I recently took part in a webinar hosted by EDC on How to Keep Up with the Logistics Evolution. You can view it on-demand to learn more about how the industry is changing, as well as hear from other panelists, including: Domenic Mancini, a Business Development Manager with Purolator Canada; Amanda Martyniuk, Senior Business Development Manager at eShipper; and Emiliano Introcaso, an Export Help Advisor with EDC. The webinar provided a great overview of the industry and, in particular, how Canadian companies can streamline their own logistics practices.
Why logistics is in a state of constant change
I’ve been working in the brokerage industry for more than three decades, so I have more than a passing acquaintance with the industry’s developments over time. And I can honestly say, without a doubt, that the last six to 12 months has been more vibrant than my previous 35 years, combined. We’ve witnessed immense adjustments to supply chains. We’re living the e-commerce revolution. Add in a dollop of trade wars, and you have the recipe for unprecedented change.
As my fellow panelist, Domenic Mancini from Purolator pointed out, change is the watchword for the logistics industry, and increasing customer expectations are leading that wave of change. Gone are the days when we ordered something online and were delighted to have it delivered within a few weeks. What’s ordered today is expected tomorrow, or even today. And this is hardly a B2C phenomenon. Business customers also want goods delivered faster, at a lower price, and with more transparency.
New technology is also a key driver. Data analytics and cloud-based solutions—such as those provided by eShipper—promise to make the sector increasingly more efficient. Some of the automated solutions being used today, or are being tested for use in the near future, would have been considered science fiction not that long ago. Autonomous vehicles and delivery drones may become the new normal in the next decade.
Regardless of the changes to speed or mode of delivery, every package leaving or coming into Canada needs to clear customs. This can be a major challenge, but take heart. This is where customs brokers come in, and we’re here to help.
The duty of customs brokers
Customs brokers, like me, facilitate trade by working with supply chain partners—carriers, importers, exporters, and warehouses—to ensure that each element of the transaction is interpreted and actioned in accordance with all applicable regulations. A customs broker is similar to an accountant in that you rely on your broker to file declarations on your behalf.
But here’s the thing: those declarations are ultimately your responsibility, much like you retain responsibility for your taxes even if an accountant files your tax return. So any error or omission—and the liability that results from those—ultimately rest with you, the business owner. Just as you should be intimately aware of your financials, you need to be crystal clear on what you’re shipping, and make sure your documentation reflects this clarity. I like to think of it as the two foundations, or parts, that drive the customs process.
Part 1: Product identification
Believe me, product identification is more complicated than it sounds, but here are some tips. Make sure you understand the composition of the product, the origin of inputs, its end use, physical characteristics like size and weight, and whether it’s going to a person or a business. All of those factors can attract different rules and regulations, and most importantly, whether there’s going to be any assessment of duty or taxes.
Here’s why this step is so important and why it gets a bit complicated. In identifying your product, you will be assigning it an HS (Harmonized System) Code, and this code will ultimately determine the tariff classification of your good. In my experience, this process is sometimes more of an art than a science.
Case in point: hockey gloves went all the way to the Supreme Court of Canada to determine a correct tariff classification. As a Canadian customs broker, I find that mildly amusing. Far less amusing is the case of a Red Deer company that was fined $90,000 in 2014 for shipping a $15 package of O-rings overseas. Although they were shipping the product for an oilfield application, it was routed to Iran, which was on a restricted party screening list. And just like that, they got hit with a crippling fine.
Which brings us to the next tip: after you’ve identified your product, you need to determine if there are any import/export or regulatory restrictions on the product, either in Canada or in the destination country. You can look to Global Affairs Canada for the latest updates on export and import controls. And remember to do this same level of research in the country to which you’re exporting.
Part 2: Accurate documentation
Last year, the Auditor General of Canada combed through 1.4 million supply chain documents. Their findings: three out of four of those documents had insufficient information to appropriately assess tariff clarification. So clearly, we have a bit of a problem here.
The key documents in shipping goods include the commercial invoice and bill of lading. Take the time to ensure they include an appropriate description of the good being transported. As well, they need to itemize the origin, routing, and conditions of sale…the essential indicators that will drive what actions your broker or supply chain partner must take to facilitate each particular transaction.
Speaking about conditions of sale, today’s consumers want to buy everything on a ‘delivered duty paid’ basis. They want the goods arriving at their door, and they don’t want to pay extra for shipping costs, import duties, taxes, or customs brokerage fees. So it’s critical to ensure your shipments are going through with cost certainty, that you’ve factored in all of these variables into your pricing.
Timely advice on tariff retaliation
Both current and potential trade actions are causing businesses to review their products and supply chains. More than ever, brokers are invaluable trading partners, because we’re able to interpret historic trends with current data to help businesses look forward. In fact, GHY has proactively collaborated with many of our customers to amend classifications, where possible, to avoid new surtaxes. And we’re not alone. Many brokers have been successful in having goods reclassified prior to the surtaxes coming into effect. It’s really about working with a partnership mindset. Sometimes you have to bring experts on board—in this case, brokers who are certified trade compliance specialists—to ensure your export success in an era where the only constant is change.