Canadian Customs Regulations Explained for Shipping to Canada: Purolator International
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Canadian Customs Regulations, Security
Mandates, Duties, and Fees
Although the U.S. and Canada enjoy the world’s most lucrative and most enduring trade
relationship, with more than $680 billion in goods and services crossing the U.S./Canadian
border each year, the fact remains that shipments between the two countries are international
transactions, and subject to customs-related mandates.
While both the U.S. and Canadian governments have affirmed their desire for less challenging
border clearance processes, there are still pro-trade agreements, customs regulations, security
mandates, and duties/fees that must be complied with in order to successfully ship goods
across the border. Many businesses have complained the border clearance process has become
more complicated in recent years, especially as each government has instituted new security
regulations intended to prevent the entry of hazardous materials or contraband into their
countries.
Learn more about the U.S./Canadian border compliance process by selecting a topic from the
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Shipments traveling from the United States to Canada are international transactions, and must
comply with applicable Canada Border Services Agency (CBSA) and Canada Revenue Agency
(CRA) regulations before being cleared for entry. Regulatory mandates include tariff and duty
assessments, security clearances, registration requirements, filings and shipment
documentation. Following is a brief overview of some key border clearance requirements:
Duties and Fees
While the North American Free Trade Agreement (NAFTA) eliminated tariffs on most
domestically-produced goods traded between the U.S., Canada and Mexico, there are other
taxes and fees that may be assessed on products shipping to Canada.
Canadian Sales Taxes: Imports to Canada are subject to federal and regional sales taxes, of
which there are three categories:
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: The provinces of Nova Scotia, New Brunswick, Prince Edward Island,
Newfoundland and Labrador, and Ontario have opted to “harmonize” their provincial
sales tax with the general sales tax. This combined rate is called the “harmonized tax,”
and represents the sum of the 5 percent federal GST plus the appropriate provincial
tax.
The harmonized tax is administered by the Canada Revenue Agency. According to CRA,
while the consumer pays the tax, businesses are responsible for collecting and remitting
the funds to the federal government. The federal government then returns the
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Canadian Customs Regulations Explained for Shipping to Canada: Purolator International
provincial portion of the tax.
Businesses that collect the GST/HST are required to register with the government and
receive a registration number.
Provincial Sales Taxes: Most 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 9.975 percent
collected in Quebec.
Following is an overview of the tax structure in each province and territory:
Province
GST
PST
HST
Alberta
5%
0
NA
British Columbia**
5%
7%
NA
Manitoba
5%
7%
NA
New Brunswick
5%
NA
13%
Newfoundlanc & Labador
5%
NA
13%
Northwest Territories
5%
NA
NA
Nova Scotia
5%
NA
15%
Nunavet
5%
Onatario
5%
NA
13%
Prince Edward Island*
5%
9%
14%
Quebec
5%
9.975% (QST)
NA
Saskatchewan
5%
5%
NA
Yukon
5%
0
NA
In addition, certain categories of goods are subject to excise taxes, or excise duties. Examples
of goods subject to excise tax include:
Automobile air conditioners
Certain passenger vehicles
Certain fuels
Tobacco and certain alcohol products
Tariffs
According to the U.S. Department of Commerce, a tariff, also called a duty, is defined as a tax
levied by governments on the value, including freight and insurance, of imported products.
Different tariffs are applied on different products by different countries.
Domestically produced goods traveling between the U.S. and Canada are almost entirely
exempt from duties, as outlined in NAFTA. 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 shipped to Canada from U.S. businesses. If your business
manufactures 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.
Every item entering – or leaving – Canada must be assigned an appropriate tariff classification
code. Canada is among the vast majority of countries that adhere to the international
Harmonized System of tariff codes. The harmonized system is a uniform list of codes for
roughly 5,000 different commodity groups. Each commodity is assigned a six-digit code.
Because of HS, a product originating in one country will carry the same HS code as the same
product manufactured in a different country.
In Canada, the six-digit harmonized system code is supplemented by a four-digit Canadian
Customs Tariff. The additional four digits are used by the Canadian government as a way to
capture additional information about goods entering and leaving the country.
Improper coding could result in overpayment of duties, or in the failure to benefit from
applicable trade agreement provisions. If the HS code applied results in an underpayment of
duties, it could result in the application of interest on the underpayment, trigger an audit, and
possibly result in fines.
Registration and Paperwork
http://www.purolatorinternational.com/trade-regulations[6/22/2016 10:27:18 AM]
Canadian Customs Regulations Explained for Shipping to Canada: Purolator International
Several agencies within the Canadian government have authority over various aspects of the
international commerce process, each agency has its own set of processes and requirements
that must be followed. Following 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 obtain 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.
Advance Commercial Information: ACI is administered by CBSA as a way to obtain
advance notification about shipments heading to the Canadian border. By requiring
advance notice, CBSA is able to anticipate potential contraband or hazardous
shipments, and to pre-clear “non-threatening” shipments. ACI includes the mandatory
eManifest filing system, which provides an electronic portal through which all necessary
information can be transmitted.
Automated Export System (AES). The U.S. government imposes a similar electronic
filing mandate on U.S. exporters. While businesses have always had to submit
paperwork, as of September 30, 2008, all filings were required to be done
electronically, through the Automated Export System (AES).
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 footwear to Canada 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 leaving the United States that include more than
US$2,500 worth of a single commodity.
Harmonized System Tariff Code: Before a shipment can clear the border, it must have
an appropriate Harmonized System code attached. 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 as a shipment of televisions coming from Korea. Each
country then attaches its own supplemental code, which allows it to further categorize
goods to meet its unique recordkeeping and reporting requirements. Proper tariff code
assignment is essential to ensure that proper tariffs are paid, shipments benefit from all
applicable favorable trade provisions, and to avoid penalties and possible punitive
action.
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