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PRESS COVERAGE Progressive purchasing Purchasing Management Association of Canada Let's face it, dealing with Customs Brokers can be the most frustrating part of life as a purchaser. At least that's what Josianne Adeboyega thought. After several years coordinating RCC Electronics purchasing duties, she had successfully managed to excel at all her tasks except dealing with her Customs Broker. Rounding up all the information her broker requested was time consuming, tedious and thankless. "Our broker was making tons of mistakes," Josianne recalls, "and dealing with him was a pain". Searching for another broker to do basically the same thing was one option. Another option, she discovered, involved dealing with Canada Customs herself. After finding a few other companies were bringing the customs clearance process in-house, Josianne became more than interested and started investigating the process. She knew big companies had access to Customs directly but the electronics industry was just getting through the recession and she knew RCC couldn't afford a big investment in technology at this point. RCC is a good size company but not huge. Last year the electronics firm had a broker prepare about 600 entries to clear their imports through customs. Her broker kept driving her crazy so she continued her investigation into the new technology. Josianne finally went to Carl Hewitt, RCC's controller, and discussed some of the alternatives she had discovered. The two began to work on a solution that would suit their needs. Josianne wanted to deal with customs directly instead of using a broker but she knew she would need some training. She had never dealt one on one with customs without the use of a broker and she wanted to find the right tools. The controller knew how lime-consuming the process had become and knew that many advantages would be gained with a system like the one Josianne had described. For example, "if we discovered we overpaid and were due a refund from customs, we'd have this fight pending with our broker. Sure it was just $50 to $100 but these all add up." Carl also maintained his interest because, as he says, "Josianne's functions, dealing with goods ... this is our business." Carl also bad along list of concerns that needed to be addressed before they could move any further. A new employee was out of the question. So was a new computer system. Any software system would have to be easy to use and not dependent on just one person. Training would have to be targeted specifically to RCC's needs and any interruption in the all-important purchasing function would have to be minimal. The system would also have to fit in with the company's long term plans. With an impressive history of growth, this was a well learned lesson at RCC. Finally, the system would have to be supported. "I didn't want to be abandoned and hung out to dry if there was a problem," Carl remembers. Despite the conditions, Carl was still interested. "Josianne knew the procedures involved (with importing goods) but we clearly weren't in control of this function." Josianne was having difficulty with her broker. "Purchasing is dealing with brokers, invoices and the like. I was discovering all of our brokers' mistakes and new products took a while to clear if I had to deal with different brokerage offices." The savings both Carl and Josianne saw were threefold: getting rid of all the time dealing with the broker, making sure the mistakes (misclassifying goods and paying too much duty and taxes) were eliminated, and of course, getting rid of the high brokerage fees. At the time, RCC's brokerage fees alone were anywhere from $60 to $70 an entry, that amounted to about $40,000 a year for just 600 entries. After all the details were worked out, Carl and Josianne got permission from the president, Henry Taub, to begin the first phase of the procedure. Josianne purchased the software that would allow her to create all the necessary accounting documents that Customs required on her PC clone. As Josianne recalls, "this transitional period was challenging but interesting." After a brief training session and with a couple of manuals, she began collecting the necessary information, which was nothing new, and entering the information into the PC to create a B3 form, which was new. This form was then sent to EDI customs brokers in Toronto, who charged just $20 to send it to customs. In the beginning, the new broker even checked the forms to make sure everything ran smoothly. After a few months, Josianne's confidence increased and she was ready to take the final step in the process. Josianne applied directly to Canada Customs for her own CADEX (Customs Automated Data Exchange) line. This would enable her to simply have her imports bar-coded (by a release agent) and scanned by customs at the border. Then, the necessary documentation could be completed on her PC and sent directly to Customs without the use of a broker. The line and the modem necessary for these EDI transmissions were provided free of charge by Revenue Canada. After receiving these documents, Customs would send Josianne's PC the K84 form which would confirm to RCC the necessary taxes and duty owing for that shipment. These charges could be paid at the end of the month and, this time, she felt confident that the fees would be correct. Bumps in the system were quickly smoothed out 'There are only about eight people at customs but there is always someone to talk to," Josianne recalls. "The biggest frustrations occurred in the transitional stages when we were still dealing with brokers and trying to ad-lib the CADEX system." So, Carl states, "this summer we felt confident enough to start doing all of our entries." Brokers will be used in the future only when Josianne is on vacation. Financially, things are right on budget. Carl still expects to pay off the system in 1.5 years on the brokerage savings alone. Their is no time being wasted with a Customs Broker. It is the other benefits to RCC that Carl enjoys. "We're getting control. With this new database, we can ask whatever we want." Often, these files are used for summary reports. By obtaining a report on duties by supplier, RCC can calculate all costs to the general ledger. Since the system is still relatively new, further benefits are still being uncovered. For example, determining Canadian content for electronics is time consuming since there are so many small parts that need to be sourced. Hopefully, the new database could be helpful in expediting this task. For Josianne, the benefits are clear and numerous. The worst part of the purchasing function, according to Josianne, has been made interesting. "The more you learn, the more interesting it becomes." Now people ask Josianne questions and, based on her knowledge, better purchasing decisions can be made. "I feel I know more now than our old brokers knew." This is hardly the brokers fault. The key to clearing customs, thanks to EDI technology, is not having a place at the border. The key is having complete knowledge of the goods being imported. That's why a purchaser with a PC and some initiative can become the best possible Customs broker a firm can have. |
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