MILLAR KREKLEWETZ LLP is a boutique Canadian law firm with lawyers who have significant expertise in alcohol tax and duty matters, including alcohol tax and duty issues arising under the Excise Act, 2001.

The following is a short introduction to alcohol taxes and duties in Canada.

NAFTA Origin

The duty-free trade that comes with the North American Free Trade Agreement (“NAFTA”) comes with a number of requirements, including the “NAFTA origin” requirements applicable to imported goods.  Essentially, the NAFTA origin requirements for imported goods requires that (1) the goods originate in a NAFTA territory (as determined through specific rules), and (2) written certificates be provided by the producer or exporter of the goods to the importer of the goods and kept on hand at all times during and after the importation process.

Origin is very important because the origin of the goods must be determined before the appropriate rate of duty, such as the preferential NAFTA rate, can be determined. 

Certificates of Origin

The basic rule is that where NAFTA preferential status is claimed, an importer must have a valid NAFTA Certificate of Origin (a “Certificate”) in its possession.

However, having a Certificate in your possession is not necessarily the end of the story.  The more difficult task is actually ensuring that the person providing you with the Certificate has properly provided and prepared it.  Under the NAFTA, the ultimate responsibility for importing goods is on the importer.  That means that where there are problems with the Certificate, the ultimate liability falls on the importer.

How is Origin Determined?

Determining “origin”, like determining appropriate tariff classification (as discussed below), is a complex process. 

Detailed rules exist for determining the “origin” of goods imported to Canada, usually involving Canada’s NAFTA Rules of Origin Regulations, and involving a further examination of the tariff classifications of each of the “inputs” in the imported good, effectively breaking down the imported goods into its basic components, and asking whether each of those components also “originated” in a NAFTA country.

NAFTA Verifications

The NAFTA Verification review, which can entail site visits, is the tool used by the Canadian Border Services Agency (the “CBSA”) to verify that the goods imported under a Certificate do actually meet the NAFTA “origin” requirements.

If at the end of a NAFTA Verification review the CBSA takes the view that an exporter has issued an improper Certificate, and that the imported goods do not in fact qualify for NAFTA treatment, then a number of serious implications follow for both the exporter and importer.

Millar Kreklewetz LLP is well-placed to provide assistance in matters involving the NAFTA origin requirements, and persons facing NAFTA Verification review or wishing to better understand their NAFTA origin obligations are encouraged to contact us for a 30 minute free consultation on the issues inherent in their files.

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