CUSTOMS
Overview
Customs
law generally governs and controls how goods cross Canada's
borders, by imposing applicable custom duties, taxes and other
levies on imported goods, and by prohibiting or restricting the
importation and exportation of certain goods, such as firearms,
narcotics and cultural property. Custom duties are imposed on
imported goods through the operation of the Customs Act and Customs
Tariff. While the Customs Act contains the administrative
rules necessary to (among other things) value imported goods, the
Customs Tariff sets out the tariff classification and rates of
duties imposed on these goods when they are imported into Canada.
As
of January 1, 1998, most goods imported from and exported to the
United States have become duty free under the North American Free
Trade Agreement ('NAFTA'). Despite the concessionary
treatment of these goods under NAFTA, Canada Customs has given
notice that it is still requiring strict adherence to Canada's
tariff classification and valuation provisions, if only for
statistical purposes and to protect the integrity of the customs
process.
Determining
the duty applicable on imported goods is a multi-step process.
Tariff
Classification
First,
the imported goods must be identified, which is done by classifying
them under Canada's tariff classification regime. Canada's
system is referred to as the Harmonized Commodity Description and
Coding System (the "HS"), and has also been adopted by
Canada's major trading partners, including the United States and
Mexico (and by all World Trade Organization member nations).
Under
the HS System, tariff classification requires classifying imported
goods into the 10 digit tariff item which best describes the goods.
Tariff
Treatment
Once
goods have been properly classified, the correct "tariff
treatment" must be determined. The "tariff
treatment" will enable the importer to determine the precise rate
of duty applicable to the imported goods.
Several
tariff treatments potentially apply depending on the origin of the
goods. Potential tariff treatments include the Most Favored
Nations Tariff ("MFN"), which is the schedule of duty
rates applicable to goods imported from most of Canada's major
trading partners, the General Preferential Tariff ("GPT"),
which applies to goods originating from certain "developing
countries", and the United States Tariff ("UST")
rates of duty, which applies to goods originating from the United
States.
Special
rules exist for determining with tariff the good is to be given the
benefit of.
Valuation
After
the appropriate tariff class and tariff treatment are determined,
the value of the goods must be determined, so as to allow the tariff
rate to be applied to some known duty base.
Canada
uses the GATT Valuation Code, which is the regime for valuing goods
for customs purposes used by most industrialized countries,
including the United States and the European Union (and which has
also been adopted by all WTO members).
Canada's
valuation code is set out in sections 43 through 53 of the Customs
Act and is detailed in its application. The Canada Border
Services Agency ("CBSA") position regarding valuation has
also resulted in many valuation issues (e.g., the treatment of
royalties) which have been litigated before the applicable Canadian
tribunals and courts and which are closely watched by other
countries which have also adopted the GATT Valuation Code.
TRADE
Trade
issues relate to the international supply of goods and services, and
would include, for example, anti-dumping, countervailing and NAFTA
issues.
Anti-Dumping
Anti-Dumping
& Counterveil legislation is part of Canada's trade remedies
legislation, and applies in situations were goods are unfairly
traded into Canada as subsidized or artificially low prices, thereby
affecting detrimentally the domestic manufacture of the same goods.
Where this occurs, the goods are referred to as being
"dumped" into Canada, and Canada's Anti-Dumping
legislation may apply. (Technically, "dumping" will
be seen to occur where an exporter sells goods for export at a price
lower than what they charge in their home market.)
In
Canada, the Anti-Dumping legislation is found in the Special
Import Measures Act (SIMA), which is also administered by the
CBSA, which investigates complaints, makes determinations of dumping
and enforces the payment of duties. CBSA determinations are
adjudicated by the Canadian International Trade Tribunal (the CITT),
which is required to decide whether the allegedly "dumped"
goods have caused or will cause injury to Canadian production, or
has or will retard its development. This adjudication is done
by means of determining the (1) whether particular goods are in fact
being dumped, and then determining the (2) “margin of dumping”
of those goods.
Counterveil
Countervailing
duties are imposed when the CITT determines that foreign
government subsidies have or will cause injury or retardation.
NAFTA
Issues
The
North American Free Trade Agreement ("NAFTA") was
implemented effective January 1, 1994, and contains, in itself, a
number of obligations on each of Canada, the U.S. and Mexico, and a
number of dispute settlement mechanisms to deal with those disputes.
| Free
Tax & Trade Information |
| Introduction to the GST
| Introduction to the PST
| Introduction to Customs
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