Universal Logistics welcomes Premier Cargo Alliance members at annual conference
Universal Logistics played “host” this year, as the Premier Cargo Alliance (PCA) annual freight forwarder conference was held in Canada. As the Gold Sponsor, we welcomed all PCA members from around the world to Quebec, La Belle Province, and the historic city of Montreal.
Universal was represented by Debbie McGuire, Director – Freight Solutions; Cathy Fong, Director – Freight Pricing along with Mark and Paul Glionna from the Executive team. Meeting regularly with our global freight forwarding partners enables us to build strong relationships which are invaluable in this industry.
During the 3-day conference, we had the opportunity to meet with agents representing over 25 countries, some of which we have worked with for many years, and others who are new to the alliance.
Group photo of the attendees at the PCA Conference in Montreal.
Paul Glionna took part in a 6 person panel comprised of agents from Germany, Vietnam, Mexico, UK and Canada, who shared their insights and expertise on achieving agility and resilience in logistics. One topic discussed by the panel was the challenge of a new hybrid work environment after COVID. Hybrid work appears to be the norm in North America, which is not necessarily the case in other countries. The main issue with the new hybrid work environment is that many forwarders are struggling to administer a clear plan and structure. “We were able to implement a fair and scheduled process to ensure that there is no disruption to our clients, while providing our employees the advantage of participating in a hybrid work environment”, says Paul Glionna.
If you are shipping internationally and looking for ocean or air freight options and pricing, please contact Cathy Fong, Director – Freight Pricing.
CBSA proposes "Last Sale" Rule for Customs Valuation
Following the Canada Border Services Agency’s (CBSA) proposal to change Canadian customs valuation rules to require the “last sale”, they have now extended the consultation period for an additional 30 days and are encouraging stakeholders to submit any comments concerning the regulatory proposal, including any perceived unintended consequences and any suggested amendments, using the online commenting feature on the proposal’s consultation page on or before July 26, 2023.
The CBSA published the proposed Regulations Amending the Valuation for Duty Regulations stating that they were intended to close the loophole on an “unfair advantage” that current regulations provided for non-resident importers (NRIs), which allow NRIs to declare a lower foreign sale price instead of a sale to a Canadian purchaser. As per the CBSA, these amendments would serve to level the playing field with Canadian resident importers. However, the concern is that the proposed amendments have a much broader impact than described. Essentially, unless goods are imported on speculation (i.e., without any previous agreements, purchase orders, or other types of arrangements for the sale of the goods prior to importation), the value for duty will be determined by the sale price on the last sale to a person in Canada. Why is this so concerning? That “last sale” would serve to significantly increase the declared value on which duty and taxes are paid at the time of importation into Canada, thus increasing prices to consumers.
Under the current Value for Duty Regulations, import duties are typically calculated on the transaction value of the goods (price paid to the foreign vendor). However, this proposed change to those regulations require that when an imported product is subject to multiple sales, the “sale for export” of that product is the “last sale”.
Following are just a few of the key visual representations produced in CBSA’s amendment:
Figure 2: Visual representation of the second importation scenario
Company E, which is located in Canada, purchases goods from company F, located in a foreign country. The goods are shipped to company E’s warehouse in Canada. Following the importation of the goods, company E sells the goods to company D in Canada, with no prior agreement. The goods are the subject of two sales: (1) from company F to company E, and (2) from company E to company D.
The only sale that is considered to have occurred prior to the importation of the goods into Canada is sale 1, from company F to company E. It is this sale that causes the goods to be exported to Canada. Therefore, sale 1 would be the sale for export to Canada that would be used to determine the transaction value of the imported goods.
Figure 7: Visual representation of the seventh importation scenario
Company Q, located in Canada, places an order with a company in a foreign country, company R, through its branch or dependent sales agent located in Canada. Company R contracts with another company in the foreign country, company S, to fill the order. The goods are the subject of two sales: (1) from company S to company R, and (2) from company R, through its branch or dependent agent, to company Q. The goods are shipped from company S to company Q through a third-party warehouse in Canada.
The intercompany transfer from company R to its Canadian branch cannot be a sale, as the branch is not a separate legal entity. Likewise, in the case of a dependent sales agent, although a separate legal entity, it does not purchase the goods. Both the sale between Company S and Company R, and the sale between Company R and Company Q are considered to have occurred prior to importation. The sale from company R, through its branch or dependent agent, to company Q is the sale that causes the goods to be exported to Canada and is the last sale in the supply of the goods to Canada. Therefore, it would be considered the sale for export to Canada and would be used to determine the transaction value of the imported goods.
Figure 8: Visual representation of the eighth importation scenario
Company U, located in Canada, is a wholly owned subsidiary of company V, which is located in a foreign country. Sales in Canada are solicited using sales agents.
In this case, the sales agent has obtained an order from company T, located in Canada, and the order is placed through company V’s computer system. Once the purchase order is accepted by company V, two invoices are automatically generated – one from company U to company T, and another from company V to company U. Company V then contracts with company W, also located in the foreign country, to fill the order. The goods are the subject of three sales: (1) from company W to company V, (2) from company V to company U (intercompany sale) and (3) from company U to company T. The goods are shipped from company W to company T, through company U.
All sales are considered to have occurred prior to importation. The order from company T, sets off the chain of events that cause the goods to be exported to Canada and provides for the last transfer of the goods in the supply of the goods to Canada. Therefore, it is sale 3, from company U to company T, on the authority of company V, that would be considered the sale for export to Canada and would be used to determine the transaction value of the imported goods.
We will continue to keep our clients apprised of key developments in this Consultation process, and would recommend that you utilize the online commenting feature on the proposal’s consultation page on or before July 26, 2023.
For more information, contact Brian Rowe, Director – Customs Compliance & Regulatory Affairs.
Ocean & Air Freight market trends
Ocean Freight:
The Asia Pacific market has continued with its rise and fall in Q2. Carriers implemented a General Rate Increase (GRI) in June but it was short lived, as the rate came back down shortly thereafter. The current spot rate is close to the level it was in the second half of May, before the GRI was implemented. We anticipate Q3 to continue on the same trajectory, with imports to North America continuing to decline due to the economic downturn and high interest rates affecting importers buying power. Industry publications are also predicting another GRI and/or Peak Season Surcharge (PSS) to be implemented at the beginning of August, which will likely suffer the same quick decline as the Q2 increases.
With the current market conditions, the load factor for vessels is between 50-70%. Carriers are trying to cut their losses by implementing blank sailings, reducing capacity on lanes which are not profitable and allocating vessels to more profitable trade lanes (i.e. Asia – Europe, India Subcontinent, Latin America and Intra-Asia). By implementing blank sailings, carriers reduce space for bookings and create their own supply and demand. This helps to increase vessel bookings per sailing and could cause carriers to be overbooked which can result in cargo rollovers and delays.
The Europe to North America market rates continue to decline and are now close to pre-pandemic levels. There is still a downturn in volumes and no signals from the market that these will be rebounding soon. The supply situation is not changing, so rates remain under pressure and the shipping lines are forced to work on rates to avoid losing market share. Space and equipment are fluid on these trade lanes. We expect to see the same trend continue for Q3.
Air Freight:
Air freight continues to be affected by the economic downturn, however, economists are confident it won’t get much worse. It is expected that capacity will not go back to pre-pandemic levels for quite some time, however, capacity should improve due to the resurgence of global tourism. China and Hong Kong are expected to take a little longer to recover, as they seem to be behind in the rebound in passenger traffic. The airline industry was hoping for a Q3 rebound, but we do not feel that this will happen. Some carriers are operating at 20% of pre-COVID levels, but hope to be close to 85% by the end of 2023.
For more information, contact Debbie McGuire, Director – Freight Solutions or Cathy Fong, Director – Freight Pricing.
Global Spotlight Quiz
Name the city featuring a historic cable car
- The southernmost capital in the world.
- The movie making capital of its country, it was a central hub for the making of the Lord of the Rings and Hobbit films.
- Has over 400 cafes and restaurants which, on a per person basis, rivals New York City.
- Everything is within walking distance and you are never far from the beach.
- The city sits on a major geological fault and experiences high seismic activity.
Answer: Wellington, New Zealand
For more information about shipping freight to or from this city, contact Debbie McGuire, Director – Freight Solutions.
Quick Tip
If you’re not able to control your freight, you should at least know who to contact if something goes wrong.
Remember, you are always free to appoint someone locally to monitor and handle shipments on your behalf, even when your supplier has made the freight arrangements.
At Your Service:
Maryam Mehrdad
IT Solutions
Maryam Mehrdad joined Universal in March 2022 as a member of the IT Solutions team. She has 7+ years of experience in IT, including desktop support, database management and supporting and troubleshooting various software applications.
Maryam’s friendly and open personality as well as her attention to detail make her a valuable asset to the team.
Maryam can be reached by phone (905) 882-4880, ext. 1204 or by email.
Maryam Mehrdad
IT Solutions
SMART Logistics
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