CAIE Report
Is it Your Business?
It has been said that trade is the lifeblood of Canada. Last year Canada was trading a daily average of more than $2.1 billion of merchandise worldwide, according to Statistics Canada. This figure does not include trade in services and the illegitimate trade that is unreported. With trade in services included, however, Canada’s trade rises to an average figure of $2.5 billion per day. These trade figures will clearly drop when averaged out over 2001, but according to the latest merchandise trade figures from Statistics Canada, Canada was trading an average of $2.2 billion daily during June 2001.
Business, government and the majority of Canadians all want to increase international trade and business. Companies are therefore changing the way they conduct business, forming more and more partnerships to achieve objectives that they could not have achieved otherwise. Not surprisingly, Customs and other government departments are often considered as strategic partners in this process.
But there is an important factor to be mindful of in this process. For example, are you aware of the law of diminishing resources and increasing workload? In this situation companies are forced to slash budgets, reduce headcount and increase their employees’ workload. While companies are often compelled to do this, governments do not necessarily adhere to this practice. Instead, in many of these situations the government downloads responsibilities it once assumed to the private sector.
Consequently, companies have become accountable for more and if they dare get any of their business practices wrong, they will be punished more severely in the future. In the words of the Canada Customs and Revenue Agency (CCRA), the new Administrative Monetary Penalty System (AMPS) will be an “effective sanctions regime.”
| “…companies have become accountable for more and if they dare get any of their business practices wrong, they will be punished more severely in the future.” | ||
The government wants companies to be compliant and industry wants to be compliant. Unfortunately, in many cases, compliance is not interpreted in the same way by industry and Customs. Much of this has to do with the timing of when and where the trade data is first reported. The earlier in the process that data is required, the greater the tendency is for it to be incorrect. Taking a look at classification discrepancies, the CCRA indicates that industry as a whole is classifying products at the 10-digit Harmonized System (HS) correctly from 23 to 98 percent of the time. Taking a rough average, industry is correct slightly more than 60 percent of the time. Does the CCRA care? You can bet your bottom line they do! Does industry care? If they haven’t in the past, they will when AMPS penalties begin affecting their bottom line this fall.
What are the options available to industry? Does industry simply keep spending more money on systems, on internal and external resources to get classification right at the 10-digit level? Does industry just ignore these statistics and simply pay the penalties when AMPS comes in? Are there other options available to industry?
The question that needs to be asked is this: Is it your business what CCRA and other government departments do? If you think it should be your business, then I would like to plant a seed for thought.
The scenario works somewhat like this. You ask the CCRA about their enforcement of compliance for the 9th and 10th digits in the HS classification. Their response is that they are enforcing only the laws and regulations that they are legally bound to uphold. The statistical digits are what fall under the Statistics Canada jurisdiction and not that of Customs. If it were up to them, they would be satisfied with classification of products up to the eight-digit level. When you ask Statistics Canada for their response, they might answer that industry requires this information from them and that is why they must have it. When you ask industry about who requires this information, the vast majority indicate that they do not need it. What kind of picture does this portray? Tens of millions, if not hundreds of millions, of dollars are spent by companies across Canada on getting the 9th and 10th digit classified correctly to satisfy a small percentage overall. To top it all off — on average slightly more than 60 percent of product is classified correctly at this level of classification! Does this make sense in today’s business world? If a law does not make sense should it remain on the books? You be the judge. If this is your business, then you might want to do something about it.