Keeping Customs Documents in Order at the Border

by James Menzies

CALGARY, Alta. – For companies involved in international trade, it’s never been as important (or challenging) to keep on top of changing documentation requirements as it is today.

New security standards have complicated the process and the repercussions for not complying can be severe.

At the Van Horn Institute’s Reality Check 2004 conference in Calgary, Randy McCord of logistics provider Schenker was on-hand to discuss some of the requirements.

“The greatest bottleneck in an international move is the information flow. It’s easy to move a crate from here to Pakistan, the real problem is making sure everybody along the way gets the information that allows it to flow smoothly,” explained McCord.

“We need the smooth flow of information in the same way we want to produce the smooth flow of physical materials. If they both flow smoothly that’s when you create the most effective supply chain and are going to have the greatest success in international trade.”

McCord took a look at the lighter side of the Customs documentation world but while his presentation drew a number of laughs from the audience he emphasized taking export documentation lightly is no laughing matter.

“Insufficient information means you get fined – wrong information means you go to jail,” warned McCord, when speaking about Pro-Forma invoices.

Pro-Forma invoices are aimed at providing all the data necessary for Customs to understand the nature of the transaction.

“If you’re going to do international transactions it behooves your contract people and your buyers and other people involved with the contracts to understand these terms,” McCord said.

Information required on the Pro-Forma invoice includes the product’s country of origin. McCord said that’s a simple term that is often misunderstood.

“Americans tend to think a country of origin is the place where the goods actually left from,” said McCord.

“In commercial documentation, what that means is the country the goods were manufactured in and that’s vital to the process – that must be included on the documents.”

Another form of documentation that may streamline the border-crossing process is a basic commercial invoice.

However, McCord said these often lack the necessary details.

“Most companies don’t provide the correct information on the commercial invoice to be able to clear Customs,” he said. “Most commercial invoices lack information such as transport details or cost. Customs wants to know the true value of your goods, not the discount you sold it to your customer for so these are relative pieces of information that should appear on a commercial document.”

HS codes are also an important piece of information and they tend to vary depending on whether the shipment is being imported or exported. A misdeclaration of HS codes can result in fines.

“Things like marks and numbers are very important on international transactions,” stressed McCord.

One piece of documentation that isn’t required for shipments to the U.S., yet is still highly recommended, is a packing list. Although not required for U.S.-bound shipments, McCord said a packing list can be a lifesaver, especially if you’re trucking multiple commodities.

“What if you’re shipping 20 crates on a truck and you hit that border in Sweetgrass and the customs official decides he’d like to take a look at that crate with the T-shirts?” asked McCord.

“You don’t have a packing list? I guess we have to open all the crates.

“The packing list is vital to ensure that customs can easily inspect the product when it’s coming into the country of being exported out of the country.”

It can also be beneficial for the client as well, he stressed.

He cited an example of a piece of machinery that is required for a product demo in Calgary.

When a hydraulic hose fails the day before the big event and the spares are on in a container in Halifax along with 47 other crates what do you do without a packing list?

“You air freight the whole bunch of them at a coast of tens of thousands of dollars whereas you could’ve had a packing list, gone straight to the crate, opened it up and couriered it and had it the next day,” McCord said.

Another important piece of export documentation is the B13-A, although it’s not required for shipments within North America. It is required on shipments to other countries which exceed $2,000 in value and it allows the government to keep track of international trades and better negotiate trade agreements with those countries.

In addition to the previously mentioned documents, there are a host of U.S.-specific documents required for a wide range of commodities (for example FDA documentation for food shipments).

“The United States is the most document-heavy country in the world, they want documents for everything,” pointed out McCord.

In order to simplify the export documentation process, McCord suggested companies find a way to integrate their sales software with documentation software. Schenker and other logistic services providers offer such programs along with the training required to use them.

Also, he stressed that companies ensure their staff are properly trained on the current requirements and that all documentation is handled by someone well-versed in the subject.

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