Vol. 148, No. 25 — December 3, 2014
SOR/2014-271 November 21, 2014
Regulations Amending the Accounting for Imported Goods and Payment of Duties Regulations
P.C. 2014-1274 November 20, 2014
Whereas the annexed Regulations give effect to a public announcement made on January 8, 2013, known as Customs Notice 13-003;
And whereas that Customs Notice provides that the changes proposed to the Accounting for Imported Goods and Payment of Duties Regulations (see footnote a) are to come into force on January 8, 2013;
Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Public Safety and Emergency Preparedness, pursuant to subsection 164(1) (see footnote b) and paragraph 167.1(b) (see footnote c) of the Customs Act (see footnote d), makes the annexed Regulations Amending the Accounting for Imported Goods and Payment of Duties Regulations.
REGULATIONS AMENDING THE ACCOUNTING FOR IMPORTED GOODS AND PAYMENT OF DUTIES REGULATIONS
1. (1) The portion of paragraph 6(1)(a) of the Accounting for Imported Goods and Payment of Duties Regulations (see footnote 1) before subparagraph (i) is replaced by the following:
- (a) in the case of goods that have an estimated value for duty exceeding $2,500,
(2) Paragraph 6(1)(b) of the Regulations is replaced by the following:
- (b) in the case of goods that have an estimated value for duty not exceeding $2,500, a commercial invoice, current price list, bill of sale or other similar document that describes the goods, denotes the number of units being imported and contains information sufficient to enable an officer to determine the tariff classification and appraise the value for duty of the goods.
2. The portion of paragraph 7(2.1)(d) of the Regulations before subparagraph (i) is replaced by the following:
- (d) goods that have an estimated value for duty not exceeding $2,500, if
3. Subparagraph 7.1(a)(i) of the Regulations is replaced by the following:
- (i) have an estimated value for duty not exceeding $2,500,
4. Paragraph 8(a) of the Regulations is replaced by the following:
- (a) are commercial goods that have an estimated value for duty exceeding $2,500; or
5. Paragraph 8.2(d) of the Regulations is replaced by the following:
- (d) commercial goods that have an estimated value for duty exceeding $2,500.
6. Paragraphs 10(a) and (b) of the Regulations are replaced by the following:
- (a) in the case of goods that have an estimated value for duty exceeding $2,500, within five business days after their release; and
- (b) in the case of goods that have an estimated value for duty not exceeding $2,500, not later than the 24th day of the month following the month of their release.
7. Section 10.31 of the Regulations is replaced by the following:
10.31 Despite section 10.3, a CSA importer may account for commercial goods that have an estimated value for duty not exceeding $2,500 by the 24th day of the month following the month in which those goods were released under subsection 32(2) of the Act.
COMING INTO FORCE
8. These Regulations are deemed to have come into force on January 8, 2013.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the regulations.)
As the global economy recovers from the 2008 economic crisis, imports of low value shipments continue to rise. Along with growth in foreign sales and a strong Canadian dollar, Canada continues to import large volumes of goods every year. As the demand for low value imports grows, the importance of trade facilitation becomes ever more critical for business and the need to reduce red tape and streamline business processes becomes more pressing.
The process of importing goods adds to importers’ costs, including costs associated with providing information to government organizations. Canadians benefit when these costs are minimized, as any increase can weaken the competitive position of Canadian industries and cost increases may be passed on to the consumer.
The Courier Low Value Shipment (LVS) Program, administered by the Canada Border Services Agency (CBSA), is designed to streamline the release of low value shipments through customs while providing the express courier industry with the expedited release of goods obtained through the exporter declaration without any importer intervention. An expedited release process helps to reduce costs borne by importers and accelerates the delivery of merchandise, which ultimately benefits the consumer. One of the requirements for the Courier LVS Program is that a shipment must have a value for duty (VFD), which is the foreign value of purchases converted into Canadian dollars, of less than C$1,600.
Increases in global trade have resulted in increases in the number of shipments that are processed by the CBSA with a value for duty above C$1,600. Since these importations are valued at more than $1,600, they do not qualify to be processed under the Courier LVS Program, and therefore do not qualify for expedited release.
The increase in relatively low value trade which exceeds the LVS threshold of $1,600 is placing a strain on the CBSA’s commercial systems that are used to process these importations. The increased volume of LVS has created backlogs and system failures in some cases, which have at times resulted in delays for businesses which are attempting to have their shipments cleared for release into the Canadian marketplace.
The CBSA plays a vital role in preventing the entry of goods detrimental to Canadian society while striving to balance facilitation with enforcement by allowing low-risk persons and goods to enter Canada with minimum administrative requirements.
All foreign goods that are imported into Canada must be reported to the CBSA. To account for shipments in the CBSA commercial environment, the importer is responsible for presenting a fully completed accounting package to the CBSA. This package includes the following:
- the required copies of the cargo control document, including the cargo control number;
- an invoice containing all of the required data elements necessary to account for the goods (e.g. value, description, importer/exporter data, weight);
- a unique transaction number that is specific to the importation;
- all appropriate permits, licences or certificates, if required; and
- a Form B3 accounting document which is presented, in most cases, five days after the release.
The accounting requirements vary if the goods are valued at less or more than the low value shipment (LVS) threshold of $1,600. The value of a shipment is determined by the importer and/or broker using the invoice of the goods and is the amount that was paid to the seller. In addition, if the goods were permitted to be released before the duties and taxes are paid to the CBSA, the LVS threshold will also determine the time period for the formal payment of the duties and taxes.
The Courier LVS Program was created in 1993 and was designed to facilitate and expedite the high volume of low value shipments by streamlining the import process of these shipments. The Courier LVS Program uses a consolidated report/release document to achieve the release of the goods. For release purposes, participants report mandatory transactional data (i.e. importer, exporter, description, value, country of origin, etc.) for qualifying shipments on a single consolidated Cargo/Release List, rather than on an individual cargo manifest, with follow-up consolidated LVS accounting, rather than on a transaction-by-transaction basis, as is done in the regular commercial stream.
The LVS threshold impacts all commercial and casual goods entering Canada through the CBSA’s commercial processes (i.e. the regular commercial stream, the Courier LVS Program, and the Postal Program). The Postal Program differs from the regular commercial stream whereby goods are reported under the program whenever a foreign exporter hands its shipment over to their country’s postal service, which is then handed over to Canada Post.
Casual goods are defined as goods imported into Canada other than commercial goods; these goods are consigned to individuals in Canada. Once qualifying shipments have been released, Courier LVS Program participants must provide the appropriate importers/customs brokers with the LVS cargo report and any accompanying accounting documentation for each of the shipments in order for the goods to be formally accounted for. This accounting function is completed on a consolidated basis rather than by individual transaction, thereby lessening the impact on the CBSA’s commercial systems.
The consolidation of accounting provides significant benefits to the importer/customs broker and courier companies. Instead of providing the CBSA with multiple individual B3 accounting documents (each representing one shipment), the importer/customs broker can present a single B3 document that represents all of their respective shipments.
A customs broker is a hired professional whose main role is to clear goods through customs for their clients, importers and exporters. Customs brokers are licensed by the CBSA; therefore, an importer must grant a customs broker authority to act on his/her behalf. Customs brokers communicate with their clients, the CBSA and other government agencies that control the importation and exportation of goods.
In December 2012, Canada and the United States issued the Beyond the Border Action Plan (BAP), a comprehensive framework for cooperation between the two countries, designed to enhance security while accelerating the legitimate flow of people, goods and services. In an effort to find new ways to help businesses move efficiently across the border while reducing administrative burden, the BAP committed both Canada and the United States to increase and harmonize the low value thresholds for expedited customs clearance to C$2,500 and US$2,500 respectively. Adopting a harmonious LVS threshold between Canada and the United States will result in the promotion of economic growth and competitiveness for importers. Regardless of whether the goods are travelling north (into Canada) or south (into the United States), importers/exporters know that the threshold is the same. This increase was effective as of January 8, 2013, and was implemented in Canada via a Customs Notice (CN13-003).
The objective of amending the regulations is to accelerate the legitimate flow of goods into Canada by allowing more shipments to qualify for the streamlined LVS reporting and release process, thereby reducing the backlog of shipments that exists in the CBSA’s commercial systems. The increased threshold will allow importers to benefit from improved operational efficiencies, enhanced customs clearance processing times as well as simplified and lower processing costs.
The increase of the low value threshold from $1,600 to $2,500 will deliver on the commitment under the BAP to promote supply chain connectivity by harmonizing low value shipment processes with the United States to expedite customs administration. This increase will also assist the CBSA in fulfilling its mandate to support national security and public safety while facilitating the free flow of persons and goods into Canada.
These regulations will raise the threshold for low value shipments from $1,600 to $2,500, in order to facilitate the expeditious flow of low value goods and harmonize Canada’s low value threshold with the United States, fulfilling a commitment under the BAP to promote supply chain connectivity. This amendment will impact all importers and customs brokers who import goods into Canada.
In order to raise the threshold, the Accounting for Imported Goods and Payment of Duties Regulations and the Fees in Respect of Mail Regulations will be amended to change all references from $1,600 to the new $2,500 threshold. The Fees in Respect of Mail Regulations will also be amended to replace the term “Priority Courier” with “Express Mail Service.” This change is to reflect the current terminology recognized internationally and will not impact how these Regulations are interpreted or applied.
The “One-for-One” Rule will apply to this amendment. The regulatory amendments will, over time, decrease administrative burden on stakeholders by an estimated $688,221, annualized and, therefore, constitute an “OUT” under the Rule.
The CBSA estimates that an additional 1.5 million shipments per year will be processed through the expedited Postal and Courier LVS Programs. The increase in shipments processed through the low value stream are expected to lead to a total annualized decrease in administrative costs of $688,221 as importers will no longer have to present release request entries or manifests to their local CBSA office in order to obtain release of these goods. Based on the removal of up to 1.5 million shipments per year from the regular commercial stream (i.e. goods valued between $1,600 and $2,500), it is assumed there will be savings to importers/customs brokers in the collection calculation and assessment of this release information. Each business will save varying amounts depending on the frequency of importations (i.e. more importations will mean more savings), as they will no longer be required to prepare and submit individual release request entries to the CBSA for goods with a value not exceeding $2,500, as required in the regular commercial stream.
Small business lens
The small business lens does not apply to this proposal, as there are no costs to small businesses.
A key commitment included as part of the BAP was to engage with all levels of government and with communities, nongovernmental organizations, the private sector and citizens on innovative approaches to security and competitiveness. The Government of Canada and the Government of the United States held joint town hall sessions on February 28, and 29, 2012, in Niagara Falls, New York, and Toronto.
The purpose of these consultations was to engage stakeholders on all four areas of cooperation of the BAP: addressing threats early; trade facilitation, economic growth and jobs; integrated cross-border law enforcement; and critical infrastructure and cyber-security. During these consultations, businesses and people engaged in cross-border shipping, including UPS Canada, the Canadian Courier and Logistics Association, and the Canadian Federation of Independent Business, suggested that simplifying the administrative processes governing the shipment of low value goods across the border would be beneficial to trade, and supported the proposal to raise and harmonize the low value threshold from $1,600 to $2,500. Since its implementation in January 2013, the harmonization of the LVS threshold has received positive feedback from stakeholders, who have commented that harmonized LVS thresholds will allow for swifter movement of goods for importers and exporters of all sizes.
Amendments to the Accounting for Imported Goods and Payment of Duties Regulations and the Fees in Respect of Mail Regulations are necessary in order to raise the low value threshold from $1,600 to $2,500. This increase will allow Canada to achieve one of the commitments made under the BAP by harmonizing the low value thresholds for expedited reporting and release process with the United States. Allowing more shipments to qualify for the streamlined Courier LVS Program will also reduce the backlogs that exist in the CBSA’s regular commercial import stream, allowing for greater trade facilitation and reduced delays in processing goods.
These amendments will ensure that commercial importers and brokers importing goods into Canada valued at less than $2,500 will no longer need to present release request entries to the CBSA to obtain release of their goods, resulting in reduced processing time for business and quicker facilitation and entry into the Canadian market. As a result of the increase in the LVS threshold, up to 1.5 million imports per year, valued between $1,600 and $2,500, which are currently processed through the regular commercial import stream, could potentially transition into either the Postal Program or the Courier LVS Program. The import costs associated with shipments released in the Courier LVS Program are approximately half of that in the regular commercial stream. It presently costs businesses $3 to process a low value shipment compared with $6 for a high value shipment.
With the threshold increase, customs brokers will save a substantial amount of time and money. In order to obtain release of goods valued between $1,600 and $2,500, customs brokers will no longer have to present release on minimum documentation (RMD) accounting entries (carrier manifests, invoices, etc.) to their local CBSA office, as required under the regular commercial stream. If the goods are released under the Courier LVS Program, it takes, on average, approximately 3.84 minutes for a customs broker to account for the goods (i.e. a consolidated B3 is only required before the 24th day of the month following the month of release). However, if the goods are released in the regular commercial stream, it takes approximately 11 minutes to account for the goods (i.e. an RMD needs to be prepared to obtain the release of each of the goods and the subsequent form B3 accounting document is required for each of the goods within five days following the release). In addition, the cost to a customs broker for clearing a shipment is $3 in the Courier LVS Program (i.e. consolidated B3 only) compared with $6 for high value shipments in the regular commercial stream (i.e. RMD and B3 for each of the goods). Therefore, goods below the LVS threshold can be processed in an expedited, less-costly manner for all customs brokers.
The increased LVS threshold may also decrease penalties imposed on importers as a result of more shipments qualifying as commercial LVS. The time frame to account for goods (i.e. submit a B3 formal accounting document to the CBSA) is different between the LVS and regular commercial streams. Under the LVS commercial stream, LVS shipments must be accounted for by the 24th day of the month following the release of the goods, in contrast to the five business days for commercial shipments that are not LVS. The additional time allocated to importers to account for goods under the LVS stream could result in fewer late accounting penalties being imposed.
By raising the low value threshold and decreasing the number of shipments considered high value, the CBSA will be able to better divert resources in order to focus its risk assessments on higher value or risk goods.
Implementation, enforcement and service standards
The low value threshold increase from $1,600 to $2,500 was implemented via a Customs Notice (CN13-003), on January 8, 2013. Under section 167.1(b) of the Customs Act, the CBSA may issue a public announcement via a Customs Notice containing its proposed regulatory wording. These regulations will be deemed to have come into force retroactively as of January 8, 2013. The system changes required to increase the LVS threshold have been operationalized by the CBSA.
Senior Program Advisor
Courier LVS Program
Canada Border Services Agency
150 Isabella Street, 4th Floor