Clearing the Border With Purolator International

Canadian Customs Regulations, Fees, and Duties

With more than $670 billion in goods and services crossing between the United States and Canada each year, it is not a surprise that the two countries pay close attention to shipments arriving at their borders. As close as the two countries are geographically and culturally, the fact remains that cross border shipments are international transactions.

And while both the U.S. and Canadian governments have taken significant steps to facilitate the flow of goods, there are numerous regulatory mandates and Canadian customs regulations that must be complied with in order for a U.S. business shipping to Canada. This has become especially true since September 11, 2001, as each government has instituted new security regulations intended to prevent the entry of hazardous or contraband materials into their countries.

Learn more about US/Canadian customs regulations compliance regulations by selecting a topic from the following menu:

ABC’s of CBSA (Navigating the Canada Border Security Agency)
Duties and Fees
Tariffs
Registration and Paperwork
Trade Incentive Programs
Security Clearance Programs
Penalties

ABC’s of CBSA (Navigating the Canada Border Security Agency)

Shipments traveling from the United States to Canada are international transactions, and must comply with numerous Canada Border Security Administration (CBSA) and Revenue Canada regulations before being cleared for entry. Regulatory mandates include tariff and duty assessments, security screenings and Canadian customs requirements, filings and shipment documentation. Following is a brief overview of some key border clearance requirements:

Duties and Fees
While NAFTA eliminated tariffs on most U.S., Canadian and Mexican manufactured goods, there are other taxes and fees that may be assessed on products shipping to Canada. There are three types of sales taxes imposed throughout Canada:

Goods and Services Tax: Most goods entering Canada are subject to a Goods and Services Tax (GST), which is a five percent federal tax imposed on goods and services sold in Canada for domestic consumption.

Harmonized Tax: Goods destined for Ontario, Brunswick, Newfoundland, Labrador and Nova Scotia will have an eight percent provincial retail sales tax added to the five percent GST. (The provincial sales tax in British Columbia is seven percent). Together, the combined taxes comprise a Harmonized Sales Tax (HST). The HST is administered by the Canada Revenue Agency, which after collection, disburses the appropriate amounts to each participating province.

Provincial Sales Taxes: Provinces that do not participate in the HST collection process do impose their own taxes. The tax is collected at the local level, rather than through the Canada Revenue Agency. Provincial sales taxes vary by province, but range from a low of five percent imposed by Saskatchewan to a high of 10.5 percent collected by Prince Edward Island.

Questions about US-Canada trade? Ask Purolator, the premier Canada freight and courier company at 1-888-511-4811.

Tariffs
While NAFTA did eliminate tariffs on all goods manufactured in the U.S. that are shipped to Canada – it does impose fees on non-U.S. manufactured components that are shipping to Canada from U.S. businesses. In other words, if your business manufacturers products that include parts obtained from non-U.S. suppliers, you will have to pay a tariff on those parts.

To determine if your shipment is eligible for a tariff waiver or reduction, businesses must file a “NAFTA Certificate of Origin” form, which must accompany shipping documentation.

Registration and Paperwork
Several agencies within the Canadian government have authority over various aspects of the international commerce process, and not surprisingly, each agency has its own set of Canadian customs requirements that must be followed. Here is an abbreviated overview of the regulations a business may face:

• Any business importing or exporting goods to Canada must register with the Canada Revenue Agency and be issued a “business number” to be used on all paperwork.
• CBSA requires that a cargo control document (CCD) be submitted for each shipment, along with an invoice and customs coding form. These forms provide examiners with information including: description of the goods, direct shipment date, tariff treatment, country of origin, tariff classification, value for duty, appropriate duty or tax rates and calculation of duties owed.
• The Canadian Border Security Agency (CBSA), through its Advanced Commercial Information (ACI) program, requires notification about shipping to Canada prior to arrival at the border. ACI was developed as a way to provide notification to border agents about potential high risk or contraband shipments headed to the Canadian border. ACI is a three-phased program that is expected to be fully implemented in late 2010, when e-Manifest provisions are expected to go into effect, requiring electronic transmission of cargo information. ACI Phase One, which applied to marine carriers was implemented in 2004, and Phase Two, which affects air carriers took effect in 2006. When implemented in 2010, Phase Three will apply to highway and rail carriers shipping to Canada.
• The U.S. government imposes a similar electronic filing mandate on U.S. businesses that ship goods out of the country. While businesses have always had to submit paperwork, as of September 30, 2008, all filings are required to be done electronically, through the “Automated Export System” (AES). The new regulations, issued by the U.S. Census Bureau, are designed both to improve reporting accuracy, and to enhance security procedures. The regulations impose filing deadlines based on mode of transit, which will enable government officials time to review each shipment, to ensure that no restricted goods leave the country.

In addition to pre-arrival filing requirements, other requirements may include:



NAFTA Certificate of Origin: The 1994 NAFTA agreement eliminated virtually all tariffs on goods traveling within the U.S., Canada and Mexico that originate in the exporting country. For example, a U.S. business shipping to Canada a shipment of footwear will be exempt from tariffs if every component of the footwear – leather, canvas, heels, eyelets, etc. – is U.S.-made. If however, any of the materials contained in these components was obtained from a non-U.S. source, then tariffs must be paid on those non-U.S. parts. The NAFTA Certificate of Origin must be completed as a way to (a) verify that a shipment should be exempt from tariffs or (b) list those parts of the shipments that are liable for tariff assessment.



Shipper’s Export Declaration: This is a form required by the U.S. Census Bureau that must accompany all shipments that include more than US$2,500 worth of a single commodity.



Harmonized System Tariff Code: Before a shipment can clear the border, in fact, before a shipment can even begin the clearance process, it must have an appropriate “Harmonized System” code attached. In its most basic form, the Harmonized System is an international agreement to classify goods and commodities using the same coding standards worldwide. Thus, a shipment of televisions originating in Italy would have the same six-digit Harmonized code assigned to it as would a shipment of televisions coming from Korea or the U.S. Each country then attaches its own supplemental code, which allows it to further categorize goods to meet its unique recordkeeping and reporting requirements.



Questions about US-Canada trade? Ask Purolator at 1-888-511-4811.