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PRESS COVERAGE Revenue Canada helping Canadian companies save time and money It is not too often that a government initiative can be of great benefit to Canadian companies and reduce the deficit at the same time. Revenue Canada's EDI initiatives for Customs clearance, however, have done just that. With the proliferation of international trade agreements from the late 1980s to the present, the government has been continually modifying its practices at our borders. Many Canadian companies are taking advantage of these new operating procedures and incorporating EDI technologies that let them deal with Revenue Canada directly; benefits include, but are not limited to, the elimination of brokerage fees. You probably remember Otto Jelinek. It's too bad he's keeping a lower profile these days importers and exporters certainly owe him a lot. In 1990, as Revenue Minister, he launched Customs 2000: A Blueprint for the Future. This visionary document aid out the changes in infrastructure that would be necessary at our hot-borders to handle the increased traffic that a free-trade environment would create. Unusual for the times, Otto believed EDI technologies would be of pivotal importance in this new infrastructure so he initiated the government's first EDI project. CADEX (Customs Automated Data EXchange) allowed any company in Canada to install a phone line in its office and deal directly with Customs. Revenue Canada paid for the modem, the line, and any charges associated with the line. That was the first step in facilitating direct communication with Customs which Canadian companies, and the government, would require with the FTA, NAFTA, and GATT on their way. Even with these changes now firmly rooted, many companies still view Revenue Canada as draconian and "scary." As one purchaser was recently warned by her controller, "Whatever you do, don't get us in trouble with Canada Customs!" What this controller was forgetting is that you are responsible for your dealings with Revenue Canada, whether you do it yourself or you use Customs broker. Today, Customs is anything but difficult to deal with on your own. An importer simply puts, or has the exporter put, a bar-coded label on the commercial invoice accompanying the goods. Customs then scans the code at the port of entry. If the importer or exporter cannot apply the label, an agent at the border can be hired to complete this simple task for about $5.00 a shipment. In the case of clothing, for example, an agent can also be hired at the border to submit an import permit when necessary. The goods can then be Released on Minimum Documentation (RMD). The accounting documents can be transmitted to Customs within five business days via CADEX. The government, via the CADEX system, provides the importer with an invoice at the end of the month that can be paid at the nearest Customs office. It is also possible to set up electronic payment with your bank. Canadian companies such as Jantzen, Sony, Honda, RCC Electronics and Hallmark Cards are among the many companies that have discovered the primary benefits associated with using CADEX, benefits that include:
SAVINGS ON BROKERAGE FEES Savings on brokerage fees are the most concrete benefit resulting from self-clearance and are easy to quantify. Sony's Philip Choi had a CADEX system installed when he was sure that Revenue Canada would support the system in the long term. After one year of operation, he conducted an analysis and found his savings estimates to be equal to about 80 percent of the previous year's brokerage expenses. With Sony's importing volume, this adds up to a fair bit of change. Honda Canada calculated the total savings for the first year of self-clearance. With all software, hardware, and training taken into account, they saved over $700,000 in the first year alone. With all installation costs paid in full, and minimal maintenance fees, these savings will grow every year. Even if importing volume dramatically increases, importing costs at Honda will remain virtually unchanged. Savings on brokerage fees depend on the quantity and variety of product you are importing and on what your broker is currently charging for his or her service. Even smaller firms, however, are finding the CADEX system worthwhile based on the elimination of brokerage fees alone. RCC Electronics in Toronto, for example, paid off all costs associated with self-clearance with two years of brokerage savings. That is impressive considering this thirty person firm was only importing about 600 shipments a year. While CADEX has been great for importers and exporters, Custom's EDI initiatives have decimated the Customs brokerage community. Since 1988, the number of Canadian Customs brokers has dwindled to 275 from 500. With decreasing revenue from transaction processing, the number of Customs brokers will continue to decline as the market declines. Carol West, president of the Canadian Society of Customs Brokers, laments, however, that only about 70 per cent of all the shipments in to Canada are still being cleared by Customs brokers. Five years ago, Customs broken cleared 95 per cent of all Canadian shipments. REDUCTION OF TARIFF MISCALCULATIONS Surprisingly, Canadian companies find savings through more accurate classification of their goods when they take over the Customs clearance procedure themselves. Gordon T. Best, a professional Customs consultant, says, "The secret in selecting the appropriate tariff classification number for any good is knowing the product's composition and its end use. A person inside the company is best able to gather this information." James Mann, controller for Jantzen Canada in Vancouver, agrees: "We know exactly what percentage of lycra is in each of our suits." Furthermore, Mr. Mann claims that "Relaying this information to a third party creates a grapevine effect and this information can be incorrectly recorded by the clerk at the brokerage." Jantzen, like most companies clearing their own goods, has set up a database of importing information. Classification is only necessary when a product is imported for the first time. Using a historic database and conducting necessary tariff searches yourself ensures the most accurate tariff classifications. Getting refunds for misclassifications as a result of broker errors is generally an expensive process. You have to pay a consultant to do an audit on an hourly or contingent basis. Furthermore, your money is bed up at Revenue Canada in between audits. Both these costs are reduced with self-clearance, since not only is there less money sitting at Revenue Canada, but it is quicker to conduct an audit through in-house automation. INCREASED EFFICIENCIES IN LOGISTICS ADMINISTRATION As Mr. Mann at Jantzen alluded to, dealing with a third party, your customs broker, is not only unnecessary but time consuming as well. Getting all the relevant information rounded up (beyond that of tariff classification) and supplying it to your broker is a redundant task. Mr. Mann say;: "We even discovered that some of the information the broker was requesting was not even necessary. Entering the information into a computer program and transmitting it to Customs is incredibly efficient. Iris Jameson from Hallmark Cards in Toronto says, "The time savings alone on import document preparation are running at about 85 per cent per workload." Many companies are able to transfer some logistics staff after bringing their clearance function in-house. AUTOMATIC CAPTURE AND REPORTING OF COSTING INFORMATION While there may be fewer people in the logistics function after automating customs clearance, the information they create can be of greater use to others in the organization. Hallmark, for example, calculates landed costs by cost-center. Their in-house clearance systems provide this information automatically. This saves the accounting department significant time and some tedious calculations. The controller of a Toronto-based discount retailer believes the quick calculation of landed costs is essential to the success of his business. He states, "Our buyers use the logistics database to calculate landed cost before the purchase decision. We are in a price-sensitive industry and purchasing requires this information but it took too long to calculate when we were using a broker." After installing an in-house clearance system, these discount purchasers have the landed cost information at their fingertips. ENHANCED CONTROL OVER INVENTORIES This discount clothing retailer has another concern that all businesses can relate to– keeping inventory levels down. Manufacturers with just-in-time inventory practices cannot afford to be on the phone to their broker wondering when the goods will clear. Carl Hewitt at RCC Electronics says, "We know just as much as our broker did. When a shipment clears, CADEX notifies us; we get to know the process so we can anticipate our traffic now." A traffic manager only needs to deal with their carrier to know all about their shipment and in status. Better control over the shipping function allows better control over inventories. It is no longer necessary to provide a "cushion" of inventory for the age-old logistics excuse, "The goods are held up at Customs." CUSTOMS AND THE FUTURE The rate of change at Canada Customs continues unabated. While companies are praising the existing procedures, new development this fall will allow importers to not only file the documents and pay via EDI, but they will be able to provide Customs with the information they need to make a recommendation before the goods even reach our borders. Electronic release, called ACROSS (Accelerated Commercial Release Operations Support System), is currently a pilot project underway at four of Canada's busiest ports. It is expected to be expanded nationwide this fall. ACROSS allows an importer to transmit the information found on a purchase order plus a cargo control number (from your carrier) to Customs where a release decision is made. Foreign Affairs is also helping Revenue Canada and Canadian importers. At present, when importing some goods (such as textiles), an import permit must be presented at the port-of-entry before the shipment can be released. EXCAPS is a program from Foreign Affairs that makes electronic import permits available to these importers. EXCAPS will make it possible for even greater participation in the government's EDI initiatives. Using ACROSS to release goods will make it possible for most importers to handle the three stages of Customs clearance (releasing, accounting, and paying) from any desktop in the country. Taxpayers and companies should thank Revenue Canada for in foresight and keep up the pressure for even more efficiencies in the future, even if a few agents have to adapt. |
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