While Canadian businesses may have a 30-day reprieve from the threatened Trump and Canadian retaliatory tariffs, businesses should take the opportunity now to put plans in place to minimize the fallout should tariffs be enacted.  One avenue businesses can pursue to mitigate the impact of the tariffs is duty drawback.   

While President Trump’s Executive Order removes the option for American businesses to claim duty drawback, Canada Border Services Agency (“CBSA”) has confirmed that duty drawback remains available for Canadian businesses engaged in the import and subsequent export of goods, even if retaliatory tariffs come into force.

What Is Duty Drawback?

Duty drawback (“drawback”) is a relief program that allows businesses to apply for a refund of duties already paid on goods imported and subsequently exported from Canada.  Drawback is available to importers, exporters, and manufactures who utilize imported goods.  Importers seeking to have relief from duty before importing goods into Canada that will eventually be exported should explore the Duties Relief Program, which has similar eligibility requirements to drawback.

What Is Eligible For Duty Drawback?

Goods eligible for drawback are those imported into Canada and, before being exported, are:

• Further processed;
• Displayed or demonstrated;
• Used for the development in Canada of goods for subsequent export; and
• Exported without being used in Canada for a purpose other than the three previously listed.

The drawback program provides businesses with much needed flexibility.  Goods meant for domestic and export production can be mixed, and imported goods can undergo processes that range from minor adjustments or repairs to being entirely used up in the manufacturing process can still be eligible for drawback, so long as the final product is still exported.  Even scrap or waste in certain circumstances can be included in a claim.  Imported goods transferred to another business which are then exported can still be eligible for drawback – businesses may not even realize drawback is an option available to them!

How To Apply For Duty Drawback

Businesses have four years to make an application for drawback.  Businesses applying for drawback must navigate issues concerning valuation, parties with claims to the same goods, and must understand the legislation they are relying on to justify their claim.  Legal advice is recommended to ensure applications are correct and businesses face no preventable delays in obtaining their duty refunds. 

Takeaways

The duty drawback program is a valuable option for Canadian businesses looking to mitigate the impact of Canadian retaliatory tariffs, should they come into force.  Many businesses may be unknowingly eligible to make claims and should obtain legal advice to determine eligibility and help with their drawback applications.

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