18 March 2015, Global Connections

How to get started with Canadian customs laws

Canadian exporters bring in hundreds of billions a year. Before companies sell overseas, though, they need to research documentation requirements and understand potential risks.

Companies that expand internationally can realize huge rewards, financial and otherwise. Before they can get there, however, they must first learn how to navigate the sometimes choppy waters of international customs requirements

In 2011, Canadian exports accounted for about a third of the country's gross domestic product, or $374 billion, according to Industry Canada. Large companies accounted for nearly 60 per cent of total exports, and 16 percent came from mid-sized companies.

"The Canadian market is small, so Canadian companies have to look beyond our shores," says Jeff Brownlee, vice president of public affairs and partnerships with Canadian Manufacturers & Exporters (CME), a trade and industry association. "One lesson the recession taught companies is it's not a wise move to put all their eggs in one basket."

The United States continues to be the largest market for Canadian exports, followed by China, the United Kingdom, Japan, and Mexico. Canadian trade agreements with some regions, including with the United States and Asia, mean goods shipped there may be subject to reduced duties.

Individual countries have their own customs laws and regulations on imported goods, which means Canadian businesses preparing to expand internationally need to do their homework to avoid penalties or delays at the border.

"It's doesn't take much to either have the shipment delayed or destroyed completely," Brownlee says. "We live in a just-in-time world, so any delay sends a ripple through the supply chain."

Here's a look at some of the things that businesses should consider before shipping overseas:

Make paperwork a priority

Filing the right paperwork is crucial for goods to be delivered on time. Canadian companies planning to export need to register with the Canada Revenue Agency (CRA) as an exporter. Once registered, they need to complete a B13A Export Declaration Form as required by the Canada Border Services Agency (CBSA) and Statistics Canada.

In 2015, companies planning to ship exports by air will also need to become registered shippers under Transport Canada's Air Cargo Security (ACS) program, according to Ruth Snowden, executive director of the Canadian International Freight Forwarders Association (CIFF), an industry group.

The Canadian market is small, so Canadian companies have to look beyond our shores

Jeff Brownlee, Vice President of Public Affairs and Partnerships with Canadian Manufacturers & Exporters (CME)

Countries also maintain their own import declarations forms and requirements. Depending on the goods and the country, Canadian businesses might need valuation documents and sanitary certificates. They may be subject to specific requirements for shipping containers. Whatever they are, follow requirements as closely as possible to minimize potential issues.

"When you're dealing with countries around the world, no two customs laws will be the same, so it's really important to do the research," says Brownlee, the CME vice president. "There's discretion to interpret the law by customs agents, so it could be different depending on who you're getting."

Consult a professional

Large companies may export enough goods to fill their own liner and have in-house expertise to manage those logistics. However, not all companies ship in large quantities or have staff equipped to navigate customs laws around the world. For those exporters, hiring a freight forwarder, customs broker and customs consultant could help avoid costly mistakes. Many small or medium-sized companies use all three, according to Martha Goncalves, director of consulting for Farrow, which provides customs brokerage and consulting, international freight forwarding and related services around the world.

"With the complexities of international trade, it's always good to get the guidance of someone who specializes in that area, even an international trade lawyer," Goncalves says.

Professionals can help companies anticipate when political issues might delay a company's shipment from crossing into a foreign country, or understand how goods potentially could be damaged inside a box car or ocean container while they’re being shipped, says Snowden, the CIFF executive director. They can also help companies file the appropriate paperwork and adapt to new customs regulations as things change. Freight forwarders typically also have an office or agency relationship in the receiving country to make sure goods reach their final destination.

"Paying upfront for an expert is well worthwhile because time is money," Brownlee says. "If you can't do it on time and get the product where it needs to go, chances are your competitor will beat you to it."

Plan for problems

Even when companies dot their i's and cross their t's, there's no guarantee everything will go according to plan. Goods sitting at a port can be randomly selected to be examined before leaving the country. "You can miss a sailing, causing delays of several weeks," Snowden says. Examinations do not cost anything. However, companies may need to pay several thousand dollars to move a container that's been selected for inspection to and from the port and have it opened and closed. "If it was a shared container, [the companies] still have to bear their share of that cost, and a lot of exporters don't realize that," Snowden says.

Exporting also carries risks. Goods can fall off a vessel, get hit by a forklift, or encounter other hazards while en route. Customs experts can help identify where transfer risks might occur and find ways to mitigate some of them, Goncalves says. Purchasing insurance is also a good idea, so a company is protected against potential damages, she says.

Buyers of exported goods may pressure an exporter to deliver as quickly as possible. But setting unrealistic delivery dates can backfire if goods are held up in customs or a shipment is delayed. Instead, Brownlee suggests building in extra time on the back end and testing the waters before shipping a large shipment of expensive goods. "Your first shipment into a country should never be the most important shipment," Brownlee says. "Try a smaller one so that you don't break the bank if something does happen."

Seek professional advice

As the information contained in this article is of a general nature, it is recommended that companies looking to export consult with their professional advisors before undertaking any transactions.

Disclaimer

The information presented is not meant to be comprehensive and does not constitute financial, legal, tax or other professional advice. You should not act upon the information contained in this document without first obtaining specific professional advice. While reasonable care has been taken in preparing this document, HSBC does not make any guarantee, representation or warranty (express or implied) as to its accuracy or completeness. The information presented in this document is subject to change without notice.

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