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NEW US FOREIGN IMPORTER OF RECORD RULES

NEW RULES WILL AFFECT CANADIAN BUSINESSES IMPORTING INTO THE US

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Both Canada and the US have a concept that allows a foreign entity to act as the "importer of record" of goods into the other country – traditionally referred to in Canada as a “non-resident importer” or NRI. The US term for this is a “foreign importers of record” or FIOR.

New US rules put in place by the Trump Administration in Executive Order 14411 are addressing US concerns with improper compliance with the FIOR status by Canadian and other foreign importers (who BOTH export their goods to the US, and act as the “importer" of those same goods for US entry purposes). The new rules target virtually any non-compliance by the FIOR (e.g., use of incorrect tariff class, valuation and/or origin for imported goods), and allow US CBP to assess and obtain FULL and satisfactory monetary compensation for that non-compliance.

Key US Changes

Among the many rule changes in Executive Order 14411, the three most significant for Canadian FIOR are the following:

1. Canadians may no longer be permitted to use informal entries, which are simplified customs entries generally used for certain lower-value shipments. In practical terms, this means those shipments may now require formal entry, increasing documentation, bonding, broker involvement, and compliance costs.
2. Canadians may no longer be able to rely on continuous bonds for formal entries unless CBP is satisfied that U.S. revenue is fully protected.
3. There will now be a minimum penalty floor of at least 50% of the original assessed penalty, absent exceptional circumstances. This means that penalties will rarely be reduced below the 50% floor, while penalty mitigation is eliminated altogether for repeat customs offenders.

The Customs Big 3

Given that full formal entries (and a much higher penalty floor) will now be the norm for Canadian FIORs moving forward, there is a clear premium on ensuring the accuracy of all US entry declarations, and other supporting import documents. Critical components of any import to the US will remain each of the "Customs Big 3", namely tariff classification, valuation, and origin. These three elements require a detailed customs knowledge basis which, while largely harmonized between Canada the US and other WTO nations, usually required a significant level of customs expertise, if not specialized legal knowledge in the Customs & Trade area.

Experienced Customs & Trade Counsel can help on the front end, by reviewing tariff class, value and origin, and help Canadian importers to the US avoid costly duty and penalty assessments.

Takeaways

New US rules aimed at Canadian and other foreign entities acting as "importers" to the US (i.e., exporting and importing goods to the US on their own account) are expected to increase US scrutiny on all importer transactions, putting a huge emphasis on getting things right on the Customs Big 3: tariff classification, valuation, and origin.

Experienced Customs & Trade Counsel can help get things right from the outset, and avoid costly assessments for additional duties, interest and penalties.

For help with tariff class, valuation or origin issues, please click here.