You have decided to start exporting from Canada to the United States, but the whole prospect seems just a little bit overwhelming (okay, a lot overwhelming) and the idea of sifting through all the paperwork and figuring out the basic steps is a job you just don’t want to tackle. Well, in order to help you, we have put together some pointers here with an overall look at who does what, and how to get from A to Z without losing your mind.
Before getting into the specifics, it should be mentioned that when you first start out, you will need to be talking to people with previous export experience, asking questions, and generally being open to gathering advice from different corners. If you take a look at the websites of different Customs Brokers, you will find sections on exporting to the United States along with the requisite forms. Government websites have a lot of information, and are necessary resources, but they can seem overwhelming. That being said, the US Customs and Border Protection Agency has two well-laid out and informative pages on exporting to the United States, and they are good to look at once you have an idea of how it all functions. These websites are here and here.
You also need to keep in mind that the learning curve can seem steep, but eventually you will have enough experience to know what you need to do and what can be left out, depending on the part you are shipping.
Our First Shipment
So, let’s get started. We are going to use a scenario where we have a fictitious Alberta company that is selling an $8000 engine to a company in Montana. Let’s see what we need to do to get this going by looking at who will be involved where, and the documents:
Seller in Canada
Buyer in the US
Shipper (probably originating in) Canada
Customs Broker (on the American side of the border)
NAFTA Country of Origin Form
Bill of Lading
Bill of Sale
(keep in mind that most documents have instructions on them for filling them out correctly, and if you have questions along the way you can ask your Shipper and/or Customs Brokers for help)
We need a Business Number from the CRA that will allow us to obtain an import/export account (free of charge). If you don’t have a Business Number or have one and want to set up the import/export account, you can call the CRA’s Business Window at 1-800-959-5525, or visit the CRA’s Business Registration Online link here.
Determine the Country of Origin for the goods we are exporting: this information is key, and will be needed on an essential document later, the NAFTA Country of Origin Form. With this information, it can be determined if the parts being shipped are eligible for preferential tariffs under the NAFTA agreement. The information can usually be found on any original paperwork obtained when you originally bought the part, or by calling the manufacturer and finding out.
Certain goods can’t be exported from Canada (i.e. black bear claws and counterfeit money), and while our engine might seem to be a safe export, we can still look at the Government of Canada’s website here.
We might want to determine if our shipment will be subject to any permits, restrictions or regulations by the Canada Border Services Agency or other departments. The link to go to is this one.
Also, when we are dealing with vehicles and automotive parts, there are often times environmental regulations involved and the website to look at is from the American Environmental Protection Agency, here. With engines in particular, because they emit pollution, there are certain regulations they have to conform to, and this form has to be included in the shipment.
In terms of shipping costs, if our Buyer is using their own Shipper and Customs Broker (see below for information on both), we don’t have to worry about it as the bills will go to them. However, if we are providing the Shipper and Customs Broker, we will need to contact them with details on the shipment so they can give us a quote which we will include in our estimate to the Buyer. Once the Buyer accepts this estimate, we can go ahead with the next steps.
The Shipping Company
Now that we have figured out we can send our engine to the United States without too many problems, and our Buyer has agreed to the sale, we need to determine who the Shipper is going to be if the Buyer is not supplying their own. We choose between road, train and air depending on the urgency of the delivery and the amount of shipping a buyer will pay. The Shipper will put together a Bill of Lading, which is a detailed list of our shipment in the form of a receipt from them to us. The Shipper will give us a copy, and the document will accompany the shipment through Customs and to the final destination.
The Bill of Lading needs fairly exact information on it, and this will come from a Packing List. While a Packing List is not necessarily the responsibility of the Seller, we are going to put it together as we know our product well and will probably make fewer mistakes than a third-party. The Shipper could do it when they arrive for pick-up, but we can do it as well.
The Shipper will arrange for a pick-up at our facility and we will provide to them a Commercial Invoice as well as the NAFTA Certificate of Origin Form. The Commercial Invoice is a standard document for international shipments and it identifies the goods being shipped as well as the Buyer, Seller and details on the actual shipment (date of shipment, etc.). For the Commercial Invoice, we also need the Harmonized Code (or HS, the Harmonized Commodity Description and Coding System) for our engine. The HS is a 6-digit number that comes from the World Customs Organization (WCO), an independent intergovernmental organization. The HS numbers classify and identify products in an internationally standardized system in order to facilitate international trade. You can find a listing of the codes here.
The NAFTA Certificate of Origin Form will ask for much of the information above in addition to tax identification numbers (your CRA number, the Buyer’s IRS number) and country of origin for the engine (as the name of the form implies) as well as the HS number. This form will determine whether or not your shipment will qualify for tariff reductions under NAFTA.
Once the Shipper has the previously mentioned documents in order, they will send the information through a third party to the US Customs Border Agency for a pre-clearance which will make getting through the border must faster. These documents plus a Bill of Sale will also be sent to the Customs Broker we have at the border (more on that next), who will then later receive the pre-clearance approval number which will allow admittance of our shipment to Customs.
The Customs Broker
To import a commercial shipment into the United States, American law requires that we have a Customs Broker on the American side of the border to provide the paperwork to the US Customs Border Agency, pay immediately for all duties and taxes and generally take care of clearance. Our Buyer might have a Customs Broker of their own if they import often enough and they will deal with the relevant fees on their own. If our Buyer does not have a Customs Broker, we can find one ourselves (preferably one who also has an office in Canada to make things easier). If we are not sure how often we will be exporting, we can set up a one-time account which will allow the Broker to act for us with this one shipment. If we think that we are going to export more frequently and would like to offer the service to future clients (they would be billed for this, obviously; we don’t pay for brokerage fees or duties and taxes unless it somehow seems necessary and still leaves us with a profit), we can set up a permanent account. This would require a Customs Power of Attorney (to allow them to act for us), some sort of a bond depending on the estimated value of exports in one year (this bond is filed with US Customs to cover all fees, duties, etc.) as well as a credit application. There might be other forms to fill out depending on the Customs Broker we go with.
To go back to the shipping: with the pre-clearance number, the Customs Broker will send the documents to the US Customs Border Agency and be available at the time of the shipment’s arrival for any questions. If all of the paperwork is in order and the Customs officials approve the shipment, the truck will be allowed through and our part will be on its way to the Buyer.
Because exporting to an individual can be tricky, we are going to normally be selling to businesses or, at least, individuals who can act through a business. If we are delivering by truck, we need to keep in mind that the truck needs to have a proper space to unload the shipment and have it received.
Once our shipment has been received and all is in order, the only thing we have left to deal with is filing our paperwork and then any accounting. We’re done! (until the next shipment, that is).