I N D U S T R Y   R O U N D U P

 C O M P A N Y   C O R N E R

Open Skies agreement opens
new opportunities for freight savings

The recent liberalization of air services between the U.S. & China (referred to as the “open skies agreement”) will have a dramatic impact on the number of cargo and passenger flights between China and North America, with the total number of daily flights expected to double by 2012.

This is important news for Canadian importers/exporters because increased air cargo capacity between China and the U.S. opens up opportunities (both routing and service options) for cargo destined to Toronto (and Vancouver, Calgary, Montreal), based on overnight proximity to hubs such as Chicago, New York, and even Detroit. You can also expect that pricing will decline because of the increased capacity.

You can take advantage of this opportunity by routing your freight via the U.S – and the entire process can be seamless with the help of our Airfreight Services team. For more information, contact Islay Fairholm, Supervisor - Airfreight Services.

Another key change is the growth of next-day expedited truck service between Canada and the U.S. These expedited truck carriers are expanding networks, bringing even more U.S airports into overnight delivery proximity to the Greater Toronto Area. That means these airports are now a feasible alternative to Pearson International Airport, which has much higher landing fees and passes on these costs to Canadian importers and exporters. For example, Pearson charges US $10,986 for a Boeing 747-400 to land, while New York's LaGuardia charges US $5,031.

Yes, we handle “project” air cargo

Do you have unusual freight that is oversized, temperature sensitive, extremely time critical or shipped from offsite/remote locations?

We can handle these special orders, known technically as “project freight”. For example, one of our clients, ROI Resources, based in Montreal, won the contract to supply the Canadian Embassy in Ireland.

The job required 10,000 kgs. (65 m3) of cargo to be shipped by air from Calgary to Dublin under strict time frames. Moreover, to meet the delivery requirements and deal with the physical space limitations of the aircraft servicing Calgary and Dublin, we arranged for an expedited truck service from Calgary to Toronto, booked an air-freighter service from Toronto to London Gatwick and on-forwarding from London to Dublin via truck.

Yet another challenge was the physical layout of The Canadian Embassy in Ireland, which had no loading facilities and only a very small elevator. This was overcome by gaining permits to block the streets while an onsite crew uncrated and delivered the goods direct to the Embassy’s floor.

The entire project was completed on time and within budget.

True or false? Universal Logistics handles Asian air freight.

The answer is true. We handle Asian air freight and earlier this year expanded our service by adding three freight services per week, to and from Hong Kong, to handle large volume shipments.

Following is a more detailed review of our Asian service:

Proof Universal Logistics is well connected

Earlier this year Universal Logistics was named the sole Canadian delegate of the Certified Transportation Network (CTN) an international group of logistics providers.

This is good news for our clients because it means our global network of trusted, reliable partners now extends to 73 countries and over 200 cities. Most important, we now have wider access to proven local services that can have a very positive impact on freight costs and transit times.

On a worldwide basis, CTN member-partners move over one million shipments every year to and from every country in the world. CTN member-partners are meticulously screened, based on customer service, accreditation by international authorities and a proven track record of being among the top independent forwarders within their respective regions.

CTN member-partners are also recognized for their comprehensive services and formidable knowledge of logistics processes worldwide. With combined worldwide buying power, CTN member-partners can offer their customers the foremost pricing schedule possible with customer-defined service levels.

Mandatory Electronic Release at all Canadian Ports

In a recent announcement, the Canada Border Services Agency (CBSA) advised that, effective October 15, 2007, paper release packages will no longer be accepted for any shipments (subject to exceptions) entering Canada. This announcement came just as the port of Windsor implemented mandatory line release for shipments crossing over the Ambassador Bridge.

Key changes to the import release process are described in Customs Notice CN07-008 "Measures to Increase the use of Electronic Data Interchange (EDI) for Release Purposes".

This policy change is being implemented to prepare importers for Phase III of the CBSA's Advance Commercial Information (ACI) initiative (also referred to as E-Manifest), which has already been implemented in the air (Phase I) and marine (Phase II) modes of transport. Phase III will include all modes of transport into Canada.

As per CN07-008, "Unless otherwise exempted, paper Release on Minimum Documentation (RMD) and paper Pre-Arrival Review System (PARS) service options will not be accepted by the CBSA as of October 15, 2007.”

The biggest impact will be on shipments arriving in Canada via the highway (truck) mode of transport. Drivers/carriers must ensure that documentation for customs clearance is provided to the broker well in advance of shipment arrival (especially for large multi-page/item invoices) as the broker must now translate that information into an electronic release request to the CBSA.

In the past, many drivers would arrive at the border and present documents to the broker to have a paper release package prepared (the driver would then take that package to Customs for processing). Once the change to mandatory EDI is implemented, drivers handling shipments in this manner will be delayed while the broker prepares the electronic submission.

As the CBSA currently does not have full EDI capabilities, the following list of exceptions to EDI processing have been issued:

Goods are subject to the requirements of another government department or agency and there is no EDI link between the CBSA and the other government department or agency:
Paper must be used in situations where another government department or agency does not have an EDI link with the CBSA. The CBSA is currently working with OGDs and agencies to address the issue of paper permits and certificates.

The invoice for the release transaction contains more than 999 invoice lines:
Currently, the Accelerated Commercial Release Operations Support System (ACROSS) does not permit release requests with more than 999 invoice lines. If your invoice has over 999 lines, we recommend that you note this on the release package to avoid any unnecessary rejections from a border services officer.

There is more than one warehouse sub-location code per release transaction:
Because only one Release Notification System (RNS) message can be generated for one transaction, a broker can only transmit one warehouse sub-location code per EDI release on minimum documentation (RMD). Therefore, the electronic options cannot be used if, for example, an importer has an invoice for one shipment that has been transported in more than one load and is located in more than one warehouse.

The release transaction is covered by multiple highway cargo control numbers at the border:
Currently, ACROSS does not permit release requests with more than one cargo control number (CCN) under the PARS option. Where multiple CCNs are involved, the RMD option must be used. The EDI RMD option is not permitted at highway border points; therefore, the paper RMD option must be used.

The CBSA has issued a paper Y50 form, Reject Control Document, to the importer/broker for courier/low-value shipments (LVS):
The CBSA matches the paper Y50 attached to the release package to the Y50 in the CBSA control file. The system remains paper-based.

Goods are moved into a bonded warehouse using the RMD option (grey wrapper):
The actual authorization by the CBSA to move goods into a bonded warehouse location remains paper-based.

Goods are to be released from a Queen’s warehouse:
The CBSA requires a paper copy of Form E44, Customs Notice – Unclaimed Goods, to accompany the release request from a Queen’s warehouse. This process remains paper-based.

There is a CBSA, importer and/or broker system outage:
When a system outage occurs, clients must revert to a paper-based system. The CBSA will determine, on a case-by-case basis, under what circumstances and for how long paper copies will be accepted from a client who is experiencing a system outage.

To ensure your shipments are set-up electronically and to avoid potential delays, book your freight directly with Universal Logistics.

Full text of Customs Notice 07-008

Additional information is on the CBSA web site

For more information, please contact Brian Rowe, General Manager - Customs Consulting Services, (905) 882-4880.

Fast Facts – Air Freight

• Air Canada has launched daily B767-200ER services between Montreal and Rome. The airline now has five European destinations - Rome, London, Paris, Frankfurt & Munich
• Toronto Pearson Airport handles over 45 per cent of all of cargo that moves by air in Canada. The airport is undeniably Canada’s largest air cargo hub, processing more than 516,000 tonnes in 2006.
• One-quarter of Canada's population is located within 160 km of Toronto and more than 60 per cent of the population of the United States is within a one-hour flight. More than 130 million potential consumers in Canada and the U.S. are within a day’s drive of Toronto.
• Pearson charges US $10,986 for a Boeing 747-400 to land, while New York's LaGuardia charges US $5,031.
• For the third straight year, Korean Air Lines has retained its position as the world’s leading transporter of international air cargo. In 2006, the airline was responsible for 8.68 billion freight tonne kilometers.

Fast Facts - International Trade

• Sugar, zinc & precious metals are the fastest growing Canadian exports to the U.S., while copper, gold & nuclear fuels are the fast-growing imports into Canada from America.
• Canada exported US$303.4 billion worth of merchandise to the United States in 2006, up 4.5% from 2005 and up 45% in just 4 years.
• Canadian imports from the U.S. rose 8.7% to $230.3 billion in 2006, up 43.1% since 2002.
• Canada’s largest trading partner is the United States, and USA’s largest trading partner is Canada. In terms of the merchandise flow between the two countries, USA’s trade deficit with Canada was $73.2 billion in 2006, up 52% from 2002. The U.S. trade deficit with Canada actually decreased 6.7% in 2006 from 2005 – down from the 18.1% deficit increase in 2005 from the year earlier.
• Of the $303.4 billion in U.S. imports from Canada in 2006, the following product categories had the highest values:
  
  Petroleum products …US$63.7 billion (21% of Canada to U.S. exports, up 6% from 2005)
  Passenger cars … $36.6 billion (12.5%, up 1.5%)
  Car parts & accessories … $15.6 billion (5.1%, down 2.5%)
  Complete & assembled cars … $12.2 billion (4%, down 2.3%)
  Aluminum … $7.7 billion (2.5%, up 36.1%)
  Lumber … $6.6 billion (2.2%, down 8.9%)
  Finishing materials (e.g. shingles, wallboard) … $5.9 billion (2.0%, down 10.7%)
  Plastics … $5.8 billion (1.9%, up 7.9%)
  Telecommunications … $4 billion (1.3%, down 0.7%)
  Engines & parts … $3.98 billion (1.3%, down 8.6%)
• Below are U.S. imports from Canada in 2006 with the highest percentage sales increases from 2005:
  
  Sugar … US$43.4 million (up 130.4% from 2005)
  Zinc … $1.4 billion (up 122.2%)
  Precious metals … $685.9 million (up 72.4%)
  Oil field drilling equipment … $1.0 billion (up 65.6%)
  Copper … $2.0 billion (up 51.1%)
  Medicinal, dental & pharmaceutical preparations … $3.5 billion (up 43.5%)
  Nickel … $1.2 billion (up 38.9%)
• Canadian Imports from U.S.:
  
  Of the $230.3 billion in U.S. exports to Canada in 2006, the following product categories had the highest values.
  Vehicle parts & accessories … US$23.6 billion (10.3% of Canada from U.S. imports, down 1.5% from 2005)
  Passenger cars … $13.1 billion (5.7%, up 8.1%)
  Trucks, buses & special purpose vehicles … $11.8 billion (5.1%, up 16.6%)
  Industrial machines … $7.5 billion (3.2%, up 9.4%)
  Engines & parts … $6.4 billion (2.8%, up 3.3%)
  Plastics … $6.3 billion (2.7%, up 5.9%)
  Electric apparatus … $5.7 billion (2.5%, up 11.2%)
  Computer accessories … $5.2 billion (2.3%, down 5.9%)
  Industrial engines … $4.7 billion (2.0%, up 2.9%)
  Iron & steel mill products … $4.3 billion (1.9%, up 7.2%)
• Below are U.S. exports to Canada in 2006 with the highest percentage sales increases from 2005:
  
  Copper … US$1.1 billion (up 122.6% from 2005)
  Gold … $1.2 billion (up 108.8%)
  Natural gas liquids … $693 million (up 94.7%)
  Nuclear fuels materials … $75.8 million (up 62.8%)
  Specialized mining … $163.8 million (up 58.4%)
  Non-ferrous metals … $871.5 million (up 57.7%)
  Precious metals … $647.2 million (up 50.2%)

Sources for this Article
This article presents independent calculations and insights based on data drawn from the CIA World Factbook and the U.S. Census Bureau – Foreign Trade Statistics.

China – Reductions to VAT Rebates for Exports

On 14 September 2006, the government of China issued "Notice Regarding Adjustment of Export Value Added Tax ("VAT") Refund Rates and Commodity List of Prohibited Category Under Processing Trade" ("Circular 139"). This regulation was effective from 15 September 2006, and serves to amend or eliminate the export VAT refund rates for certain products leaving China.

Under Circular 139, Chinese exporting companies are not eligible for export VAT refunds for certain products, including:

• All non-metallic mineral products (except for salt and cement) which are listed in Chapter 25 of the Import and Export Tariff Guide, coal, natural gases, paraffin wax, bitumen, silicon, arsenic, stone material, non-ferrous metals and scrap materials;
• Metallic ceramic, 25 kinds of agricultural chemicals and the relevant intermediate products, certain finished products of leather, lead-acid storage battery, mercuric oxide battery; and Cashmere, charcoal, crossties, cork products and certain initially processed wood products.

The export VAT refund rates for the following products have been revised, however, as rates are based upon the specific H.S. Classification, this table is a general example only:

These VAT rebate changes for exporters will lead to higher prices for the export of affected goods. The change was put into effect after China recorded its 28th consecutive month with a favorable balance of trade, which led to a trade surplus of US$18.8 Billion.

Regulation of Imported Fish and Seafood Products in Canada

The CFIA regulates over 1000 fish and seafood importers. Under the CFIA’s Fish Import Inspection Program, importers of fish and seafood for commercial sale must hold either a Fish Import License or a Quality Management Program Import Licence from the CFIA.

Importers are responsible for ensuring that their products meet Canadian regulatory requirements including the food safety standards established by Health Canada. Non-compliant shipments are not permitted for sale within Canada.

All licensed fish importers must meet the following requirements:

• Importers are required to make every shipment available for inspection prior to distribution and sale in Canada;
• Importers are required to notify the CFIA of every import shipment within 48 hours;
• Importers are obligated to keep accurate and complete records of imported shipments so that shipments can be easily traced; and
• Importers must obtain information on the manufacturing processes and controls used in the production of all ready to eat and canned products which they import.

Additionally, importers holding a Quality Management Program Import (QMPI) licence must meet the following requirements:

• Importers must develop an acceptable quality management system demonstrating how they will meet, as a minimum, the product inspection frequencies, methods and standards set by CFIA.
• Once accepted by the CFIA, the importers must implement and comply with their written QMPI.
• The importers must forward all product inspection results to the CFIA.
• The CFIA audits and inspects importers to ensure that they are meeting the conditions of their license.

For more information, see the complete fact sheet, published by the CFIA on 25 June.

Fish and seafood products imported into Canada are inspected to prevent the marketing of unsafe, unwholesome or mislabeled products.

The CFIA uses a risk-based approach to determine the frequency at which to inspect imported product. The frequency varies based on food safety risk, the history of compliance of a particular product, the history of compliance of the processor, and the country of origin of the product. Health Canada carries out risk assessments on specific products and the Agency is responsible for enforcing chemical contaminant guidelines set by Health Canada.

Fish and seafood products imported from processors who have never shipped products to Canada are inspected at a rate of 100%, meaning that a representative sample of fish is taken and tested from each first shipment.

The frequency of inspection for imported products with a history of compliance ranges from 2% of all shipments for non-health and safety analysis such as label analysis, up to 5% for health and safety analysis such as mercury and drug residue analysis. This risk-based approach results in a high rate of confidence in the compliance level and safety of imported products.

Shipments selected for inspection are sampled according to the internationally- recognized procedures of CODEX Alimentarius, the international standard setting body for food safety. This approach provides assurance that the sampling is representative of the shipment.

Expert CFIA and accredited private laboratories staff use state-of-the-science technology to provide specialized testing. These food laboratories test for a wide range of chemical and biological contaminants such as veterinary drug residues, pesticides, metals, bacterial pathogens, marine toxins, and food additives.

When testing results show the emergence of a problem related to a particular product, processor, or country of origin, or the CFIA is made aware of problems in exporting countries, the CFIA may increase its rate of inspection up to 100% inspection.

If a shipment fails to meet Canadian regulatory requirements, and the product cannot be brought into compliance by the importer, the entire shipment is removed from Canada or destroyed. In addition, the foreign processor is put on CFIA’s Import Alert List and incoming products are inspected at a rate of 100% until four consecutive shipments comply with Canadian requirements.

If the CFIA identifies products that were not appropriately dealt with by an importer, enforcement action is taken which may include recalling the product from the market, revocation of the import licence and/or prosecution under the Fish Inspection Act and Regulations and/or Food and Drug Act and Regulations.

Mandatory Line Release at Windsor’s Ambassador Bridge

Effective July 30, 2007, changes to what is currently considered “exceptions” to the mandatory line release requirement at the Ambassador Bridge will come into effect. All shipments that can be released using PARS will be required to do so and will not be permitted to report to the off-site for purposes of preparing a Release on Minimum Documentation (RMD).

Previously any shipment that required an import declaration, confirmation of sale, inspection certificate, etc. was allowed to proceed to the off-site to clear on RMD. All of these commodities can be cleared using PARS, and will be required to do so by July 30, or be rejected back to the U.S. Paper PARS will continue to be accepted according to national policy.

These changes will result in further reducing the trucks required to report to the off-site for processing purposes and will enable the CBSA to focus on security at this location.

The updated exceptions to the mandatory line release requirement at Ambassador Bridge, Windsor will include:

• Live Animals
• RIV
• Short Shipments, Value Included, Provisional, etc.
• Temporary Imports
• B3
• Courier (non-sufferance)
• Used agriculture or construction equipment
• Used tires
• B4 Household Goods (Commercial Carrier)

Publishing industry endorsement

For the 12th consecutive year, the Book and Periodical Freight & Distribution Committee is recommending Universal Logistics. “Universal has earned this continued confidence on the strength of a full compliment of value-added customs brokerage services at competitive prices”, says Anne McClelland, Executive Director.

“Your continued dedication to education and seminar training on issues of particular interest to our industry has been invaluable. Universal has provided our membership with the tools required to help streamline and maximize their operational capabilities. Your partnership approach to compliance and your ability to bring representation from Canada Customs to discuss those issues specific to our industry are unique.”

“We value the tradition of fine service Universal has provided to the publishing trade and look forward to developing our ongoing relationship.”

Indigo new business win confirms our status as
premier supplier for publishing industryy

Indigo new business win proves service matters: Earlier this year, we learned that Indigo Books & Music Inc., the largest book retailer in Canada, was getting ready to consolidate its logistics service providers, which at the time included two customs brokers and four freight forwarders. In short, they wanted a one-stop shop to gain better control of their freight.

Seven companies, including Universal, were invited to bid and we came out on top, a huge win for the company. We are now providing Indigo with the following key services:

• international freight; ocean and air imports
• domestic inbound truck freight
• transborder truck freight
• Canadian customs brokerage
• U.S. customs brokerage

This new business solidifies our already strong position as the leading provider of customs brokerage and freight forwarding for the publishing industry, a status that is confirmed by the Book Council recommendation of our service for 12 consecutive years.

As you would expect, Indigo was looking for ways to cut costs and we met that objective, but not by simply cutting our rates. Instead we showed them how to save money by taking better control of their freight – with our help.

For example, we are now involved in the supply chain at the moment a Purchase Order is issued – about two to five months earlier than previously, which gives us far more opportunity to provide valuable input (such as consolidation opportunities) that translates into reduced freight costs.

We also supported Indigo’s decision to change its Incoterms, a necessary step to take full control and gain visibility of their freight – from point of origin to final destination.

Importing Personal Goods - Don't Use the Corporate Account

Customs recently began cracking down on importers that use their corporate account (i.e. commercial importer account) for personal goods. Although what you're importing may be small, low value or even low risk, there are tax implications.

For example, if you purchase a bicycle from the U.S. and have it declared under the "company" account and cleared by their customs broker - the item will enter Canada with payment of duty (where applicable) and GST. However, as this is a personal import it is also subject to Provincial Sales Tax or the Harmonized Sales Tax (HST) depending on which province you are in.

Due to the number of personal goods entering the commercial stream, and the resulting evasion of Provincial Tax payment, Customs have begun looking for these transactions. You may think that a bicycle or other item here or there won't be noticed. However, as soon as Customs run an importer history profile, these items will immediately stick out compared to the "normal" goods the company imports. As these imports have evaded tax payment, they are now subject to penalties under the Administrative Monetary Penalty System (AMPS) which will be issued to the "company".

When purchasing personal goods from outside Canada, keep in mind that they cannot be customs cleared using a corporate account. All personal goods being imported must be consigned to an "individual" and not a company. When you are advising shipping details, and need to have the goods delivered to your work address, ensure the supplier also has your home address listed on their invoice - and do not provide them with the corporate Customs Broker information.

By having your personal goods cleared in your own name you can also take advantage of available Personal Exemptions, if you have been out of the country and return with the goods.

What are your personal exemptions?

After an absence of 24 hours or more
You can claim up to $50 worth of goods without paying duty or taxes. This is your personal exemption. You cannot include tobacco and alcohol in your 24-hour exemption.
If the goods you bring in are worth more than $50 in total, you cannot claim this exemption. Instead, you have to pay duty on the full value.

After an absence of 48 hours or more
You can claim up to $400 worth of goods without paying duty or taxes. These goods can include some tobacco products and alcoholic beverages.

After an absence of seven days or more
You can claim up to $750 worth of goods without paying duty or taxes. These goods can include some tobacco products and alcoholic beverages.

Do I need a Passport to enter the USA?

Unsure of whether or not you need a passport to travel to the USA - the answer is yes and no - it all depends whether you are flying or driving. To enter the USA via air you must have a valid passport. If entering the USA via land, you'll only need to present proof of citizenship (i.e. Birth Certificate) and a photo ID (e.g. Driver's Licence). However, it is expected that by summer 2008 you will require a valid passport to cross the border via land also.

For more traveller information, refer to the Canada Border Services Agency (CBSA) web site: www.cbsa.gc.ca/travel/canadians-e.html

	Bettina Scharnberg – editor of Route

AT YOUR SERVICE

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