Embracing globalization : the benefits for your supply chain. September 27th, Solimpex. September 2017 Solimpex 1

Transcription

1 Embracing globalization : the benefits for your supply chain September 27th, 2017 Solimpex September 2017 Solimpex 1

2 What has been happening? Outsourcing and offshoring fuelled the growth of manufacturing in Asia, with China becoming the Factory of the World The pursuit of low-cost country sourcing chased the lowest cost locations manufacturing activities This led to the large-scale unbundling of production, in turn driving the globalisation of supply chains Product life cycles are becoming shorter and some of the ingredients of today s efficient supply chain are: Proactivity Visibility Velocity Speed-to-market September 2017 Solimpex 2

3 Canada s international merchandise trade September 2017 Solimpex 3

4 Population 36 million $335 billion 76% of Canada s exports $248 billion 52% of Canada s imports Population 325 million September 2017 Solimpex 4

5 Master the Incoterms to secure a competitive advantage September 2017 Solimpex 5

6 Incoterms are international rules that define the obligations of buyer and seller in connection with the delivery of merchandise They specify who pays for what shipping related costs and where the risks shift from seller to buyer September 2017 Solimpex 6

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10 The no worries Incoterm The vendor pays for all shipping costs to deliver the goods to the buyer s door, including customs clearance in Canada, duties, taxes and related expenses The vendor/exporter becomes the importer of record in Canada (non-resident importer) & is responsible for customs compliance Advantage for the Canadian buyer : no worries Drawbacks: - GST refund - Lack of control - Transparency/visibility of cost components - Seller unwilling to take the costs/risks September 2017 Solimpex 10

11 DAT is a new Incoterm DAP replaces DDU (Delivered Duty Paid) The vendor pays for all shipping costs to deliver the goods to the import terminal in Canada (DAT) or to the buyer s door (DAP), excluding customs clearance in Canada, duties, taxes and related expenses Advantage: no worries, except for customs Drawback: lack of control & visibility September 2017 Solimpex 11

12 The supplier pays for the shipping costs to ship the goods to the Canadian port, airport or terminal but the goods travel at the buyer s risk when they leave the point/port of origin Advantage: benefit from the supplier s buying power Drawbacks: -lack of control -goods travel at the buyer s risk September 2017 Solimpex 12

13 The buyer arranges to pick-up the goods in the vendor s country (vendor s door, terminal or port/airport) and pays for most shipping costs Advantages : - control of the process - full visibility of cost components Drawback : more demanding September 2017 Solimpex 13

14 Two options: FCA seller s premises FCA port, airport or forwarder s facility (in the country of supply) To select the one that works best depends largely on the country of supply (risks, regulations, etc..) and the nature of the goods September 2017 Solimpex 14

15 Risk management tool: Cargo Insurance Why take cargo insurance? To be compensated for physical loss or damage to our cargo during the voyage Because carriers have limits of liability September 2017 Solimpex 15

16 Svendborg Maersk February 2016 Over 500 containers lost in the Bay of Biscay September 2017 Solimpex 16

17 Carriers limits of liability Road transport: In Canada : CA$2/lb or C$4.41/kilo In the U.S.: it varies - can be as low as $0.60/lb Air transport : between CA$30 and CA$35 per kilo Ocean transport : it varies between US$500 and US$900 per customary shipping unit Express/couriers : it varies Freight forwarders : usually around CA$3/kilo September 2017 Solimpex 17

18 How does cargo insurance work? No insurance => you claim against the carrier You are insured => the insurance company pays you and claims against the responsible party/parties International clauses revised in 2009 Institute Cargo Clause A Institute Cargo Clause B Institute Cargo Clause C Institute Strikes Riots and Civil Commotions Clauses Institute War Risks Clauses Watch out for deductibles, exclusions and limitations September 2017 Solimpex 18

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20 First 5 causes of cargo claims Road accidents 16.1% Handling equipment collision 13.5% Theft 12.7% Fire 10.5% Inadequate packaging 10.8% Survey by the London insurance market September 2017 Solimpex 20

21 International payments Payment in advance good for the seller but dangerous for the buyer Open account great for the buyer but potentially tricky for the seller Letter of Credit or Documentary Credit: 1.Guarantee of payment for the seller 2.Guarantee of shipment for the buyer September 2017 Solimpex 21

22 Letter of credit process September 2017 Solimpex 22

23 The document of title September 2017 Solimpex 23

24 Your shipping partners International Freight Forwarders Ocean carriers Air carriers Surface carriers Load brokers Customs brokers September 2017 Solimpex 24

25 Wood Packaging Materials September 2017 Solimpex 25

26 International Standards for Phytosanitary Measures No 15 (ISPM 15) Heat Treatment (HT) or fumigation with methyl bromide (MB) September 2017 Solimpex 26

27 ISPM 15 Non-manufactured wood over 6 mm thick Mention in your Purchase Order to your supplier: all WPM must be ISPM 15 compliant We currently have an exemption with the US but it only applies to US (or Canadian) WPM September 2017 Solimpex 27

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29 The main components of customs compliance Product Description & Tariff Classification (HS code) Valuation Origin Intellectual Property Import permits & quotas Record keeping (6 years + current year) September 2017 Solimpex 29

30 Product description and tariff classification Know what is being imported, where it was made and what it is made of Provide complete and accurate description Provide correct tariff classification (H.S. code) International classification of products issued by the World Customs Organization and revised every five years (HS2017) First 6 digits = international Last 4 digits = can vary 99 chapters September 2017 Solimpex 30

31 Progression of the H.S. code Chapter 01: live animals Chapters 41 & 42: hides Chapter 94: leather seats September 2017 Solimpex 31

32 The H.S. code September 2017 Solimpex 32

33 Valuation Declare the price payable for the merchandise, considering rebates, indirect costs, additional payments, assists, commissions or royalties Transactional value (arm s length) Are you and the buyer related parties? Declared value for customs in Canada: FCA/FOB value (i.e. excluding freight and insurance) September 2017 Solimpex 33

34 Royalties September 2017 Solimpex 34

35 Country of origin September 2017 Solimpex 35

36 Intellectual Property If the merchandise or its packaging bear trademarks or copyrighted images, ensure that you have the legal ight to bring them into Canada Ensure the merchandise is genuine and that you have permission from the trademark holder to import it September 2017 Solimpex 36

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38 The North American Free Trade Agreement January 1 st, 1994 Lower customs duties on most products Rules of origin: determined according to the country of manufacture, the Regional Value Content and the tariff shift (manufacturing process) Origin certication : NAFTA Certificate of origin September 2017 Solimpex 38

39 NAFTA Certificate of Origin September 2017 Solimpex 39

40 Canada s other Free Trade Agreement Israel (January 1997) Chile (July 1997) Costa Rica (November 2002) European Free Trade Association (EFTA): Iceland, Liechtenstein, Norway, Switzerland (July 2009) Peru (August 2009) Colombia (August 2011) Jordan (October 2012) Panama (April 2013) Honduras (October 2014) Korea (January 2015) Ukraine (August 1 st, 2017) European Union (provisionally implemented September 21, 2017) September 2017 Solimpex 40

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42 Form A Lower duties on goods from developing countries September 2017 Solimpex 42

43 Customs clearance Low Value Shipments (LVS) Goods valued at less than CA$2500 Expedited customs clearance (informal entry) No requirement for NAFTA certificate of origin Goods valued at CA$2500 and over: B3 (formal entry) September 2017 Solimpex 43

44 B 3 Canada Customs Coding Form September 2017 Solimpex 44

45 How are duties calculated? Transactional value (without freight/insurance) Tarif treatment (based on origin and FTA s) 1.Rate of duty % 2.SIMA assessment (Special Import Measures Act): anti-dumping and countervailing duties 3.Excise tax (luxury goods, alcohol, tobacco) 4.Above are totalled up to get to the value for tax 5.Then the GST is assessed How do we know our rate of duty? Tarif treatment: normal countries, preferred countries, developing countries, FTA countries September 2017 Solimpex 45

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47 Embracing globalization : the benefits for your supply chain Thank you for your attention! Christian Sivière Solimpex Ottawa & Montréal Christian.siviere@videotron.ca Solimpex September 2017 Solimpex 47