spending less time, you have gained more control over this function and can integrate customs clearance with other shipping functions. You may also want to consider the added benefit of self-clearance if many of your imports below $1,600 qualify under the Low Value Shipment (LVS) program. You only need to prepare summary sheets, which the carrier presents to Customs, instead of individual documents, and the importer simply accounts for them once a month. WORKING WITH YOUR BROKER The self-clearance option may not be for everyone. Shippers must base their decision on whether to use it primarily on its savings of time and money. Even so, bringing a Customs clearance function in-house can help you in dealing with your broker to become more familiar with the new initiatives. "The main factor to consider," Dave Ogle stresses, "is cost." While there is no hard and fast rule, a company usually needs to be importing about 500 shipments a year to yield a satisfactory return on the investment. So, after all these new considerations and programs are explored, you may find your volume still does not merit a self-clearance system. Nevertheless, just knowing more about Customs 2000 can improve your importing processes. For new products especially, you may find it rewarding to periodically check your broker's tariff classifications. If you would like your GST billed monthly, ask your broker to help you apply for an Account Security Number. This will allow your broker to forgo the bond for your GST. These saves accounting time and helps your cash flow. If you only create the accounting documents yourself but are not in a position to handle your own releases, you benefit from your customs broker's reduced fee. With programs changing so rapidly, at least be sure to get a yearly review. It's worth paying a Customs consultant to keep your company up-to-date on new clearance conditions. While ACROSS and the reduction in the security bond represent the most recent infrastructure changes in Customs
2000 initiatives, they are certainly not the last. Whether you choose self-clearance or not, you need to reexamine
your Customs practices regularly and to monitor Customs program changes as they're introduced if you hope to keep
your company competitive. |
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