What exactly does a customs broker do?
World to Canada (W2C) has been around for more than 10 years, yet I still hear this question today in different forms. In fact, it pops up even more when I mention that W2C is a customs broker and our office is located on Montreal’s airport site. Believe it or not, people think we wear uniforms and work for the government!
Meanwhile, the reality is very different: we actually work for the importers. Simply put, we are import “facilitators.”
For a better understanding of our role in the import process, read the following example.
Imagine you are a table distributor, “Distribution ABC.” (Don’t ask me why it has to be a table. For some reason I always use them in my examples, as was the case in my previous blog!)
You want to import tables from a supplier, “Table 123,” which is located in New York City. You place an order totaling C$50,000. Next, you choose the “XYZ” transport company to pick up the pallets from this supplier and deliver them to you.
Pick-up of merchandise
After arriving at the destination, the transport company, XYZ, will pick up the merchandise. The supplier, Table 123, will provide the truck driver with a commercial invoice, perhaps a packing list and, if applicable, a NAFTA certificate of origin.
Transmission of information to broker
The driver will assign a barcode to the series of documents, constituting a unique cargo control number. In order to be able to cross the border and deliver the merchandise to you, the driver must of course go through customs. Depending on the transport company, the driver or dispatcher will have to forward the documents and relevant information to your customs broker, either by email or by fax.
In our example, the driver will directly fax the broker the commercial invoice, the packing list and the certificate of origin with the barcode specified on it. The driver will provide the number of items and total weight as well as indicate the date and time he or she plans to cross the border and at what customs office. For purposes of this example, the driver will cross the border on February 8 at 11 a.m. at the Lacolle office.
Preparation of application for release
The customs broker will receive the documents and check if all the information has been provided (quantity, description, unit price, total price and currency). Next, the customs broker will enter all the information received into the system and search for the appropriate harmonized system (HS) classification code, if necessary.
To recap: the broker will notify customs electronically that on February 8 at 11 a.m. the XYZ transport company will arrive at Lacolle with $50,000 worth of tables, bought by you, Distribution ABC, from a New York City supplier, Table 123.
On the customs side
The information will be received in the central system (Ottawa) and at the Lacolle customs office where it will be processed. Once the automated or human decision has been made, the customs broker will receive notification that the transaction is accepted and that the driver may proceed to the customs office.
Release of merchandise
As planned, on February 8 at 11 a.m. the driver will arrive at customs and submit the documents with the barcode. The customs officer will digitize the barcode and the system will issue the status, namely, whether the merchandise must be examined or whether the driver can cross the border and deliver the tables to your company. In our example, the driver is authorized to enter Canada to deliver your merchandise, which, in customs lingo, means that the merchandise has been “released.”
Once the application for release has been made, the customs broker must then send the detailed customs declaration (the B3 form) to customs. The broker must submit the full details, including the classification of products, the value, the exchange rate, and the calculation of duties and taxes owed to the government by your company. This is the fiscal aspect of the work. In fact, it’s very similar to an income tax return. Just imagine you have hired H&R Block, but instead of filing your tax return, it files a commercial transaction for you.
In our example, you had C$50,000 worth of tables bought – and manufactured – in the United States and you had a certificate or origin. The customs broker will declare on your behalf that you owe $2,500 in GST on this import. Depending on your agreement, you will pay the Receiver General and the customs broker for its services. Another option: the broker will invoice you $2,500 for the GST, which will be paid on your behalf, as well as a customs brokerage fee for this service.
Ultimately, the transaction described here is the “bread and butter” of all customs brokers. In the case of W2C, we offer this service to our clients and conduct thousands of these transactions every month. This is a simple example, but customs brokers also do the same thing for sea and air imports.
Responsibility for duties and taxes
At the end of the customs accounting period, i.e. the last business day of the month, the customs broker must remit the total amount corresponding to the GST and the customs duties for all its clients. It must remit a single payment at the end of the month for everyone – and not on the “32nd” of the month, or spread out over several payments, or make a late payment. The broker must send a cheque for the amount owed, including the total amount of cheques received from clients, directly to the Receiver General of Canada. Needless to say, this entails treasury movements! When I try to explain all this to business people from other industries, I get a lot of confused looks!
The other side of a customs broker’s work
There is also an information and advisory component to our work. Overall, given that different products are controlled by several government departments, the broker is always searching to find answers for clients and prospective clients. Here are a few examples of questions we are asked:
“What is the customs duty rate on product X?”
“How do I import this product into Canada?”
“Do I need a special document to import it?”
…or simply: “Are we allowed to import this into Canada?”
There are a multitude of laws and regulations that are constantly changing. Moreover, there are so many different products being imported by companies these days that no matter how many years of experience individuals may have accumulated while working at a customs brokerage firm, they always feel that they have learned something new each week.
Of course, the example described was an import by truck, from the United States to Canada, from point A to point B, carried out without any problems. I could elaborate on exceptional cases that make this part of the job interesting for adrenaline junkies, but I’ll leave that for another blog.