Magazine article CMA - the Management Accounting Magazine

Revenue Canada Helping Canadian Companies Save Time and Money

Magazine article CMA - the Management Accounting Magazine

Revenue Canada Helping Canadian Companies Save Time and Money

Article excerpt

It is not too often that a government initiative can be of great benefit to Canadian companies and reduce the deficit at the same time. Revenue Canada's EDI initiatives for Customs clearance, however, have done just that. With the proliferation of international trade agreements from the late 1980s to the present, the government has been continually modifying its practices at our borders. Many Canadian companies are taking advantage of these new operating procedures and incorporating EDI technologies that let them deal with Revenue Canada directly; benefits include, but are not limited to, the elimination of brokerage fees.

You probably remember Otto Jelinek. It's too bad he's keeping a lower profile these days - importers and exporters certainly owe him a lot. In 1990, as Revenue Minister, he launched Customs 2000: A Blueprint for the Future. This visionary document laid out the changes in infrastructure that would be necessary at our borders to handle the increased traffic that a free-trade environment would create. Unusual for the times, Otto believed EDI technologies would be of pivotal importance in this new infrastructure so he initiated the government's first EDI project. CADEX (Customs Automated Data EXchange) allowed any company in Canada to install a phone line in its office and deal directly with Customs. Revenue Canada paid for the modem, the line, and any charges associated with the line. That was the first step in facilitating direct communication with Customs which Canadian companies, and the government, would require with the FTA, NAFTA, and GATT on their way.

Even with these changes now firmly rooted, many companies still view Revenue Canada as draconian and "scary." As one purchaser was recently warned by her controller, "Whatever you do, don't get us in trouble with Canada Customs!" What this controller was forgetting is that you are responsible for your dealings with Revenue Canada, whether you do it yourself for you use a Customs broker.

Today, Customs is anything but difficult to deal with on your own. An importer simply puts, or has the exporter put, a bar-coded label on the commercial invoice accompanying the goods. Customs then scans the code at the port of entry. If the importer or exporter cannot apply the label, an agent at the border can be hired to complete this simple task for about $5 a shipment. In the case of clothing, for example, an agent can also be hired at the border to submit an import permit when necessary. The goods can then be Released on Minimum Documentation (RMD). The accounting documents can be transmitted to Customs within five business days via CADEX. The government, via the CADEX system, provides the importer with an invoice at the end of the month that can be paid at the nearest Customs office. It is also possible to set up electronic payment with your bank.

Canadian companies such as Jantzen, Sony, Honda, RCC Electronics and Hallmark Cards are among the many companies that have discovered the primary benefits associated with using CADEX, benefits that include:

* elimination of brokerage fees

* reduction of tariff misclassifications

* increased efficiencies in logistics administration

* automatic capture and reporting of costing information

* enhanced control over inventories.

Elimination of brokerage fees

Savings on brokerage fees are the most concrete benefit resulting from self-clearance and are easy to quantify. Sony's Philip Choi had a CADEX system installed when he was sure that Revenue Canada would support the system in the long term. After one year of operation, he conducted an analysis and found his savings estimates to be equal to about 80 percent of the previous year's brokerage expenses. With Sony's importing volume, this adds up to a fair bit of change.

Honda Canada calculated the total savings for the first year of self-clearance. With all software, hardware, and training taken into account, they saved over $700,000 in the first year alone. …

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