Surprise! Unexpected Costs To Plan For When Importing Into Canada
After months of effort, you successfully establish a solid foreign source for a product line. You have met with the manufacturer and are confident with the company and their ability to produce a quality product that meets your criteria and time frame. You have determined packaging and labeling requirements, sought out a good freight forwarder to manage the movement of the goods, and have carefully researched the customs clearance process with your customs broker. Incoterms®, terms of sale, financing, tariff classification, import documents - everything is in order. In short, you have done all your homework to purchase the right product for the right price to get it to the right place at the right time.
So would you anticipate paying any other costs to import your goods? Probably not - because you have carefully covered all possibilities. However, let's look at some of those unexpected fees that could occur. Some which are preventable and some which could happen even if you have done everything correctly.
4 Commonly Overlooked Import Costs
1. Customs Exams
Most of these are totally unavoidable. As the front line of defense for goods entering a country, any customs agency in the world has the right to examine goods and will never divulge their process for determining which shipments are examined and which are not. If this is your company's first import, it will definitely be examined and as the importer you will be responsible for all costs associated with the Customs examination. In particular, you can expect an increased chance for an exam if you are importing from overseas for the very first time, or if you import from countries which could be deemed to be a higher risk.
- Depending on the type of CBSA examination, full ocean container inspections can range from $550 - $3500 CAD. Variables such as how the goods are packed in the container, if they are palletized play a role in the costs associated with an exam.
- Less Than Container Load (LCL) shipments are significantly lower in examination costs and start around $35 CAD.
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2. Canadian Food Inspection Agency (CFIA) Exams
There are many other government departments involved with the importation of goods, however, the CFIA is the predominate one. They are Canada's watchdog when it comes to imports of food, meat, fruit and vegetables, plants and flower bulbs to name but a few of the products under their governance. This also gives them the authority to conduct their own examinations independently from Canada Customs. Quite often these examinations are done on site for regular importers, however, the CFIA will determine this based on their own criteria.
Wood packaging examinations are done under CBSA control for the CFIA, using their contracted carriers and bonded facilities. These costs can range from $1200- $3500, depending on the packaging, time spent unloading and loading into the container. Wood packaging is taken seriously because of the possible effects that insects can have in Canada.
- There are usually costs that the CFIA issues for standard inspections but if goods are held in detention the costs could be over $100 CAD/hour. For more information on these costs visit: Canadian Food Inspection Agency Fees Notice
- If the CFIA finds bugs (dead or alive) inside a shipment, the shipment will be fumigated and ordered to be exported from Canada, at the importer's expense.
Are these avoidable? The latter situation is, however the CFIA works in a similar approach to CBSA and has the right to examine shipments as they determine.
3. Demurrage, Detention And Storage Fees
These are fees usually assessed for rail or ocean freight movements when free time has expired.
Generally the free time allotted can range from 1 day to 3 days. The amount of free time that you have to move the container from the dock or rail yard will largely depend on several factors:
- Mode of transportation (rail - 1 day or ocean - 3 days)
- Terminal location (for example, Vancouver could be different than Montreal)
- Shipping line or freight consolidator (in the event of less than container load freight)
Your best course of action is to stay in close communication with your freight forwarder and customs broker to verify who is looking after the final delivery once the container arrives at the terminal. Having all documents and instructions in place before the shipment arrives will also prove helpful.
- Based on the aforementioned factors the storage rates for a full container range from about $126 - $252 USD per day for the first 5 days, and increase after that.
- There will also be demurrage costs for the container itself payable to the steamship line if there are delays. These costs range from approximately $200 - $300 USD per day.
- In many cases the daily rate will continue to increase if freight remains at the terminal longer from one to three days. Rates will increase after so many days as well.
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4. AMPS Penalties
AMPS is an acronym for the Administrative Monetary Penalty System which came into effect in 2002. AMPS covers a wide range of importing and exporting infractions where the penalties are administered by the CBSA (Canada Border Services Agency) and could be issued at either the time of entry into Canada, or during an audit or import review.
- To view the entire master penalty document go to: AMPS - Master Penalty Document
Potential AMPS Penalty Amounts
- There is a broad range of penalties from $150 - $25,000 CAD.
It is important to note that in most cases penalties increase with subsequent occurrences of the same infraction. Therefore if you do receive an AMPS penalty please put procedures in place to avoid future penalties which can only become more costly.
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How To Keep These Importing Costs Down
1. Gain A Better Understanding Of Your Responsibilities
Pacific Customs Brokers hosts a series of trade compliance seminars and demand courses throughout the year to help importers and exporters stay current with changing regulations. In particular, our Canadian Customs Compliance and Audit Seminar will take you through the importance of complying with customs regulations and what you can do to assure that you meet all of the requirements governing the movement of commercial goods
2. Build A Compliance Program With Your Customs Broker
An experienced customs broker can assist you with the different facets of compliance under the CBSA.
Topics You Should Include When Documenting Your Import Process
Pacific Customs Brokers' Trade Advisors have years of experience helping importers and exporters save as much time and money as possible all while keeping you trade compliant.
We can create tools and systems that you can implement to reduce your import risk. We can help with books and record keeping systems, customs procedure and compliance manuals as well as in-house compliance audits. We will guide you on CBSA's "reason to believe", why self auditing is important, when you should self correct past entries, the timelines to do so and prepare you in case of a Customs audit.
The Bottom Line
It's better to ask than assume. No one likes unpleasant, particularly costly, surprises especially at a time when profit margins are slim and time frames are short. The intent of this information is to make importers aware of some of the unforeseen situations so they can be best prepared when making a foreign purchase.