Canada Customs and Revenue Agency THINKING ABOUT IMPORTING or EXPORTING? THE CUSTOMS BASICS Canada
Acknowledgements/caveats • All but a few of these slides were graciously provided by Carla Busnardo of the Canadian Customs and Revenue Agency (now Canada Border Services Agency) • Slides 13, 14, 21-23, 30, and 46 are my own • The slides reflect information in 2003
Outline • Where to get Help • Getting Started • Duty Rate Determination • Other Duties and Taxes • Duty Relief Programs • Customs Accounting • Corrections/Adjustments • Administrative Monetary Penalty System (AMPS) • Export Process
Business Number Registration • you need a ‘Business Number’ to import/export • can apply in person, phone, fax, or mail • The BN has 15 digits 123456789 RM 0001 Telephone Business Enquiries 1-800-959-5525
Other Government DepartmentsYou may require permits, certificates, or other authorization • Environment Canada • Industry Canada • Department of Foreign Affairs andInternational Trade (DFAIT) • Health Canada • Canadian Food Inspection Agency (CFIA)
What does Customs need to Know? • Where did it come from? • What is it? • Tariff • Classification • Origin • Special Considerations? • What’s the value? • Duties Relief • Valuation • SIMA
Duty rate is determined by two factors: ClassificationandTariff Treatment What the goods are or Country of origin/manufacture, what the goods are made of. and point of direct shipment Duty rates may be specific (3.21/kg) or ad valorem (6.5%).
Structure of the Classification numberChapters, headings, subheadings, tariff #, and classification #: 95 ...... chapter 95.06 ...... heading International 9506.11 ...... subheading component 9506.11.10 ...... tariff number Canadian 9506.11.10.00...... classification number component } }
Tariff Treatments • (MFN) Most-Favoured Nation • (AUT) Australia • (NZT) New Zealand • (GPT) General Preferential • (LDCT)Least Developed Countries • (CCCT) Commonwealth Caribbean Countries • (GT) General Tariff -- 35%
Free Trade Agreement Tariff Treatments • (UST) United States Tariff • (MT) Mexico Tariff • (MUST) Mexico-United States Tariff • (CT) Chile Tariff • (CRT) Costa Rica Tariff • (CIAT) Israel Tariff
CUSTOMS TARIFF - SCHEDULE • LIST OF COUNTRIES AND APPLICABLE TARIFF TREATMENTS
CUSTOMS TARIFF-SCHEDULE 95-5 Tariff Item SS Description of Goods Unit of MFN Applicable Meas. Tariff Preferential Tariffs Articles and equipment for general physical exercise, gymnastics, athletics, other sports (including table tennis) or outdoor games, not specified or included elsewhere in this chapter; swimming pools and paddling pools. - Snow -skis and other snow ski equipment: -- Skis --- DownhillPAR Free UST, CCCT, LDCT, GPT, MUST, CIAT, CT:Free --- Other 7.5% UST, CCCT, LDCT, MT, MUST, CIAT, ----- Cross Country............PARCT: Free GPT:5% ----- Snowboards..……….NMB ----- Other ...........................PAR 95.06 9506.11 9506.11.10 00 9506.11.90 10 20 90
CUSTOMS TARIFF-SCHEDULE 62-3 Tariff Item SS Description of Goods Unit of MFN Applicable Meas. Tariff Preferential Tariffs 62.02 Women’s or girls overcoats, car-coats,capes,cloaks,anoraks,(incl. ski-jackets, wind-cheaters, wind-jackets and similar articles, other than those of heading 62.04 -Overcoats, raincoats, car-coats, capes, cloaks and similar articles: --Of wool or fine animal hair19% UST, CIAT:Free NZT:14.5%AUT:14.5% MT:2.5% CT:2.5% ---- Lined with “long pile” knitted fabrics: ------Women’s............................... NMB ------ Girls’.................................... NMB ---- Other ------ Women’s ............................. NMB ------ Girls’ ................................... NMB 6202.11.00 11 12 91 92
Agriculture • Price support programs exist for dairy products sector, eggs, chicken, and turkey. These commodities account for 25% of total farm receipts. • Price supports are complemented by supply management and import restrictions. • Import quotas apply to supply-managed commodities subject to small “in-quota” tariffs. These import quotas often amount to less than 5% of domestic consumption. High (often prohibitive) tariffs apply to imports beyond quota levels. For example, the tariff rate for chicken within the quota is 5% but 238% outside quota. • Free trade partners are granted preferential access
Least Developed Counties • As of 2003, Least Developed Countries goods can enter Canada duty free.
Proof of Origin - General Preferential Tariff (GPT), Least Developed Country Tariff (LDCT), and the Commonwealth Caribbean Countries Tariff Treatment (CCCT) • Form A Certificate of Origin; or • Exporter’s Statement of Origin
EXPORTER’S STATEMENT OF ORIGIN I certify that the goods described in this invoice or in the attached invoice #__________ were produced in the beneficiary country of _____________ and that at least ____ per cent of the ex-factory price of the goods originates in the beneficiary country/countries of ________________ . Name and title_____________________________ Corporation Name and Address _______________ Telephone and fax numbers __________________ Signature and date (day/month/year)___________
NAFTA Tariff Treatment • NAFTA certificate of origin • Statement of origin for goods valued under $1600 Cdn.
NAFTA Certificate of Origin Revenue Revenu Canada Canada Protected (when completed) North American Free Trade Agreement CERTIFICATE OF ORIGIN Instructions attached 1 2 Exporters name and address Blanket Period From To 3 4 Producers name and address Importers mane and address 5 6 7 8 9 10 Description of goods 11 I certify that... Canada
NAFTA Statement of Origin STATEMENT OF ORIGIN FOR COMMERCIAL IMPORTATIONS OF LESS THAN $1600 Cdn “I certify that the goods referenced in this invoice/sales contract originate under the rules of origin specified for these goods in the North American Free Trade Agreement (NAFTA) , and that further production or any other operation outside the territories of the Parties has not occurred subsequent to production in the territories.” NAME: ___________________________________________________ TITLE: ___________________________________________________ COMPANY: ___________________________________________________ STATUS: Exporter_______ Producer______ of the certified goods TELEPHONE:______________FAX: ________________________ Country of Origin: United States____ Mexico____ Mexico & U.S. _______ Signature ________________________ Date ________________________
Rules of origin (ROOs) • ROOs are tariff-treatment and product specific and can be extremely complicated. • For non-RTA treatments, a certain percentage of the ex-factory price of the good must originate in beneficiary countries. Additionally, the good must be directly shipped from a beneficiary country. The critical value content varies by treatment: 50% for MFN treatment, 60% for GPT, and 40% for the LDCT.
ROOs for RTAs: TVs in the NAFTA • Article 401 of the NAFTA sets out four possible criteria that can be used to establish North American origin • The main criterion used for products incorporating non-North American inputs (``non-originating materials") states • Each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification set out in Annex 401 as a result of production occurring entirely in the territory of one or more of the Parties, or the good otherwise satisfies the applicable requirements of that Annex where no change in tariff classification is required, and the good satisfies all other applicable requirements of this Chapter
Example (cont.) • Annex 401 is a 243 page document that specifies for every tariff item (8-digit classifications) what inputs must be sourced from within North America in order for the final good to be deemed of North American origin. For most TVs (8528.12.bb) • A change to tariff item 8528.12.bb from any other heading, except from tariff item 8529.90.dd or 8540.11.aa or more than one of the following: tariff item 7011.20.aa, tariff item 8540.91.aa. • 8540.11.aa is the most important part of the TV, the cathode ray tube.
Tariff TreatmentWill depend on: • Country of origin • Trade agreements available for that country • Rules of origin • Origin certification • Direct shipment requirements
Country of Origin MarkingSIX CATEGORIES • Household and personal use • Hardware • Novelty and sporting goods • Paper products • Wearing apparel • Horticultural products Customs Memorandum D11-3-1
Methods of MarkingMust be legible, permanent and, conspicuous • STENCILING • ENGRAVING • ETCHING • PRINTING • TAGGING • LABELING MADE in U.S.A. 100% COTTON
Other Duties and Taxes • Goods and Services Tax (GST) • Excise Duty and Excise Tax • Anti-dumping and countervailing duty (SIMA)
SIMATo protect Canadian business from unfair trading practices DUMPING SUBSIDIZATION Goods imported at less Where foreign than the full cost of the manufacturers have good and/or less than received specific financial goods would sell for in incentives from their their home market government
Excise duties and taxes in Canada • Excise duties are imposed under the Excise Act, 2001 on spirits, wine, and tobacco products. • This site contains technical information relating to excise taxes and special levies (ET/SL). Excise taxes are imposed on jewelry, certain petroleum products, heavy automobiles and air conditioners designed for automobiles. There is also a tax imposed on insurance premiums and a charge imposed under the Air Travellers Security Charge Act. • scr: www.cra-arc.gc.ca
Duty Drawbackcan provide for recovery of duties paid where; • Goods are exported in the “same condition” as imported • Goods are imported and used in the manufacture of goods exported • Obsolete or surplus imported goods are destroyed ...and certain conditions are met.
Duty Deferral Program Duties NOT paid at time of importation Duties Relief Bonded Warehouse Relieves or defers payment of duties on imported goods re-exported Defers payment of duties until goods enter Canadian market Application and license required
Corrections / Adjustments by the Importer • 4 year limitto correct or adjust import information and file Refunds - (except NAFTA and CCFTA refunds - one year • within 90 days after importer has “reason to believe”that the original declaration of origin, tariff classification, or value for duty is incorrect, to pay additional duties owing (up to 4 years)
Reassessments by Customs • Department has 4 year period to review and correct import information Appeals / Disputes by Importer • Importer has 90 days from the date of a decision made by the department • Commissioner, Canada Customs and Revenue Agency • Canadian International Trade Tribunal (CITT) • Federal Court (on a point of law)
Record KeepingWhat books and records must you keep? • all books and records to show what was imported • either in paper or electronic format • must be kept for 6 years
SUMMARY Helpful Advice before Importing • Obtain detailed information from vendor or exporter • Choose reputable carrier • Choose location of release • Be aware of traffic peaks and Customs hours of service • Decide who will prepare your documentation ( you or an agent ) • Determine duties and arrange how and when to pay them • Know your rights and obligations
SUMMARY(continued) • Obtain detailed invoices • Use National Customs Rulings • Maintain records for 6 years after import • Obtain valid certificate of origin from exporters and have them available to present to Customs upon request • If you need further information contact our Department
The Export Process • Exporting goods to the United States for consumption in the United States. • Exporting goods to non-U.S. destinations.
Exporting for Consumption in the United States • Arrangement between Canada and the U.S. • Canadian export data obtained through U.S. import data. • B13A Export Declaration not required. • Export Permits still required for Controlled, Regulated and Prohibited goods. • B13A Export Declaration required for goods transiting through the U.S.
Exporting to Non-U.S. Destinations B13A Export Declaration is required for the following: • Commercial shipment valued at $2,000.00 (Can.) or more • All goods that are controlled, prohibited and regulated must be reported on a Customs B13A Export Declaration, regardless of value
Permits? • When do I need a Permit prior to export? • Cultural Property • Area Control List • Endangered Species • Export Permits Act • Canadian Food Inspection Agency • Canadian Wheat Board • www.dfait-maeci.gc.ca
Controlled Goods under the Export and Import Permits Act Import Controls: • Textiles and Clothing (www.dfait-maeci.gc.ca/trade/eicb/textile/industry-eliminate-en.asp) • Agricultural Products (www.dfait-maeci.gc.ca/trade/eicb/agric/intro-en.asp) • Steel Products • Weapons and Munitions Export Controls: • Agricultural products: Refined Sugar, Sugar-containing Products and Peanut Butter • Textiles and Clothing • Military, Strategic Dual-use Goods • Nuclear Energy Materials and Technology • Missile, Chemical or Biological Goods of Non-proliferation Concern • Softwood Lumber, Unprocessed Logs and Certain Other Forest Products • Miscellaneous Goods including Goods of U.S.-origin, Roe Herring and Certain Items with Medical Value • All Goods Destined for Countries on the Area Control List: Angola and Myanmar. www.dfait-maeci.gc.ca/eicb/eicbintro-en.asp
Administrative Monetary Penalty System (AMPS) for Exports • ImplementedOctober 2002 • 16 Penalties for infractions of export regulations • Penalties range from a warning to $25,000. depending on infraction • Exporters are responsible
The Tariff Mismatch • What are average US tariffs? • What are tariffs on sweaters? On footwear? How much savings would occur for a $202 basket of goods at Wal-Mart if tariffs were eliminated? • How much of tariff reductions would be passed on the consumers? • What explains variation in tariff rates across products? • Why hasn’t shoe production moved to NAFTA-country Mexico? • What is the focus of the Doha Round? What issues have stymied the Round?