A government-issued licence is one prerequisite to becoming a customs broker, according to subsection 9(1) of the Canada Customs Act. To qualify for a customs broker licence, one must first pass the rigorous customs broker professional exam.
Individuals and companies can clear their own import and export shipments by themselves. This can save thousands of dollars in broker fees.
So why use a customs broker at all?
Customs Compliance Advantages
Customs brokers are knowledgeable. For example, they can advise a refrigerator exporter in Toronto on how to apply for a drawback that refunds tariff duties paid for cooling units imported from France. The drawback applies if those components are part of an export to one of Canada’s North American Free Trade Agreement (NAFTA) partners, Mexico or the U.S.
Customs brokers are experts in filling out hundreds of prescribed customs forms. This includes completing applications for drawbacks on those French cooling units.
In addition to correctly filling out prescribed forms, inexperienced importers risk severe penalties if they do not comply with a daunting array of detailed customs rules. If a shipment is rejected 3 times for even simple reporting deficiencies, customs can seize the imported goods.
An experienced customs broker will not re-file documentation for a previously rejected shipment until all root problems are identified and resolved. This may involve a review by a senior certified customs specialist and a meeting with the supervising customs director.
Keeping Legal Customs Records
Canada Border Services Agency (CBSA) Memorandum D-17-1-21 specifies that records for commercial goods imported into Canada have to be kept for 6 years from date of import.
New importers often lack adequate record-keeping systems that could pass rigorous customs audit requirements.
Many customs brokerage firms have electronic systems for storing trade records and documentation. Those systems provide clients with fully secure storage, often with remote access and search privileges.
One possible disadvantage to third-party record keeping is the fact that the customs broker is legally obligated to remain silent if an importer client is under investigation. Under subsection 9(3) of the Customs Act, a customs officer can ask to see any records that the client is required to keep. By federal law, the customs broker cannot tell the client about the investigation – even if he knows that his client will be subject to severe criminal penalties.
Saving Money on Tariff Duties
Customs brokers are skilled in identifying the tariff codes that apply to specific goods. It is not always as simple as looking up codes in the Customs Tariff. For example, a new technology import such as the Apple iPad may not be listed in the latest customs manual.
An experienced customs broker will look for a similar item, also known as an akin good. In the case of the iPad, a computer netbook is similar so customs officers will accept harmonized system code 8471.30.00.00 for computer notebooks, netbooks and iPads imported into Canada. Choosing the wrong tariff code can result in thousands of dollars in extra duties and taxes.
Another expensive error is when the import documentation does not itemize individual tariff codes for each and every item in a shipment.
Consider the following shipment imported from China:
- $100,000 worth of roofing nails (duty free under tariff code 7317.00.10.20)
- $50,000 worth of thumb tacks (duty free under 7317.00.90. 40)
- $10,000 worth of safety pins (to 7% duty under 7319.20.00 00).
A novice importer may declare only the roofing nails, perhaps because it represents the largest charge among the imported items.
On discovery of this error, customs officials will charge a 7% tariff on the value of the entire shipment. In this case, that amounts to $11,700 instead of $700 that would have been payable had a customs broker filled in the documentation properly.
If customs officers impose punitive charges, the amount of customs duty can triple to over $35,000.
Saving Customs Broker Fees
Customs brokers can save thousands of dollars by reducing duties, taxes and by avoiding hefty customs compliance penalties.
For simple transactions, importers may want to consult a customs broker for an initial shipment only. Once they have thoroughly mastered the process, those businesses can export or import on their own.
Take a mom-and-pop shop that, 3 times a week, exports high-definition television sets from Toronto to New York. If the customs broker fee is $500 per shipment, exporters can save $1,500 per month if they clear routine shipments on their own.
Importers and exports can then use their savings selectively, when the need arises. This includes consulting with a customs broker for more complex problems or advice on money-saving opportunities.
See also Sample Customs Act Questions for Canadian Customs Brokers Exam.
Daniel Workman - A senior business and finance writer who also does French translations, notably international trade and insurance materials.
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