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PRESS COVERAGE No Brokers, No Borders Canada's Electronic Customs Clearance In the late 1980's, Revenue Canada Customs had a problem. The Free Trade Agreement precursor to NAFTA) was sure to dramatically increase traffic at Canada's dispersed ports-of-entry. With a huge deficit and limited resources, the government could not afford to handle this traffic in the traditional manner. A solution was found with EDI In the last four years, traffic has doubled at Canadian borders yet Revenue Canada Customs has slashed its budget by a quarter of a billion dollars a year. Canadian branches of US companies, such as Eaton-Yale, have found the benefits of these systems have gone well beyond the typical EDI installation (i.e., paper savings, time savings, greater accuracy). Not only has the need for a Customs broker been eliminated, but the entire Customs process has moved from a location function to an information function. Margaret Stinson, Customs and Transportation Supervisor at Eaton-Yale in Burlington, Ontario had never used a PC until 1988, the year Revenue Canada Custom's systems were made available. While MIS managers were grappling with company-wide EDI systems, enterprising Canadian traffic managers could purchase a PC, some software, and implement the CADEX (Customs Automated Data Exchange) system, which allowed importers and brokers to transmit Customs information from their office directly to the federal government in Ottawa. The government paid for the modem, the line, and any charges associated with the line Margaret says "I came from a world where you just never thought about dealing with Customs electronically." The program caught on quickly; today, over 33% of the volume of imports are being accounted for by the importer and not a Customs broker. THE CADEX PROGRAM Desktop customs clearance is made possible by the separation of the three stages of Customs clearance – releasing, accounting, and paying duties and taxes on imports. Instead of having to handle all these functions at the border before the goods could be brought into the country, an importer or broker could delay the accounting and paying phases. More importantly, thanks to EDI, an importer could now control this function themselves. Since the importer had access to all the information Customs required, the unnecessary step of verbally supplying this information to a third party was eliminated The person with the most knowledge, and not the best location. could handle the process. At present, Stinson only hires an agent to handle the release function at the border. The Customs broker submits an RMD (Release on Minimum Documentation) package on Eaton-Yale's behalf. Creating this package involves applying a specific bar-code to the commercial invoice and attaching any specialized permits. Some importers have the exporter apply this barcode, however hiring an agent at the border to submit the RMD package only costs about $7 per shipment. After the RMD is submitted and the goods have been released, Cutler-Hammer has five business days to transmit the accounting documents to Ottawa. The accounting function is much more involved than the release function. This phase has historically represented 80% of the work (and the cost) of clearing Customs Eaton-Yale has installed a system that not only handles the tedious calculations found on the B3, but draws up information from a database for products she has previously imported. Tariff searches, a requirement of the B3 form, have also been automated. A quick search through the harmonized tariff system is all that is required. This process, according to Stinson, is easier for an importer than a broker; "I know my product's end-use and composition so I can find the appropriate classification quickly." For most of Eaton Yale's imports, searching for the appropriate tariff is unnecessary. "All you have to deal with are new products you haven't brought in before." Stinson says, "The other transactions are handled automatically." Eaton-Yale transmits the accounting documents via CADEX a few days before the five day deadline just in case Ottawa rejects the entry. An error code informs the user of any problems and the necessary revisions are handled immediately on the electronic form. Quick, two-way communications have ensured that Revenue Canada receives all the information for compliance before deadline. The third stage of Customs clearance, paying duties and taxes for goods, illustrates another benefit from this two way communication. "Once a day we get a statement from Ottawa stating which entries were accepted and the previous day's bill," Stinson says. Centralized payment privileges allow importers like Eaton-Yale to pay all their invoices at the end of the month at the closest Customs office. Stinson expects the company to be paying electronically by the end of the year to avoid this trip altogether. THE FUTURE OF CUSTOM'S EDI SYSTEMS 1996 will be the first year that a Canadian importer can handle all three phases of Customs clearance from
their desktop. Revenue Canada Customs will nationally release a pilot project that allows for electronic releases
The Accelerated Commercial Release Operations Support System (ACROSS) will allow importers to get a release from
Customs through their CADEX line. The system will not only help Canadian business, but will help Revenue Canada Customs fulfill its mandate more efficiently and effectively. Should Customs wish to inspect a certain product, such as South American grapes, the system can be set up to hold these shipments before they enter Canada. Only importers with clean track records will be permitted to participate in the ACROSS/CADEX program. Others will have to rely on the old physical inspection process. Armed with more information from companies motivated to participate, fewer resources will be needed to protect Canadians from dangerous products. Stinson believes that, even though she will now be able to save even more money and her goods will be cleared even more quickly, processing releases wilt not take her or her staff any additional time. What is changing is when the information is sent, not what information is sent. The ACROSS information can be rolled over to the B3 accounting system. After completing (either keying-in or retrieving from a database) a few more fields, the accounting information can then be transmitted to Ottawa via CADEX. Integrating the Customs clearance system with other systems is still an area Eaton-Yale would like to explore. Transferring an electronic purchase order or invoice to the system would eliminate the need to key-in any information. At present, only frequently imported goods can be automatically generated. Canadian Customs brokers, faced with a tremendous loss of business, are now beginning to embrace EDI. Canadian
Customs brokers now number 230; down from over 500 before CADEX was introduced. "The Gateway Project" is
a recent initiative by Customs brokers to link themselves with carriers and freight forwarders to integrate all
transportation data. One holistic approach that will have an impact is the NAFTA automation talks currently taking place amongst NAFTA partners. Linking the system with the U.S. ACS)Automated Commercial System) will greatly simplify transactions between North American trading partners. Since issues from many participants must still be discussed, we cannot expect to see this system in operation in the near future. Eaton-Yale, as well as other Canadian importers, do not seem too concerned discussing theoretical futures of EDI. While many were computer novices, the CADEX system has allowed them to implement EDI technology long before the rest of the company. Savings were immediately quantifiable since, not only were paper, processing time, and errors reduced, but the Customs brokers bills were "virtually" eliminated. Other departments in Canadian companies, such as marketing and accounting could also have access to this information that was once thought to be the "duty" of the traffic department. The success of Revenue Canada Customs' EDI solution has ensured that any new industry standard will have to consider the hundreds of dispersed corporate Canada participants. |
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