Business Adviser

Importing and Exporting? – Top ten things your business should know

By John Pajek
Senior Manager, KPMG Enterprise/Toronto

As your business grows, you might start importing or exporting goods. When you do, you’ll have to deal with complex customs rules but if you prepare correctly, you may be able to reduce your costs and paperwork and create a streamlined international trade process for your business. On the other hand, incorrect declarations can result in costly penalties, increased scrutiny by the customs authorities or even suspension of importer/exporter privileges.

For example, I know a company that imports goods with a very specific end-use for their industrial equipment product. Based on our review, we discovered this importer’s goods qualified for an end-use tariff code that would exempt them from duty. By applying the end-use tariff code, this importer got a refund of more than CAD$1 million for four years’ worth of overpaid duty.

To help your company develop an efficient process for its importing and customs compliance to improve your cash flow, the top ten things you need to do are:

Open an import/export account with the Canada Revenue Agency (CRA) — If you already have a business number with the CRA, you’ll need to activate an import/export account against that number.

Know your imported goods and their end-use — Imported goods are subject to different duty rates depending on what they are and sometimes on how they’re ultimately used. Some products can be imported at a reduced customs duty rate or duty-free if they meet the requirements of “end-use” tariff codes or qualify for other Canada Border Services Agency’s (CBSA) duty relief incentives.

Identify the country of origin, manufacture and export of your imported goods — Canada has trade agreements with several countries that usually allow goods imported directly from these countries to enter duty-free or at a reduced duty rate with a valid certificate of origin. Most trade agreements require the goods be shipped directly from the beneficiary country to Canada on a through-bill of lading. Identifying where the goods will be shipped from is essential before importing.

Declare the correct value of imported goods — Canada has several methods to determine imported goods’ correct value for customs. The selling price, possibly with adjustments, is the most common value declared on import. Vendor invoices should provide a complete and accurate description of the goods, the selling price and conditions and terms of sale.

See whether you can save GST — GST is payable on most imported goods but several categories of goods are zero-rated or GST-exempt — it’s worth checking on the GST status of your imported goods.

Ensure you can legally import or export your goods — Some goods are controlled, regulated or prohibited by the CBSA or other government departments. It’s important to determine in advance whether your goods fall into any of these categories.

Meet your marking and labeling requirements — Imported goods are subject to strict marking and labeling requirements, for example, for the country of origin. It’s important to ensure your imported goods meet their labeling requirements so you can sell them in Canada. It’s best to address these issues before the goods leave the exporting country.

Get written agreements with service providers — If you hire a customs broker, transport company or other service provider, you are still responsible as the importer/exporter of your goods. It’s a good idea to write instructions outlining each party’s responsibilities to ensure you comply with all the customs rules.

Document your procedures — As an importer or exporter, you must ensure the information declared to the CBSA on your behalf is accurate. Penalties for non-compliance will be issued to you, not your service provider. Your documented procedures should include a post-entry review to identify errors in value, tariff classification or origin and submit corrections to the CBSA on time.

Follow the rules to avoid penalties — If your company doesn’t comply with customs laws, you could end up paying penalties ranging from $100 to $25,000 per infraction under the Administrative Monetary Penalty System (AMPS).

Customs rules don’t have to get in your way. As long as you take care to meet your customs obligations, moving goods across borders can go smoothly and your business can continue to grow.

Business Adviser is published by KPMG Enterprise™ specifically for owners and executives of private companies. KPMG Enterprise is devoted exclusively to helping business owners and entrepreneurs build thriving enterprises. For further information about how KPMG Enterprise can help private companies, visit www.kpmg.ca/enterprise.