Trade Talk Blog G
HY, a distinguished player in the world of customs brokerage and trade consulting, has made strides over many years in its mission to simplify cross-border trade. One of the key pillars of this approach is our “One Border One Broker™” promise and philosophy. This message encapsulates GHY’s commitment to providing unified customs solutions to clients on both sides of the Canada-USA border. It’s a philosophy deeply rooted in the shared history of international trade regulations and the understanding that, in many cases, what is known by different names in Canada and the USA often serves the same purpose.
The Foundation: WTO Harmonized Tariff and NAFTA [now USMCA]
The journey towards “One Border One Broker™” began with the World Trade Organization’s (WTO) Harmonized System (HS) for the classification of goods. It was implemented on January 1, 1988, and is the global standard that allows participating countries to use the same tariff codes for the first six characters, harmonizing trade practices across borders. This standardization was a pivotal step towards creating a seamless trading environment.
With the introduction of the North American Free Trade Agreement (NAFTA), another layer of uniformity was added. NAFTA established consistent rules for Free Trade Status across North America. This development allowed businesses to realize that if they could navigate trade regulations in one country, they could do the same in another, as the underlying principles were fundamentally alike. GHY recognized that these programs mirrored each other and, crucially, were just called different things.
Discovering the 10 Similarities Between Canada and the USA Trade Requirements
We’ve compiled a list of 10 key similarities between specific trade requirements in Canada and the USA. These similarities lay the foundation for our “One Border One Broker™” philosophy, as they demonstrate that a single approach works on both sides of the border. Some of these key similarities included:
USMCA/CUSMA Certificate: When dealing with tariff-free products, Canada doesn’t necessitate a USMCA/CUSMA certificate. In the USA, due to the assessment of the Merchandise Processing Fee (MPF) on duty-free products, it is of benefit to claim USMCA/CUSMA duty-free products, although not required.
Temporary Entry: Both countries have provisions for temporary entry. Canada uses the E29B form filing, while the USA employs Temporary Importation under Bond (TIB) filing (filed as a 7501 entry summary) for this purpose.
Refunds and Drawbacks: The process for rectifying overpayments or reclaiming duties differs slightly between the two countries. In Canada, the Drawback program is the primary avenue for such actions, while in the USA, the Post Summary Correction (PSC) and Protest programs serve a similar role.
Bonds and Security: Currently, in Canada, usually importers have their imports covered under their Customs Broker’s bond/security. However, this arrangement is set to change in 2024 due to the implementation of the CBSA’s Assessment and Revenue Management (CARM) project. In the USA, importers are obligated to secure their own bond or security.
Business Identifiers: Both countries employ unique identifiers for businesses. In Canada, this is the business number issued by the Canada Revenue Agency (CRA), often accompanied by an importer identifier like RM0001. In the USA, businesses are identified by their Employer Identification Number (EIN), Internal Revenue Service (IRS) number, Social Security Number (SSN) or Customs assigned importer number.
Textiles and Tariff Preference Levels (TPL) Process: Canada and the USA have similar processes in place for handling textiles and TPL. The specific product categories, eligibility criteria, and enforcement mechanisms can vary between the two countries, reflecting their unique trade relationships and agreements.
Compliance Penalties: Both countries issue penalties when importers are found to be in non-compliance. In Canada, Reason to Believe (RTB) is a program administered by CBSA, and it is a mechanism used to ensure compliance with Canadian customs laws. It is a provision under the Administrative Monetary Penalty System (AMPS) in Canada. Reasonable Care is a principle enforced by CBP in the United States. It’s not a specific program but rather a legal requirement placed on importers, customs brokers, and other parties involved in international trade.
Transfer Pricing: Transfer pricing regulations in Canada and the USA share the common basis of the arm’s length principle, aiming to ensure fair pricing for transactions between related entities, but there are differences in regulatory frameworks, preferred methods, and specific rules, including the impact of recent tax reforms such as the TCJA in the USA and BEPS-related changes in Canada. Both countries require detailed documentation and allow for Advance Pricing Agreements, and the risk of transfer pricing audits exists in both jurisdictions.
Trade Priorities/Initiatives: Specific trade priorities may vary between the two countries. Canada publishes their priorities annually, with priorities carrying over from previous years. The USA lists trade initiatives, where areas of risk are updated/added as they are assessed like Canada initiatives have remained listed from previous years.
Free Trade Agreements (FTAs): Canada and the USA are both involved in various FTAs, and the negotiation of such agreements is ongoing. However, the composition of these agreements may differ significantly, as they involve different sets of countries.
One Border One Broker™
GHY’s dedication to being the “eyes and ears” for our clients is paramount. GHY’s “One Border One Broker™” represents a commitment to simplifying the complexities of cross-border trade. By identifying the hidden similarities and differences between Canada and the USA’s trade practices, GHY empowers its clients to navigate the international trade landscape more effectively. Our dedication is to ensure our clients are well-informed and prepared to make strategic trade decisions. In a world of evolving trade regulations, we strive to stand out as a reliable partner for businesses looking to expand their horizons and remain compliant in their trade activities with all regulatory bodies.
Book a meeting or email one of our Trade Experts today and we can ensure that that your cross-border trade is seamless.