5 Topics You Should Include When Documenting Your Import Process

In part one of this blog, Six Reasons Why You Should Document Your Import Process, we identified some key reasons why you should document your import process. As promised, this sequel covers the specific topics that you should include in your procedures and some of the questions that you should be able to answer.

In order to provide some context, let's assume an importing situation where a Canadian company is purchasing products from U.S. and overseas vendors where the Canadian company is the importer of record. While 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?
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 if other products are purchased (for instance halfway through the year)? Who maintains copies of the certificates, you or your broker? To learn more about NAFTA Certificates, please refer to our previous article - 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: Often referred to as the "procurement to payment" cycle. Using our importing example in this blog, 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 event of an audit, Customs may choose several transactions where you need to submit 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 are over 40 separate documents related to valuation in the Customs regulations therefore it would be highly recommended that you discuss this with your customs broker if you feel any of these areas apply to your importing situations. D Memoranda D13 - Valuation

How To Accurately Complete A NAFTA Certificate Of Origin

This is a general list to get you started and is focused more so 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.