The Cost Of Customs Compliance
Carrying on from last week's Part 1 article, a Customs compliance penalty often brings into question whether the Customs Broker can be held accountable if the importer is found to have errors in their import declarations. Since Customs holds the Importer of Record (IOR) ultimately responsible for Customs compliance, it is rare that an importer can shift the blame to their service providers or vendors who offered incorrect advice, submitted the declaration with erroneous information or lacked the expertise to catch potential problems with an imported item. Therefore, it is important to ensure your service provider evaluation includes the following:
- Does the Customs Broker have a process in place to review Customs declarations for incomplete or inaccurate documentation prior to submission to customs?
- Does the Customs Broker offer Trade Advisory Services which can help with binding ruling applications on unclear product classifications or on new product purchases to determine any additional duties required and/or reporting requirements to other government departments?
- Does the Customs Broker clear all modes of transportation including courier shipments therefore ensuring consistency in both process and tariff classification?
- What is the level of certification, education and experience of the entry staff who are reviewing and submitting declarations on your behalf?
- Is your Customs Broker open during your hours of operation? If so, will they have an experienced representative available to answer questions about your specific account?
If your company's supply chain requires the use of multiple Customs Brokers, we advise you to look into the following possible areas of inconsistencies.
Multiple Customs Brokers = Multiple Inconsistencies
We previously published an article on the Downside of Using Multiple Customs Brokers in which we highlighted two things to look out for when using multiple Customs Brokers.
Inconsistency between your chosen Customs Brokers: Customs Broker 'A', who clears your incoming air shipments, may use a slightly different tariff classification code for your imported item than Customs Broker 'B' who clears the same item via highway transport. During our trade compliance seminars we often tell the tale of the outcome of three Customs Brokers classifying the same item and each coming up with their own justifiable explanation for their classification. This is a result of a highly complex harmonized system tariff schedule, the different experiences each of those Brokers have had in their classification practice, as well as their understanding and application of the General Rules of Interpretation (GRI) as they relate to the item.
Difference in business process: Not all Customs Brokers are created equal. Each has its own area of expertise and therefore business process. A courier company who offers Customs Brokerage as an added service has a priority to ensure speed and accuracy with the parcel delivery. A compliance Broker, like us, Pacific Customs Brokers, specializes in ensuring their clients trading practices fall within Customs law. Our process differs in the the attention given to detail.
Review Your Entries To Mitigate Risk
As you can see from the areas of concern we have addressed in this article, and despite best efforts, an importer may be completely unaware of their shortfall in Customs compliance. One way to review your Customs Broker's accuracy is to review the declaration summary provided with the invoice against the following checklist:
- Has your vendor provided a full and accurate description of goods for classification purposes?
- Is the value declared on your vendor's invoice correct and will it match your reconciliation to the vendor?
- Will you be receiving any additional invoices for value added costs such as royalties or commissions?
- Have all applicable discounts been declared and taken where applicable?
- Has the country of manufacture been declared correctly for all items on the invoice?
- Were all the items listed on the invoice received? Were there shortages or overages?
- Do you have properly completed certificates on hand for all items declared under a preferential tariff treatment, including North American Free Trade Agreement (NAFTA) Certificates of Origin?
- Has the Goods and Services Tax (GST) been correctly accounted for on all items?
We encourage you to reach out to our Trade Advisory team with any questions you may have regarding your Customs compliance practice. We are here to help!