Are you planning to import goods into Canada or the U.S.? Maybe it's your first time, or maybe it's a new product that you have not purchased before. A word of advice - consult with a customs broker prior to making your purchase decision and NOT when the goods are already in transit. Otherwise, you could be in for a costly surprise! A customs broker will be able to inform you of all the added importation costs - including shipping, duties, certificates, permits, etc. The information provided to you will also assist in determining whether the foreign goods being purchased will be profitable for you or not. Here are a few considerations when importing goods from a foreign country:
- Customs duty: Duty rates have fallen considerably over the past 20 years, however, there are many situations where they still apply. It can be a startling surprise when purchasing goods under the assumption that they're U.S. or Canadian made (usually duty free) and later discover the goods were actually made overseas and are dutiable. Recently, we received a call from a company importing milk powder. The purchaser assumed that they had made a correct assessment and determined the milk powder was duty free under NAFTA. Unfortunately, milk products fall into a special category and the duty rate was over 200%. In this example, the importer should have reviewed the situation with a customs broker before making a purchasing decision. For more information about the importance of proper tariff classification (which leads you to the duty rate!), please see our previous blog - https://blog.pcb.ca/2011/03/determining-the-correct-tariff-classification-how-important-is-it/710
- Countervailing or dump duty: Countervailing and dump duties are additional duties imposed by a country in order to protect their domestic industry by counteracting foreign government subsidies, and from unfair foreign competition due to goods sold to Canada or the U.S. below normal prices. These have become more common in the last ten years and have made importers take note as the duty rates can be extremely high.
- Other government departments/agencies: If your imported goods involve other government departments besides Canada and U.S. Customs, there may be other regulations that you need to consider. There are many other government departments/agencies but these are the primary ones that you might encounter: the Canadian Food Inspection Agency, Health Canada, the U.S. Food & Drug Administration, the Department of Transportation, and the U.S. Department of Agriculture. In many cases it involves applying to these agencies well in advance of importing. This also brings us to...
- Special documents and certificates: Planning to import plants, meat, fruit & vegetables? How about snake skin boots? Items like these require special certificates as determined by the respective government department or agency. In some situations these must be original documents. Also, if you are purchasing from overseas suppliers, it is may be imperative that your foreign vendor secures the necessary documents before the shipment leaves their country, as it may be very difficult to obtain them after the fact.
- Free Trade Agreements: How do these agreements affect your goods? As noted above, do not assume that just because your goods are U.S., Mexican or Canadian made that they will qualify under the North American Free Trade Agreement (NAFTA) and be duty free. What about other free trade agreements? Are you purchasing from Chile, Panama, Colombia, Peru, or Israel? Canada also has free trade agreements with these countries which could affect the duty rate paid on goods. Hopefully, this will reduce your duty rates, however, you will need to have a specific free trade certificate of origin completed and signed by your vendor. More about the completion of a NAFTA Certificate of origin can be found at https://blog.pcb.ca/2011/04/5-top-mistakes-when-completing-a-nafta-certificate-of-origin/798
- Export procedures: Are you planning to purchase a used vehicle from the U.S. and import it into Canada? Please note that U.S. Customs requires prior notification of 72 hours before the vehicle can leave the U.S. In addition, please note that this requirement applies to all used self propelled vehicles which means that golf carts, tractors and even Segways are included.
When considering a foreign purchase, take the time to first consult with a customs broker. This could save you time, money and frustration. After all, your ultimate goal is to achieve maximum profit potential.