Importing Auto Parts Into Canada: It’s a Big (Lucrative) Wheel!
????Did you know that the global value of the Auto Parts Manufacturing Industry in the world was valued at US$66.2 billion in 2022? That number is expected to grow for US manufacturers by at least 2% in the next year. Included in the Auto Parts Manufacturing Industry is everything from motor pieces, brake pads, fuel cells and accessories. Each item carries different regulatory requirements, so don’t get stuck with your tires spinning by not preparing properly for importing and exporting into Canada and the US.
Importing INTO Canada is also a multibillion-dollar industry, in 2021, according to Canada’s Government Trade data, Canadian imports of automotive parts and components totaled US$13.1 billion. The US’s share in the total Canadian automotive import market is still dominant over other countries, at approximately 63% of total imports.
Importing and exporting auto parts is clearly a big wheel when it comes to making an exhausting amount of ROI. Car puns aside, it’s a market that A & A has provided expertise in for over 30 years, and with the evolving automotive industry, moving the literal parts is big business. Our experts have compiled some of their top findings from firsthand experience.
What makes a good automotive import customs broker?
One of the biggest drivers in choosing to work with a customs broker instead of figuring out everything on your own, is that even with “ironclad” regulations on both the Canadian and the USA government border websites, there are still discrepancies you need to be aware of.
Here are some ways that a great customs broker can make life easier for businesses reliant on auto importing:
A & A Account Executive, Lisa McLaughlin is a CCS certified customs broker, with a North American focus. Her knowledge and proximity to both sides of the Canada/USA borders are just some of the reasons our clients look to her expertise when it comes to importing auto parts and accessories. She really emphasizes the importance of correct classification of every aspect of your import, and not just for the obvious pieces, like engines, bodies and chassis – there are multiple classifications, and they are often changing. Working with a customs broker can take that burden off your plate.
Why classifications really count:
- Getting all of the classifications done properly, with specific, detailed and accurate descriptions is essential when it comes to duties and taxes.
- Classifications are often changing, even on seemingly minute things, like seat covers.
- Listing vague items (ex. “Auto parts”) on invoice descriptions is a red flag for customs officials.`What kind of consequences?
If errors are found later – the shipper can face serious potential financial penalties, with audits going back as far as 4 years. Nothing is more tedious or stressful for business owners than an audit. You may have to pay back the duties or taxes missed, and potentially face penalties, which are levied on an entry-by-entry basis.
The better your documentation, the more border crossings trust you and your shipments and the quicker turnaround times you’re likely to have. Something our A & A experts know that isn’t said on any government websites is that specific border crossings are particularly high maintenance. In Ontario, for example, the Windsor and Sarnia crossings’ production lines are easily stalled if importers don’t have the right documentation. You do not want to be that delay! If you have questions for specific border crossings and best practices on planning and crossing them, down to time of year, day of week, even time of day, a customs broker can really help ensure you have quick turnaround times and frictionless border crossing with your auto part imports.
Liz Smith, a longtime A & A Client Services & Sales Coordinator specializing on electronic streamlining capabilities on both sides of the border, reiterates Lisa’s emphasis on proper classification.
“Without providing the exact classification for each imported item, the immediate consequences can be that your import is outright rejected,” says Liz. “The long-term consequences are often expensive, and erode trust in your business. Long-term impacts are late duties and taxes charges, and in some cases, even audits.”
What sets A & A apart from other customs brokers?
Not every broker is the same! A & A prides itself on going the extra mile with all of our import clients, and that extra push really counts when dealing with the auto parts industry. We’ve mentioned classifications – we’re not unique in managing these but we are especially attuned to changing rules and regulations, so our clients are never left surprised at the border or stung by penalties. As expert Lisa McLaughlin points out, a great customs broker will be exceptional at collecting unique details from importers – which matter a great deal in streamlining border crossings.
We file ITNs for our auto importers, something that very few brokers do as it is time-consuming, and extra work.
What is an ITN? An ITN is an Internal Transaction Number, which is legally required for vehicles or vehicle parts to be exported out of the U.S. Without an ITN, exporters attempting to cross the border with their vehicle could incur fines of up to $10,000, according to U.S. Census Bureau foreign trade regulations. Exporters from the U.S. must file through the AES (automated export system) to obtain an ITN.
Direct & constant communication with Transport Canada
We also correspond directly and provide valuable information from Transport Canada, and potentially RIV (Registrar of Imported Vehicles). Doing all of the steps correctly can actually provide exemptions (free money!) and other benefits. Relationships matter!
There are many benefits to working with customs brokers when you’re importing auto parts and accessories, including assuaging various trade agreements.
Are these things keeping you up at night?
- Understanding of free trade agreements; there are many and they can change quickly, without public consultation
- These have a big impact on importers, and A & A is on top of all of them and how they relate to your business
- Duty, taxes, or, put simply, costs. Auto parts importing is a very margin-constrained industry, so cost is an enormous factor for every importer/exporter
- Worrying about whether or not you’re subject to any restrictions
As we mentioned at the beginning of this article, the auto parts industry is a hugely lucrative marketplace, and it could reap you major financial benefits. It’s also a highly restricted industry, with many moving parts (and not just the ones you’re importing/exporting). Working with a customs broker lets you focus on other parts of your business.
We’d love to chat with you about your business needs and see if A & A could provide you with the expert customs brokerage support you want, but also very well might need!
Contact us today!