Author: Paul Condeco - Manager of Business Development & Strategic Solutions, ICECORP Group
When I started in the logistics and customs brokerage industry after university, I was amazed at the amount of jargon and acronyms thrown around in the average conversation. Everything seemed to mean something else. CBSA, CBP, CSA, ACI, FOB, PARS, PAPS, AMs, KAMs, SKAMs...For someone who had no formal education in customs policy and transportation, I often times felt my colleagues were speaking in some language only spoken by an indigenous tribe deep in the Brazilian forests.
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I came to realize that there were those who weren’t sure the meaning of the words themselves but needed to use them to appear as if they knew what they were talking about. Keeping it real, I may have been guilty of it sometimes too. Then I read a quote by Mark Twain, “Don’t use a five-dollar word when a fifty cent word will do.”I realized that my clients didn’t like expensive words either and they preferred simpler explanations.
There is an abundance of jargon in the customs and logistics language and following the philosophy that less is more, I want shed some light on some often misunderstood expressions used throughout the supply chain industry.
Importer of Record
The importer of record is the company/person responsible for the payment of duties and taxes and maintains Customs records for 6 years plus the current year. I find that importers will agree to be an importer of record in order to have something cleared “quickly” through customs not realizing the implication later such as taxes and audits.
On transport documents - particularly those used by Sea and Air - there is normally a section marked "Notify Party". It is used by the Shipper and/or the party who has contracted with the Carrier to identify any third party that is to be notified by the Carrier of the cargo's impending arrival. It could be a Bank, a clearing agent etc. The use of the Notify Party goes back to a time prior to mass communication and nowadays this is often no longer provided by the Carriers. In fact, Carriers don’t guarantee to notify any party regarding arrival. Should they offer the service, it is without obligation, risk or undertaking to actually perform the service.
Be very careful when using the Notify Party as it is intended for the sole means of a pre-alert communication between the seller and buyer. Customs Brokers that are not listed do not receive the Bill of Lading or Transport documents and may not even be aware of a shipment on route. It is the responsibility of the Importer or Notify Party to provide documentation to the Customs Broker for timely customs releases.
Customs Brokers that are not listed do not receive the Bill of Lading or Transport documents and may not even be aware of a shipment on route.
This acronym is Delivered Duty Paid and is one of the INCO terms ( sorry, I did it again) that outlines the responsibilities agreed upon by a seller and buyer and when ownership and risk is transferred from one party to the next. DDP is used when a seller is responsible for arranging carriage and delivering the goods to the consigned location. The seller is responsible for the applicable taxes and duties. This term places the obligation on the seller and is the only terms that requires the seller to take responsibility for import clearance and payment of taxes and duty. This can be problematic as the seller may not have an importer number or customs broker at the destination and will be exposed to foreign laws, tax implications and delays in the import clearance.
Free on Board
Here is another INCO term where the seller delivers goods cleared for the export loaded on board the transport such as the vessel at the port. Once the goods have been loaded on board, the risk transfers to the buyer, who bears all of the costs thereafter. Many instances, importers do not realize that there are terminal and handling charges/ examination fees and transportation costs once the vessel arrives at the port.
Reason to Believe
This expression is outlined in D-Memorandum D-11-6-6. The D-Memo describes the circumstances and obligation of an importer when that importer has “reason to believe” that a declaration to customs is incorrect. This may require importer correct declarations going back up to 4 years adding substantial administrative costs and paying unpaid duty and taxes. These amendments may pertain to specific information regarding the origin, tariff classification, or value for duty of the imported goods. The circumstances may vary from a formal letter from CBSA as a result of a verification audit to when an importer receives information from the exporter that casts doubt on the accuracy of previous declarations. Pursuant to section 32.2 of the Customs Act, importers are required to make corrections within a 90-day period starting on the date that the importer has, or was considered to have had, specific information that a declaration was incorrect (reason to believe).
Importers are strongly encouraged to request a ruling if they have any doubt as to the correct origin, tariff classification, or the value for duty of goods. Reach out to your trusted customs broker to discuss your options.
As a logistics professional, I am often asked to explain complex terms and jargon in plain language. Words do matter and can impact your business if they are misunderstood. Remember there are no dumb questions. Having someone shed light on these terms and expressions could help avoid a lot of hassles.