Customs compliance… starts with a solid understanding of the customs process.
In this age of international transactions, customs training has become a critical need for companies.
No matter what type of business I visit, the situation is often the same: people assume that the compliance of customs activities is overseen by the customs broker in charge of formalities. Usually, it only takes two or three questions for me to identify the possible risks that companies face and explain the potential impacts.
The customs industry is too often viewed as a necessary evil. Thus, this aspect of business is frequently overlooked. Managers believe that everything is going well if they do not have any problems. But nothing could be further from the truth!
Lack of experience…
Often, employees responsible for customs transactions have been thrust into this role. They have had to step in on short notice and replace the person who did this task before them or carry out several duties simultaneously.
… and the consequences when it comes to exports
- These employees complete the pro-forma export invoices the same way as their predecessors. They consult a previous invoice and change some bits here and there, without understanding what they’re doing.
- A sale is made in Europe and the goods are delivered door to door. Meanwhile, the employee doesn’t ask questions about customs implications overseas. The employee is then faced with the surprise of having to pay the VAT and perhaps even customs duties.
- Some companies issue NAFTA certificates of origin to be able to ship merchandise to the United States because this is what they do for all the products they make. Out of habit, they issue a NAFTA certificate as if they were the manufacturer, while in fact they are not. Instead, they are non-resident importers to the United States. They are therefore taking risks.
- Some exporters buy parts from a manufacturer and resell them in the United States by issuing a NAFTA certificate, even though the parts are not manufactured in North America.
Customs declarations
Customs declarations completed by brokers end up on the desks of import managers for approval prior to payment. Too often, however, no approval process for the customs declarations has been implemented, and they are simply paid without any verification.
Consider a company running the risk of having to pay tens of thousands of dollars in antidumping duties for a merchandise container from China, the first in a series for a new importer. The company did not do its homework before purchasing goods in China and did not know that antidumping duties applied.
Understanding the customs declaration
I am still surprised to find that some managers pay for customs brokerage services without having a clue as to the information in their own customs declarations. In the best of cases, the individuals responsible for verifying and approving customs declarations pay attention only to the amounts related to duties and taxes – if that!
The business world is changing rapidly. To keep pace, industry leaders want to and need to do everything quickly. They are cutting corners but, unfortunately, are not aware that they are doing so. They do not take the time to understand commercial transactions and their implication with respect to border crossings. And yet, believe me, it is vital for them to do so!
NAFTA: your responsibility
Recently, a participant in one of our training sessions told me that she has been doing things the same way for 20 years: she sends NAFTA certificates to her suppliers, who then return them to her once they are completed. Even though it is the supplier’s responsibility to complete them, she never realized that she was the one who was responsible inside the Canadian border.
Be a responsible manager!
I’m not going to try to scare you with all the financial consequences that may result from customs activities. However, you must be aware that there are indeed risks to take into consideration.
Minimal customs training for all concerned staff can be very helpful for companies. Such training should focus on the financial implications if certain details, which might seem trivial, are overlooked.
Business owners who do not have the time to understand customs processes must ensure that their employees who are responsible for this area have the knowledge required to manage customs activities.
A repeat mistake can become an unfortunate situation – your situation.
Even if your way of doing things has remained the same for years, your import-export company is not immune to future problems.
Ignorance of the law is no longer an excuse.