Cost of Compliance: U.S. Laws Present Taxation Nightmare

(Globe & Mail – David Milstead)

Ecotex Healthcare Linen Service Inc. operated in the United States in the mid-1990s, before the weak Canadian dollar drove it back north of the border. When shifting fortunes for the loonie opened up new possibilities outside of Canada, Ecotex CEO Randy Bartsch knew one of the steps he needed to take was to get U.S. tax advice. Plenty of it.

“Every different local county, state, city and town have different tax rates,” said the head of the Abbotsford, B.C.-based company, which ultimately re-entered the United States through a 2008 acquisition of a business in Tacoma, Wash. “In some places, it can be 4.93%, and across the street, which is also across the county line, it could be 5.19%.”

While Ecotex knew what it was getting into, many other Canadian businesses are caught off guard by the complexity of the U.S. tax system, with its 7,000-plus taxing jurisdictions, Canadian chartered accountants say.

And while Ecotex was clearly going to be paying the U.S. taxman, by dint of owning and operating laundry facilities in that country, many Canadian businesses that have U.S. sales but no physical presence in the United States think they’re off the hook.
That’s not necessarily so.

It all adds up to a nightmarish spider-web of tax rules and regulations that can easily entrap Canadian entrepreneurs. At a minimum, it makes the United States, a country with a reputation for cost-cutting, an expensive place to do business. Read more here.

CBP: New Informed Compliance Publication on Rulings

(World Trade Interactive)

U.S. Customs and Border Protection has posted to its Web site a new informed compliance publication that provides guidance on the administrative process involved in submitting requests for rulings, internal advice, protest reviews and reconsideration of previously issued ruling letters.

However, CBP cautions that the material in this publication is provided for general information purposes only. “Because many complicated factors can be involved in customs issues,” CBP states, “an importer may wish to obtain a ruling … or to obtain advice from an expert who specializes in customs matters, for example, a licensed customs broker, attorney or consultant.”

CBP summarizes the information in this publication as follows:

“If you plan on importing into the United States, you may wish to consider obtaining a binding ruling before the product arrives at the port so that you will know how CBP will treat the merchandise. Should you disagree with the ruling that you have received, you may appeal that letter by sending a request for reconsideration to the [Regulations and Rulings] RR Headquarters Office. In addition, if you have questions about how a port is handling your goods, you may request that the port seek internal advice from the RR Headquarters Office. Finally, if you disagree with the port’s decision regarding your merchandise you may protest that decision and request that the RR Headquarters Office review the port’s decision on the protest so long as certain requirements are met. By following the suggestions above in formulating your requests, you can make the process of obtaining a ruling or other decision from CBP as problem free as possible.”

The publication includes information on the following issues.

• who can request a prospective ruling and how this should be done

• what information must and should be included in prospective ruling requests

• who can rely on rulings issued by CBP

• protesting CBP rulings and requesting further review of protests

• filing requests for internal advice

• judicial review of CBP decisions

Criminal Conviction for False NAFTA Certificate of Origin

(Susan Kohn Ross — The Journal of Commerce)

The Patriot Act contains a provision which allows the U.S. to prosecute for export violations, see 18 U.S.C. 554. Gerardo Cantu was indicted under 46 counts, one each per shipment. Cantu pled guilty to ten (10) counts agreeing that he imported fabric rolls from China, moved them in-bond and intended to import them into Mexico relying on phony NAFTA Certificates of Origin. Cantu was sentenced to six (6) months in prison, three (3) years probation, and an $8,000 fine for fraudulently and knowingly facilitating the transportation, concealment and sale of Chinese textiles from the United States to Mexico with falsified invoices and NAFTA certificates of origin.

The violations came to light when an outbound shipment was designed [sic] for examination and a NAFTA Certificate of Origin claiming U.S. origin was found. Cantu was interviewed and admitted he was doing so in order to evade Mexican duties.

Any wonder why we keep seeing more export inspections?

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