A communication with a long time friend and experienced and certified trade professional lead to an awareness that a major manufacture did not know what assists were! They were looking for help to correct the situation.
This article came about because in the course of communicating with a long time friend and experienced and certified trade professional we found a major trailer manufacturer who didn’t know what assists are!
We continue to reference ‘assists’ on every importer meeting as most people don’t appreciate/comprehend the implication. Let’s face it ‘in Canada we all think of assists as something related to reward for the person passing the puck to the goal scorer’ 
Seriously though any input to the manufacturing process that an importer provides is to be included in the value of the goods. Most common references relate to tools, die’s, etc. that are provided to a manufacture in order to make a part for an importer. That could even be as simple as a ‘sticker’ applied to a product, where the sticker was supplied by the importer.
A leading manufacturer of household accessories was able to save over $6,000,000 annually in duty by designing and implementing an effective NAFTA management strategy.
NAFTA and Duty Recovery Saves $6 Million
An industry leading organization specializing in window covering was able to save over $6M in duty as a result of having an effective integrated trade compliance strategy. By coordinating NAFTA with organizational processes by use of a compliance champion, the company was able to assign tariff to every item. This then allowed the organization to have clear visibility of duty payments thus allowing the option of duty recovery for particular items. By integrating a well structured NAFTA program throughout the industry, the organization was able benefit from multiple drawbacks and save both time and cost.
Case Analyzed
The message is clear, by using the model of an Integrated Trade Compliance Strategy, this firm created efficiencies in terms of process but also cash management with an integrated strategy that factored NAFTA status and duty drawback for Non-NAFTA related products. The resulting $6 million savings were a result of their in-house trade compliance champion who oversaw the entire process on imports as well as exports and worked in conjunction with their professional trade services provider to handle the claims paperwork on both sides of the border.
A major organization, specializing in vehicle manufacturing, gained significant financial benefits as a result of duty drawbacks.
A major organization, specializing in vehicle manufacturing, gained significant financial benefits as a result of duty drawbacks. The company had been operating on a compartmentalized approach to trade in which classifications of parts were disordered, and duty payments were veiled from the organization’s CEO and Executive Team. Desperately needing a change to the current trade strategy, the organization began to integrate all communications and trade related processes throughout the entire company. This created visibility of duty payments thus allowing the organization to choose which duties to recover.
Case Analyzed
This case is a textbook study of the models we presented earlier this year. The first is that silo based approach and the problems it causes, that was presented in an article Risky Business the Problem with Silos. This firm had that exact issue and it did not have visibility to the organization vertically in order to allow the CEO and Executive Team to understand cash flow for duty payments, as well as provide support in order to pursue duty refunds where applicable.
The answer for this firm was an Integrated Trade Compliance Strategy which addressed the visibility within the organization, but also the horizontal communication across divisions and 3rd party providers in support of providing better cash flow management for the organization. We covered that with the presentation of an Integrated Trade Compliance Strategy, what is it?
This post highlights the importance of doing the appropriate research and background checks of all the cost and regulatory elements BEFORE you commit buying components or finished goods from new off shore vendors.
International Sourcing Strategies
Taking a proactive approach to the implications of offshore sourcing helps protect your bottom line. Many North American manufacturers are finding it increasingly challenging to deal with a growing influx of imported materials and products originating from off competitors, especially those based in China and India.
These competitive pressures are compelling Canadian and US companies to consider various measures to protect market share, including shifting their sourcing arrangements for components, peripherals and finished products outside of North America, to take advantage of lower cost alternatives originating in the emerging economies of Asia, Eastern Europe and South America.
This post highlights the importance of doing the appropriate research and background checks of all the cost and regulatory elements BEFORE you commit buying components or finished goods from new off shore vendors.
Why is this more important than ever?
Because North American manufacturers have traditionally sourced most of their materials in the US., Canada or Mexico, where duty is generally not an issue of the goods are NAFTA qualifying, and Customs and regulatory issues are well documented and understood. These assumptions can not be taken for granted when sourcing goods outside North America. Canadian and US importers are encouraged to review the full spectrum of variables, including currency exchange ratios, marking and packaging requirements, duty rates and tariff treatment, anti-dumping/countervailing duty applicability, duty drawback eligibility, and NAFTA eligibility, if the offshore components are incorporated into products ultimately sold in Canada or the US.
For example, purchasing motors in China that are incorporated into machines you manufacture in Canada for sale to a customer in the US, may negate the finished product’s NAFTA eligibility and duty free status, thereby increasing the ultimate cost of the product, and possibly eroding your margin or forcing you to raise your retail price and risking your competitive position.
Conversely, if you purchase the motors from China and sell them to an US customer in the same condition and without modification, you may be eligible to recover all Canadian duties paid at time of import under the Duty Drawback program. Of course you will need to assess all the trade offs to arrive at a bottom line comparison that takes all the factors into consideration, and gives you and “apples to apples” view of the offshore versus North American sourcing options.
Taking a proactive approach to studying the implications of off shore sourcing can confirm that you will achieve the desired competitive cost advantage, help you avoid unexpected costs or surprises, and minimize the probability of unexpected regulatory issues with Canada Border Services Agency or United States Customs and Border Protection
United States Customs and Border Protection estimates that 3 billion dollars per year of US import duties are eligible for drawback, of which 80% are not recovered.
Do you use imported merchandise to produce or manufacture products for export ?
Are you paying import duties on finished goods which are eventually exported ?
If the answer is “yes”, Duty Drawback is an opportunity to increase profitability and reduce costs. You may be entitled to duty recoveries and not even know it !
United States Customs and Border Protection estimates that 3 billion dollars per year of US import duties are eligible for drawback, of which 80% are not recovered.
Although there are no published statistics available from Canada Border Services Agency, it is our belief that the unrecovered amounts are also significant.
Up to 99% of all US Customs duties can be refunded on imported merchandise subsequently exported, or in some cases used to manufacture a new article for export. Duties paid up to 6 years ago may be refunded against exports over the past 3 years.
Up to 100% of all Canadian Customs duties can be refunded on imported merchandise subsequently exported, or in some cases used to manufacture a new article for export. A claim for drawback must be filed within 4 years of the date the goods were released from Customs.
The growth of off-shore and near-shore sourcing has made it increasingly important for Canadian and United States firms to adopt strategies that factor into account opportunities to reduce or eliminate cost inputs through programs like Duty Drawback.
You should talk to your professional trade services provider about filing for retroactive duty drawback claims in both Canada and USA, or to establish a new drawback program, so you can take advantage of costs savings on a regular basis.
