In part one of this blog, we identified the main reasons why you should document your import process - Six Reasons Why You Should Document Your Import Process. This sequel covers specific topics that should form part of your procedures and includes some of the questions that you must be able to answer.

In order to provide some context, let?s assume an importing situation where a Canadian company is purchasing products from both U.S. and overseas vendors where the Canadian company is the importer of record. Since penalty avoidance is always a priority for an importer, we?ll cover the key areas that the Canada Border Services Agency targets during an audit.

  1. Tariff Classification / Duty Rates: How do you determine the tariff classification and duty rates for incoming products? Is this done before a purchase decision is made? Or do you let your customs broker figure it out when the goods arrive?   Do you pursue written rulings if it is difficult to discern between two or more possible classifications? Do you have a process for auditing your customs entries to ensure classifications are applied correctly by your customs broker? For further information about the importance of correct tariff classification read this blog-   Determining the Correct Tariff Classification ? How Important Is It? 
  2. Country of Origin: Is the country of origin (country of manufacture) correctly identified for each product? Do your suppliers advise you if the country of origin changes? (Tip ? the most common mistake is for a U.S. company to indicate "U.S." when in fact the goods were manufactured overseas and imported into the U.S. prior to their sale to Canada.)
  3. NAFTA and other free trade agreements: Do you have a process for reviewing NAFTA Certificates of Origin from U.S. or Mexican vendors to determine if they contain valid coding? If your customs broker performs this task on your behalf, make sure you understand how they decide if a certificate is valid or not. Do you use blanket or individual certificates? If you use blanket certificates, do you ensure that copies are maintained for six years plus current year in Canada, and five years plus current year in the U.S.? If you use blanket certificates, do you have a process for obtaining updated certificates when new products are purchased from current vendors?  Who maintains copies of the certificates, you or your broker? To learn more about NAFTA Certificates of Origin, read this blog? Top 5 Mistakes When Completing a NAFTA Certificate of Origin. If you enjoy the use of other free trade agreements, you will need to have a similar process.
  4. Documentation Cycle: Using our importing example at the beginning of this article, this means all documents in the process from when the Canadian company issued a purchase order to when they paid the vendor for the goods. This would include the purchase order, commercial invoice, packing slip, bill of lading, certificates of origin, Customs entry, receiving records, and proof of payment. In the past this was referred to as the "Procurement to Payment" cycle but should now be called the "Procurement to Post-entry cycle" as it should also include any amendments made to the original customs entry. In the event of an audit, Customs may choose several transactions where you would need to provide all of these documents within 30 days. It would be very helpful to identify where these are retained within your company as it is probably unlikely that they are kept in one place.
  5. Valuation: If you are purchasing from a company that is related to yours, you will need to review this area. You also need to determine if there are other factors which could affect your customs declarations. These could include cash discounts, trade discounts, freight amounts, assists and royalties. At last count, there were over 40 separate documents related to valuation in the Customs regulations therefore it would highly be recommended that you discuss this with your customs broker if you feel any of these areas apply to your importing situations. Customs D Memoranda D13 - Valuation

This is a general list to get you started and is focused on the customs process. As indicated in part one, the purpose of documenting your import process needs to reflect each company?s objectives, the parties to include, and the overall breadth of the project.

Do you have questions about documenting your import process?  Or would you like further information on any of the above topics? Leave them in our comments section below.


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While we strive for accuracy in all our communications, as the Importer of Record it is incumbent upon your company to ensure that you are aware of the requirements under the new regulations so that you maintain compliance as always.